Pharos Energy (LSE:PHAR) — FY24 Results

0:00 Good morning, and welcome to the PHAROS ENERGY PLC Preliminary Results Investor Presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can view the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to split the following poll. I'd now like to hand you over to CEO, Catherine Rowe. Good morning.

0:30 Thank you, and good morning, everybody. I really appreciate everybody taking the time to join this morning's presentation. We did release our results last week, but thought this was a good time to open up to all of you who've joined, to listen this morning. So thank you again. I'm joined this morning by our CFO, Sue Rivett. So the both of us will be presenting this morning. We'll take you through, the results for the full year '24, but also some of the critical items that we've been working on and also importantly, things to look forward to for this year and beyond. And then, obviously, we'll be closing at the end, with some q and a, and happy to take your questions and answer as much as we as we can. So just moving forward, I'd like to start with an overview.

1:21 For those who are of you who are not aware of of PHAROS, we have two producing jurisdictions, two producing oil assets in in Vietnam and Egypt. And I think what we're doing today is presenting just, how they have delivered those assets financially and operationally, during the course of of last year. But importantly, what we can do this year to grow and extract further value from those assets. And it feels, very much, to to the business that that we're at a turning point in terms of growth ahead and actually capitalizing on that strong financial position, and looking to grow and scale our business. So how do we do that? Well, we have existing quality assets that are delivering that stable production that you see in the results, meeting guidance for last year.

2:09 And that has allowed us to look for, additional growth of those assets and and, as I say, extracting further value. We did require some catalysts in order to look forward for an additional work program. One of those key catalysts was the granting five year license extensions in our two producing assets. So if you can see here on the left hand part of that middle box, the TGT and CNV assets are our producing assets, and we were given an extra five years from the current term granted just before Christmas, last year. What that's allowing us to do is move forward with an activity, drilling activity campaign for this year, and we'll we'll talk a little bit more about that later on.

2:56 We did have a successful two well drilling program in TGT last year, which is really important to to sustain volumes. They are mature, producing assets. So we do need to invest in order to maintain those production volumes. But as I say, really important and critical now is actually how we look to grow incremental volumes from those existing assets. And again, I'll talk a little bit more about that later on. In Vietnam, which is our core core asset base, we also have our exploration potential. And I know some of you are are very aware of of these exploration blocks one two five and one two six. They've been part of the PHAROS portfolio for many years. It is a deep water frontier exploration, opportunity.

3:45 And with that comes a high degree of risk, but also potential high high reward. So what we're looking to do is balance the ability to give shareholders exposure to that, and and ultimately, the the absolute priority is to see, block 125 drilled in the near term. What we haven't been, able to announce today is is a partner, for that exploration, but we are continuing our discussions. And one of the things that is coming out of those discussions is the need for more time on the license in order to progress a a partner. So with that in mind, we we've applied for a two year license extension for blocks one 25 and one 26, which would take us towards the end of twenty twenty seven, and that provides future optionality, for us to to to see that that drilled.

4:42 What we do feel is very confident that that extension, will be approved, mainly because of the strong relationship we have with Petro Vietnam, our government stakeholder in in Vietnam. It's critically important we have a strong relationship with our government stakeholders in both Vietnam and Egypt. And having demonstrated those five year license extensions in the producing assets, we do feel confident, that we will be given, extra time to pursue our exploration. The other thing that we did last year was made a financial commitment of around $5,000,000 of long lead items in order to progress the drilling of that exploration opportunity. And that really provides some tangible evidence to the government that we're serious about seeing that drilled.

5:30 We've made the commitment, and, that will will put us, in good stead for securing those license extensions. So that's something that that we hope to be able to talk about in the coming months. So that's Vietnam. We also have producing assets in Egypt. Egypt, whilst less of a core to the to the overall business, is self financed. It is a self contained part of the business, so it does, fund itself. And I think that's an important part because it contributes a group level whilst also, being a profitable entity in its own right. However, in order to move forward and increase volumes, we're currently producing 1,400, 1,500 barrels a day from Egypt. We'd like to see that increase materially.

6:20 In order to do that, we need an increased time on our existing license, and we also need improved fiscal terms. And and how we're trying to achieve those is through a consolidation of the two existing license concessions concessions into one agreement, and this is this is, a well trodden path. There are precedents in country of this having happened. There are other conversations with other companies in country going going on in the same vein. So it's well understood, by EGPC who is our government partner. And, again, in order to demonstrate that we're making tangible progress on this, we were able to sign a memorandum of understanding with EGPC last month at the annual conference. And that's a critical milestone for us because it's not only dictated some of the key commercial terms, but also showing that the the government is moving forward in a meaningful way with our

7:16 discussions. Once those discussions have concluded, it will incentivize both ourselves and our partner, to reinvest in the assets, in a very meaningful way, and hopefully deliver those incremental volumes that we're trying to do. And, again, just to just to remind everybody, we are nonoperator, in Egypt, so we do follow our operator IPR, in order to to to get further reinvestment coming through. So we've got plans and work programs identified in both Vietnam and Egypt to move our business forward. And the the the ability to do so is is also helped by the financial performance that we see with the business today. We're able to reinvest back into our assets because we're financially capable and able to do so. And that's really helped by removing the leverage that the historical debt.

