Interim results 2020 Set to thrive Pharos Energy 26 August 2020 / - - PowerPoint PPT Presentation

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Interim results 2020 Set to thrive Pharos Energy 26 August 2020 / - - PowerPoint PPT Presentation

Interim results 2020 Set to thrive Pharos Energy 26 August 2020 / 2 26 August 2020 Pharos Energy 2020 Interim results Disclaimer Nothing in this presentation or in any accompanying management discussion of this presentation The Group


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Set to thrive Pharos Energy

Interim results 2020

26 August 2020

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Pharos Energy – 2020 Interim results 26 August 2020

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Disclaimer

Nothing in this presentation or in any accompanying management discussion of this presentation constitutes, nor is it intended to constitute: (i) an invitation or inducement to engage in any investment activity, whether in the United Kingdom or in any other jurisdiction; (ii) any recommendation or advice in respect of the ordinary shares (the Shares) in Pharos Energy plc or the group of companies of which it is the ultimate holding company (together the Group); or (iii) any offer for the sale, purchase or subscription of any Shares. The Shares are not registered under the US Securities Act of 1933 (as amended) (the US Securities Act) and may not be offered, sold or transferred except pursuant to an exemption from,

  • r in a transaction not subject to, the registration requirements of the US Securities Act and in

compliance with any other applicable state securities laws. This presentation contains certain forward-looking statements that are subject to risk factors and uncertainties associated with the oil and gas exploration and production business generally and specifically with the business, operations and financial position of the Group. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "projects", "expects", "intends", "may", "will", "seeks" or "should“, “could” or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward- looking statements include all matters that are not historical facts. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward-looking statements and forecasts. For a detailed analysis of the factors that may affect our business, financial performance, or results of operations, we urge you to look at the Principal Risk and Mitigations section in our Annual Report and Accounts. The Group undertakes no obligation to revise any such forward-looking statements to reflect any changes in the Group’s expectations or any change in circumstances, events or the Group’s plans and strategy. Accordingly, no reliance may be placed on the figures contained in such forward- looking statements. Forward-looking statements are not guarantees or representations of future

  • performance. Similarly, past share performance cannot be relied on as a guide to future
  • performance. Even if the Group’s results of operations, financial and market conditions, and the

development of the industry in which the Group operates, are consistent with the forward-looking statements contained in the presentation, those results, conditions or developments may not be indicative of results, conditions or developments in subsequent periods. No representation or warranty, express or implied, is or will be made in relation to the accuracy or completeness of the information in this presentation and no responsibility or liability is or will be accepted by Pharos Energy plc or any of its respective subsidiaries, affiliates and associated companies (or by any of their respective officers, employees or agents) in relation to it. All written and oral forward-looking statements attributable to the Group or to persons acting on the Group's behalf are expressly qualified in their entirety by the cautionary statements above and by all other cautionary statements and disclaimers contained elsewhere in the presentation. By attending this presentation and/or accepting a copy of it, you agree to be bound by the foregoing limitations and conditions and, in particular, will be taken to have represented, warranted and undertaken that you have read and agree to comply with the contents of this notice including, without limitation, the obligation to keep this presentation and its contents confidential.

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Ed Story

President and Chief Executive Officer

Introduction

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Introduction

Pharos Energy – 2020 Interim results 26 August 2020

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Safeguarding people and assets

  • Safety is the highest priority
  • Committed to operating safely

and responsibly

  • JOC’s in Egypt and Vietnam

implemented Health & Safety procedures across our operations

  • Business continuity and
  • perations have not been affected

Survived impact

  • f oil price crash

Opportunities and

  • ptionality

COVID-19 Oil price Opportunities

  • Focus on capital discipline and

financial stability - part of the Company’s DNA

  • Intense focus on cash cost

savings

  • Operational flexibility in Egypt

work programmes allowed for quick reaction to oil price crash

  • Portfolio of opportunities and
  • ptionality
  • Egypt: Onshore, low-cost

development drilling and exploration opportunities

  • Vietnam
  • TGT: 6 firm infill wells
  • Blocks 125 & 126

exploration potential

  • Israel: low-cost option for

material gas

Complementary portfolio Our Assets

  • Group production 12,093 boepd net

in line with guidance

  • Egypt 1H production

5,979 bopd

  • Vietnam 1H production

6,114 boepd net

  • Initial two-year extension granted
  • n TGT/ CNV licences
  • 2020 Production Guidance

