Pharos Energy (LSE:PHAR) — Interim Results

0:01 Good afternoon, ladies and gentlemen, and welcome to the PHAROS ENERGY PLC Interim Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during today's meeting. However, the company will review all questions submitted today, and we'll publish those responses where it is appropriate to do so. Before we begin, we would like to submit the following poll, and your participation, I'm sure, will be well received by the company. And

0:33 I'd now like to hand over to CEO, Jan Brown. Good afternoon, Jan. Good afternoon, and thanks, everybody, for your interest and for joining us today. With me presenting are Sue Rivet, our CFO, and Mohammed Syed, our group head of technical. We're gonna go through the presentation at a bit of a pace because we've already got quite a few questions in, and encourage you to submit any, during the the presentation itself so that at the end, we've got time to focus on the bits that that really interest you. Okay. Can we move to the first slide, please, Manan? So when we were here in March, we talked about resetting the dial, and we've come a long way since then. We've got production guidance that we're well on track to meet, supported by that and the oil price. We've had very strong cash generation, in the first half of the year and continuing, and that's given us choices. We've been able to invest into our assets, but also, we've initiated a share buyback program in July, which is ongoing.

1:39 And last week, we announced the framework for the resumption of regular dividends, which will start in 2023. We've also announced our commitment to net zero, and both the dividends and net zero will come back to you at the end of this slide deck. Then Moe will go into the detail on the asset side, but just a very, brief high level overview. Vietnam, we're drilling, starting this month. The objectives of the drilling program are really about maintaining production levels. But when you've got payback periods on drilling of about six to seven months on TGT and netbacks for the Vietnam production, of over $50 a barrel at a $100 oil, This is production well worth maintaining.

2:31 We're also in the process of requesting license extensions to take the licenses through to the early twenty thirties. Also in Vietnam, we've got Block 125, which is an exciting basin opening play, the largest undrilled or virtually undrilled basin left in Southeast Asia. Seismic substantially complete. There were some delays and largely COVID related on processing the seismic, but it's nearly complete. The well planning is ongoing, and there are a number of parties that have already, indicated interest in farming in. So that's Vietnam. In Egypt, we announced in July that we had secured a rig on long term contract. Anyone who follows the industry in Egypt knows that this is a very hot market for rigs.

3:20 That gives us the foundation to, drill, El Fayoum and help get those production levels up. And even more importantly, what Mo will talk to you about is further value enhancements that he has under review with IPR. We're also gonna drill the first well on our exploration block, MBS, in q four. And just as a reminder, we are fully carried for all joint venture costs, OpEx, CapEx, and g and a. And with that, I'll hand you over to Sue to talk you through the numbers. Thanks, Jan. Yeah. If I could take you through the first half, results, I guess we should start with the production number. So just under 8,000 barrels of oil per day there.

4:10 We we should put that on a like for like basis because during the period, we farmed down from a 100% to 45% on our Egyptian producing assets. And so on a like for like basis, that comes up to just over 9,000 barrels a day. So pretty flat period on period with the same period last year. I should mention the Vietnam production 8% up, which is important. As you would expect, the revenues have increased considerably this year, $130,000,000 essentially up because of that oil price, 65 in first half twenty one versus just under $110 for this period. So a great result there in terms of the oil prices.

4:58 From a cash generation perspective, up over 200% to 57,000,000. So great cash generation from our operations there. In terms of the balance sheet, we've seen a strengthening of the balance sheet up to 300,000,000 there. That's largely the result of being able to take bring back impairments that we'd written in previous period. So a reversal of that largely due to the oil price, but also due to

5:30 an improvement in the fiscal terms in Egypt with that cost recovery improvement from 30% to 40%, which gives us an extra 20% on our revenues. And if I could move to the cash flows, Vinand, that would be great. Thank you. So in terms of the the cash flows, we we end the the half year at 47,500,000, so so up 20,000,000 in the period. I'll just concentrate on a couple of numbers there. So 10.1 consideration received, that's from IPR, our new partners in Egypt. 3,000,000 of that is cash consideration, and 7.1 is part of the carry that we're starting to to to come into, you know, taking from the deal itself. And I'll come back to the deal later in the slide decks.

6:24 In terms of other things to note, they see the 7.5 and the 6.7 and in and out, basically, that's the National Bank of Egypt facility that we have, which is very much a working capital facility, allowing us to draw down and back. So very good facility to have in our toolkit, if you like. And then if I could move to the net debt. So concentrating on the four columns there, you'll see operating cash flow 27.6. That number is important as we move forward, and Jan will talk about that as part of the dividend position that we've announced to today. So 76,000,000 coming in there from operations.