8:13 We repaid that fully last year, so we sit here debt free today with cash, and a healthy operating cash flow, from last year as you can see of that 54,000,000. That does also allow us to continue our sustainable dividend policy. The dividend policy has been in place for several years. It's an important part of our investment proposition. It does protect the downside. It does deliver a tangible income return to shareholders whilst we're trying to create capital, return as well through through the assets. So we feel like we're getting a healthy balance of allocating capital towards the ongoing dividend. We do have a policy, a set policy of no less than 10% of operating cash flow. But we've announced last week that we've increased that, and we were able to increase a 10%, year on year dividend last week. So we're we're pleased about that.

9:08 And I have now been, in seat at PHAROS as the relatively new CEO for for nearly nine months, and it's really enabled me to have a very good understanding of of the assets, the opportunities, and how we grow this business. I spent a lot of time in Vietnam and Egypt, getting to know our stakeholders, better understanding of our assets, better understanding of the economics, and really what we can do to allocate capital to drive the best returns for shareholders. So that's really been my priority. As I say, we're working on some of those, immediate near term priorities such as the extensions, such as the consolidation in Egypt and now moving forward to, you know, how do we grow our business. And this is one of the first times in in in in the company's last few years where we've really been able, to look at new opportunities, not just within the existing assets, but possibly outside and adding to the portfolio and and and having the the financial ability to to do so. So really strong position.

10:11 I'll just move briefly on to slide four here. Just gives you a a a an overview for those not so familiar. As I say, Vietnam very much the core part of this business, very much where we prioritize and allocate capital. And Sue will be talking a little bit about this in a moment. Egypt, again, contributes to group. Lots of opportunity. There's a lot to like about Egypt. We do have a legacy receivables position, because payment risk is still one of the concerns. But we are very clear that unless we can see a reduction in those receivables or we use them in country, that's that's what we mean by sort of self funded growth in in Egypt.

10:57 So we work every day to reduce that receivable balance. And last year, we received $26,000,000, from EGPC, which enabled us to to reduce our and and take out our existing debt. So there is still opportunity to recover those receivables. And, again, we'd like to see that coming through, later this year. And and, Vietnam, I've talked about, mostly in terms of the key catalysts. So I'll come back a little bit later on just to talk about the the activity predominant in Vietnam for this year. But at the moment, I'll hand over to Sue for a more in-depth review of our financial results. Thanks, Sue. Thank you, Catherine. I'll just move over to my slides. So just picking up on the '24 results position. So strong revenues there, 136,000,000 coming into the group.

11:51 As Catherine mentioned, the hub of the group, if you like, or the core is Vietnam. So 85% of that coming from our Vietnam assets there. I think the key for us was moving to a debt free

12:07 position during the year. So 16,500,000 in cash as we finished the year. I mean, that was very much ably assisted by the Egyptian receivables as Catherine mentioned, just under 26,000,000 that we received from the government there. I mean, we do still have 29,500,000 at the end of the year that was outstanding to us. And so very much something for us to to go after and bring into the into the balance sheet. I think also important there in in the left hand side, the OCF, so the operating cash flow, 54,000,000. That's important because that's the criteria that we use for dividend setting. So it's a minimum of 10% of that number.

12:55 So important there. If I move to Slide seven. So strong cash flow from operations there. So 80 odd million and then you've got obviously taxes to government coming out there. So getting to your 54,000,000 of OCF. We've invested circa 26,000,000 into the assets themselves. So that two world program in Vietnam taking up roughly two thirds of that position. And indeed in Egypt, where we've been able to utilize some of our Egyptian pounds there to invest in the assets and continue to keep those stable.

13:43 Also worth noting, so you've got £24,600,000 there, the operating free cash flow before distributions, but you've got the 8,200,000 that's continues to be important. That was the carry, the to do with the farm out to IPR. So 5,000,000 roughly of that is to do with carry, which finished in the first quarter last year. And then you've got 3.2, which was to do with the contingent consideration. So we've still got two more years of that contingent consideration to run. So, again, so part of that still to look forward to, but the carry is now finished. Moving on to slide eight. So a couple of charts there just on the cash. So we went from 33,000,000 at at the end of the previous year to 16.5 at the end of this year. But, of course, we've paid down that big wedge of debt essentially to on the RBL and National Bank of Egypt, so 41,000,000 going out there.

14:49 We've also indeed spent just under 10,000,000 in share buyback and dividends to shareholders, etcetera. So a good position. And just put pointing out on the right hand side there, you know, if we'd have got the money in from the Egyptian receivables or more money in, I should say, then we could have ended the year, you know, just under 50,000,000. So, again, something to look forward to as we move forward. Just to give you a bit more color on the split between Vietnam and Egypt and what they both bring into the party. So Vietnam itself, 27,000,000 there coming in from from the asset. And indeed Egypt adjusted of of 17,000,000.

