Malcy’s Blog: Flash blog: Pharos, Reabold.

A flash blog again this morning, I’m in the smoke for meetings and the Pharos analysts presentation. As always if anything extra comes from the meeting or Q&A I will revert tomorrow. The same goes for Reabold after I talk to them. 

Pharos Energy

Pharos has announced its preliminary results for the year ended 31 December 2024. 

Katherine Roe, Chief Executive Officer, commented:

“2024 was a year of strong progress and delivery for Pharos, culminating in the approval for the extension of our producing licences in Vietnam. This milestone has enabled Pharos to begin 2025 with renewed momentum and a focus on growth. 

“Operationally we delivered successful drilling results and maintained stable production in Vietnam and Egypt delivering 5,801 boepd, generating consistent cash flows, allowing us to fully repay the legacy debt and declare today a 10% increase in the final dividend. We now have the benefit of an unlevered balance sheet capable of supporting additional financing for growth alongside our existing cash resources of $16.5 million at year end.

“The recent licence extensions in Vietnam are enabling us to move forward with a work programme to fully unlock the significant resource potential within these high quality assets. In Egypt, the signing of an MOU with EGPC for the merger of our Egyptian concessions in February this year demonstrates the alignment between all parties to conclude negotiations as soon as possible.

“Our disciplined approach to capital allocation continues to underpin our work programme as we focus on projects that yield the highest returns for our shareholders. We have recently submitted an application for a two-year extension on Blocks 125 & 126 which will allow us to retain future optionality for the prospect to be drilled, whilst investing in near term production growth in Vietnam.

“Pharos is a cash generative, debt free business with a robust balance sheet. This provides us with the flexibility and capacity to pursue both organic growth and inorganic opportunities, specifically compelling accretive acquisitions, to utilise our existing in-country track record and relationships to drive scale, growth and continued shareholder returns.

“I would like to thank all of our colleagues and stakeholders for their continued efforts and support and look forward to delivering in the year ahead.”

Pharos is in increasingly good nick, whilst today’s finals are clearly backward facing they were in-line with the whisper and the beat meant strong finances and a 10% y/y increase in the divvi whilst eps gained from a positive $20m impairment reversal.

Guidance for this year is unchanged at the moment but with an upped capex budget we can expect better production in the medium term following recent licence extensions. Longer term there is excitement across the board but obviously the market are still focusing on the exploration at blocks 125 and 126, but in order to get their ducks in a row especially with regards to a potential farm-out a key licence extension is very important. 

With the board keeping an eye out for potential M&A opportunities the company are focusing on organic and inorganic growth and the robust finances make Pharos look a well managed, strongly funded play in two exciting international areas. More after the analysts meeting……

2024 Operational Highlights

·      Group working interest 2024 production was 5,801 boepd net, in line with guidance:

–       Vietnam 4,361 boepd

–       Egypt 1,440 bopd

·      Successful drilling campaigns in both Vietnam and Egypt

·      Strong safety record with no LTIs

·      Vietnam:

–       Applications for five-year licence extensions to the TGT and CNV fields formally granted by the Vietnamese Government in December, increasing year-end 2024 2P reserves in Vietnam by approximately 19%  to 8.9 mmboe and enabling further investment in both fields

–       TGT: successful completion of two-well infill drilling programme in October on time and under budget; we are pleased that both wells are now producing in line with expectations

–       Blocks 125 & 126: detailed drilling engineering studies for the proposed well on Prospect A commenced in 3Q; orders placedfor long lead items in August

·      Egypt:

–       El Fayum: successful drilling of second exploration commitment well in September, encountering oil-bearing reservoirs in Abu Roach G formation

–       One El Fayum development well put on production in December

–       North Beni Suef (NBS): ongoing processing of 3D seismic data

2024 Financial Highlights

·      Group revenue of $136.1m ^1,2 (2023: $168.1m ^1,2)

·      Cash generated from operations $89.3m (2023: $88.8m)

·      Operating cash flow $54.0m ³ (2023: $44.9m)

·      Cash operating costs ⁴ of $17.80/bbl (2023: $15.70/bbl)

·      Cash balances as at 31 December 2024 of $16.5m (2023: $32.6m)

·      Net cash ⁴ as at 31 December 2024 of $16.5m, the Group is debt free (2023: $6.6m net debt ^4,5)

·      Profit for the year of $23.6m (2023: loss $48.8m), including post-tax impairment reversals of $19.9m (2023: post-tax impairment losses of $42.7m)

2024 Corporate Highlights

·      Commitment to shareholder returns continue:

–       Sustainable dividend policy delivered with an interim dividend of 0.363 pence per share for the 2024 financial year, and proposed final dividend of 0.847 pence per share announced today, subject to shareholder approval at 2025 AGM

–       Share buyback programme concluded in January 2025 following full utilisation of the latest $3.0m committed to the programme. Since its initiation in July 2022, 30,708,855 ordinary shares have been repurchased by the Company at an average price paid of 23.65p per share

