TIDMPHAR
RNS Number : 5601M
Pharos Energy PLC
12 May 2020
Pharos Energy plc
("Pharos" or the "Company" or, together with its subsidiaries,
the "Group")
2020 AGM Trading and Operations Update
Pharos Energy plc, an independent oil and gas exploration and
production company, issues the following Trading and Operations
update in advance of the Company's AGM on 20 May 2020. The
information contained herein has not been audited and may be
subject to further review and amendment.
Ed Story, President and Chief Executive Officer, commented:
"The health and safety of our employees, contractors and other
stakeholders is always a primary focus of Pharos. As the COVID-19
pandemic continues, it remains at the forefront of our thinking as
we maintain production operations. Earlier in the year in response
to low oil prices, we took prompt action and cut capital
expenditure by deferring some of our largely discretionary
investments in Egypt. We are working closely with our partners to
achieve cost reductions across the business and are managing our
portfolio to ensure we remain robust in this challenging period. We
firmly believe demand for oil and gas will continue to be an
important component of the global energy mix over many future
decades and we are positioning ourselves to survive the low oil
price environment for the medium to long term for the benefit of
all our stakeholders."
Summary
-- Despite the COVID-19 pandemic, production operations continue
in both Vietnam and Egypt, with strict health and safety measures
in place. No reported cases of COVID-19 amongst staff, contractors
or JV partners to date.
-- Group working interest Q1 production 11,589 boepd net
o Egypt Q1 production 5,596 bopd; April averaged 6,396 bopd and
peaked at 7,009 bopd 23 April 2020
o Vietnam Q1 production 5,993 boepd; April averaged 6,467
boepd
-- Vietnam 2019 two-well TGT drilling campaign completed on time
and under budget, and the upgrade to Gas Turbine compressors
completed ahead of schedule in Q1 2020
-- Group revenue for Q1 2020 was c.$35.0m before the benefit of our Q1 hedges of $5.8m;
o A further $6.3m of hedging revenues have been booked for
April
o Mark to Market ("MTM") value of hedges as at 30 April for the
remainder of 2020 stands at $23.7m
o Remaining eight months of the year c.52% of forecast
production, hedged at an average price of c.$53/bbl
-- Group Q1 cash Opex was under $12/bbl
-- Cash balances as at 30 April 2020 of c.$54.5m, Net debt of c.$41.7m
-- Cash capex for full year of $44m of which over 60% incurred by 30 April
-- Dividend payments withdrawn for 2020 given the continued
uncertainly in the macro environment
-- Group is targeting an overall reduction in its cost base of c.25% across the business
-- 2020 Production Guidance
o Egypt 2020 production guidance, taking account of capex
deferral programme now updated to 5,000- 6,000 bopd
o Vietnam 2020 production guidance remains unchanged at
5,500-6,500 boepd net
COVID- 19 response
We have taken swift and robust action to help our employees,
contractors and other stakeholders to stay safe and well. Our
production operations in Egypt and Vietnam have not been disrupted
by COVID-19 and, in line with the government directives in Egypt,
Vietnam and the UK, measures are in place to minimise the risk of
any outbreak occurring. In Vietnam, in addition to following
government guidelines, the HLHVJOC has implemented a policy of
testing all staff for COVID-19 before transfer to offshore
operations. In the event that a case of COVID-19 is identified
offshore, personnel evacuation plans and other mitigation measures
are in place to ensure that the impact of any outbreak is quickly
contained and operations are maintained.
In Egypt, at the El Fayum base camp, Petrosilah has implemented
robust health and safety and social distancing measures to mitigate
the risk of any cases of COVID- 19 arising.
In the UK and Vietnam, office staff have been working from home
with negligible disruption to the business. In the Cairo office, in
line with Egyptian government guidelines, social distancing
measures are in place; half the staff work from home and half in
the office on a two-week rotation with negligible disruption to the
business.
Outlook
We have acted promptly to protect the balance sheet and preserve
the resilience of our business in order to survive in a prolonged
period of low oil prices. The business in Vietnam is well
positioned with its low breakeven price; and in Egypt, we are using
the break in drilling activity to improve revenues, costs and
productivity. Our approach to hedging will stand us in good stead
this year while we shape the business to be fit for purpose for the
future.
In a prolonged oil price environment the company has flexibility
across the business and continues to evaluate alternative scenarios
for its Egyptian assets, where the inherent flexibility offers a
range of operational options if the downturn progresses.
Financial Update
We have worked quickly to ensure that the business is resilient
and can survive if there is a sustained period of low oil
prices.
Cash/net debt
The balance sheet entered in to the March oil price downturn in
a strong position with cash balances at the start of the year of
$58.5m and net debt of $41.5m. Cash balances as at 30 April 2020
were c.$54.5m with net debt of c.$41.7m.