15:36 And that's got that 8.2 in which I spoke about earlier. So, you know, part of that will continue into the next two years. Let's say that around the three level, but the the five has has now gone, which was the carry position. So so again, you can see that both jurisdictions bringing free cash flow into the into the business. And, of course, the the the 52,000,000 at the end there, that's the repayment of of debt and indeed dividends to and share buybacks to our shareholders. And just pulling out again that the point, the sustainable dividend shareholders very important to us, part of our DNA. And as Catherine announced, we have declared a 10% increase in the dividend to one two one from one ten last year. So obviously, that has to be ratified at the AGM, which is in May.

16:40 And as we move forward to the next slide. So just telling you a bit about the spread of possible capital spend this year. So we've got a range there. So at the smaller end, you have 37,000,000, top end of 66,000,000. And very much that's driven by sort of an ambition, if you like, to go after the top end. Just to explain what's in the the bottom end there, we've got a a commitment well on 18 x in Vietnam, TGT, which is to do with the license extensions. And we've also got long lead items in there for five additional wells in Vietnam and plus a modest program of work in Egypt. So that's the lower end of the scale. What we really want to go after is that top end.

17:35 And what that means effectively is that we would be drilling six wells in Vietnam. So four on TDT, two on CMV. And we would be looking for a sort of similar a

17:51 program of work, one rig on CMV and one on TDT. So so running those together. So as I say, so that's our that's our ambition. Why would we want to to go after that spend? You won't see the production this year. It will, of course, come into next year and beyond. So what we're actually aiming for is is something in the order of 20% increase in production for next year and into the next three to four years. So so that's the the the prize there. Also in Egypt, as Catherine mentioned, we've got the consolidation discussions ongoing with the government. Again, we we would like to do a more ambitious program and bring the number of wells up there, but also obviously that production target. So again, a bit more of an aggressive position there. So I think, you know, that's great for us to to go for.

18:50 The bids in Vietnam are being opened currently by the JOCs. So we'll be able to give more information on that in the next few weeks. Just going over to slide 12 there. So just trying to give you the valuation of the company as as as you all know, the market cap, very modest $11.09. The assets themselves, $26.04, that's your build up from Vietnam, Egypt, plus the working capital and cash balance there. But indeed, other things to go after on the right hand side, you've got the commitment appraisal wells, which we'll be doing hopefully later this year on both CMV and TGT.

19:37 The Egyptian consolidation to go after that will give us longevity of the license, which will actually obviously increase the value plus increase in fiscal terms. And then we're looking to move two c into two p on all of our assets and indeed one two five, one two six, which we talk about there. So hopefully lots to to look forward to as we move forward. And with that, I will hand back to Catherine. Thank you, Sue. So we're just moving a little bit more just about activity for this year in Vietnam, which ties into, Sue's discussion on capital allocation and and really where the capital is allocated and and what do we hope to achieve by by doing so.

20:26 So just starting with TGT, as a consequence, of the license extensions and and just, just for for clarity, this license extension was was extend this license was extended to 2031. I think some of the the questions we've had is, you know, what is the new, expiry, post extensions?

20:48 So TGT was 2027. It is now, 2031. So you can see that we've we've got some time to to reinvest, recover the costs, obviously see the benefit of those additional production volumes. So, what I'd like to point out here is is 18 x appraisal well. It's that bottom left, yellow, box. That is our commitment well, and that's the first well that we'll be drilling later this year. We've guided q four for that. But as Sue says, bids are out. We're we're starting to plan for that, and and see if we can drill that as soon as possible. What's really important about this is that it's potentially opening up a new part of of our existing block. Obviously, you can see our existing production here in the green.

21:34 But what we're targeting, is that pale pink, part of the of the of the concession, which opens up a a potential new area. And that's what eighteen x appraisal well is really designed to do. If that is successful, which we hope it will be, it opens up a a whole new, development program here on the left hand side, and that's what we want to to try to go after because that will deliver incremental volumes rather than just sustaining, the current production. In parallel and unrelated, but as as part of, an important piece of of work on the asset is also our infill wells, and you can see those green infill wells, identified there. And those are the the long lead items that that we need to commit to in order to see those drilled that that you just referenced, that's part of our capital allocation.

22:28 The beauty of this is that the infrastructure is in place. Again, on the right hand side, you can see our existing infrastructure. We do not require additional wellhead platform. So this ties in, as you can see, that gray outlined box to our existing platform. So very, very quick and easy to get on stream in in a successful situation. So absolutely, the right thing for us to be going after, the right thing to be reinvesting back into the assets, and the right deployment of our of our capital priority. So so that's really important, and made possible, obviously, with the extensions because, obviously, we've got further time on the license to recover those costs and make the economics work for us. So we are in a a JOC. Again, just a reminder, we're in a JOC type structure in Vietnam.

23:14 So we have ourselves, Petro Vietnam, our government stakeholder, and our Thai partners, PTTP. We are fully aligned to move as quickly as possible with that drilling program. And if we can run as fast as possible, you'll see some of that lower band CapEx move into the upper band that that Sue's just talked about, and that's what we want to get after. It's a similar story in CNV. Again, just to remind everybody that the license term now extends to 2032. It was, '28. It's now '32.