7:10 Unfortunately, taxes, we all have to pay our taxes. So 27,000,000 going out there to to the government for those. Also important that I draw your attention to the 18.9, which is an adverse movement on the working capital position. Of note is the Egyptian receivables, which is 14.9 at the end of the period, that was 7.5 at December. That increase is largely a factor of a catch up invoice that we were able to put into EGPC for that improvement in the fiscal term. So so, you know, partly to do with that, but also we'll also pick up the fact that in country, there is a limited US dollar position, and and therefore, that was is impacting the receivable position as well. But I'll pick up on that later on as we move through.

8:07 In terms of the next slide, please, Manan. So on hedging, we've put a bit more color in the hedging here that that you've asked for previously. Previously. So we've we've put the swaps separately against the zero they're all zero cost colors, I should say, there, but that gives you the volumes that we've traded and the prices that have been achieved on those products during those periods. What we should say is that the hedged production is moving from fairly heavily hedged a few months back to a lot lower position as we move forward. The first half was 45% that was hedged effectively to protect the balance sheet.

8:53 As you know, 35% of the volumes the Vietnam volumes have to be hedged for the the RBL. So just to confirm on that. If we move forward to the Egypt position, please, Manan. Thank you. So in terms of Egypt, you'll have seen the fiscal terms before in our results. That's at 7,000,000 that I mentioned, the catch up invoice for past sales, which is good to be able to send that into EGPC. In terms of the deal, so small cash consideration, 5,000,000. By far, the biggest chunk, the 37,000,000, is the carry that Jan mentioned, and that was essentially the money to kick start, again the development program there.

9:43 During the period, we've utilized 7,100,000 of the carry, and we expect to utilize a further just under 14,000,000 in the second half with 16,000,000 being carried into 2023. So, you know, a great position there. We're carried not only for CapEx, but OpEx and G and A. Also of note is the contingent consideration. So anything above Brent price of 62 up to a cap of 90.5, and we'll achieve a 5,000,000 over the next four years. So we should expect to see 5,000,000 into our bank account first of June next year in US dollars. So that would be the first of the four year period. So and then if I could move to the next slide, please, Vinad. Thank you. So in terms of the cash CapEx forecast for the full year, we would have been we would be spending around GBP 44,000,000.

10:45 However, we have funded on that carry for GBP 15,000,000 of that, so down to GBP 20,000,000 that we're funding from our pockets, if you like.

10:57 And in terms of 2022, 23 key considerations, revenue still being received direct into our to our account. We should obviously address the receivables position there, the lack of liquidity of US dollars in country. And, you know, we are working on that very hard. I'd say, you know, we've got about six projects going to improve the dials there to make sure that we can get US dollars converted rather than accept Egyptian pounds, which is, you know, it it it's in difficulty at this point in time. So in terms of Vietnam, so some low breakevens, fast payback, as as Jan mentioned. So six to seven months on the TGT wells, wells we've got there.

11:52 The CMV well takes a little bit longer, much more stable production, lower stable production, so around twenty four months. But the great thing is we're back to dividends and share buybacks as we move forward. So thanks very much with that, and I'll hand over to Moe to update you on the technical side. Thank you. Thank you. Couple of things before we get in the slides. Number one, you've heard the highlights from Jan, which shows the strong performance in the first half of the year. So I will not go through all the details of what she has already communicated. I I will will not not also be reading every word on the slide. I will hit the main point. I will give you a little bit of details.

12:37 Because of the time, I cannot give you the full details. However, I'd like this to be more interactive, so the time on the q and a, I will be more than happy to answer any of the questions you may have. And some of the questions that already been submitted will will address some questions. Okay. Just jumping right into it. As you can see in the plots in the middle, it shows a steady strong performance in, in Vietnam, in TGT in the top

13:03 plot, and CNV in the bottom plot, which, still underpin our, we're confident that we're going to deliver the guidance. Same. We delivered the guidance last year and the year before, and this year, we're confident we'll meet the guidance in Vietnam. The performance in TGT is underpinned by the four wells we've drilled in 2021, which you can see them on the map on the right highlighted in yellow. So you can see on the map, four wells highlighted in yellow in yellow. These are the four wells we drilled in 2021. The two wells we plan to drill in 2020 at two are highlighted in orange, and you can see they're, planned to be in different fault blocks.

13:48 The first of the two back to back wells in PGT is already started, and we're, like, three, four days into drilling.

