Pharos Energy (LSE:PHAR) — Retail Investor Presentation

0:01 Good afternoon, ladies and gentlemen, and welcome to the PHAROS ENERGY PLC retail investor presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Simply type in your question and press send. Company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your investor.me company dashboard, and we'll notify you once these are ready for your review. I'd also

0:33 like to remind you this presentation is being recorded. Before we begin, we'd like to submit the following poll. And I'd now like to hand over to Sue Rivett, group head of finance and general manager, talk to Mike Watts, managing director and Ed Story, CEO. Ed, good afternoon. Well, good afternoon to everyone. So let me first comment on the people you see on the screen, and I ask them to stay on the screen so you could see their faces. And to my left, Sue Rigid Rivet. Sue has recently been announced to be the new chief financial officer of PHAROS and will replace in function Jan Brown, who is gonna do continue as a managing director and do many other things. But the past year or so has been quite challenging for the financial function.

1:23 And Sue has been with us five years. She's quite up for this. And Jan is relieved to pass that baton, if you will. So to my right is doctor Watts, doctor Mike Watts. And Mike and I go back many years, more than we care to remember. We worked together in a venture in Australia, which was part of our history, and I'll comment on in a moment as well. And then also through the involvement that Mike and I had at Karen and subsequently with Jan Brown, our other managing director. Jan and Mike are both well known to us. So within our executive management group, we've worked closely together.

2:08 The junior one being Sue, five years, and maybe as many as thirty with Mike. So let me get my face off the screen, and then I will talk about some of our history. Okay. So we I began this thing a long time ago with a venture in Thailand, in the Gulf Of Thailand, and progressed that through various other investments, other partners. And eventually, we took control of a listed Australian company you never would have heard of. And that's where I first met Mike. So the Australian company went to two places that worked out quite successfully.

2:53 One was Bangladesh, and Mike managed that venture and also India where he did that support. In '96, we sold Command Petroleum to Cairn Energy and then listed in London in '97. So we chose London be because we thought there would be a much better understanding of our asset mix there than it would have been anywhere else. And in fact, in Australia, we left Australia because at the end of the day, it was pretty parochial in their view of certainly India and Bangladesh as a place to be in the oil industry. So we've been here since '97 listed, and continue on. So if we could have the next slide, I'll give an overview of where we sit.

3:49 There we go. So over that period of time since 1997, last year was not our first difficult time. Because for some of you, you might recall 1999, we had single digit oil prices. So last year was not the first time. And in '99, we brought in a group of investors to put some additional equity in that stood us through that difficult period, and the majority of those investors remain today. So we have a core group that over time bought shares. They have not sold shares. So they're quite quite strong and quite committed, and I'll comment a little further about them in a moment.

4:40 But when it first became clear, which it was becoming clear very early as I was in the Far East in the beginning of twenty twenty, that this was a serious issue. And we were very early to take action to close our office, to start working remotely, and we're extremely proactive in those decisions as well as doing everything possible to preserve the balance sheet. One of the most difficult things for us was to suspend the dividend. And people can debate dividends or what have you, but over the history of this company, we have returned $550,000,000 to shareholders. So it's significant, and that's part of the reason the core shareholders that we have remain in place. Nonetheless, we had to suspend it in 2020.

5:33 And we can talk about the future a bit later when you see the cash flow contributions that we will be seeing following the actions that we took last year. So the guidance, in terms of our production was in line line actual in line with guidance. We just didn't get that much for the product. So early in 2021, we raised 11,700,000 of of equity to support phase one b of the water flood program in Egypt. Jan came to me and put the arm on me and she said, you know, we need to demonstrate our support of key owners, shareholders, executives in this offering.

6:19 So she's a strong arm twister. I can I committed to an amount? I call one of our long standing shareholders, who I'd never asked for anything before. He stepped up and his sister stepped up and some other executive, and nonexecutive directors. So we underwrote 25% of that offering to then give comfort to the market that we were putting our money where our mouth is. So that resulted in the amount raised, which was actually oversubscribed. So in 2021, we are doing further reductions in g and a costs. Reducing this the head office count is very difficult for us. We're close to these people. They've been with us, but we can't sustain that level of an organization in today's time.

7:13 We also announced in fact, I proposed that we reduce executive salaries by 50% beginning April 1. It was a hell of an April fool's joke. But in any event, I have trouble explaining to my wife. In fact, I haven't told her I would have trouble that I put more in the PHAROS kitty this year than I took out. So Egypt, we acquired Egypt looking for a growth avenue going forward. And we saw actually a pretty simplistic operational concept. You drill wells, you conduct water flood, you increase recovery, and it goes on. But it requires investment, significant investment.

