There is good news regarding two oil wells in which Pharos Energy Plc (PHAR:LSE) owns a working interest, reported Auctus Advisors analyst Stephane Foucaud in a May 25 year-to-date report.
As such, Auctus maintained its £0.55 per share target price on the England-based energy company, trading today at about £0.23 per share, wrote Foucaud. The difference between the two prices represents a significant return to investors of about 139%.
Foucaud reported the recent developments with the two wells.
More oil than expected
One of them, the VNV-2PST1 lateral well in Vietnam is producing three times more oil than the pre-drilling estimate. Producing since late March, it is flowing at 3,000 barrels per day (3 Mbbl/d), which is 750 barrels per day (750 bbl/d) net to Pharos.
"This could have a positive impact on 2023 production expectations," added Foucaud. "It is still early stage, but this could open up the possibility of lower further development costs."
New commercial discovery
The other well, the NBS-1X well in Egypt, in the North Beni Suef (NBS) concession, encountered multiple pay zones in the Abu Roash G formation, Foucaud relayed. Thus, it was declared a commercial discovery. The well's stabilized production test rate before fracking was 470 bbl/d gross.
"The result of the well could add a few 100,000s of barrels of Proven and Probable reserves and opens a new area," wrote Foucaud.
A second well is slated to be drilled at the NBS concession later this year.
Year-to-date production
Also in Foucaud's year-to-date update, he provided financial highlights.
Pharos' total working interest production for the period between January and April 2023 was 6,805 barrels of oil equivalent per day (6.805 Mboe/d). Of this total, 5,477 boe/d were from Vietnam and 1.328 Mbbl/d were from Egypt.
This production missed Auctus' forecast by about 400 boe/d, noted Foucaud.
However, he added, "with the new Vietnam lateral starting production in late March and the Egyptian discovery well onstream in Q3/23, production over the last eight months of 2023 could be high."
Other notable financials
Receivables from Pharos' assets in Egypt increased to US$29M at the end of March from US$24M at year-end 2022 (YE22).
"This would suggest that the business has generated underlying free cash flow of about US$5M net of share buyback over the first months of 2023," wrote Foucaud.
As for net debt, at the end of April 2023, it was US$29M, relatively unchanged from YE22.
Guidance unchanged
For Vietnam, Pharos has guided to full-year 2023 production of 4,700–5,700 barrels of oil equivalent per day (4.7–5.7 Mboe/d) and for Egypt, 3–4 Mbbl/d gross, for a total of 6.05–7.5 Mboe/d.
Estimated capex is about US$23M.
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