RBL
The scheduled half-yearly redetermination of our RBL over the
assets in Vietnam is underway with a price deck under discussion
with our banking group and a full update will be provided when this
is concluded, expected to be in July 2020.
Hedging and revenues
Our hedging positions provide some protection for the year with
credit of $5.8m taken in Q1 and a further credit of $6.3m in April
plus a MTM value as at 30 April of $23.7m for the remaining hedges
in place. For the remaining eight months of the year, we have
approx. 52% of our forecast production, hedged at an average price
of $53/bbl.
Group revenues for the three months to 31 March were approx.
$35m plus $5.8m from hedging. The average realised oil price per
barrel achieved for the same period from Vietnam was $58/bbl
representing a premium of nearly $6/bbl to Brent and for Egypt
approx. $46/bbl, representing a discount of approx. $5/bbl to
Brent.
Egypt receivables
Our receivables continue to be settled in Egypt and at 31 March
2020 stood at $12.1m comparative to $14.3m at year-end 2019.
Capital expenditure
As announced at our preliminary results on 11 March we have
reduced our capex for the year by c.$13m and the cash capital
expenditure for 2020 is planned to be c.$44m with the programme and
activities as set out in the operations section. Over 60% of this
capex has already been incurred by 30 April.
Cost base
The Group is targeting an overall reduction in its cost base of
c.25% across the business. As non-operator of the assets in both
Vietnam and in Egypt, we do not have direct control over Opex and
JOC G&A levels but, as with the capex deferrals in Egypt, we
are working closely with our partners to identify potential cost
savings and revenue enhancements. EGPC, our partner in Egypt, has
targeted cost reductions of 25% across the supply chain for the
industry in Egypt. Similarly in Vietnam, we are working with our
partner, PVN to target a 25% cost reduction.
All UK payroll staff have accepted a voluntary 10% reduction in
salary with a further review in three months' time. Executive
Directors have volunteered a reduction in salary of 25% for a
period of at least four months. Savings on all contracts are being
negotiated with a target minimum G&A saving of 25%.
Impairment
The drop in the oil price is a clear indicator of impairment and
we will run our DCF valuation models for our half-year results
using the oil price curve at that date. If the pricing remains
unchanged from the current market position, we would expect a
significant impairment on our Group assets.
Dividend
The Board believes it is appropriate to withdraw dividend
payments during 2020, given the continued uncertainty in the macro
environment.
The Board will continue to use the well documented capital
allocation criteria to assess where and how to spend any free cash
flow generated. The key goals are to preserve balance sheet
strength, to invest in growth opportunities in excess of the cost
of capital and to generate sustainable returns to shareholders.
Operations Update
Our diversified production portfolio is positioned to see us
through the downturn. We have significant operational flexibility
onshore Egypt and steady production from offshore Vietnam.
Egypt
El Fayum Production
We are seeing the benefits of the three drilling-rig programme
in Q1 2020 reflected in increased production levels relative to
year-end 2019. Production from the El Fayum Concession averaged
5,596 bopd from 1 January - 31 March 2020; in April, production
averaged 6,396 bopd and production peaked at 7,009 bopd on the 23
April 2020. Taking into account the capex deferral programme and
the consequent scaling back of drilling activity for the remainder
of the year, the Egypt 2020 production guidance has been adjusted
to 5,000-6,000 bopd.
El Fayum Development and Operations
In Egypt, three drilling rigs and three workover rigs were
operating through Q1 2020. Seven wells (five producers and two
injectors) were drilled in 2020 through to April in the Greater
Silah Fields and the N.E Tersa satellite field. The combination of
production and injection wells allows the water flood programme,
which is the critical element for secondary recovery within the
overall field development, to be gradually extended across the
fields. The increased field activities resulted in an increased
level of production, peaking at 7,009 bopd on 23 April 2020.
2020 Work Programme
The discretionary drilling programme in Egypt has been scaled
back to preserve capital in the present uncertain macro-economic
environment. Two drilling rigs have been released, and one remains
cold stacked at zero rate, until drill site preparations are
completed to enable drilling of the remaining two contracted wells.
Other than these two wells, there will be no further drilling
activity for the remainder of the year or until the macroeconomic
environment improves. However, during this period production
operations will continue in the field. The modern artificial lift
systems installed in all El Fayum wells provide maximum operational
flexibility for individual well control, with minimal input
required to shut-in or ramp-up production as needed.
One workover rig has been released, one remains on zero rate
standby, and one remains operational to perform well maintenance
operations. Work on the well intervention and water flood
management programme will continue utilising the remaining active
workover rig. Forward operations will be focussed on enhancing
productivity from existing wells through recompletions, the
addition of new producing zones, and the conversion of selected
existing production wells to injector wells.