8:00 So we had several things that were hindering any bonds investment. The commercial terms were bad in terms of both things that EGPC, the state oil company, could control and those that beyond went beyond their level. So the first was dealing with product price discounts, fees, that sort of thing, which we resolved last year. Then we needed a fundamental change in the structure of the concession agreements. So we went began those negotiations, discussions, and they were resolved with EGPC, like, two weeks ago. So it improves the cash margin by $6 per barrel. Very significant.

8:46 The we conducted and began then a competitive farm out process to bring in an industry partner or two and farm it out and basically have their their funding cover us for a period of time to get this program back on track. And I'm I'll be talking a little bit later, but we have made great progress there and expect some positive news very soon. In Vietnam, had gone through a period for a number of years that they were fundamentally closed for business. There was a lot of mismanagement within Petro Vietnam, and we helped with that understanding of economics and worked with a group that was formed as the the the management body over PetroVietnam, and that was the commission for management of state capital. And I met with them twice, the most recent time in January of this year.

9:51 So it helped educate them about the economics and what can be done with proper management in oil exploration and development in their own country. So we were granted a two year extension on the TGT is is the bigger of the two fields, and then secondly, c and v to 2026 in the case of TGT and one more year in c and v. But the point of that was to then underwrite and undertake a longer term drilling program to drill more wells. So in Vietnam, particularly TGT, you drill wells, you produce more, you generate more cash flow. It had been very stagnant for a long period of time. So we reached approval to get an additional drilling campaign going, six additional wells.

10:42 We will drill four this year, two more next year, and they're very attractive economics under most any sort of environment. Because the TGT, which is the bulk of the production, it it breaks even at $26 a barrel, kind of on the CNV field at $21 a barrel. So very great economic structure. So we've drilled 32 odd wells. We will also have nine other potential locations. So we could drill half of many as again again of future wells to increase and sustain production. We have a wildcard in Vietnam, and that's Blocks 125 and 126, where it's a very prospective and and potential basin.

11:31 Mike will talk about it, but it could be a tremendous game changer for the industry and for this company, and we'll talk more about it in a moment. So may I have the next slide, please?

11:48 So we recognize all of the issues regarding, operating a sustainable business. And we have recognized this for a long period of time, not just since it became fashionable over climate change. We operate with a number of constraints. One is the environment in the country in which we operate, and we work within those constraints, educate to the extent possible. And it's it's peculiar in the case of Vietnam because every BTU that we produce in natural gas are the majority of the production, oil production, goes to back out coal. So coal is is the cancer of the energy industry, and it's a big problem in terms of pollution levels in Vietnam.

12:38 We've been very active with the society in terms of support we give to various charities to talk about the impact that we have had on the country. We have generated in the historical production of TGT and CNV over $3,000,000,000 to the government coffers of Vietnam. We have generated 1,500,000,000 in addition to their state oil company. So in going through those results with the commission for management of state capital, they said there has been no activity like this in the history of Vietnam.

13:23 So you have to stay. Whatever, you know, we need to do to extend licenses or whatever, you are part of our community. So with that, let me pass it to Sue. There we go. Thanks. Thanks, Ed. Thanks a lot. Yeah. So in terms of wrapping up for 2020, obviously, very difficult year as as we all know. In terms of production, we were down 6% on the prior year at just over 11,000 barrels of oil equivalent a day. Roughly, the mix of that was 6,000 for Vietnam and five for Egypt.

14:11 Those numbers actually mask really where we were and and sort of mask the the progress that we've made on Egypt. So as we began 2020, we were very gung ho in terms of going for growth in Egypt. We had six drilling rigs running, and we were heading for much higher production. We reached peak production of 7,000 barrels a day in actually April. But of course, with the pandemic and the oil price crash in March, we had to curtail our drilling program. So sadly, we didn't end the year where we could have been if we'd have kept going with our campaign.

14:59 So in terms of the turning to the revenue, dollars 142,000,000, down 25 from prior year, really a factor of that price reduction in Brent. That $142,000,000 there actually is supported by just under $24,000,000 of hedging receipts. So very important program there to keep up the revenue. That hedging receipts also factors fully into the cash generated from operations. Otherwise, that would have been down considerably further. Turning to the cash OpEx, dollars 11.60 a barrel, so up from prior year, largely a function of the reduction of the production volumes, but also as we turned off the capital spend in Egypt on the development program there, we had more workovers to deal with, which obviously comes into the operating cash line.

16:05 In terms of the cash CapEx as we've spent, we curtailed as soon as the pandemic struck really and the price crash happened, we curtailed all of our capital program that we could. In Vietnam, we were just finishing 15x well, which was a 2019 well that had come over into the 2020. And in Egypt, we just curtailed the whole development program. Going forward to look at the balance sheet. The balance sheet finished the year just under GBP 300,000,000, so down from $05,000,000,000 from the prior year. Largely, as you'll have seen in the income statement, we took some impairments on our assets, largely, again, a function of that Brent price fall.