remains unchanged

  • Egypt 5,000-6,000 bopd
  • Vietnam 5,500-6,500

boepd net

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A sustainable business

Jann Brown

Managing Director and Chief Financial Officer

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Operating a sustainable business

  • Despite COVID-19, operations have continued

without disruption in Egypt & Vietnam

  • Business continuity plans remain effective across our

locations

Social investment initiatives

* All data correct as at 1H 2020

Carbon Disclosure Project

Continued participation in 2020

Task Force on Climate-related Financial Disclosures

Work to ensure we are prepared to report in line with the TCFD guidelines has begun and is progressing

Governance changes

  • Chair and 2 NEDs appointed
  • Independent Board

Vietnam

  • Offshore operations - robust health & safety

measures in place Egypt

  • Onshore operations - robust health & safety

measures in place Vietnam

  • Continued support to HLHVJOC

Charitable Donation Programme

  • Projects in the first half include charitable

donations of medicines and food to local families and hospital. Egypt

  • Petrosilah donated face masks, face shields,

and protection suits to the El Fayum General Hospital

Business continuity

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Jann Brown

Managing Director and Chief Financial Officer

Finance

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1H 2020 Financial summary(1)

(1) All numbers are to 0 decimal place (2) Including the benefit of our 1H hedges of $21m (1H 2019: loss of $0.9m)

Cash Capex 1H 2019: $22m

$32m $80m(2)

1H 2019: $92m

$11.1/ bbl

1H 2019: $9.4/bbl Revenue Cash Opex Balance Sheet

Vietnam $310m Egypt $62m Net Liabilities ($123m) Total BS $249m FY 2019 Total BS $510m

12,093 boepd

1H 2019: 12,541 boepd Production

4% 13%

Net Debt

$36m

1H 2019: $34m

7%

49% 27%

Cash from Operations

$56m

1H 2019 : 55m Hedging gains

$21m

1H 2019: loss $0.9m

1%

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Financial Outlook

Vietnam Corporate

Group expenditure reduction for the year

25%

G&A cost reduction for the year

c.35%

Remuneration reduction

25%

For Chair, NEDs and Executive Directors

No bonuses will be paid for the year 2020 dividend payments withdrawn

Egypt

(1) Life of field, fully capex loaded, NPV 11 | (2) Life of field, fully capex loaded, NPV 13 | (3) Commitments have been deferred

Operating cost FY estimate

c.$12/boe

<$26/bbl

No commitments in Vietnam or Egypt for 2H 2020

(3)

Breakeven (1) Breakeven range (2)

$38-42/bbl

Operating cost FY estimate

c.$11/bbl

  • Incorporates ongoing reduction in:
  • Western Desert discount
  • El Fayum discount
  • Suez refinery handling charge
  • Range depends on pace of investment
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Cash sources and uses

2020 Capex – c.85% incurred in 1H

$41.0 $31.9 $26.1 $2.9 $0.8 $58.5 $37.8

20 40 60 80 100 120

Cash Balance at 31 Dec 2019 Operating CF Investing Activites - Capex (incl. abandonment) Repayment of borrowings Interest on borrowings Other Cash Balance at 30 June 2020

$m

Sources $100m

  • Generation of sustainable returns
  • Balancing investment for longer term with immediate cash

flow generation

  • Balancing shorter payback/higher Capital Productivity Index

EGYPT $21m

Capex Spend

(including abandonment)

