Pharos Energy Share Discussion Threads

[yasx] 16/8/2023 20:16

OilAl,

Thanks for your considered thoughts, as always.

"The bottom line is : do you think the company is going to remain solvent into next year and will not need to issue any fresh equity? "

I think you hit the nail on the head - my initial reaction on the first announcement of the leak was that this may prove existential, but the more recent update to my mind removes that prospect and I think any short term financial effects arising from the downtime and repair will be managed.

Hopefully no further nasty surprises and I earlier today did increase my exposure despite being mindful of potential risks for the reasons you have alluded to - if they can ride this out it will prove to have been an incredibly good opportunity in a year or so from now.

[oilinvestoral] 16/8/2023 17:53

Hi Yas "I wish they disposed of the entire thing (Egypt) at a substantial loss"....I agree but I doubt her ego would allow that. That would be admitting defeat! Remember she was parachuted in late 2016/ early 2017 as part of the business development team to secure acquisitions using Soco's 140 million war chest! After a 2 years of hunting far & wide, Merlon is all she could find ...Like you, my opinion is that if they could find someone to pay 50-60 million, I say dump it and move on! Not worth the hassle (specially with the growing receivables mountain)!Re Jadestone: yes I've seen the update. All things being considered, it's probably as good as could've been expected! The fact that that the leak posed no safety or structural risk, nor any risk of a hydrocarbon leak to sea gives some comfort that hopefully NOPSEMA won't be overzealous with any pre-restart stipulations.There was an ominous reference to the RBL having a requirement for Montara, not to be shut in for a continuous period of 60 days. I was initially concerned when I read that but I think they were required to declare this so that if anything else happened over the next few weeks, they can't just drop that bombshell on the market later. I don't actually think (based on the issue discovered thus far), that we are looking at an extended shutdown but who knows what inspections on tanks 4P and 5C might unearth... The bottom line is : do you think the company is going to remain solvent into next year and will not need to issue any fresh equity? If so , it is extremely cheap for a company potentially producing 25,000 BOPD starting next June from a highly diversified asset base! PS: full disclosure... I have been buying at 23p and my average is now significantly below the recent placing price so I'm very biased (DYOR)!

[yasx] 16/8/2023 08:35

OilAl,

I wish they disposed of the entire thing (Egypt) at a substantial loss, although I doubt any party would pay a meaningful sum.

Re: JSE

I assume you have seen the Montara update - thankfully it seems the issue can be adequately contained, but on the flip side my reading is it may lead to a technical breach of the RBL which may have some financial consequences. I say this on the basis that the Co. has thought it appropriate to mention the 2 month cessation of output as a factor that triggers such a breach and have done so since they think it likely to be that long or fairly close to that.

Hopefully will get a further update in a week or so. Any thoughts?

[oilinvestoral] 15/8/2023 11:19

I mentioned a few years ago that future case studies in value destruction will be written about the Merlon acquisition...The recent progressive research note (which reads like it's been written by PHARcical as it has the usual tone of blaming others for their inadequacies) stated that if they continue to huff & puff in Egypt with 1-2 rigs they'll reach 5000 bopd net to Pharos by 2027. Then comes the more important question: will they get paid for it? Egypt receivables are currently on an escalator upwards! Egypt needs heavy investment and heavy investment needs EPC to pay their bills! It's a chicken / egg scenario!

[yasx] 15/8/2023 09:18

We live in hope.

The process of securing a partner is taking a disproportionately long time and Egypt continues to be a thorn in the side of Pharos.

The only activity here is inactivity.

[biotechbull] 10/8/2023 19:18

Also, I don't think the analyst's NPV model can be right. It suggests c. $40m NPV for Egypt at $55 oil. That's $50 after El Fayum's discount, the govt takes half = $25/bbl, opex is likely $18/bbl but is maybe a bit less if they can scale up a lot, call it $16, so implies netback pre all capex of only c. $9/barrel. They need to spend >$10m/yr to keep even current puny production flat, so they'd only break even at 'FCF pre interest' at $10m/$9/bbl = >1.1m barrels/yr or c. 3,000 barrels/day net to PHAR. We're running at <1,500bbl/day. It would cost probably $10s of $ms capex to get production up to those levels again. So where's the positive cash flow for the NPV?

[meanreverter] 10/8/2023 13:39

stepone68 : It's pretty much linear: 38.4 — (51 — 38.4) = 25.8.

[stepone68] 10/8/2023 11:34

What about $55 ?