17:01 What we should say is that even at GBP 300,000,000, I'm sure you're all aware that, that's less than half of our sorry, our share market cap is half that. So some way to go there in the market recognizing the asset value. In terms of the net debt to EBITDAX, point four eight, very low, and that's the way we like to keep it. So I'll move over to the next slide. So if we concentrate on the left hand side, so really, again, 2020, we tie we we don't we used all of the dials that we could in terms of, you know, preserving our balance sheet strength.

17:51 So deferred capital expenditure where we could overheads, we took we looked at all of those in order to stream those down. And as Ed has already mentioned, the exec have taken a 50% cut from April 1. And sadly, we are having to reduce our headcount in the London office from this year as well. Also, the suspension of the dividend. So we turned all of the dials to help preserve that balance sheet strength essentially. In January, we raised a small placing really to support the Al Fayyum in water flood program in Egypt.

18:43 Essentially, reason being there to ensure that the production levels remain sensible as we move forward into the PHARMAC process. And Mike will talk more about the PHARMAC processes as we move on. And obviously, Ed has already mentioned the improved terms that we got on oil price discounts and handling charges in Egypt. But by far, the biggest piece of news was presented. There was a press release about a week prior to the results announcement concerning the cost recovery impact on the fiscal terms there in Egypt, which means roughly six dollars a barrel to us. So quite a considerable thing there as we move forward.

19:35 In terms of hedging for 2021, obviously, 2020 was, from a hedging perspective, very much supporting the balance sheet and the cash flow position. As we moved into 2021, obviously, the prices today are quite a lot higher than this, but we moved in certainly a lower position than we are. So these really are to support our underbelly, if you like, as we move forward and to make sure that stress testing is not impacted adversely. So in terms of the cash flows, we started the year 2020 with just under $60,000,000 in cash and ended at $25,000,000 I guess the big ticket item there is the $47,400,000 going out to the RBL lenders for the loan. Clearly, that was much higher than anticipated as the RBL lenders also took a knife to the Brent prices. And so essentially, all of the dials that we turned in the earlier position had helped us retain at least that GBP 25,000,000 cash and also repay the RBL lenders a considerable amount more than expected.

20:58 So in terms of net debt, finished the year at just under GBP 33,000,000, roughly 20% down on the prior year.

21:09 In terms of 2021 and looking forward, hopefully, much better year than 2020 presented itself. Ed mentioned that TGT program, fulfilled development program there that we have fully approved. It's a six well program, and we commence in the second half of this year four of those wells. It's fully funded from our cash flow, and we expect to be post CapEx free following all six wells. So two of those wells fall into 2022. In terms of Egypt, as I mentioned earlier, the Phase 1B waterflood in progress there and essentially there to maintain production whilst we continue with the farm out discussions.

22:06 That farm out is expected to fund the development program in full as we move forward. So we enter so 2021 expected CapEx of just under $32,000,000 And I'll hand over to Mike. Thank you. Thank you very much, Sue, and hello. Good afternoon, everybody. We have a slide in front which shows you the asset base of of a couple of maps. We're in Southeast Asia, and we're in the Eastern Mediterranean, as you well know. If we look at the Southeast Asia map on the right, you can see Vietnam and the producing properties, the two fields, the TTT and the CMB fields, are within that circle off the coast of Vung Tau in in Southern Vietnam in shallow water.

23:03 Our production in Egypt is within the circle just South of Cairo, onshore in the Western Desert. So in Vietnam, let's let's go back. The the contracts were signed, TTT contract. It was a exploration block. It was signed in 1999, and the exploration block, became CMB, was signed in the year 2000, both both of them on twenty five plus five year contract terms. In Vietnam, we've been very successful. We've explored, we've developed, and we've produced. So first oil for the larger field, the TGT field, was in 2011, and the field came on plateau production at 55,000 barrels.

23:57 And it's been on decline, natural decline since then and is presently producing about 14,000 to 15,000 barrels a day. The interest we have is 29.6%. And as in Vietnam and Egypt, we we operate through a joint venture with the state entity, which is PetroVietnam. The field the TGT field has been developed with three wellhead platforms and an FPSO. And the crude is a very good quality crude. We get a premium to the benchmark crude, which is Brent. Currently, it's around about $3 a barrel, but in the past, it's been up at 5, even $6 on on occasions.

24:49 The CMV field came on production in 2008 and had peak production at, 12,000 barrels a day and is currently producing about 4,700 barrels. That's, developed with a single unmanned platform tied back to the Bakho Field. The Bakho Field is a is a Russian Vietnamese joint venture, and it's produced over a billion barrels, and it straddles our two fields. And the whole basin that we're in, the Kulong Basin, is a very productive basin. There's probably been 2,000,000,000 barrels produced out of that basin all told. We got a look at Egypt now, the production in Egypt. We have 10 fields in the El Fayoum concession in the Western Desert.