$37m

TGT $13m

125 & 126 $2m CNV $1m

El Fayum

  • Production Wells

CNV

  • No drilling activity
  • Abandonment funding

TGT

  • TGT-15X
  • Abandonment funding

Blocks 125 & 126

  • Operational Office / G&G
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Debt capacity & Hedging

  • Facility Agreement $125m, plus a further $125m on an

uncommitted “accordion” basis over Vietnam assets

  • Half-yearly redetermination of the RBL producing assets in

Vietnam now complete

  • Payment of $3.8m made in January 2020 and a further

$31.7m(1) made in accordance with the June redetermination

  • Borrowing Base at $64.5m

Reserve Based Lending Facility (RBL) Hedging

  • Delivered c.$21m of cash flow in 1H 2020
  • c.60% of Group’s forecast production in 2H 2020 hedged at $47.1/bbl
  • c.35% of the Group’s forecast production until September 2021 is

hedged at an average price of $44.8/bbl

  • Building a level of protection

Production forecast hedged for 2020

  • Initial two-year extension of licence term on TGT /CNV
  • pens discussions with banks on extending tenor of RBL
  • Longer term Debt capacity for Egypt
  • longer tenor RBL has potential to include Egypt
  • terms with NBE over Egypt being finalised

77% 60%

1H 2020 2H 2020

$61.3/bbl $47.1/bbl

(1) of which $9.4m paid in July 2020

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Asset overview

Mike Watts

Managing Director

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Pharos assets – Egypt, Israel, Vietnam

TGT & CNV

Egypt & Israel Vietnam Offshore Israel El Fayum & North Beni Suef onshore

Blocks 125 & 126 TGT & CNV Fields

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Egypt

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Reforecast drilling & completion schedule 2020

YEAR

2019 2020

QUARTER

1Q 2Q 3Q 4Q

Drilling Rig #1 Drilling Rig #2 Drilling Rig #3 Workover Rig #1 Workover Rig #2 Workover Rig #3 Rig stacked on zero rate Rig released out of contract Rig stacked on zero rate

Workover & water flood programme Workover Rig activity continues

Rig stacked on stand-by Rig released out of contract Oil production rate peaked at 7,009 bopd on 23 April 2020 Oil Price Shock 7 March

  • Management is currently

targeting deployment of capital in Egypt in early 2021 3 drilling rigs 3 workover rigs 7 wells (5 producers + 2 injectors) drilled through to April in Greater Silah Fields and N.E Tersa field

Drilling activities 1Q 2020

Egypt 2020 production guidance

5,000-6,000 bopd

El Fayum

1H 2020 Production 5,979 bopd Brent dropped to $9/bbl on 21 April 2020 (1)

(1) Source: Factset

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El Fayum - Reaction to COVID-19 and oil price fall in March as Brent reached <$20/bbl in April

(1) The Western Desert discount was reduced, initially from $2.90/Bbl to $1.50/Bbl in May 2020 and then further to $0.80/ Bbl from June 2020 onwards (2) Effective from 1 August 2020

  • “Survive & Thrive Strategy” announced with Preliminary results on 11 March 2020
  • Drilling & Work-over rig contracts terminated (30-60 days notice)
  • Cost reduction measures introduced across the board
  • EGPC informed that all non-essential investments on El Fayum would be suspended
  • Engagement with EGPC to seek improvements on discounts

and fees:

  • Western Desert discount to Brent reduced from $2.9 to

$0.8/bbl (1)

  • El Fayum discount to Brent reduced by $1/bbl to $2/bbl (2)
  • Suez Refinery handling fees reduced by $0.8/bbl (2)
  • Obtained EGPC approval to delay 1 commitment well to 2021
  • Option to seek an extension of the Exploration Term before

expiry 15 November 2020

  • ERCE subsurface model builds and development review:
  • Static Model constructed end May
  • Review and optimization of development scenarios
  • Dynamic Model for Greater Silah Area – work expected to

be completed September 2020

  • Phased Waterflood Management Project Initiated
  • Field operations centred on well intervention and water-flood

enhancement

  • Use operational flexibility to target recommencement of drilling

1Q 2021

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Extensive Prospect & Lead Inventory

