Interim results for the Half-year to 30 June 2020
Pharos Energy plc, an independent oil and gas exploration and production company focused on sustainable growth and returns to stakeholders, announces its interim results for the six months ended 30 June 2020. An analyst conference call will take place at 0900 BST today.
Ed Story, President and Chief Executive Officer, commented:
“As the world goes through these turbulent times, Pharos has remained focussed on capital discipline and ensuring the financial stability of the Company, something which is in our DNA. The focus on cutting cash costs across the Group has been intense and by taking action to achieve a reduction in forecast expenditure of 25%, we have put ourselves in a position to weather this lower oil price environment. Even during these testing times, Group production remains in line with guidance for 2020 and the period saw real progress for the Group as we were granted an extension to our TGT and CNV licences in Vietnam, which will act as a spur for further activity in the coming years. In Egypt, we are continuing with our workover programme and waterflood implementation as well as appraising future targets for when drilling resumes. I am also pleased to say our focus on ESG has continued through the period with social programmes in both Egypt and Vietnam as well as positive progress in our preparation to report in line with the TCFD recommendations. I would like to thank all our shareholders for their support during these difficult times and assure them that our focus on capital discipline puts the Company in the best position for its future growth.”
1H 2020 Financial summary
- Group revenue for 1H 2020 was $80.1m2,* (1H 2019: $91.8m)1,2,*
- Hedging positions have provided solid protection in the period with a gain of $21.1m (1H 2019: loss of $0.9m)
- Approximately 35% of the Group’s forecast production until September 2021, is hedged at an average price of $44.8/bbl
- Cash operating costs $11.13/bbl3 (1H 2019: $9.41/bbl)1,3
- Cash generated from operations $55.9m (1H 2019: $55.2m)1
- Cash balances as at 30 June 2020 of $37.8m (1H 2019: $66.3m), Net debt at 30 June 2020 of $36.1m3 (1H 2019: $33.7m)3
- Net loss of $268.3m (1H 2019: $19.0m loss), including non-cash impairment of $265.5m (after tax), primarily oil price related
- Scheduled half-yearly redetermination of the RBL facility now completed
- amortisation payment of $22.3m made on 30 June 2020
- a further amortisation payment of $9.4m made on 13 July 2020 and;
- a voluntary payment made of $7.3m on 30 July 2020;
- Borrowing Base Amount currently stands at $64.5m
- Forecast cash capex for the full year c.$37m of which $31.9m had been incurred by 30 June 2020
- Cash cost savings on total group forecast expenditure for the year of 25%
- Administrative expenses of $7.5m (1H 2019: $11.7m) are lower due to continuous efforts; Group reduction of G&A costs 35%
- Net debt to EBITDAX of 0.90x (1H 2019: 0.59x)
* Egyptian revenues are given post government take including corporate taxes.