25:43 There are three larger fields called the Greater Sila area, the GSA fields, and seven smaller satellite fields. Production started in 2009 and peaked at around 12,000 barrels a day in 2015 when the second and third largest fields were put under a pilot waterflood project. The main field though has never had a pilot water water flood. 81% of the of the resource volume is contained in with the three GSA fields, and 58% is in the largest field, the Sela field.

26:32 And it's interesting to note that the the comparison in Vietnam, we have a strong drive reservoir drive mechanism in both both fields. In TGT, we have a natural aquifer and a strong natural water flood pushing the the oil to surface. In CMV, we've got a solution gas and a gas cap drive driving and providing energy in the reservoir. However, in Egypt, we have no natural aquifer drive, and we have no gas in the reservoir, very limited volumes of gas in the reservoir. So the fields in Egypt produced by what's called primary depletion, and that means that, there's a very low recovery factor.

27:26 We're presently at 6%. The fields would produce about 6% of the of the of the subsurface volume if left, unattended. But to increase the recovery factor up to 18%, we need a water flood recovery program, and that's what the development, is really all all about in in Egypt. And with the producing properties, can just see on the map, we've got the, exploration position, in the Phu Can Basin in Vietnam, which is truly, has transformational potential. It could be a company maker. The Phu Can is essentially an undrilled basin, an explored basin, but it is geologically very analogous to all of the other producing basins in Southeast Asia.

28:21 So it it has the potential to be a new province. And if you look at the map and and see the the, you know, the 2,000,000,000 barrels of volume in the Kulong Basin, you could easily have that in the in the Fukan. So we're excited. We have a high equity position, 70% in in in the two blocks, one two five, one two six. And the major other party to the north of us is ENI, and and probably everybody knows ENI has been one of the world's most successful, if not the most successful explorer in the last, twelve or fifteen years or so. In Egypt, we also have an exploration position to the south of El Fayyum. That's called North Beni Swift.

29:07 Like El Fayyum, we have that a 100% at the moment, and that block straddles the western that straddles the Nile. So we've got the Western Desert portion, and we have the Eastern Desert portion. Embedded within that block, there are some fields. They're operated by Apache, an American American company company called called Apache, Apache, who is the largest producer in Egypt. Those fields have been producing for about twenty years, and they're held within discrete development licenses. And finally, just on this map, we've got a position offshore Israel. We have a one third interest. Canada, the operator, and local Israeli partner.

29:53 Ratio was the other third. The blocks have a very good address. Israel, you know, is is is a is a gas prone area. We came in for that for the reason that to expose the company to more gas potential. And but we have very little firm work program. It's a low commitment block. It's a bit of a punt. We're we're we're integrating the various vintages of data at the moment. And in about two years, we'll have a a sort of drill or drop decision. So if we just quickly go through the assets, the Egypt, 2020 with the start of the year, things were going very, very well.

30:42 We entered 2020 with six rigs, three drilling rigs and three workover rigs. We were building the production. It it eventually got to 7,000 barrels, but we were taking it on the way to close to 10,000 barrels by the end of the year. Building production, we had, formed a consortium, with CAN ENERGY and with CHARON, an Egyptian company, to look at the opportunity of buying Shell Shell's interest onshore Egypt, and we had submitted a bid together in early February. And by the end of February, we were in the group of favored bidders for the Shell process.

31:30 Unfortunately, in the first week of March, everybody knows there was the oil price crash followed very quickly by the take of the of the pandemic. The world changed for us as the oil price plummeted. We pulled out of the transaction potential transaction for to acquire Shell's interest, and we stopped all drilling activities in Egypt. We have the contracts the drilling contracts were thirty day contracts, and we gave notice within days of the oil price crash as a a a measure to protect the the the balance sheet because, obviously, it was unknown how long this the crisis would continue.

32:19 But we made use of the year. We we kept the government informed, told them exactly what we were doing, that we would only return to to drilling if we had an investment partner, and we would start a a PHARMAC process. And we did a couple of major studies. One was a large subsurface study, which we've been doing anyway, but we accelerated it and built a completely rebuilt static model of the subsurface and went on to build dynamic models. And with that work, we simplified the development plan that we've been working on and came up with an optimum 50 cell 57 well development case to develop the the properties.

33:12 The 12 of those wells were planned for the satellite fields, and nine of the wells would would be dedicated water injector wells.

33:25 But most importantly, we, really put together a a team to look at the water flood itself, and we did what was, a phase one a pilot project in the Seeler field. We injected water, in a couple of, wells and, measured, the response of the oil production in wells that were 300 meters or 600 meters away. And sure enough, after a couple of months, it the the oil rates increased dramatically over three three to four times what they were before as the reservoir was efficiently swept by by water.