El Fayum

+ Unconventional + New Plays + Northern Area Leads

North Beni Suef

Arbitrary 3D seismic line across El Fayum and North Beni Suef NE SW

Low cost upside in an area with historically high success rates

  • Deep Potential
  • Carbonate build ups
  • Apollonia
  • AR 'F’ Resource Play

Western and Eastern Desert Potential

El Fayum North Beni Suef

NE SW

El Fayum North Beni Suef

  • >40 Near Field Prospects
  • 3D seismic and infrastructure supported

El Fayum Concession North Beni Suef Concession North Beni Suef 3D data extent Fayum 3D data extent

Apache Fields

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Vietnam

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Vietnam

Vietnam 2020 net production guidance

5,500-6,500 boepd TGT & CNV Production

1H 2020 Production net

6,114 boepd

TGT field

1H 2020 Production net

4,431 boepd

CNV field

1H 2020 Production net

1,683 boepd

Cuu Long Basin - TGT and CNV Fields Phu Khanh Basin - Blocks 125 &126

  • 70% W.I. and

Operator of Exploration Blocks 125 & 126

Blocks 125 & 126

TGT and CNV Fields

Technical work continues acquired 2D seismic, gravity and magnetic data to high-grade prospective areas on which to target future 3D seismic survey(s)

Blocks 125 & 126

TGT Field CNV Field

Initial two-year extension granted on TGT/ CNV licences

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TGT highlights

  • TGT field licence extension of two years has been formally granted by the Ministry
  • f Industry and Trade in Vietnam
  • All relevant branches of Government have signed-off on the FFDP and it is on its

way to the Prime Minister’s office for formal endorsement

  • Long lead items to be ordered 3Q/4Q 2020 to support the new 6 wells drilling

campaign scheduled to start 4Q 2021

  • Targeting gross production in excess of 20,000 boepd
  • FPSO gas lift compressor upgrade completed in April ahead of schedule and within

budget

  • TGT operations focussed on a well intervention programme to manage production

improvements proactively

6 firm producers 9 contingent wells

Full Field Development Plan

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TGT Deep - 15X well

H1-WHP H4-WHP H5-WHP

TGT- 31P Deep Discovery 1Q 2019 Oil found in deeper tight E horizons tested 250 bopd TGT-15X appraisal well fracced 1Q 2020 The reservoir is too tight at this location, the deeper section of the well is currently flowing in the range of 100-150 bopd and the upper section is flowing at 200-300 bopd.

Deep & “Tight” Reservoirs TGT Producing Reservoirs

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Source Kitchen

Reservoir Seal Tilted fault block traps

Carbonate – Shallow water Fractured basement Structural trend Shelf & deep water Turbidite sands Deep water

Phu Khanh Basin Geological Model

Blocks 125 & 126

Source Type

Lacustrine and/or mangrove/swamp mudstones

Primary Reservoir

Late Oligocene-Early Miocene coastal plain, shoreface sand

Secondary Reservoir

Miocene deep water fans, Carbonates, fractured basement?

Trap

Faulted 3 and/or 4 way trap closures

Seal

Upper Miocene, Pliocene pelagic muds and intra-formational seal

  • Geological observations indicate:
  • Demonstrated source generation and migration in the

basin

  • Tertiary and basement reservoirs
  • Oil Discovery in Block 124 (100% ENI)
  • Confirms oil in the system
  • Multiple structural and stratigraphic leads identified
  • n the new seismic
  • Interpretation ongoing
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Israel

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Offshore Israel - Part of a regional MENA strategy