1 Comparative figures show Vietnam – for the full period | Egypt – from 02/04/2019
2 Stated after realised hedging gain of $21.1m (1H 2019: loss of $0.9m)
3 See Non-IFRS measures at page 25
1H 2020 Operational summary
- Despite the global COVID-19 pandemic, Pharos continues to manage its operations carefully with the Group adhering to the procedures and restrictions put in place by its host countries, with negligible disruption to business in the period
- Group working interest 1H 2020 production 12,093 boepd net (1H 2019: 12,541)1, in line with production guidance
- Vietnam 1H 2020 production 6,114 boepd net (1H 2019: 7,279 boepd net)
- The TGT field licence extension for two years has been formally granted by the Ministry of Industry and Trade in Vietnam
- The CNV field licence extension for two years has also been formally granted by the Ministry of Industry and Trade in Vietnam
- The 2019 two-well TGT drilling campaign completed in 1H 2020 on time and under budget
- Upgrade to Gas Turbine compressors completed ahead of schedule in Q1 2020
- Egypt 1H 2020 production 5,979 bopd (2 April - 30 June 2019: 5,262 bopd)
- The three drilling-rig programme in Q1 2020 increased production in April, production averaged 6,396 bopd and production peaked at 7,009 bopd on the 23 April 2020
- Production operations in Egypt have continued, focusing on well intervention and water-flood enhancement following scaling back of drilling activity
- Reductions agreed on both El Fayum oil price discount ($1/bbl reduction) and refinery handling charge ($0.80/bbl reduction), initially for six months while technical review continues
- 2020 production guidance 5,500 - 6,500 boepd net remains unchanged
- Operations are focussed on optimising production from the existing wells, principally through gas lift optimisation
- Proactively manage the existing producing reservoirs
- Approval of the TGT FFDP by the Ministry of Industry and Trade expected in Q4 2020
- 2020 Production guidance of 5,000-6,000 bopd unchanged
- Continue with workover programme and waterflood deployment
- Assess the results of recent waterflood pilot projects in Greater Silah area
- Continuation of work on the subsurface dynamic and static models to improve future well drilling campaigns and future waterflood implementation
- Continued assessment of Egypt drilling programme in relation to oil price environment
- Israel low-cost activities during the initial phase of the licences comprise reprocessing of existing 3D seismic data and evaluation of the acreage’s potential. The operator has started preparation for this work.
In January 2020, Pharos announced that Ettore Contini, Non-Executive Director, would not stand for re-election to the Board of Pharos at the Company’s AGM on 20 May 2020, following 18 years of service. John Martin became Chair of the Board of Directors with effect from 13 March 2020. Lisa Mitchell and Geoffrey Green were appointed as Independent Non-Executive Directors with effect from 1 April 2020 and 20 May 2020 respectively.
Upon his appointment on 13 March 2020, the incoming Chair, John Martin, volunteered to reduce the Chair fee by 25%. Subsequently and in addition, the Chair and the Independent Non-Executive Directors voluntarily agreed a further 25% reduction in their 2020 fees. The Executive Directors have voluntarily agreed a reduction in base salary of 25% for 2020 effective 1 May 2020. The Board has also agreed that no bonuses will be paid in 2020.
As announced in May, the Board believed it was appropriate to withdraw dividend payments during 2020, given the continued uncertainty in the macro environment. The decision to re-instate the dividend will be kept under review and the Board will continue to use the well documented capital allocation criteria to assess where and how to spend any free cash flow generated. The key goals are to balance the preservation of balance sheet strength with investing in growth opportunities where returns exceed the risked cost of capital, in order to generate sustainable returns for shareholders.
Joint Broker Appointment
We are pleased to announce the appointment of Peel Hunt LLP to act as the Company’s Joint Broker with immediate effect.
Pharos Energy plc Tel: 020 7747 2000
Ed Story, President and Chief Executive Officer
Jann Brown, Managing Director and Chief Financial Officer
Mike Watts, Managing Director
Sharan Dhami, Group Head of Investor Relations
Camarco Tel: 020 3757 4980
Billy Clegg | Owen Roberts | Monique Perks
Notes to editors
Pharos Energy plc is an independent oil and gas exploration and production company with a focus on sustainable growth and returns to stakeholders, headquartered in London and listed on the London Stock Exchange. Pharos has production, development and exploration interests in Egypt, Israel and Vietnam.
In Egypt, Pharos holds a 100% working interest in the El Fayum oil Concession in the Western Desert.The Concession produces from 10 fields and is located 80 km south west of Cairo. It is operated by Petrosilah, a 50/50 JV between Pharos and the Egyptian General Petroleum Corporation (EGPC). Pharos is also an operator with a 100% working interest in the North Beni Suef (NBS) Concession, which is located immediately south of the El Fayum Concession.
In Israel, Pharos together with Cairn Energy plc and Israel's Ratio Oil Exploration, were successful in their bid for eight licences in the second offshore bid round in Israel. Each party has an equal working interest and Cairn is the operator.
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%. Pharos also has a 25% working interest in the Ca Ngu Vang (CVN) 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 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.