34:12 And it was that demonstration of the applicability of the water flood to the the largest field that led the auditors, to to upgrade our reserves. So we've we've had a a 50% up increase in in reserves this year, because of that fact. Sue has already mentioned, Ed mentioned it, that we negotiated with the government some easements on the discounts to the the benchmark here, which is also Brent, but we get discounts to there instead of a premium as in Vietnam. And we had some easement, a six month easement from the middle of the year from the government because of the low oil prices. The engagement continued.

34:59 We we at the end of the year, we got approval from the executive committee of EGPC for a three and a half year extension of the El Fayoum exploration area. And throughout the year, we had been working on the North Fayoum three d seismic. And the I think one of the interesting things there is it's quite clear that in one or two occasions, some of these producing fields of Apache may actually extend out of the development leases into the exploration concession. And right at the end of the year, November, December, we started our formal PHARMAC process.

35:47 A 100% equity is very high. We went with Jefferies Bank, American investment bank, well known in the PHARMAC market, and we approached a number of companies. And by the, I think, the end of November, early December, we had signed 24 NDAs with potentially interested parties. And over the December, January period, we conducted about 15 management presentations, half a day management presentations, and moving on into 2021. And this this year, about eight of those companies have gone on into the physical data room, and we are presently in discussions, critical phase, sensitive phase discussions with a short list of companies.

36:37 And we're still very hopeful of an announcement of transaction before the end of this quarter. We raised equity, as has been mentioned before, at the beginning of the year, 10,000,000 or $11,000,000 That has enabled us to commence the Phase 1b of the waterflood program, which is the to complete and, recomplete and and and reperforate existing wells in the main field. And that's all a prelude to phase two. Phase two would be the full blown water injection, so drilling of nine new water injection wells.

37:27 Most importantly, it's already been mentioned by Sue, we had discussions continued the discussions with EGPC to on the fiscal terms. And that really is very important because we're talking about a fifty seven well investment case, and we needed surety and certainty on on the fiscal terms. And the government has been very receptive. So we we did a trade whereby we forego about a $115,000,000 of historic capital costs in return for getting the cost recovery cap moved from 30% to 40%, and that has a dramatic influence on the economics.

38:16 It takes our take from the present 42% up to 50% of the revenue line. And there's a $6 per barrel improvement in the in the breakeven. So a very dramatic improvement in the economics, and it's most felt over the over the next seven seven or eight years. But it's very much allied with the development plan, the investment case development plan.

38:47 And, of course, it's all been wrapped up with the, PHARMANI discussions, the PHARMANI potential PHARMANI partners have been following this very, very closely closely. So that's the overview. And I just very quickly, there's a bit of detail on the on the slide here talking about the the the phase one a and phase one b, the water flood. In the bottom right hand corner, you can see a little chart. It's one of the wells that we had last year. It was a well that was doing about a 100 to 90 barrels a day. And then when we inject water, you can see that the the there's a dramatic increase in the in the in the oil production rate up to 300 odd barrels.

39:37 The circles on the map, a little bit of detail, but that's the one b program. That's a nine month program, $10,000,000 or or just under $10,000,000. That's the program that we're we're embarking on now to will take us through the the the next year. And then phase two will be the full full drilling. In terms of catalysts and timetable, the PHARMAC process is ongoing. It's very much, as I said, at a at a very critical stage. We have some competitive tension with some interested parties parties in in the process and parties who are, well, familiar with operations in in in Egypt.

40:24 The pressure support program, the phase one b is ongoing. That will lead to to phase two. And the license extension and the renegotiation of the fiscal terms are now on a parallel track process. So so we had EGPC executive approval in early February. We had EGPC main board approval at the end of March. We put out a recent press statement on the back of that. We've now finished the contractual documentation for the what's what's called a a third amendment for the contract for the for the project. And that is just about to be initialed.

41:10 It would be initialed by us and then initialed as it goes around the various legal commercial departments with EGPC, and then it goes into the parliamentary process where it it goes to a parliamentary committee, the energy committee, eventually to parliament, and then ultimately, the president of the country will sign off. Now I I think it's largely a formality, that whole process. The main work was the AGPC board approval, but we can't be sure of the timetable because in the parliamentary process, there is a, quite an extensive summer recess in in, Egypt, the hot weather, and, we may get it done before the summer recess. It may be after the summer recess.

42:01 There you can see the development drilling, can't quite predict, but when once we have, announced the sales and purchase agreement on, with the transaction with a third party, we'll we then seek government approval and and then we'll be drilling the 57 well program, which is a two year program. Just to to note, we've got an exploration well, a commitment well that was a commitment well from last year. It's called Patran. We're just about to get the rig rig on on location, and it will start drilling in in in in a week or so's time. And sometime in May, we will have a result. It's a it's a small small target, but it's something that could add several 100 barrels a day if it if it were to come in.

