This particular group, which used to be called SOCO International, declares that it has the elements for sustained success.
It operates with a lean, efficient structure, designed to identify and realise value for all its stakeholders.
Now called Pharos Energy (LON:PHAR) it is an independent energy company with a focus on sustainable growth and returns to its investors.
The business centres upon near-term value-adding activities in Vietnam and Egypt, both of which have the potential to generate free cash flow, and on the longer-term prospects such as its exploration assets in Blocks 125 and 126 in Vietnam and El Fayum & North Beni Suef in Egypt.
Group Interests
Pharos has production, development and exploration interests in Egypt and Vietnam.
In Egypt, it holds a 45% working interest share in the El Fayum Concession in the Western Desert, with IPR Lake Qarun, part of the international integrated energy business IPR Energy Group, holding the remaining 55% working interest.
The El Fayum Concession produces oil from 10 fields and is located 80 km southwest of Cairo.
It is operated by Petrosilah, a 50/50 joint stock company between the contractor parties (being IPR Lake Qarun and Pharos) and the Egyptian General Petroleum Corporation (EGPC).
Pharos also holds a 45% working interest share in the North Beni Suef (NBS) Concession in Egypt, which is located immediately south of the El Fayum Concession.
The first development lease on the NBS Concession was awarded in September 2023 and production started in December 2023.
IPR Lake Qarun operates and holds the remaining 55% working interest in the NBS Concession.
In Vietnam, Pharos has a 30.5% working interest in Block 16-1 which contains 97% of the Te Giac Trang (TGT) field and is operated by the Hoang Long Joint Operating Company.
Pharos’ unitised interest in the TGT field is 29.7%.
It also has a 25% working interest in the Ca Ngu Vang (CNV) field located in Block 9-2, which is operated by the Hoan Vu Joint Operating Company. Blocks 16-1 and 9-2 are located in the shallow water Cuu Long Basin, offshore southern Vietnam.
Pharos also holds a 70% interest in, and is the designated operator of, Blocks 125 & 126, located in the moderate to deep water Phu Khanh Basin, northeast of the Cuu Long Basin, offshore central Vietnam.
Trading Update
On Thursday 18th July the group issued a Trading And Operations Update,
At that time CEO Katherine Roe stated that:
“We are delighted to report a solid first half, both operationally and financially.
Production remains within previously set guidance underpinning our strong net cash position and our commitment to sustainable shareholder returns through the Company’s dividend policy and share buyback programme.
The positive macro environment in Egypt has seen a significant improvement in our receivables position with c. $19 million received to date, substantially reducing our receivables balance.
Further discussions continue regarding outstanding payments.
The recent ratification of five petroleum agreements for onshore and offshore acreage further demonstrates the new Government’s commitment to our sector.
In parallel, we remain focused on near-term drilling and finalisation of the licence extensions for TGT and CNV in Vietnam to enable us to prioritise future investment to deliver additional volumes.
We also continue to progress rig and farm-out discussions for Blocks 125 and 126, our significant exploration prospects.”
Analyst Views
Peter Hitchens, analyst at Progressive Equity Research, notes that Katherine Roe, who became CEO at the start of July, was previously CEO of Wentworth Resources and realised significant shareholder value through the sale of that company.
Ahead of the Interims, he has already stated that the group is continuing to strengthen its balance sheet as the group benefits from strong cash flows and improving Egyptian receivables.
He reckons that the healthy balance sheet leaves the group in a good position to fund its capex programmme and enhances its ability to return cash to shareholders.
His estimates for the current year to end-December are for $146.0m ($167.9m) revenues, with adjusted pre-tax profits of $44.2m ($37.1m), lifting earnings to 10.4c (8.7c) and paying a 1.10c (1.10c) dividend per share.
Analyst James Hosie at Shore Capital Markets has set a 49p value on the group’s shares.
He stated that:
“Pharos Energy’s ability to deliver self-funded production growth while continuing to return cash to shareholders remains underappreciated.
Trading at a c.50% discount to our Tangible NAV estimate of 49p/share, investors remain cautious after years of declining production.
We see a set of upcoming catalysts that can reset expectations and prompt a re-rating of the business.”
In My View
Next Wednesday, 18th September, will see it announce its Interim Results for the six months to end-June.
With a refreshed leadership team now in place, we could soon see the group announcing that it is reviving its production plans.
At the current 26p the group’s shares could offer a very attractive Upside.