2025 Outlook and Highlights

·      Group working interest production guidance of 5,000 – 6,200 boepd net:

–       Vietnam 3,600 – 4,600 boepd

–       Egypt 1,400 – 1,600 bopd

·      Vietnam production; following the approval of the TGT and CNV five-year licence extensions:

–       TGT: Drilling of an appraisal commitment well in 4Q; appraisal success would open up an undrilled area in the field

–       TGT: Three infill wells drilling programme expected to commence in 4Q

–       CNV: Planning underway for the drilling of one infill well expected to commence in 4Q

–       3D seismic reprocessing on both assets commenced in January 2025, expected completion in 3Q

·      Vietnam exploration; Blocks 125 & 126:

–       Submitted application for a 2-Year PSC Exploration Phase Extension in February 2025

–       Long Lead Items for Block 125 exploration well expected to arrive in 2Q 2025

–       Renewed focus on farm-out strategy to enable drilling of the prospect

·      Egypt:

–       El Fayum: Testing of the successful exploration commitment well in February

–       Application for commercial discovery declaration submitted to EGPC in 1Q

–       Planning underway to commence two-well El Fayum drilling programme in 2H

–       NBS: expected completion of 3D seismic data processing in 1H, with interpretation and mapping to follow

–       Memorandum of Understanding (MOU) with EGPC in relation to the proposed consolidation of the El Fayum and NBS concessions signed in February 2025

·      On track to achieve our Net Zero interim three-year target (2024-2026) of 5% emissions reduction

·      Forecast Group cash capex in the year expected to be a minimum of $37m and could potentially increase to $66m. The minimum programme reflects the drilling of one TGT appraisal commitment well and long lead items for TGT and CNV infill wells. The upper range would include drilling the three TGT infill wells, one CNV appraisal commitment well, and one CNV infill well. The minimum range includes long lead items for Block 125 exploration drilling in Vietnam. In Egypt, the minimum programme includes two El Fayum development wells and two injector wells, with the  potential for three additional development wells on El Fayum and two development wells and one water injector in NBS in our upper range, should activity increase following approval and signature of a consolidated concession agreement

·      Active capital programme aimed at delivering important production growth from 2026

¹ Egyptian revenues are stated post government take

² Stated prior to realised hedging loss of $0.1m (2023: loss of $0.2m)

³ Operating cash flow = Net cash from operating activities, as set out in the Cash Flow Statement

⁴ See Non-IFRS measures on page 40

5 Includes RBL and National Bank of Egypt working capital drawdown

Reabold Resources

Reabold has provided the following corporate and operational update.

Corporate Update

Further to the announcement on 30 January 2025, the Company is pleased to announce that LN Energy Ltd, (“LN”) has entered into a binding purchase and sale agreement (“PSA”) to acquire the entire outstanding issued share capital of LNEnergy S.r.l (“LNE S.r.l”). LN is the manager and is currently owner of a 20% interest in LNE S.r.l., the Italian company that has a 90% interest in, and is seeking regulatory approval for the development of, the Colle Santo gas field in the Abruzzo region of Italy.

The consideration to be paid by LN will be:

·      US$100,000 upon completion of the PSA;

·     US$400,000 upon approval for the Colle Santo development plan by the VIA Commission of the Ministry of the Environment of Italy;

·     USD $10,500,000 within 60 days of the formal Colle Santo concession decree award by the relevant Italian ministry; and

·      a 4% Net Profits Interest, being defined as revenue less the relevant operating expenditures received by LNE S.r.l. from production

This PSA will replace the previously announced agreement LN had to acquire LNE S.r.l.

Operational Update

The Company has been informed that, as part of the process of the application for the Colle Santo development, the VIA Commission has carried out a site visit at Colle Santo. LN will be providing some further information to the VIA Commission post this visit, soon after which it expects a decision will be issued by the VIA Commission.

The site visit followed the Environmental Impact Study for the new small-scale LNG development plan at the Colle Santo gas field which was filed with the Ministry of Environment and Energy Security, the link to which can be found at https://va.mite.gov.it/it-IT/Oggetti/Info/1056.

Stephen Williams, Co-CEO of Reabold, commented: 

“We are very pleased to have simplified the structure of LNEnergy as it relates to its interest in Colle Santo. This project holds significant gas reserves, at a time when there is an increased focus on the energy transition and energy security in Europe.

“LNG is a transition fuel which has a central role to play in Italy’s energy transition plan, and the strong environmental credentials of the Colle Santo project underline it’s potential to directly enhance the energy transition, and energy security, in the near term.

“We remain encouraged by the regulatory process to date and we look forward to receiving the VIA Commission approval for the development of the Colle Santo project, the final milestone ahead of a full production concession being granted.”

This looks like a highly sensible tidy-up of the situation at LNEnergy and I remain confident that Colle Santo will provide an excellent play in an important European LNG market for Reabold. More after I’ve spoken to the management…