42:54 We look at Vietnam. Things have been going very well, very smoothly in Vietnam for for some time now. But particularly last year, we did a couple of things. We had a an upgrade to the compressors that we use for gas lift. That's had a significant effect effect on on reducing the flaring. We we've had to flare, unfortunately, flare third party gas under almost a forced marriage contract taking hydrocarbons from the properties to the north, but which were not really fit within the design specifications of our plant. And that meant we had at times some excess flaring.

43:43 That is now ceased a big environmental clear up, but it's also meant that we can have a higher injection pressure in the reservoirs for the gas lift. So we had a program started in the middle of the year, and it went wireline program went very successfully. About 12 or more wells were reentered and and and for for optimizing the gas lift. So production has been very, very steady. And in TGT, we we've had Ed's mentioned, we've had this additional two year extension from granted from the prime minister in in September on both of the fields, TGT and and CMV.

44:30 So there's there's a long time yet to go on on both of the contracts. But I think the main news we're waiting for is the commencement of the development drilling in TGT. The six well program that we've spoken about, that's going to start in the middle of this year. And you can see on the map the yellow dots. Four of those dots, we intend to drill them this year and two next year. We'll be starting in the South, working our way northwards. The importance of this is it will give a second wind to the TGT production life. So we're currently at 14,000 to 15,000 barrels a day. And by the time we've completed the program, we'll be up at the 20,000 barrels a day or perhaps a little bit more.

45:21 So very significant and certainly very significant with the current oil prices. CMB, there's no drilling activity, but there is some well intervention work. We'll do some acidizing, some cleaning up of some wells. So we're predicting that we will stay and have steady production throughout this year. Ed's mentioned, but it's worth reiterating, we do have these one two five, one two six. We're going to progress them in the summer. In block one two five, we're going to shoot a three d seismic survey. Very, very hopeful that this is a company maker within our portfolio. These are deepwater blocks, but we have a high equity percentage at 70%.

46:09 So our intention is to acquire the data seismic this year, process next year, and we will be seeking a license extension probably two years from the government to enable us to bring in a a Pharminee to fund to fund us through one or perhaps two wells, exploration wells in this block. So that's something to watch out for. And just very briefly on the last slide here, the timetable, catalysts, the development drilling starting middle of the year and probably going to continue right through the six wells to next year.

46:56 We do have, in addition to the six firm wells, we do have nine contingent wells. They're not yet approved, and and I think it'd be the end of the program. But but certainly, in in in 2324, we could be drilling contingent wells. So the by the time we finish, there'll be almost 50 wells, 49 wells in the in the TGT field. That's all for me. Back back to you, Ed, for a sum up. Okay. There we go. So that's the slide. I will be brief because I probably exceeded my allotted time, and we need to have some time for questions and answers. The the headline is position for future organic growth.

47:46 The subtitle is with other people's money. And I say that in terms of Egypt relative to the farm out to enable us to go forward, you know, for extended period of time to get enough investment behind that program, to get the water drive going, to get the recovery rates up, and to significantly increase the level of production. So any reserves that would then go to the farm in partner would be more than offset by the value created by increasing the overall recovery factors and amount of production reserves that is attainable by performing the water flows.

48:33 So Vietnam, we've talked about extensively. So it will increase production there by a third. So it is built in organic growth. The wells payout quickly. We've had questions about dividends. I think once this program kicks in next year, we'll be in a very good position to discuss the timing and level of future dividends. The seismic, we've talked about studies on the seismic on 125, one two six. The driver there is to lay out the ideal setting because we have two areas within those two blocks. One is more shallow, which would be a lower cost well, and could be in the one, two hundred million barrel recoverable type reserve position.

49:25 The other is in the deeper water, more expensive, which be in the billion barrel recoverable reserve position. So how to optimize that program, how to draw out the three d survey that would give comfort to one or more partners to come in to do so. It is just the sort of thing that would appeal to companies who specialize in that area. And there are two very obvious ones to us, and we have kept them informed along the way. But in this business and for this kind of expenditure, you must come with something that's close to being a drill here opportunity.

50:12 So we think everything that we saw on the two d will provide us that capability to sit down and say, here it is. Are you in or are you out? And there should be competitive tension in that process. So we have, obviously, I think we've demonstrated and firmly believe a very strong relationship and successful history in Vietnam. So there are other things that we seek to do there going forward. So we expect to be there for a long time into the future. With that, if we could turn it over for comments, questions, or whatever you'd like. Absolutely. Ed, thank you very much, and thank you to you and the team for the presentation. And ladies and gentlemen, do please continue to submit your questions using the q and a tab situated on the right hand corner of your screen. I just want the company to take a few moments to review those investor questions submitted already. I'd like to remind you the recording of the presentation along with a copy of the slides and the published q and a will be available via investor dashboard on the Investor Meet company platform.

