Pharos Energy Plc (PHAR:LSE) recently issued full-year 2023 production and financial results along with initial 2024 guidance.
The independent E&P with assets in Egypt and Vietnam delivered results in line with prior forecasts while further reducing net debt, according to a January 16 report by analyst Stephane Foucaud of Auctus Advisors.
2023 Results
Pharos' working interest production averaged 6,508 barrels of oil equivalent per day (boe/d) last year. This matches the guidance of 6,350-6,750 boe/d, driven by Vietnam's output of 5,127 boe/d and 1,381 boe/d from Egypt.
Despite a US$6.4 million rise in receivables, Pharos lowered net debt to US$6.5 million as of December 31, 2023. This marks a US$10 million reduction for the full year through free cash flow generation. The company also trimmed the drawn debt to US$30 million.
2024 Outlook
Next year's capital budget is set at US$27.3 million to deliver average volumes of 5,200-6,500 boe/d. While the production outlook trails the analyst's 6,800 boe/d forecast, lower spending is favorable for cash flows.
Key potential catalysts for 2024 are securing a farm-in partner and a drilling slot for Block 125 offshore Vietnam. Pharos also seeks updated development approvals for the CNV field that could boost reserves.
In Vietnam, drilling is slated to restart late this year after revisions to the TGT field plan. The 2024 program comprises 3,900-5,000 boe/d from Vietnam along with 1,300 to 1,500 barrels per day from Egypt.
Updated Valuation
The analyst has revisited Pharos' valuation to account for lower 2024 production guidance and cut its Brent price deck to US$85.50 per barrel. The target price falls to £0.50, representing over 100% upside.
The revised net asset value calculations stand at £0.33 per share on a core basis and £0.51 per share on a risked basis.
Approval for a five-year extension of TGT and CNV licenses would add £0.28 per share, as would unlocking US$37 million of trapped Egyptian receivables.
By the end of 2024, the analyst sees Pharos holding US$15 million in net cash after funding this year's spending and shareholder returns. Upside to the target relies on executing development plans to grow low-cost production organically.
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Disclosures for Auctus Advisors, Pharos Energy Plc., January 16, 2024
Pharos Energy plc (“PHAR” or the “Company”) is a corporate client of Auctus Advisors LLP (“Auctus”). Auctus receives, and has received in the past 12 months, compensation for providing corporate broking and/or investment banking services to the Company, including the publication and dissemination of marketing material from time to time.
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Author The research analyst who prepared this research report was Stephane Foucaud, a partner of Auctus.
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