23:49 We've we've got additional time here to to pursue the same story. We have eight, five x. As you can see there is our commitment appraisal well, and that's designed to appraise block b here on the right hand side, just on the right hand side of our block. Again, with well design, we do not need a new platform, in order to tie this in. So that's, made the economics improve quite significantly for us. And, again, we're planning for that. Hopefully, we can also drill this well,

24:22 later this year, if not early next year. So, hopefully, that gives a little bit more color on what we're trying to achieve in Vietnam with the existing the existing our existing license and existing production. In Egypt, again, you know, we have a work program, that is relatively minimal at the lower band, in in Sue's CapEx lower band. That's really based on existing environment, the existing the existing commercial environment with the existing terms. When we are able to conclude the consolidation discussions, we will then look to accelerate an investment program, and that would move some of that investment into that upper band. And that's really based on, as I say, increased time, which will give us an immediate uplift a bit like we saw in Vietnam, but also that motivation and incentive and and improved economics to to reinvest.

25:22 But critically for PHAROS, again, we're very clear that this has to be self funded growth. You know, we do we'll not deploy dollars, that we earn in Vietnam into Egypt. It will be self funded, any growth there. We are making progress. It is part of a a process in terms of government approvals. So we've attempted to give some indicative timing here. It is a bit unknown, but we are making progress. And let's say, I think that MAU signature last month, we were one of the few, to sign an m o the MOU in that vein. So that does demonstrate that there's alignment from all parties. And, again, our operator IPR is driving this process as operator, but we're very, very much sort of on the same page in terms of what we're looking to achieve, because it works for for all parties.

26:18 So that's helps to explain, the difference between the the lower band and the upper bands in terms of CapEx. We do think the upper band is ambitious in terms of just how much activity we can physically, do this year, but we really want to demonstrate that we're able to fund that even that more, aggressive CapEx budget through internally generated cash flow. Also worth saying that we assume we make an conservative assumption that we have not recovered any additional receivables from Egypt, which we clearly hope will be the case this year. We'd like to see that that $30,000,000 balance coming down, but we don't assume that for for the purposes of funding our CapEx program or or indeed the the shareholder, return through the dividend.

27:08 So I think just, in order to sort of maybe round up before we we, take some of the questions and and try to answer those, this is a real turning point for PHAROS. You know, we're really looking forward. We're looking at growth. We're looking at scale. We're looking at delivering more and more returns to shareholders in the best possible way. Vietnam is absolutely core to our business. It underpins our long term cash flows, and it's the right place to deploy capital for for the reasons I just explained. And we have high premiums to Brent. It's it's very it's more profitable oil production than than perhaps we see in Egypt.

27:53 Having said that, Egypt can fund itself and can deliver incremental volumes, if we ensure we have the right commercial framework. So we're very disciplined about that, but also clear that that it contributes, at group level as well. And partly, obviously, as we've mentioned before, it's that those recovery of receivables from Egypt, which have come through, albeit lumpy, but they did come through last year. That allowed us to to deleverage the balance sheet. So we we sit here today with an unlevered balance sheet and and firepower that in itself gives us financial flexibility and firepower to to go after growth, not just with the existing assets, but possibly outside of the existing portfolio.

28:38 So I think that's really important that for the first time in a while, not only do we have accessible opportunities, but we have the ability to to be a credible counterparty, to be funded, and to have the strength, to be part of these conversations. And, again, just to touch on 125 and 126 again because I know, for some of you longer term shareholders, this has been an important part of the investment proposition. We are taking a fresh look at that, and and that was something that I was able to do coming in new. You know, is this an important part of the portfolio? Should it should it be here? Should we be moving this forward?

29:15 And we all feel that the answer is yes. And, you know, we do need to buy, extra time. We need additional optionality to to progress those discussions. And we do feel that the overall macro sentiment for frontier exploration, it is is certainly improved than perhaps a few years ago. It's a strategically important basin in that region. If it unlocks, we saw we saw exploration success, towards the end of of last year, in the Kulong Basin, the southern part. We saw an exploration success with Murphy who are now moving forward with an accelerated appraisal program. So we have an opportunity, and we need a fresh approach, and and that's very much, the next priority that we're working on. So we are trying to deliver a balanced portfolio of stable, healthy, profitable production with some exploration upside, all of which is underpinned with a very strong balance sheet and a shareholder return through the dividend. And and, hopefully, we can deliver shareholders an income return as well as a capital return, over the coming year or two.

30:30 So I think with that, I I I thank you very much for listening. We try to keep it as as succinct and efficient as possible, and obviously, we can address some of the questions. So thank you. Perfect. And thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions, and you can do so just by using the q and a tab that's situated on the top right hand corner of your screen. But just while the company take a few moments through the questions that have been submitted today, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. As you know, have received a number of pre submitted questions and we have received questions throughout today's live event. And Manan, at this point, if I just hand over to you to share the q and a, that would be great. And then I'll pick up from you at the end. That's great. Thank you. Thank you, Catherine and Sue, for your presentation. The company has received a number of pre submitted questions ahead of today's presentation.