51:14 I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you'll be redirected to the opportunity to provide your feedback in order that the company can better understand your views and expectations. And perhaps before we move on to some of the live q and a, we have received a a number of presubmitted questions from investors. And if I just may, I'll read these out and just ask you a few responses. The first one we have here is understand there are always two camps with dividend, and I know we've touched on the dividend in the presentations. Those that would prefer them and those prefer the company to reinvest free cash flow in the business. Where does PHAROS currently sit? Okay. Let me comment on that. I think the history says that when we see opportunities to invest, we invest. When we see opportunities to return capital, we do so.

52:08 And we suspended the dividend in order to survive last year. But I see no reason that you can't manage your risk to bring in other potential investors alongside when you're controlling risk on something like one two five, one two six, or where you have a large scale program like we have in Egypt to bring in someone alongside. So we intend to have, if you will, the the cash flow capability to maintain a consistent stream of dividends and moreover to have opportunities such as one two five that could be transformational. So you had the gentleman, doctor Watts, who created Rajasthan for Care. Alright?

52:56 And most of us are Care shareholders. I, from the days gone by when we sold our company to Karen. So those are rare. If you take a company with this small market capitalization to offer the opportunity to come in for something that would put it in a different stratosphere just like Karen did. Fantastic, Ed. Thank you very much indeed. The next question we've got here is what are the company's views on m and a? Is the company interested in any more acquisitions in Egypt? And what about acquisitions outside of Egypt? Can you go, Ed? You better continue. Okay. I don't wanna be the only one to talk. Okay. So I think why did we do the acquisition that we did?

53:47 And that was in Egypt. We did that acquisition because we saw a limited future in Vietnam. The door was closed going forward or barely open. That door is wide open now, and so we see organic growth potential. If it's something you know, it's organic, do it. Stay there before you reach out to the unknown. That's not to preclude m and a. And, you know, at some point, this company will reach a size that it will be more appealing to others. That's fine too. That's great. And just touching a little bit more on Egypt. Further question we've got here is when when will there be a farm out announced on Egypt? How is this process going? And and, where will the future growth come in Egypt? So sort of three in one there for you. Yeah. Let let me pick up on that because there's there's also some more written written questions coming in that I can see.

54:44 Obviously, we're limited to what we can say, but we are hopeful that be before the end of June, the end of this quarter, we will have an announcement. We asked what we were looking for as it was a party to come in and fund the 57 well program. So that's, you know, $5,055,000,000 dollar program in return for 30% equity. That's that's our ask. That's not where we're gonna end up, obviously. But we're the most important thing for us is to is to end up with a transaction where we have somebody coming in funding the large part, if not all, of that development program. So the timetable is yeah. It's it's this quarter. We can't say anything more at the moment.

55:36 Thank you. Indeed. Thank you. And the next one we have here is what are the use of proceeds from the recent placing? Yeah. That quite clearly, the the the the virtually all of it is earmarked for the phase one b water flood program in the Sila field, get it kicked off. It's a nine month program. It's about $8,000,000. And there's also the Bertrand exploration well. So it's it's funding the activity for this year while we wait for an investment partner to come in for the main development. That's great. Thank you. Next two really relating to Vietnam. Again, something I think you have touched on in the presentation. When is the drilling campaign due to start in Vietnam and where is the future growth coming from in Vietnam?

56:27 So I think let me just respond to that. And the campaign will begin when the rig is finished its job where it is and will move over. So it's, you know, it's within well within the drilling window weather wise. It's sooner rather than later, but more likely beginning third quarter. Vietnam has you know, we see one two five, one two six. We see other opportunities. We understand the basin well, and it's just time will tell over opportunities as they come available. And we will be there to evaluate them with a sound database to respond. And the final pre submitted question we have here is what is happening in Israel?

57:16 Well, in in Israel, as I said, there is there is a lot happening because, obviously, the the Israeli, fields are now big fields are on production. They're exporting, to Jordan and now, as of a year ago to Egypt. So there's a high of activity offshore, and you've seen Chevron come in. Well, in our blocks, they're exploration blocks. So we are, reviewing the existing seismic database and the world database just to see if anything has been missed by the early exploration period. So it remains to be seen. It's it's gas potential, you know, it's a modest 2 or $3,000,000 commitment in the first phase.

58:02 The first phase is has another two years to go, and then we have a decision point. Do do we go on and and and then drill a well or or or not? So we're in an active review phase right now. Thank you very much indeed. Thank you, Mike. Perhaps we can turn to the live q and a. Minhan, perhaps I can turn over to you. We obviously had a number of questions from investors that have come through the presentation today. Perhaps if I may hand over to you, and if you could just read out the questions where appropriate to do so and then pass them to the relevant member of the team, please. Yeah. Sure. I'll read out some questions in the q and a tab. There are quite a few of them I see, so I do apologize if I were not able to answer all of them. The first question is from William p. He's asked, will you format the one two five and one two six to a third party in order to fund the drilling? And presumably, you'll drill after the three d seismic. When is the three d, please?