  • Pharos, Cairn Energy plc

and Israel's Ratio Oil Exploration are JV partners

  • Cairn is the operator
  • Low commitments - First

phase seismic studies only

  • Tamar and Zohr Play

potential

  • Option on East

Mediterranean gas play Licences

8

Working interest

33.33%

Signed

October 2019

El Fayum and North Beni Suef Concessions

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Scope for Growth

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Pharos Production and Development: Scope for Growth

Potential to increase production up to 20 mboepd within two years

Multiple development & infill drilling opportunities Illustration of the impact of different development investment scenarios on production1 Vietnam (2)

  • TGT 6 infill wells planned to

commence late 2021

Egypt (3)

  • Highly flexible approach to low

cost development drilling programme and expanded waterflood

1) Production profiles are Pharos net working interest monthly production rates, pre economic cut-off. 2) Vietnam 2P profiles are Pharos HY20 estimates and are subject to audit; TGT infill well programme includes 6 firm wells approved by partners; ministerial sign-off expected. 3) ERCE profiles; drilling programme optimisation work continues. 4) ERCE is engaged by Pharos to provide technical consulting services for the El Fayum licence and TGT.

5 10 15 20

mboepd

El Fayum 4 Rig Scenario El Fayum 3 Rig Scenario CNV TGT

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Ed Story

Chief Executive Officer

Summary

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  • Onshore, low cost, in-fill drilling path to

significant short-term production growth

  • Multiple low-risk (extensive 3D) low-cost

exploration opportunities – near-field, frontier and new plays

  • Operational flexibility
  • TGT & CNV offshore producing fields - shallow

in-fill drilling to maintain production

  • Blocks 125 & 126 – material frontier exploration

potential

  • Low-cost option for material gas

Pharos offers a platform for organic growth & multiple attractive investment opportunities

Diverse and complementary Asia-MENA E&P portfolio

Pharos regional knowledge and relationships provide route to access further material regional opportunities

Current focus is on preserving the

  • ption value of the growth potential

for existing shareholders through efficient capital allocation Material upside to be unlocked

Strategy and Outlook

Egypt Vietnam

Material upside to be unlocked

Israel

To create a Company of Scale Based on Cash Flow Growth, Capital Returns, Low-Cost Exploration & Transformational Upside

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Summary

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Survival assured Now poised for growth Strong relationships in Asia/MENA

Inventory of growth opportunities exceeds current cash flow

Using industry leverage to expand programme

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Q&A

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Appendix

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Funding cycle

Balance Sheet Cash Flow from Operations Debt Capacity Investing in our business

Sustainable Growth

Maximising production Growth through developments Low cost exploration

Free Cash Flow Sustainable Dividends

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2P Reserves Equivalent to the sum of Proved plus Probable Reserves; denotes best estimate scenario of Reserves. Also referred to as 2P Commercial Reserves bbl Barrel boe Barrels of oil equivalent boepd Barrels of oil equivalent per day bopd Barrels of oil per day Cash Cash, cash equivalent and liquid investments CNV Ca Ngu Vang Capex Capital Expenditure CEO Chief Executive Officer E&P Exploration & Production EGP Egyptian Pound EGPC Egyptian General Petroleum Corporation FFDP Full Field Development Plan FPSO Floating, Production, Storage and Offloading Vessel FY Full year G&A General and administration G&G Geological and Geophysical HLHVJOC Hoang Long and Hoan Vu Joint Operating Companies JOC Joint Operating Company JV Joint venture kbopd Thousand barrels of oil per day M&A Mergers and Acquisitions MENA Middle East and North Africa region mboepd Million barrels of oil equivalent per day mmbbl Million barrels mmboe Million barrels of oil equivalent NBE National Bank of Egypt Opex Operational expenses RBL Reserve Based Lending Facility TGT Te Giac Trang US$ United States Dollar W.I Working Interest YTD Year-to-Date

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Glossary of terms

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www.pharos.energy

Investor Relations

Pharos Energy 48 Dover Street London W1S 4FF United Kingdom Tel: 020 7747 2000 Company No: 3300821