13:56 On the map also is referenced nine contingent wells without specific location on this map. The significance of those contingent wells is because, there is a pathway to monetize two c to two p, and I will pick up on this in the next slide. Okay. So next slide, please. Starting from the left side with TGT and staying with the operations team, the operation team in Vietnam did a really good job fixing the compressor issue that happened late last year. Early in the quarter, in q one, so this way contributed, to production and help underband that steady strong performance in TGT.

14:41 Away from the operations, the subsurface team have been working on updating the full field development

14:47 plan for the contract extension. NTGT contract extension to 2031 gives us an additional two years with roughly 1,300,000 barrel of oil equivalent net reserves to PHAROS just because of the timing. The nine ones I've mentioned in the previous slides will be on top of those resources that were already progressed due to timing. The same thing on CMV. The team is working on months update to the full fulfilled development plan and the contract extension to 2032, which is additional two years and, circa point 7,000,000 barrel of oil equivalent moving from two c to two p, just because of those two extra year of timing. Okay. Next slide.

15:35 So this one of the interesting, slides you may have some questions about, but it's a good place to be in, an exciting, interesting place in a relatively underexplored basin, one of the last remaining in Southeast Asia. If I bring your attention to the map on the right, you can see the two blocks, one twenty five and one twenty six, in gray the two d line that have been shot in seismic lines. Highlighted in red are the three d survey. The interesting thing about, the three d survey and the the two d, we've already been able to map, several, different leads as you can see them on this map. The different colors for the leads you're looking at are talking about different perspective reservoir horizons.

16:24 So we have multiple different potential, perspective reservoir horizons, which is good. The second good feature you can see are the size of those identified leads are pretty significant. And, also, some of the the shape also shows you different types of traps in in the exploration concession, and that's exactly the type of things that you wanna see in in an in an exploration block. So there is a myriad of different options to go after. So the team in Vietnam right now is working on maturing the leads to prospects and taking the prospect to the real world next year. So that's one of the key focus. Jen mentioned that has been a little bit delayed because we're doing the PSTN, the seismic interpretation and assessment processing, and and basically trying to improve on the quality of it. So that's been delayed because of COVID, but we're really we're still on track. We still believe we can we're progressing things.

17:25 First time, we presented publicly was in June. Our exploration manager in Vietnam presented about one twenty five, one twenty six block in Asia PAC conference, and that created a lot of attention. So we've been seeing some encouraging interest from a potential foreignese partners. Any of them would be have a partner that we're happy with.

17:48 So the focus so far, progress leads to prospects in drilling, prepare to and engage with those interested parties for a formal process. So those are the key two focus. I can't say too much about this right now because the work is still ongoing, but it's a good place to be in having something that's potentially significant.

18:10 Going on to the last slide on Vietnam. The important part about this, as Jan mentioned, what I'd like to share with you here is, yes, we 100% focus on the developed resource base that's including the drilling that we're currently doing in TGC, the field optimization or intervention, the contract extension. It's significant. It's important. It's enriched it generates the cash flow. And those are the green, highlighted bars at the bottom, which shows you we've produced significant amount of oil. There is more, oil in the fire is significant into p, the pathway to move two p to two c to money in the bank. And that money can be reinvested in the asset or can be handed over as dividend and buy and share buyback.

18:57 The areas where we can invest in the asset we that have this organic growth opportunity, is is pretty unique because in Vietnam, we have what we call ILX or little e, whichever of the terms you're

19:11 familiar with. What it means really is infrastructure led exploration. So we're exploring in the development lease in the area where we have an hour concession that's close to facilities. The advantage of this type of exploration is that you will find something, you can drill it, tighten at a very small development cost and get it on production quickly, backfill that spare capacity that's already available. With the contract extension, there will be more of those opportunities to go after.

19:43 Lastly, also opening up this whole new production center with the exploration block in, 125126, which we've discussed in the previous slide. So that sums up the value, development near term, midterm of ILX, and then the the basically, the big frontier exploration, 01/25, 01/26. That concludes the Vietnam section, and I'm ready to move to Egypt. So in Egypt, you see production increased in the first quarter with the modest amount of ramp up and activities we've done. You see that in the top plot, which shows you the increase in production with three wells being put on production till end of June. The interesting thing about Egypt, and we just need to remember that we the bottom plot, which shows you the history of the production of El Fium since we took over as PHAROS. So the deal closed in April 2019, and the second peak on production in the solar green is basically when we were able to build the momentum ramp up activity. It took us about roughly a year to build up momentum and ramp up activity. We had one drilling rig. We brought the second, and we were working on that. And we were increasing production every month. As you can see, in the last three months of before we had to shut down for COVID, we were adding two, three hundred barrel, every month just because of this ramp up activity gain momentum.