31:19 For ease of reference, we've grouped them into relevant categories. The first one is about blocks one two five and one two six. What happened to the PHARMAP partners who were actively engaged in the PHARMAP process for blocks one two five, one two six for more than two years? If I recall correctly, one potential partner even had a deep water rig in the area ready to meet the 2025 deadline. Can you reassure investors about the quality of these exploration assets? Yeah. Thanks, Binan. And, yeah, I think it's without dwelling on sort of previous discussions that that the company's had on on on the exploration prospect. I think, you know, having having had a a review, a fresh review, with the team, there is confidence.

32:06 There is confidence in in the in the opportunity. Even on a p 90, we have a billion barrels of oil. We have a full CPR that's available on the website so you can see, some of the the results of that CPR. So, yes, it is technically interesting, and it's strategically interesting, and it's one of the few frontier basins left under under underexplored. So, you know, we feel confident. But but what we can't do is risk the the entire PHAROS business based on sustainable cash flows or on drilling a a deep water high risk exploration prospect by ourselves. So I think that's been clear over the years. It's still very clear even with a a a refreshed view of strategy, that we cannot do that on our own.

33:00 We do need a partner to to do that. And we need a partner that is not only willing and able to fund an exploration well, but also has the potential for for for developing that in a success case. So there aren't a 100 different, potential farming partners. It it it is relatively bespoke in terms of people that would be interested, but there are discussions. And I think, you know, one of the questions we had which might be related is is why have we not achieved success, thus far? And there's a number of reasons for that. Sometimes it doesn't fit portfolios. It's oil, not gas, and there were a few discussions who who would prefer a gas play.

33:46 It hasn't fit expiration budgets to date because of other priorities. I think certainly with the recent discovery in the Southern Basin, that's changing a little bit. I think certainly with Vietnam's increased attraction or or or ability to attract international capital. You know, we have new legislation in Vietnam as of last year, a new petroleum act, which designed to to streamline the approvals process, attract additional capital. And there's certainly an an impetus from Petro Vietnam to be to be opening up as they see more activity in the region. They also want to be part of that. So so I think things are changing in terms of that respect. We are taking a revised approach to the process.

34:35 I would say that's something that we're putting in place, that that we've done differently from previous. And I say we've given ourselves, extra time on the license with with that extension request to enable those discussions to continue. So we we do feel confident, but we're not gonna do this without a partner, and those discussions, take a bit of time. But but it is a it is a high priority. So in terms of giving shareholders confidence, you know, we will give we will we will make sure that we owe it to ourselves to to to give this, the best possible opportunity, for a successful partnership. And we believe it's good enough. But as I say, it it it it's it's, you know, not not a wide number of of companies that that would, have the ability, to fund such a program.

35:27 Thank you, Catherine. You state you're applying for an extension of the license for blocks 125126. What are the odds of this being granted? Are you just kicking the can down the road? Yeah. I mean, it's a good question. You know, we saw e and I just e and I have the block above us. We saw they just secured an extension in January, so there's there's recent precedent. And, obviously, there's always the argument of you just kicking the can down the road. I think for PHAROS, it's different because we have made that commitment to the long lead items. You know, we committed $5,000,000 worth of of drill kit, last year, and that's those those items will be will be delivered this year. So we we do have some tangible, ability to say that we we were serious.

36:17 We've also got a lot of activity in TGT and CNV with Petro Vietnam. So so that all, very much helps, demonstrate to the government that this is our priority. This is this is fundamentally the majority part of our of our core business. So, yeah, we do feel confident. It it's not done till it's done, and I think we're very clear about trying to manage expectations. It will take a few months to to go through the process. We've received some positive feedback. So that gives us an element of confidence, but, you know, we'll be announcing when those extensions are secured. That's great. Thanks, Catherine. What are the top three lessons that we have learned as a company from the format process for blocks one two five, one two six that we can use in the future?

37:08 I think the you know, we've we've realized that it's technically interesting. A lot of the the feedback has been about strategic fitting that into strategic exploration budgets and priorities. And I think that's the piece that we see changing with a a more favorable macro environment, I would say. Fantastic. Thanks, Catherine. Moving on to m and a. Where does m and a currently sit within the company's capital allocation priorities? Is it something that's actively being pursued? Catherine, can you add some color and give private investors some idea of the efforts you're making in the m and a front? EG, how many assets you're screening per quarter and how many make it to due diligence.

37:56 Also, please provide some color on scale and size of potential acquisitions. Okay. Well well, just just sort of stepping back on on strategy, I think, you know, what's really important is we extract and and deliver as much value as possible from the existing assets. So so number one priority, that I saw when I joined and, you know, I I see even more clearly now is the need to reinvest into those existing assets because of the high netbacks, the the the profitability, and and leveraging the strength of of the government. We've we've been in country in Vietnam for decades, and and we have a really long standing relationship with Petro Vietnam. So if we can't leverage that, then we're doing something wrong. But but we can leverage that, and we've demonstrated that already.