[biotechbull] 10/8/2023 10:55

To reassure punters here, if you use a more sensible $75 not $65 Brent price the NAV/share pre the contingent consideration from IPR and the receivables balance is around 51p - the lazy analyst doesn't put the numbers in the sensitivity chart!

[cwa1] 10/8/2023 06:51

Progressive Research have initiated coverage of Pharos...



(You need to sign up)

It's research is entitled Back To Growth and is written by Peter Hitchens

Initiating coverage: Back to growth
Like the rest of the industry, Pharos Energy was impacted by the Covid-induced collapse in the oil price, at a time when the company was heavily investing in Egypt. Net debt rose to US$57.5m at end-FY21. However, management has farmed out 55% of its Egyptian assets and put through significant cost-cutting measures, reducing debt to a more modest level of c.US$16m at the end of June 2023. Pharos is now in a position to restart returning cash to shareholders (via a dividend and buyback) and we believe it is set to increase investment, including commitment exploration, which should be a significant driver of shareholder value

...Valuation. We explore a potential value for Pharos’s assets through a RENAV (Risked Exploration Net Asset Value) analysis, using a conservative flat Brent oil price of US$65/bbl. We achieve a value of 38.4p/share, which could be boosted by an additional 7.0p/share should Pharos get paid for
its receivables and receive deferred cash payments for its Egypt farmdown. Note that this valuation is for information purposes only and does not represent a target price.

[bhoddhisattva] 08/8/2023 11:21

Eventually another major holder will see the light and back Bradley …

[yasx] 08/8/2023 10:27

Fair point.

If he increases his exposure, that really will be interesting. He is proceeding at a leisurely pace since this has been insufficiently liquid to do things more swiftly.

[oilinvestoral] 07/8/2023 19:00

Yas While I agree he can't change anything by himself, I don't think he is on his own. The recent votes at the AGM can attest to that. There's clearly an undercurrent of disgruntled shareholders. Even the thought of action and a change of direction might be enough to get management to improve their lacklustre performance to date. I wonder if he will continue to add / accumulate...

[yasx] 07/8/2023 09:45

OilAl,

Unfortunately Bradley can call a meeting but other than that he he little ability to induce or effect change since Jann knows that she has the backing of the majority of the notifiable holders. It needs one or more of them to align with Radoff to ensure that any attempt to change the Board has sufficient backing to see it through.

[cwa1] 04/8/2023 10:07

Bradley keeps on hoovering up...




Now over 10%

[oilinvestoral] 04/8/2023 10:03

RNS OUT: Bradley Louis Radoff has just broken the 10% threshold. Looking forward to his open letter to management and/ or requisition of a general meeting.

[yasx] 27/7/2023 12:42

OilAl,

Nice to hear from you and thank you for your thoughts.

More assets in Egypt! Tin hats and all that.

Of course, more seriously, I doubt Pharos will be bidding for anything anywhere. The farm-out process has been dragging on for some time and one hopes a conclusion to that is not too far away.

Failing to increase the number of rigs in Egypt has always been an issue and I don't see that changing unfortunately.

Unless I am confusing it with another Co., I seem to recall they always had 10 or 15pc vote against certain resolutions in the past and so it is nothing new. Will have to check in case my memory is failing me.

[oilinvestoral] 27/7/2023 08:56

SDX energy recently received bids from unnamed parties for Egyptian assets. I just hope we are not involved!!!!

[oilinvestoral] 26/7/2023 09:01

In the recent AGM , there seemed to be a large protest vote against the reelection of the 2 stewards of this titanic. Jannice then did a video interview saying all resolutions were passed with flying colours (or words to that effect)! Call me old fashioned but I wouldn't call a 15% vote against your re-election something to brag about. Talk about not reading the room. It seems that Radoff isn't too happy with Pinky and the Brain. I can't wait to read his open letter to management.

[yasx] 24/7/2023 10:12

No sign of OilAl - wonder if he has moved on. He always offered a sensible, balanced view of affairs at Pharos.

[controlledmadness] 24/7/2023 06:50

Did anyone notice that since the 5th of July the RNS on purchases now include the total bought and the cost.
Well done the board.

[dunderheed] 21/7/2023 17:50

Hi Yas - maybe you're right (?!) It just irks me that I think everyone now recognises Vietnam is the quality (why it's holding relatively well) and Egypt the weight around PHAR neck - which of course is all Mike and Jann have actually brought to the table since their tenure here, IMHO.

[yasx] 21/7/2023 16:08

Dunder,

Perhaps that is the strategy - keep hitting the ground and eventually she might hit oil!

However, Pharos is holding up well, despite (and not because of) Jann's leadership.