21:12 Unfortunately for us, it happened at the worst time possible, which seemed to be a feature in the favor. Happened during COVID and the oil price crashed. Had then the oil price crashed, we were we would have been able to finish 2020 at a high number, okay, and then continue 2023 from a higher number with the same activity level to deliver FIFO full field development plan. So in summary, what's important here, yes, it it takes a little bit of time in FIFO to build momentum, but once we build the momentum, you see the impact on production. And for us as PHAROS, if it wasn't for COVID, we would have been continue. You see, look at the production and how the slope of increases. When COVID happened, we had to hit, to halt all activities. So I went to Cairo and swiftly run down, all the operations.

22:05 And for a period of eighteen months, we pretty much halt all investment. Nobody knew how long it's gonna take or the impact on the oil price. When we've seen the rebound in the oil price, we started back investment, and we already were progressing a formal process. So around November, we went back to drilling with one drilling rig, one well was drilled. IPR took over, and since so far in the period, they were able to drill six wells. I'll talk about them in the next slide. But what's good so far is with the modest amount of activities we've done, as you see in the production plot at the bottom, second collab in green is when IPR deal closed, which is March 2022. You can see the production increased and stabilizing.

22:51 So those are the signs that you wanna see as you start this ramping up operation journey we're on. So it's all been handled. IPR is going after it with our support, and we're pushing hard. Manan, if I move to the next slide, please.

23:07 Okay. So what I wanted to say on this slide, two things. Staying with to just wrap it up. Two things are important to say. We've put four wells on production till August. Two wells have just been put on production, and then two mores are planned till end of this year. So that's the sum up of the drilling for so far and the rest of the year. The important dimension is the supply chain interruption, which for us impacts the water flood ramp up ability. We have a surface pumps required from a supplier that's basically, we elected not to work with them.

23:43 We are even with different vendors and different implement the ramp up in the waterflood. So if anything, I would like to see would like to have seen a little more ramp up in the waterflood than what we have already seen in the first half, but that's already progressing looking at different options. So a lesser extent interrupted by the supply chain is our ability to secure spare parts on relatively short order. But if they they are really, really important, we pay for air freight and get it and keep the operation going. So that sums up, El Faim for you. And moving on to something similar to 125. It's an exploration block in Egypt, North Benzweep. Similar in the sense it's exploration lower in magnitude, so it's not as big as we expect 125,126 to be. But the advantage of that exploration block, it's a low cost, low risk exploration block.

24:41 It's surrounded by it already producing Apache's

24:45 field fields. So we have a well planned in the first in in this year, the first commitment well in MBS, and that's basically across the lease boundary from an already existing Apache field. With the MBS, we've already have inherited a small seismic survey. On that seismic survey, we were able to identify several good prospects, and we also plan to shoot small three d seismic survey. So IPR submitted to the government for an extension of the exploration period to to allow time to drill those exploration prospects. So depending on the timing and the prospect, we could be drilling the first commitment well in this year and then move the rig

25:31 and come back later, or we delayed drilling the commitment well to roughly first quarter in the first quarter of next year and drill couple of them back to back. But we're progressing in the S work. We think it's a value adding. It's a low risk, low cost exploration available for us in Egypt. My last slide in Egypt is the next one. And in the same way, I showed you the different value creation, value enhancement, and opportunities for organic growth in PHAROS in Vietnam. I'm showing with you the shared I'm sharing

26:03 with you the same thing in Egypt. The bottom chart shows you our percent, the 45%. We produced 25,000,000 already, 17,000,002 p already been identified, and eight more from two c, most to two p with additional drilling. So, there is a pathway to produce to move two c to two p to production to money in the bank. That money, like I said, dividends or otherwise, we can invest or both invest in the asset. The ILX exploration opportunities in Egypt are pretty significant. We have conventional and unconventional. The conventional part is split into two different components. One component is drill the same structure we have further away in the development lease. So those are, the shallow reservoirs were produced where we produced from today. And then a deeper, more prolific reservoirs, they are producing in the Western Desert elsewhere, but not yet in Enfayu. So drilling deeper around 12 to 14,000 feet for those deeper reservoir, which will have potential big big potential on the FAU production.

27:11 Lastly, ARF is a significant unconventional resources that's been recognized by us and others. We've done studies on it with US experts. It's equivalent analogies of the Eagle Ford chair. So it's an important resource that in place above 1,000,000,000 barrel in place, So at 3%, the recovery is still significant. And whether we do it ourselves or somebody does it for us is something that we continue to evaluate and proceed. And lastly, NDS,

27:39 which is again opening up a whole new production center from an exploration block that we've discussed in the previous slide, so I won't go through it in more details. That's pretty much wrap up my, Vietnam Egypt section operation and the different value enhancement, and I give it back, to Jan.

