Pharos Energy plc

Good afternoon and welcome to the Farris Energy PLC Premium Results presentation. Throughout the recorded meeting, investors will be in listen-only mode. Questions can be submitted any time by the Q&A tab situated in the right-hand corner of your screen. Just simply type in your question and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand over to Catherine Rose, CEO. Good afternoon.

Thank you, Paul, and good afternoon, everybody. Thank you very much for taking the time to join us this afternoon. We do have a short presentation to summarise events from last year, our financial results and a few operational updates, and then we will open up to some Q&A. So thank you again. Just to start us off, I'll provide a brief introduction. As some of you may be aware, I joined Pharos about 20 months ago as CEO and the priority was very much about extracting as much value from the existing assets. and ensuring that the balance sheet was strong and robust. So today, reporting full year results from 2025 is my first full year in seat at Pharos. And we are delighted to announce that we've been able to deliver on some of those key levers that we identified in order to move forward to extracting value from the existing assets. And I'll talk a little bit more about that. We have two jurisdictions in Vietnam and Egypt, both producing and both jurisdictions have appetite for exploration as well. At the end of 2024, we were able to secure license extensions in Vietnam for our two producing fields, TGT and CMV. That was really critical to us because it opened up a new development campaign, which is that six-well offshore drilling program that we really are well advanced in, and we'll talk a little bit more later in the presentation. It's the largest investment campaign in our Vietnam assets since the original development. And as I say, it was really only made possible because of those license extensions secured at the end of 24. So a lot of the first half of 2025 was spent preparing for that programme, putting everything in place, and we were able to commence that last year. We do expect that to complete on track. Again, it is on time and budget by the first half of this year. That's really underpinning the stable foundation production of our business is the majority of our production. It's also the majority of our free cash flow generation. But really importantly, those commitment appraisal wells that you see on the bottom left bullet there, TGT18X and CNV5X, Those, if successful, could drive that incremental production growth that we've guided at around 20% above just a resting natural decline and giving us that uplift. So it's been a really important campaign. We've been able to fully fund it by internally generating free cash flow. And as I say, the economics supported by the license extensions secured at the end of 2024. So exciting update on Vietnam. Again, we'll talk more operationally about that later on. Egypt, again, another successful year for us in terms of meeting some important milestones. A big part of our job in Egypt was to consolidate the two existing licenses into one new agreement. The real drive behind that was to give ourselves longer time. Again, extension of time on those licenses, but also improved fiscal terms. We do summarize those improved fiscal terms later on in the presentation. That really improved the economics to drive further investment. So last year was a relatively low activity year for us in Egypt whilst we negotiated these improved terms. That was concluded in September. Really importantly, we were able to agree a retroactive effective date, which is the 5th of October. And that's important because this consolidation is still subject to formal government ratification, which will happen during the course of this year. But because of that retroactive date, we're actually able to benefit from those increased fiscal terms from the end of October last year. One of the other concerns in Egypt that's been a huge priority for us is the recovery of our receivables position. We saw a material and growing receivable balance over the last several years, and it was really critical to us that we reduce that and have been in negotiation or discussion with EGPC, our government stakeholder, about the best way to reduce that receivables balance. We were able to secure a one-off $20 million payment at the end of last year, the last day of 2025, which meant we were able to really boost our year-end cash balance, which you can see in the third column here. What's even more important, and again, we'll talk about it later on, is the continued recovery of receivables. So whilst this one-off payment was very material and critical to us, we do need and continue to need visibility and continued payments as we go forward. So there's regularity to that payment requirement. that we see every month. That has been happening and we're able to reduce our balance even further from year end to a balance of just over $6 million today. So again, this is really giving us renewed confidence about reinvesting in a disciplined way back into Egypt, mitigating that payment risk and allowing for improved economics going forward. With that in mind, we've agreed a six-well work programme with our partner for this year. A modest programme, but one that we feel should be sufficient to increase volumes from the current level. We are about to commence that six-well work programme with the first rig identified for the first well, which we should be starting shortly. So all of those activities last year really driven the financial performance for last year. Very strong position. We remain debt free with a strong cash balance and a strong operating cash flow result. That balance sheet strength has also been able to allow us to continue our sustainable dividend. We do have a a dividend policy, but we've been able to go a bit above and beyond that and declare that 10% increase today, ensuring we try to strike the right balance between capital return to shareholders but allowing ourselves flexible financial flexibility to pursue growth. We are now looking at additional growth into the portfolio. As I say, I think last year was very successful in being able to deliver value from the existing assets to put things in place to allow us to move forward with extracting value. But we now also want to add to that with additional assets into the portfolio. And we are identifying appropriate assets to come in, really looking at existing near-term production assets. We do have our own high-impact exploration in Vietnam, which we'll again talk to a little bit later on. So exploration is lower down the priority list than near-term production. or existing production. I think it's just worth saying in this introduction slide that we are clearly in a relatively volatile scenario with commodity prices. We are seeing that across the globe. We are very fortunate that we operate in jurisdictions that have been unaffected by the Middle East conflict, but we are taking advantage of all prices, we do receive a premium to Brent for our product in Vietnam, and we've been able to take advantage. So we'll talk a little bit later on about our hedging policy. But both assets are for domestic consumption. We've had no impact. from the conflict, it's very much business as usual, but even better to some extent because of being able to take advantage of that higher oil price. And that's really capable of driving increased free cash flow generation. So we're in a very stable, robust place, good set of results today, but importantly, again, another year of activity in order to achieve further value. So that's to set the scene, I suppose, and I'll hand over to Sue.