The ultimate target for the water flood management programme in
the Greater Silah and N.E Tersa fields is to have 100% voidage
replacement. The water injection rate needed to achieve this target
is around 40,000 barrels of water per day (bwpd), however during
the current period of no further drilling activity, the voidance
replacement rates will be limited to approx. 8,000 bwpd.
In addition, the subsurface static and dynamic models are being
updated to incorporate the results of the 2019 and 2020 drilling
campaigns. This work will allow further optimisation of the
water-flood pattern and facilitate optimised reservoir management
through better well spacing when drilling recommences, which will
further improve sweep efficiency, well deliverability and lead to
an increased recovery. Reprocessing of the 3D seismic data across
El Fayum started in August 2019 and will continue resulting in
improved seismic resolution for optimising the location of future
in-fill producer and water injector wells.
GHG emissions
Further reductions in GHG emissions are anticipated through the
implementation of a second phase of associated gas generators.
However, this work will continue at a reduced pace during the
downturn. Solar power sources for satellite wells are also under
investigation for future installation at more remote sites.
North Beni Suef
Preliminary work is underway to load and interpret the large
pre-existing 3D seismic survey on the concession. Work during 2020
will focus on technical and investigative work on wells previously
drilled on the concession.
Vietnam
Vietnam Production
Production from the TGT and CNV fields net to the Group's
working interest average was 5,993 boepd from 1 January- 31 March
2020; April production averaged 6,467 boepd. This is in line with
the production guidance issued on 8 January 2020. The Group's
Vietnam production guidance for 2020 remains unchanged at
5,500-6,500 boepd.
TGT Q1 2020 production averaged 14,334 boepd gross and 4,322
boepd net to Pharos. CNV Q1 2020 production averaged 6,684 boepd
gross and 1,671 boepd net to Pharos.
Vietnam Development and Operations
Block 9-2 - CNV Field
No further drilling activities are planned on CNV for 2020. The
planned permanent conversion of the water injection pipeline to gas
lift and flow the CNV-6PST1 well has been deferred due to the cost
reduction initiatives during the downturn.
Block 16-1 - TGT Field
No further drilling activity is planned on TGT for the remainder
of 2020.
The TGT-32I, injector well, which spudded in November 2019 was
completed as an oil producer and its conversion to a water injector
has been deferred due to cost reductions.
The TGT- 15X well, which was targeting the main Miocene and
Oligocene producing sands and also appraising the deeper Oligocene
D & E sequence play, reached target depth (TD) on 28 February
2020 and was dual completed. The well is currently producing from
the upper section; however, the deeper section, did not flow when
fracture stimulated as the formation is tight.
These two wells comprised the firm well 2019 drilling campaign
and were completed on schedule and within budget.
TGT Compressors and FPSO Tie-In Agreement (TIA)
The upgrade of the TGT Gas Turbine compressors for the Leased
FPSO on TGT completed ahead of schedule in April and within budget.
The upgraded compressors are able to process the lower specific
gravity Third Party gas more efficiently and are now operating at a
higher discharge pressure.
Negotiations on the TIA between the HLJOC and the current
counterparty, Thang Long Joint Operating Company (TLJOC)
continue.
Vietnam 2020 Work Programme
Operations for the remaining part of the year for TGT are
focussed on a well intervention programme to proactively manage
production. We anticipate some incremental production improvement
in the TGT-H1 platform wells in Q2 from intervention work, which
means deepening the gas lift valves in all the H1 wells. This work
is expected to commence in May.
Stimulation efforts will continue on the deep section in the
TGT- 15X well during Q2.
An updated TGT Full Field Development Plan (FFDP), which
includes drilling six producer wells commencing in 2021 has been
approved by all Partners and is awaiting final approval from the
Ministry of Industry and Trade, however the approval time line is
extended and under review due to COVID-19 related governmental
lockdowns in Vietnam
On Blocks 125&126, technical work continues on the acquired
2D seismic, gravity and magnetic data to identify areas to acquire
a 3D seismic survey over high-graded prospective areas.
Israel
The commitment work programme is to reprocess all of the
existing 3D seismic vintages previously acquired across the eight
licences by various contractors, in order to provide a uniform data
set. The operator has started preparation for this work, which is
expected to commence in 2020.
Corporate
Remuneration
Upon his appointment on 13 March 2020, the incoming Chair, John
Martin, volunteered to reduce the Chair fee by 25%. Subsequently
and in addition, the Chair voluntarily agreed a further 25%
reduction in the 2020 fees along with the Independent Non-Executive
Directors, Rob Gray, Marianne Daryabegui, Lisa Mitchell and
Geoffrey Green who have all voluntarily agreed a 25% reduction in
their 2020 fees. The Executive Directors have voluntarily agreed a
reduction in base salary of 25% for a period of at least four
months effective from 1 May 2020. All UK staff and country managers
have voluntarily agreed a temporary 10% reduction in base salary.