28:00 Great. Thank you. So a couple of slides on ESG, one in the dividend, and then one slide to wrap up, and and we'll move to q and a. This is the usual metrics that you would expect from, any E and P company, takes their position seriously and and tries to produce responsibly. The metrics are there transparently for all to see. The next slide is a bit of a departure for us. We have announced a commitment to net zero on our scope one and two emissions by 2050. Now 2050 is a sort of entry level date for making this commitment. So we will do what we can to try to accelerate that.

28:46 And to support those efforts, we've announced the establishment of an emissions management fund. So for every barrel of oil sold where the oil price is above $75, we will put 25¢ aside into this fund, and that will provide the capital to support whatever initiatives we identify to further reduce emissions. My sense is that in the early years, this is likely to be on operational efficiencies and improvements, but you never know technology and technological change moves quite quickly. And as part of this commitment, we'll produce a more detailed road map sometime in 2023. K. Next slide, please. So shareholder returns, we've had the confidence with the cash flow generation to resume returns first with the buyback started in July.

29:43 We've used about half of that, just over half. And we've also announced the expectation of returning to regular dividends with a clear policy.

29:54 Distributions will be based on operating cash flow, and that metric's been chosen because it takes into account oil price tax, which is the main government take in Vietnam, unlike Egypt where it's abduction share of, the revenue line, and it also takes into account working capital movements. The minimum distribution is going to be 10% over operating cash flow, and we expect to declare the final dividend for 2022, based on 2022 operating cash flow, approve that by shareholders at the twenty twenty three AGM and make the the full payment after that. From 2023 onwards, we'll move to a payment in two installments, an interim, and a final.

30:43 Happy to take questions on that later if there are any. So in conclusion, you've heard from Sue, about the cash flow engine that is working well. You've heard from Moe about the wide range of organic growth opportunities we've got in the pipeline. We've got developments in both Vietnam and Egypt. Egypt fully carried this year and into next, and, of course, the enhanced license terms, which have added about 10,000,000 to the top line and on our share so far. And then in Egypt and in Vietnam, we've got exploration, the very different types of plays. So lots of growth to offer, organic growth already in the portfolio, and back to a focus on shareholders and cash returns with both the share buyback and regular dividends.

31:37 So we're targeting both the yields and the growth sides. The growth side, we believe we can do organically from our portfolio for at least the next year to eighteen months. And with that, we will finish the formal presentation, and we'll move over to q and a. That's great, Jan, and Sue and Mohammed. Thank you very much for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the q and a tab situated on the right hand corner of the screen. But just while the team take a few moments to review your questions submitted already, I'd like to

32:08 remind you that a recording of this presentation along with a copy of the slides and the published Q and A will be accessible via your Investor Meet company dashboard. Thank you to everybody for their questions this afternoon, and thank you to those that pre submitted their question in advance. And if I may, I'd like to hand back to Georgia, who will moderate the Q and A. If I could ask you please to read out the questions, and obviously, I'll pick up from you at the end. Thanks, Mark. Thank you, everyone, for your questions. I will now run through the pre submitted questions we have received over the last few days before turning to the live Q and A. We received a number of similar questions, which we have grouped together for ease. So turning to the first question on strategy. Are you pursuing an m and a strategy?

32:54 Would you consider merging with a similar size or larger pair to provide economies of scale? And I'll hand that over to Jan. K. Thanks for that. So, look, in 2020, we had to put our balance sheet into intensive care, and we've worked really hard to get that back into shape whilst at the same time preserving as much of the value, the organic growth potential portfolio as we possibly could. So we're in that position where, as I said, the production levels are solid, the cash flow generation engine is working, and that's given us confidence to fix the yield side of the equity story, the, buybacks, and now the clear dividend policy.

33:41 On the growth side, retaining as much opportunity as we could, that's gonna keep us occupied, as I said, for the next twelve to eighteen months. And in doing that, it could be to look to prove up asset values and then monetize and and move on. And that's part of the tried and tested route for both this company and us as a management team. And then if you come to a specific question about where does m and a fit into, all of those strategic elements, we don't rule it out, but we are focused on growth in value, not growth in scale. And if you take the economies of scale points, that would be, in our situation, almost exclusively, g and a, allocation over a broader asset base.