38:43 You know, we we we we identified that we needed extra time on the licenses. We secured those, and we're moving forward with a with an investment drilling program. So so growth initially, very near term growth is coming from the existing assets. However, we would like more in the portfolio, and we would like to do more in Vietnam if possible, because we know we know our way around. We have a strong relationship with the government. These are relationship driven environments and and relationship driven jurisdictions. So that's the advantage we've got. But would we look more regionally at accretive asset additions? Absolutely. But then I would also say that that anything that can deliver shareholder return is something worth us looking at.

39:32 I think given the strength of the business now, we are cautious about just not doing it and something for the sake of it. It would need to to stand. It would need to give a return. It would need to be accretive. So whilst it's quite hard to sit here today and say it looks like sort of this or that, it it probably is you know, we we probably are looking at additional production, I would say, because the reason I say that is because we've already got our own exploration upside in the portfolio. And, again, priority is to move that forward rather than looking at funding exploration elsewhere. You know, we absolutely have to, look after our our homegrown assets first, and then add to that as as we see. But we we are looking for opportunities. We would like to scale and grow the business. We think we can do that a a little bit organically, and we think we can also do it inorganically. So I hope that's at least gives a bit of a flavor as to how we look at how we look at growth.

40:31 Really helpful. Thanks, Catherine. How are you planning to fund acquisitions? Have you had any discussions with lenders regarding potential m and a capital that could be provided? What scale of debt would you be comfortable taking on? Will you be issuing bonds or RBL? Well, too early to say the structure, but, you know, we do sit here with an unlevered balance sheet, and the best time to secure good terms for for firepower is when you don't need it. So, you know, that is something that we're looking at, absolutely. And, you know, we would use our balance sheet, to fund, the right transaction if we found it. And by that, I mean, something that pays back, producing assets that are cash flow that that cash flow generate in order to repay.

41:22 The level of debt, what depends on the size of of the opportunity that that we'd be comfortable with. And we do have the ability, to support RBL be because of the stable production and cash flows. So we could look at a number of different things. And, again, the RBL versus bond plays in a little bit to how much we we would be comfortable, in terms of facility that that that we could take on at at this stage, but that it's conversations we're certainly having at the moment. Sue, I don't know if you wanted to add anything to that. No. I I think that's absolutely right, Catherine. You know, it'll depend on the the size of the prize that we're after and and therefore, you know, we'll look at it from there. But, yes, as you say, we are actively Yeah. In discussions with with things. So And I think it helps on it helps our position as well as a counter party if we can go into discussions with a a strong balance sheet plus the firepower, as I say, you know, that that puts us in a very healthy position when looking at opportunities.

42:29 Thank you, Catherine Sue. Did the company consider the recent assets sold by Harbor Energy in Vietnam? They appeared to be value accretive for PHAROS at the price they were sold at. If we did not participate, why not? Mina, is that you might have said so. Sorry. I could I could take that. Yeah. Absolutely. I mean, that's that's that's a great great question because it's a great example of something that we would like to do. We were not in a position to do it this time last year when those discussions were were ongoing. So but that is that is a really good example of an accretive transaction that that we'd like to be involved in, and, you know, that was that was interesting to see. And, again, good read across for us, you know, seeing EnQuest coming in as a new country entry, which is the first time Vietnam's seen a new country entry for a little while, it is all positive. But, yes, that's that's the sort of transaction that's interesting.

43:35 Great. And have we participated or considered participating in the upcoming Malaysia bid rounds? They have exploration, discovered resources, and late life assets in these rounds with favorable PSC terms. If not, why? I would say again, just to reiterate, you know, we we we leverage we've gotta leverage what we've got, what we're good at. You know, we we're really good at, ensuring stable production in Vietnam, and now we've got a chance to grow. So whilst we would look more regionally, I would say Vietnam is the priority. And in terms of expiration, as I said previously, we've got our own very, exciting frontier exploration, and that's got to be the priority if we're looking at at funding a moving exploration program forward.

44:23 That's great. Thank you, Catherine. The next few questions are with regards to Egypt. Has the receivable situation in Egypt continued to improve in 2025? Do you want me to take that? Yeah. Yeah. Mean, I I would say it's been quite a slow quarter in in 2025, but, you know, I I I think we would expect to see that that pick up. We did very well last year with the 25,500,000. So over and above what our revenues were. So we actually clawed back a bit of our receivable position there. And we what is good is that we now start to see monthly payments coming in.

45:08 So you whereas last year, some of the amounts were quite lumpy. What we are seeing now sort of in the last six months or so is that there is monthly payments coming through. Also, we are now able to accept Egyptian pounds having got out of that carry position. We will accept some Egyptian pounds in order to fund in country expenditure. So that's also helpful. And what I would also say is that we are now seeing for the first time for probably a couple of years that we're able to exchange some Egyptian pounds into to US dollars. So so I think, you know, the country is improving, but, you know, there's still there's still a a way to go.