Yeah, thanks. Thanks, Catherine. So in terms of the final outturn for 25, a strong set of results, so revenue £115 million, which was very, very good considering the breadth price was sort of circa 69 for last year. We were able to finish the year end with a 40 million in the bank, obviously doubled up by that Egyptian received full from EGPC there on the 31st of December, which was terrific news. In terms of cash flow from operations, we did actually increase cash flow from operations from the prior year, even though we had that decrease in the Brent price, so it's 55.6. In terms of the Egyptian receivables, you know, very important for us. And you can see the history of those and actually getting that position down to 7.4 by the end of the year was great news. And indeed, it continues to fall. So circa 6.1 as we sit here today. What's also worth mentioning is that the EGPC have said openly into the market that they expect to pay all outstanding debt by second quarter this year. So we should expect that to fall further and actually get to a position where traditionally we'd just see a month in order as would be normal. So that's something to look forward to as you move forward. If we could move to the next slide. Thank you. So strong cash flow. So with 30.5 million after exceptionals on a free cash flow basis, 2.9 coming in there from our farm down that we did with IPR a few years back. We've got one more year to follow through from that contingent consideration, and then that will be the farm down completed. But, you know, a strong set of results there. We spent roughly 28 million on the CAPEX program. Of course, the main majority of that going into Vietnam, into that program of work that Catherine was talking about. So we'd actually completed Two of the infill wells on TGT by the year end, they had been brought into production by the year end, and we had started on the TGT 18X appraisal well and indeed in CMV on the infill well. So as you'll see, as we come on to later, you'll see the final piece of the capital programme coming out in the first half this year. With that, could we move on please? So in terms of dividends to shareholders, obviously Catherine's announced that we're making an increase in the dividends this year, 10% increase. We have done that over a number of years, the last four years since we've been back to paying dividends. That doesn't mean that that is a programme that will continue. Obviously, we look at each year individually as to where the capital allocation goes. Obviously, with that 20 million coming in right at the year end, that gave us the confidence to increase the dividends there. But as I say, it shouldn't be taken as a given, but certainly we look at it each year on what should go into that dividend piece. Then if we move on. In terms of hedging, obviously very important, particularly with the current pricing and volatility in the market. We are not subject to an rbl or facility so we're not forced into hedging we do however take a a sort of a protectionist if you like um support to the the balance sheet to make sure that we hedge a minimum position of our portfolio to make sure that we're protecting the downside But equally, we have an opportunity to feature in some of that upside as we move forward. So at the moment, very modest. So just 24% that's been hedged in 26. And just at the moment, a modest 7% into the first half next year. As we are seeing prices, you know, prices that we can take opportunity of, we may fill a little bit more of that first half, 27, and also bring a bit more into the second half and indeed 26. So we will, as I say, layer that in, but it's protection and it allows the upside to our shareholders of the oil commodity price. And then in terms of the capital investment program for 26, so 50 million overall, you know, circa 80% of that obviously going into Vietnam. That's that continuation of the six-world program coming through. That will essentially all be spent by... The first half, 26. The Egyptian piece, as Catherine mentioned, you know, obviously we've got the receivables position that has come down considerably. We're also seeing receivables that are being received every month. So a constant pattern of that. So that going back to putting money into the ground in Egypt with that six well commitment for this year's budget. So hopefully that puts us in good stead as we move forward. forward on 2026. And with that, I'll hand back to Catherine.