34:35 And g and a, in our case, let's face it, is just a cost of being listed, premium listed, being a responsible operator and a good corporate citizen. And if we were looking at any deal, we would take we would factor in, those g and a reductions as part of the overall equation of whether the deal was a growth in value rather than just a growth in scale. So though we keep an eye on opportunities and we have run the slide rule over some, we are not chasing deals, for their own sake or for scale sake. And if you look at the last few years, you you can burn a lot of time, effort, and money, in pursuing deals. And if you look at the reduction in g and a that we've achieved over the past few years, part of that is by reducing the size of the organization, the size of the board, but part of it is is simply, reducing the amount of time and cost that we're spending on m and a.

35:37 So not ruling it out, but it's not something that we're pursuing or or that we count as a core part of our strategic direction at this point in time. So what we do offer is clear dividend policy, the option of continuing with the buybacks and organic growth from assets that we already have in our portfolio. Thanks, Jan. The second question is, where is future production and revenue growth going to come from? One for more, I think. Yeah. I think we in in my section, I covered the organic growth part. So we think development, as I said, we focused on that development, drilling, waterflood, recompletions in Egypt, drilling and PGT and CNV.

36:25 So that's the first part of this the the current development resource space, including monetizing the two c to two p to money in the land. So that's one clear pathway. The second one is through investing on those opportunities that I've mentioned in the new curve, the ILX in Vietnam and Egypt, and with the funding partner in Vietnam for the one twenty five point twenty six block the MBS. So we have different different opportunities in our hands to invest money in, and that's where the money and the cash flow in the future, the projection is coming from. Thank you. How should we think about shareholder returns, and where will they come from? Dividends, buyback, or share price appreciation?

37:14 So in the company, we can control, the cash returns that we make to our shareholders. We can't control the share price, and it's not our style to focus on running the business purely for the share price. We focus on value in the business itself. So focused on making the right investments in our assets to generate value, particularly in, terms of near term cash flow, but we can't guarantee that that converts into share price appreciation. So we can control the cash returns. We have the ongoing buyback with the option to continue that, probably take about six months before we're through that committed 3,000,000. And that's why we've announced a very clear framework for dividends from 2023 onwards.

38:06 Georgia, can I can I, divert slightly? Because there's quite an interesting left field question come in on the current one. So just to address that before we go into the rest of the presubmitted. The question is from Ash Kaye, and it is, are PHAROS planning to head back to working full time from office? And everybody who knows me knows I'm quite passionate about this, so I I do really want to answer this one. And the answer is it it's very much employee led. We trust our employees. We are clear with them what we want them to deliver and by when. And then with a few exceptions where everybody needs to be together or small teams need to be together, it's up to them how and when, they deliver that.

38:56 Some of our employees, have elected to be back in an office full time, and we do have a small office space for them. Some much prefer the flexibility of working from home. And to me, this is an opportunity, and I know the pandemic accelerated it, but it's not about the pandemic. It's about the technological revolution following on the industrial revolution, the agricultural revolution, each of which has changed working practices. And if we don't explore different ways of working, then I think we will have missed a real opportunity. So the answer is it's employee led. So at this stage, no. But, you know, could could all change in six months' time. Sorry, Georgia. Back to the question. Thanks, Jan. Turning to the questions we received on Egypt.

39:44 The first one was, as of the July 1, PHAROS has used approximately 20% of the free carry provided by IPR, but production in Egypt is down. Can you explain why and remind us why you chose to partner with IPR? What do they bring? K. So, my first degree was history, so forgive me. If I go back, a couple years once again, talked about being in intensive care in 2020. We we were. We needed to take a number of remedial steps, and the farm down was one of them, a really important one because we needed capital to develop the asset, but we also wanted to retain, some of the value that was inherent in that asset.

40:30 So we went through the process, well run process, and IPR made us the best offer. It was not only the best offer on the table. It was good enough. Shareholders approved it, at the time, And IPR as a partner have proved to be a company that listens and is not just squeezing us out because we happen to be nonoperated. So if you come to the production, one of the biggest lessons, probably the biggest lessons that we learned about this asset when we bought it in 2019 is that after a period of low investment, it takes a long time to ramp up. We acquired it in April 19, got control. It was April 2020, a year before we got the production levels back up. And as Moe said earlier, you know, if your price crash hadn't happened, who knows what trajectory that would have been on?

41:25 It didn't. So there's no point in crying over that. So that pattern of ramp up, is what we're seeing right now. Do we wish that there were more rigs available to throw more at it? Yeah. Of course, we do. But, again, there's no point in crying about it. You've just gotta take what there is on the market and move on. And, you know, Mo has some great stories to tell about how proactive IPR has been, in securing the rig that we've got. And, you know, there there are a lot of other companies who would be delighted to have this rig. So we talked in March about the supply chain constraints, and, you know, they're they're absolutely there, in the rig market. We also factored that into the guidance that we gave to the market in May.