58:56 Yeah. So so, absolutely, we'll shoot this the three d this year and interpret it next year. Then the intention is, once we have that evaluated, to use that to to bring in a a a partner. So it's certainly our intention to have someone to fund all or the bulk of any investment in any drilling. So it's all in hand, and it's bread and milk to us. That's great. Thank you. The next question is from Robert R. He's asked, as we are an established oil and gas operator, has the recent economic conditions given us the opportunity to acquire at GoodValue? Well, I think right now, we're not we we did look, obviously, last year at the Shell onshore Egypt position, and we have looked at some significant gas positions. But I think right now, we've made a conscious decision that not to be chasing m and a activity right right now. We've got enough.

1:00:01 We've been building an inventory, as Ed says, to which we think we can take forward organically. So that's that's really where we are at the moment. That's great. I guess the next question is from PHAROS ENERGY. Do I understand that there's a risk of some hostility from the powers that be in Egypt that could jeopardize or, at best, delay PHAROS' activities? Not at not at all. I I think the one thing about Egypt, and that's that was an attractive part of us entering, was this tremendous deal flow activity. You have to remember this, you know, the country's doing over a a million barrels a day of production. So well established well established players. There's, I think, about a 120 joint ventures, 80 or so companies active.

1:00:54 There's a strong downstream as well as upstream. And I think the government has gone out of its way to be supportive and throughout this whole process. We were very early on in the pandemic. Back in in April, we were on, you know, Zoom and Teams with the government here in The UK, and they were fully engaged, very supportive on the contractual changes. So I think there's there's there's just a a feeling in the country that oil and gas is very important for the economy. And, you know, to investment needs to be stimulated, and they do everything they can to to make it work. So, you know, it's more or less the opposite of the of the inference in the question.

1:01:47 That's great. Thank you. Alex l has asked, what do you think about future use of capital raised through the l Fayoom farm out? Well, the the the the farm out intention is to invest to bring in a partner to invest in the development. So the 57 wells is intended to take the production where we are at the moment at 4,000 up to 12,000 barrels a day. And that's that's that's where, you know, the the transaction is. We're looking for someone to come in and fund that program. So it's a it's a straightforward deal and and obviously, you know, we from government approval process and from our own viewpoint, know, it's preferable for us to seek a partner that's either established in Egypt already or or well known to operating in Egypt and and believes in the technical growth story. And that's what's been happening when we've when we've reached the shortlist of companies that we're talking to. So everybody is well funded and technically capable to to help us take it forward.

1:03:02 Yeah. And Andrea m has asked the 2021 production guidance outlook for Egypt seems disappointing. Why is this? Well, it's disappointing in in the sense that it's it's it's that's what happens when you have primary depletion. The the the the wells just deplete at high rates because there's no energy in the system. You have to introduce that energy, and that's that's what the waterflood program is all about. And, ultimately, when you when you go through the phase two program, then you you reach a stage where, you know, you you you can get full voidage replacement and and have the reservoir pressure very close to to virgin pressure. But with natural depletion, the pressure drops off, production drops off, and you need to support it. And and and that was the the placing, and that's the, the part of the the investment program.

1:03:56 That's great. Thank you very much. I see we've just gone through the hour, and and thank you indeed for answering a number of questions that you have there. And any further questions that come through, the company, of course, will review all questions submitted submitted and published responses where appropriate to do so. Perhaps we'll just close off the session. Ed, may I just ask you perhaps we might just for a few final words before we redirect investors to give you some feedback? Yes. What I learned was to cut the the visual off because it interfered with the audio. I hope you can hear me more clearly. But we appreciate having had the opportunity to give you an idea of who we are and what we're doing. We view this as you would view your money. This is our money.

1:04:41 So if you want to have someone that views your investment just like you do, it is right here in PHAROS. Because we're we're all significant shareholders, we're committed, we have a strong group of core shareholders, and it is not a job, it's not a retirement situation, It is our life and our money, and we intend to optimize it. And I think we have the talent to make that happen, we'd be happy to have you alongside us. Thank you very much indeed. And, also, thank you to Sue, doctor Watson, Minham for the presentation today. Could I ask investors not to close the session as you now be automatically redirected to the opportunity to provide your feedback? If you've accessed me accessed this meeting from our website, the feedback page will front of you. If you've accessed it via the link sent to you in the email, you'll simply be asked just to log back in. It takes only a couple of minutes and would be greatly appreciated by the company.

1:05:36 On behalf of PHAROS ENERGY, we'd like to thank you very much for attending today's session. That concludes today's event. Thank you, and good afternoon.