45:56 Anything else to add on that, Katherine? Don't think so, Sue. Only just that that confirmation that we assume we don't assume that that we've reduced that balance, for the purposes of our CapEx program for this year, which I think Yeah. Absolutely. For us to to to have that fiscal discipline. That's great. Thank you, Sue. Thank you, Catherine. Does the company think it's feasible that Egypt production can be increased back to the early twenty twenty levels in the short to medium term? Can we expect a multi rig drilling program in Egypt? Yeah. Well, I certainly think we can see multi well drilling program. That that's absolutely part of the consolidation discussion. So, obviously, the quid pro quo for us in increasing our our economics in the consolidation of of their licenses.

46:47 It is a work program, an investment program. And, you know, Egypt want additional investment. They they need every single barrel additional incremental barrel of of produced. So what comes with that is a commitment for an investment program, and a drilling program, designed to increase volumes from from where they are today. Do I think they'll get back to those twenty nineteen, twenty twenty volumes? You know, that that that's hard in the in the short short term. But do I think we've got an opportunity to at least sort of double, existing production in in Egypt? That's that that, I think, is achievable. Great. Thank you. In the recent results, you referenced in country experience when talking about inorganic growth.

47:35 This suggests you have a focus on existing geographies. How do you feel about the Egypt assets? Can you please reassure shareholders we're not going to double down in Egypt and repeat the Merlon situation, at least not before EGPC have cleared their 2018 arrears? Yes. It's the it's the short answer. Yes. You know, we are very, very clear. And and I say, I think that's why it's been very, very important for us to to take a hard look at Egypt. And as I say, to the extent that it's self funding and it finances itself, it contributes to the group level. And I think that's what we've tried to show today with with some of Sue's slides that that that the contribution, that Egypt makes.

48:22 But because of the receivables, because of the payment risk, it's partly why we use that high discount rate as well. I mean, you will see some of our peers using a discount rate of 10% for Egypt. We're using just below 15 because we take a conservative approach, on the valuation, but but also in terms of what we do with with those, those that receivables position. So until we see that balance, and that payment risk reducing, it it makes us cautious on reinvestment. Absolutely. And as I say, what we're very clear about is not utilizing Vietnam generated free cash flow for further investment in Egypt. So really hope that that's clear. Thank you, Catherine. Moving on to strategy.

49:11 Have you considered a dual listing in an exchange that's more welcoming and receptive to your resources companies, EG in North America, to get the share price closer to NAV? One of your UK listed peers have recently moved to Canada, has grown multiple. I think a general listing in itself does does is not a silver bullet. Yes. Valuations in North America tend to be healthier, and the discount slightly less. I mean, we do see that discount here, as we identified, and, again, we're we're we're we're not alone in that. But I I at this stage, there are no plans to do that. Certainly not at the size that we are. It makes more sense, when we have achieved some scale and growth, and and and we just have to focus on that in terms of of our strategy at this point in time. And as I say, having having an unlevered balance sheet allows us to to fund that growth without having to rely on equity and without having to to be effectively restricted by that that NAV discount with our share price. So no plans at this stage for a business our size, but but always a possibility as we as we move forward and and grow.

50:37 Thank you. Why are we still mentioning COVID nineteen in the annual results in March 2025? Can you confirm that working from home measures have now ceased? Yes. Yes. I think for for this business, COVID was was quite, fundamental in terms of shaping the future. But, you know, as far as I'm concerned and the the the the management and board are concerned, we we look forward. We are very active. We we've got a lot of opportunity to go after, and and we're all working hard, and and and we don't have working from home measures in place anymore. That's great. Thank you. With regards to shareholder returns, a shareholder asked, the dividend yield is only 5% this year.

51:23 Many of your peers are yielding 15 to 20%. Could this be one of the reasons that we trade at a larger discount to NAV versus our peers? I think, shareholders different shareholders want different things. We have some shareholders who value the dividend, and I think that's important for us. As Sue says, it's been part of our investment proposition for a number of years, but also, I think, demonstrates the quality of the assets that they're capable of of supporting a sustainable dividend. So so it's important to us. But, actually, also important is the capital growth. So we can't allocate all our capital back into a double digit dividend at this point in time where the assets need reinvestment. You know, peers are doing different things, and and there might come a point wherein wherein a position to increase that return.

52:16 But at the moment, the balance is about achieving a sustainable dividend that is long term sustainable, so so not just here one year, not the next, but also allows us that reinvestment back into the assets. And and these are oil and gas assets. So, you know, they do need reinvesting, and and we're at that point now where we need reinvesting back into the assets, which for us is is great because that demonstrates growth and a future for the business. So that that works for our strategy right now. Thank you, Catherine. Why did you not extend the share buyback program given the fact that the shares are currently 10% lower than the average purchase purchase price and also lower than when you stated they were undervalued in July 2022 prior to the program? Do you now see them as fairly valued? Is the current shareholder register part of the reason for stopping?