42:14 We're on track to meet those, and, to deliver what we said was possible and given these market constraints. And getting right back to the question, what IPR brings is capital, broad experience in Egypt, and a partnership that is collaborative and willing to listen, particularly to know who needs this asset better than anyone, and we really value that. Thank you. How will the company fund its 45% share of the Egypt venture after the remaining carry has been fully used up next summer? K. Perhaps I can take that. Yeah. The the great thing, obviously, as we move forward, although we're in a carry period, which is brilliant, as we move forward, Egypt will actually fund itself. So there should be no issues there, particularly at these prices.

43:07 Thank you. Turning to Vietnam. Last week, the company said that in Vietnam, further development drilling on both TGT and CNV is due to commence imminently with the rig on location and preparing to spud. When is the drilling of the two wells on TGT due to be completed, and what is the expected impact on the gross barrels of oil per day? I'll take that. So the drilling started, so we're confirming, and we expect it to finish by mid November. That's the expected time frame. On average, without giving specific numbers, so it's between 25 to 3,000 barrel oil per day between the two wells. So roughly on average, I'd say 3,000, but they come in at different time, and you can see them on the clock. So that's the answer to this particular question. But while I'm at it, there was another question in the ones that have been asked right now.

44:06 Just need the question was asked by Sam s. If Vietnam is such a high netback, why we're not we're only drilling two to three wells? And and the reason, really, in nutshell, is because the current contract extension the current contract finishes before last year, it was finishing in 2024. Last year, we were granted two years extension, which makes it finished in 2026. Those wells in Vietnam, they're high net back. So continue that investment and the contract extension we're working on will enable that further drilling. So that's it. Thank you. So the next question on Vietnam. Could you share with us the late could you share with us the latest with regards to the license situation at the TGT field?

44:54 If license extension to year 2031 is granted, can we expect more drilling in the future to support the production plateau? Okay. So I'll continue the operations question. So the third let let's answer them backward. So the first part is we expect with the license extension additional drilling. Yes. That's one of the things I've mentioned in my slides in the slide section. I'm just answering the previous question. The work ongoing right now for the contract extension to 2031 is basically include that update to the full build development plan, which identified some identifying some of the future well location. So all of which will help support the production platform. Thank you. If the lease extension at TGT is granted till year 2031, is the design life of the leased FPSO sufficient to remain on the field till then as it has now been operating at the TGT field since 2011?

45:57 Our the boat owner, Bumia Mota, did the last test with with the subject to the proper unsatisfactory inspection, we think it does not require to go to the dry docking. So we think it's continued subject to the proper unsatisfactory inspection. And the last one on Vietnam of the presubmitted questions is, as the FPSO lease contract ends in 2024, is the company planning for shorter one year optional extensions beyond that or a longer period? For example, seven years extension to see out the contract till 2031. Okay. We will do the contract extension accordingly. I think the question mentioned 2024, which I corrected.

46:46 Our current contract expiry is 2026 in PGT because we were granted two years last year. So that's already extending that contract. And, yes, with the contract, basically, we bring your model. We'll extend to that period. I've answered them the previous one to 2031. They're telling us, yes. We will do the proper inspection and the certification to extend it to 2031 as the contract extend. Thanks. And moving over to some more general questions now. PHAROS has great assets and one of the best management teams in the sector. Why is that not reflected in the share price? And, Jan, I think you're on mute. I wish I knew.

47:34 We've been doing the rounds with our current shareholders, as you would expect after the interims. The institutional shareholders are really happy with the combination of the buyback and the dividend policy and also the net zero commitment. That's really important to them. We've got, quite a portion of our register in, high net worth shareholders. They're very happy with the dividend being resumed. They've all said that they like the transparency and the fact that we're prepared to discuss risks as well as as well as just the positive aspects. So the current shareholder base, certainly institution's high net worth, very positive feedback from this set of results.

48:26 And what is apparently really difficult is to attract, new shareholders into the story. So all we can do as a management team is tell our story to as broad a range of groups of potential shareholders as possible, and keep focusing on the business and the underlying health of that business. Thanks. And then the last one is why haven't any of the nonexecs on the board purchased any shares over the past two years? I'll hand that over to Sue. Thanks. Yeah. What we have got is obviously four nonexecutive directors, all of which have shares in the company. Two of them joined in 2020 and were part of the placing that happened in January 21.

49:18 So all of them actually hold shares in the company. Thanks, Georgia. Thanks. So we'll now move on to questions asked during the call. The first one is when does PHAROS expect to be debt free? I'll take that one as well. Thank you. So as you'll have noticed from the first half, we've managed to improve the net debt position down to 37.9%. So great position because of the first half performance. Obviously, those, high prices of Brent continue to throughout this, second half. So, you know, I should expect to see a a similar trajectory, as as we move forward. So I can't give you the exact date. What I can say also is obviously the RBL itself has a tenor of 2025.