The Company is also introducing more stringent cost reduction
targets into the Key Performance Indicators. We will continue to
assess further cost--saving opportunities available to us as the
situation develops, whilst balancing the long--term requirements of
our business.
Annual General Meeting
As announced on 17 April 2020, as a result of the requirements
of the UK Government with regard to social distancing, and in order
to protect the health and safety of our shareholders and employees,
the Board has decided that the AGM this year will be convened with
only one Director and another Pharos designated shareholder
representative to be in attendance at the venue for quorum purposes
to conduct the business of the meeting. In line with the UK
Government Stay at Home Measures, shareholders will not be
permitted to attend the Company's AGM in person and, if they
attempt to do so, will regrettably be refused entry to the meeting
under the Company's Articles of Association.
Board Changes
As previously announced in March, Lisa Mitchell joined the Board
of Pharos as an Independent Non-Executive Director and Chair of the
Audit and Risk Committee with effect from 1 April and, as announced
in January, Geoffrey Green will join the Board of Pharos as an
Independent Non-Executive Director with effect from the conclusion
of the Company's upcoming AGM. In January, Pharos announced that
Ettore Contini, Non-Executive Director, would not stand for
re-election at the upcoming 2020 AGM, following 18 years of
service. The Board would like to thank Ettore for his service and
wish him all the best for the future.
Enquiries
Pharos Energy plc Tel: 020 7747 2000
Ed Story, President and Chief Executive Officer
Jann Brown, Managing Director and Chief Financial Officer
Mike Watts, Managing Director
Sharan Dhami, Group Head of Investor Relations
Camarco Tel: 020 3757 4980
Billy Clegg | Owen Roberts | Monique Perks
Notes to editors
Pharos Energy plc is an independent oil and gas exploration and
production company with a focus on sustainable growth and returns
to stakeholders, headquartered in London and listed on the London
Stock Exchange.
Pharos has production, development and exploration interests in
Egypt, Israel and Vietnam.
In Egypt, Pharos holds a 100% working interest in the El Fayum
oil Concession in the low-cost and highly prolific Western Desert,
one of Egypt's most established and prolific hydrocarbon basins.
The Concession produces from 10 fields and is located 80 km south
west of Cairo. It is operated by Petrosilah, a 50/50 JV between
Pharos and the Egyptian General Petroleum Corporation (EGPC).
Pharos is also an operator with a 100% working interest in the
North Beni Suef (NBS) Concession, which is located immediately
south of the El Fayum Concession.
In Israel, Pharos together with Cairn Energy plc and Israel's
Ratio Oil Exploration, were successful in their bid for eight
blocks in the second offshore bid round in Israel. Each party has
an equal working interest and Cairn is the operator.
In Vietnam, Pharos holds a 30.2% unitised working interest in
the Te Giac Trang (TGT) Field in Block 16-1, which is operated by
the Hoang Long Joint Operating Company and a 25% working interest
in the Ca Ngu Vang (CVN) Field in Block 9-2, which is operated by
the Hoan Vu Joint Operating Company. Blocks 16-1 and 9-2 are
located in the shallow water Cuu Long Basin, offshore southern
Vietnam. Pharos also holds a 70% interest in and is designated
operator of Blocks 125 & 126, located in the moderate to deep
water Phu Khanh Basin, north east of the Cuu Long Basin, offshore
central Vietnam.
Glossary of Terms
$
United States Dollar
GBP
UK Pound Sterling
AGM
Annual General Meeting
bbl
Barrel
boepd
Barrels of oil equivalent per day
bopd
Barrels of oil per day
bwpd
Barrels of water per day
CASH or cash
Cash, cash equivalent and liquid investments
United Kingdom
APEX or capex
Capital expenditure
CNV
Ca Ngu Vang field located in Block
EGPC
Egyptian General Petroleum Corporation
FFDP
Full Field Development Plan
FPSO
Floating, Production, Storage and Offloading Vessel
G&A
General and administration
GHG
Greenhouse gas
JOC
Joint Operating Company
JV
Joint venture
HLHVJOC
Hoang Long and Hoan Vu Joint Operating Companies
M
million
Opex
Operational expenditure
Petrosilah
An Egyptian joint stock company held 50/50 between the Pharos
Group and the Egyptian General Petroleum Corporation
RBL
Reserve Based Lending facility
TGT
Te Giac Trang field located in Block 16-1
TIA
Tie-in Agreement
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
AGMBCGDUCSBDGGB
(END) Dow Jones Newswires
May 12, 2020 02:00 ET (06:00 GMT)
Grafico Azioni Soco (LSE:SIA)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Soco (LSE:SIA)
Storico
Da Apr 2023 a Apr 2024