53:10 The share buyback program was considered several years ago when there wasn't the level of investment activity, and and, obviously, the share price was lower as well. So I think to answer the question, do we feel we're fully valued? No. We tried to demonstrate that in our valuation slide that Sue presented, and I think there's lots of upside for our business that's not captured. And and even on just a trading, even just on a production trading basis today, there's clearly a gap. So so so that that's not the case. But what we have done is, again, looking at where do we prioritize capital for the best return for shareholders. And given the the low liquidity in our stock and given the need for growth and scale, it's better use of our capital at this point in time to to to put that back into the assets than the buyback, how whilst keeping the dividend. So it's clear that we also, want to to sustain that tangible income return to shareholders.

54:11 But, again, as the buyback, it is just partly a function of of the low liquidity, not necessarily the makeup of the register, but just the fact that it's it is relatively liquid and tightly held. Now we will keep an eye on the buyback. We we look for additional buyback authority. We will be doing that as ordinary course business at the AGM, because we like the flexibility of being able to to to reinstate that policy if if we feel that's the best use of capital. But that's the reason we paused it at this point in time because of that CapEx program and the assets that we've got this year. That's great. Thank you, Catherine. We will now move on to the live questions that were submitted during this presentation.

54:58 The first question is from Andrew F. How progressed are the JOC's plans for Vietnam to deliver the upper band CapEx program? Have separate rig tenders commenced? They are well progressed, and the rig tenders, are as part of one discussion. So they're not separate discussion. They're not separate tenders. They're they're together, and, obviously, the the reason for that is is for better better commercial terms. So, yeah, we we're getting really good support. We're getting some really healthy pressure, I would say, from Petro Vietnam to to run quickly and to move as as quickly as possible. I mean, we do have some lead time because of certain items. We have weather windows, etcetera. So we that's all part of the process. But I I'd say that the JAC is really very aligned and and and wanting to move as quickly as possible.

55:49 That's really helpful. Thank you. Question from Anthony b. What are the liabilities linked to license 125 and 126? If PHAROS is unsuccessful, is there a commitment from the company, or can the company simply really push the license and walk away? Okay. Thanks for your question. Yes. There is a financial commitment linked, to 125 and 126. They're together. Just, again, to be clear, 125,126 is together essentially as as as one license. And there is a financial commitment. Obviously, that's designed to encourage drilling. In the event of of no drilling, that's a a dollar commitment $15,000,000.01 5. Having said that, obviously, that will be moved with the the the extensions.

56:39 So if we're granted those tiers tier extension that we've discussed, that liability will be moved. In the event of of an unsuccessful farm in, we're unable, then we are thinking of other ways, to maybe, work with pet Petro Vietnam, possibly in the producing assets to see what we can do about, about that liability. But in the short term, we are moving that to 2027, with the extension of the the TI license approval. Thank you. On the same topic of 125126, Sam s asked, can you clarify what exactly you have changed about the format process and why you deemed following a different process is important?

57:29 We we've reviewed the process given the lack of partnered to to date. So, you know, just just the fact that we're here, still in discussions with potential partners, has highlighted the need for a fresh approach. And that's something we're working internally. I think we'll share more details of that when we formalized it. That's great. Thank you. Due to due to the interest of time, we will take one more question before handing it back to investor and your company team. Omar f and Nigel g asked, when do you expect to receive the $29,500,000 owed in Egypt? What would be the plan for Egypt if payments from governments doesn't come through or slows down?

58:16 Really good questions. As I say, we would have liked to have seen a little bit more reduction in balance of that receivables in q one in our in our first quarter. As Sue mentioned earlier, we are seeing regular monthly payments for for sales. But what we haven't seen yet this year is a reduction in those historical invoices, which we're continuing to chase. And this is all part of the discussion of of further reinvestment in Egypt, so it's all linked. The question of what would be the plan, what would be the plan for Egypt if payments don't come through, then we just slow down investment, or or we make sure that investment is just in in maintenance of the existing production.

59:02 But, again, there's real emphasis from the government that they want to see further investment, further production, and that's got to come with with a a reduction in those receivable balance. And we're all as I said, there's a number of us, the peer group in Egypt, that are saying the same thing. So it's it's it's full awareness by the government. It's not lack of understanding on their part. It's just the ability. And as more bailout funding comes through to the government, the the the more flexibility financially they'll have to hopefully settle those receivables. So in in really short summary, we don't have, perfect visibility, but we do know that the the the wherewithal is there to reduce that balance. Certainly, we'd like to see that re reduced throughout this year.

59:50 That's great. Thank you very much for answering all of those questions from investors. Of course, the company can review all the questions submitted today, we will publish those responses out on the Investor Meet company platform. But perhaps just before redirecting investors for their feedback, Catherine, could I just ask you for a few closing comments? Thank you. And, yes, I would just like to say thanks again for everybody to for taking the time and know how busy things are and and for listening to the proposition this morning and letting Sue and I present our investment case to you. We do feel that we have a number of catalysts this year, a number of news flow items that that we look forward to delivering and ensuring that we can deliver on those items that we've we've talked about today. So, please do continue to follow us and take an interest. We really appreciate the support, and look forward to a successful year for PHAROS.

1:00:40 Thank you. Catherine, thank you once again for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? On behalf of the management team of PHAROS ENERGY PLC, we'd like to thank you for attending today's presentation, and good morning to you all.