50:15 So June 2025 is the position when that must be paid down. But, you know, obviously, as we sit here today, it's we're going further out and getting closer to that net debt, bringing that down towards the zero. Thank you. The next question, Egyptian dollars payments, what is the outlook? Okay. I'll take that one as well. Obviously, it's one that we've highlighted in our results and is very important as we move forward. What I would say is is, you know, we are working on a number of opportunities there in terms of transferring Egyptian pounds into US dollars. We did actually, as a team, meet with the National Bank of Egypt at last week, and I would say that it was very positive meeting, and they do seem to be seeing a chink of light at the end of the tunnel.

51:11 And I understand that the IMF the, you know, discussions with the IMF continue. And so, hopefully, we should see an improvement in that position as we move forward. The next question is issue bonds versus RBL an option given the punitive cost of hedges associated with the RBL? K. I don't know whether, Jan, you wanted to to pick that one up. Well, we looked at, issuing a bond a few years ago. Never say never. It was very expensive, at the time. Are the hedges punitive? It's certainly a discussion point with the banks, as we come to the next round of redeterminations given that the balance sheet strengthened.

52:05 And as you saw from one of Sue's slides, the, range of hedge positions that we've got now is opening up for more attractive oil prices. So, last year, when we needed to get through a working capital, test, stress test, or shareholder circular, we had to layer in far more hedges. That wasn't to do with the banks. That was to do with the merchant bank who were sponsoring the circular. But moving forward, what you know, we're open to swapping out what to whatever debt instrument is the most most attractive. I mean, Sue talked earlier about the term of the RBL The way that we've set the dividend policy, you know, there's a minimum payout threshold, but what we do with the cash after that, one of the options is to repay the RBL more quickly, and, you know, that's certainly something that we'll keep keep an eye on.

53:06 Thanks, Jan. And I'm conscious of time, so we'll be taking one last question now, before we move to summary. The last question is any plans to introduce green energy elements in existing producing assets, particularly TGT with the FPSO. Okay. Okay. Do you want me No. On you go. Okay. So we let's basically give you an answer on the two assets because it's important. Jen talked about the emission management fund, which will be used to fund this long term project with the technology that allows us to reduce the reduction in the two assets. The FPSO, the design of it is basically right now, we looked at many different options of what can be implemented and actually, in fact, the the the emission reduction.

53:55 So what we're looking at is improving the efficiency, like the gas compressors, the different kits. By improving the efficiency on the different kit, we improve the emission in the. In Egypt, there's a couple of different projects that could reduce the emission, one around power from the grid, and another one converting the diesel generator into gas generator. So both of those projects are are progressing right now. We're looking at different ways to implement. But overall, the reduction in emission is a way we think about it, there's two stages. First, this stage is what you can do right now, which is improving efficiency, and some of the projects that have identified economically viable, it adds to the operation's efficiency and reduce emission. So it's a one and a three different fronts.

54:46 And on the next stage is that technology that can be implemented, whether we basically, once they're available, we implement them in the field, and that emission management fund will help us implement some of this long long term technology focus. That's great. I might just jump in at that point and thank you all for your engagement this afternoon, and thank you to everybody for their questions. Any further questions do come through, we'll make those available to the company for their review post today's meeting. Jan, if I may, I know investor feedback is particularly important to you and to the company, and I'll shortly redirect those on the call to give you their thoughts expectations. But, Jan, perhaps before doing so, if I may, just ask you for a few closing comments, and then I'll send investors for their feedback. Okay. Well, at the risk of repeating myself, just three key messages.

55:35 The cash generations engines are working, and we've seen, as Sue said, significant deleveraging in the first half of this year down to 0.5 net debt to EBITDA, which is a very comfortable level. That cash generation performance has given the confidence to resume cash returns to shareholders first in the buyback and secondly, with a minimum dividend commitment starting in 2023. And finally, that's the yield side of the equation. We offer significant growth in our assets. We've got a range of opportunities. Some of them are for near term cash flow, but there's also growth opportunities in both Egypt and in Vietnam as far as today. Thank you very much for your time. That's great. Jan, Sue, Mohammed, thank you very much indeed for your time this afternoon. Ladies and gentlemen, please could I ask you not to close the session as we're now gonna automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations.

56:42 This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of PHAROS ENERGY PLC, we'd like to thank you for attending today's presentation. I wish you all a very pleasant afternoon.