Good morning and welcome to the Pharos Energy PLC preliminary results investor presentation. Throughout the recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time by the Q&A tab situated in the right corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself; however, the company can review all the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll, and I'd now like to hand you over to CEO Katherine Roe. Good morning.
Thank you and good morning, everybody. I really appreciate everybody taking the time to join this morning's presentation. We did release our results last week, but thought this was a good time to open up to all of you who've joined to listen this morning. So thank you again. I'm joined this morning by our CFO, Sue Rivett. So the both of us will be presenting this morning. We'll take you through the results for the full year 2024, but also some of the critical items that we've been working on, and also importantly, things to look forward to for this year and beyond, and then obviously, we'll be closing at the end with some Q&A, and happy to take your questions and answers as much as we can. So just moving forward, I'd like to start with an overview.
For those of you who are not aware of Pharos, we have two producing jurisdictions, two producing oil assets in Vietnam and Egypt, and I think what we're doing today is presenting just how they have delivered those assets financially and operationally during the course of last year, but importantly, what we can do this year to grow and extract further value from those assets, and it feels very much to the business that we're at a turning point in terms of growth ahead and actually capitalizing on that strong financial position and looking to grow and scale our business, so how do we do that? Well, we have existing quality assets that are delivering that stable production that you see in the results, meeting guidance for last year, and that has allowed us to look for additional growth of those assets and, as I say, extracting further value.
We did require some catalysts in order to look forward for an additional work program. One of those key catalysts was the granting of five-year license extensions in our two producing assets. So if you can see here on the left-hand part of that middle box, the TGT and CNV assets are our producing assets, and we were given an extra five years from the current term granted just before Christmas last year. What that's allowing us to do is move forward with a drilling activity campaign for this year. We'll talk a little bit more about that later on. We did have a successful two-well drilling program in TGT last year, which is really important to sustain volumes. They are mature producing assets, so we do need to invest in order to maintain those production volumes.
But as I say, really important and critical now is actually how we look to grow incremental volumes from those existing assets. And again, I'll talk a little bit more about that later on. In Vietnam, which is our core asset base, we also have our exploration potential. And I know some of you are very aware of these exploration blocks, 125 and 126. They've been part of the Pharos portfolio for many years. It is a deepwater frontier exploration opportunity. And with that comes a high degree of risk, but also potential high reward. So what we're looking to do is balance the ability to give shareholders exposure to that. And ultimately, the absolute priority is to see Block 125 drilled in the near term.
What we haven't been able to announce today is a partner for that exploration, but we are continuing our discussions. One of the things that is coming out of those discussions is the need for more time on the license in order to progress a partner. With that in mind, we've applied for a two-year license extension for Blocks 125 and 126, which would take us towards the end of 2027. That provides future optionality for us to see that drilled. What we do feel is very confident that that extension will be approved, mainly because of the strong relationship we have with PetroVietnam, our government stakeholder in Vietnam. It's critically important we have a strong relationship with our government stakeholders in both Vietnam and Egypt.
Having demonstrated those five-year license extensions in the producing assets, we do feel confident that we will be given extra time to pursue our exploration. The other thing that we did last year was made a financial commitment of around $5 million of long lead items in order to progress the drilling of that exploration opportunity. That really provides some tangible evidence to the government that we're serious about seeing that drilled. We've made the commitment, and that will put us in good stead for securing those license extensions. That's something that we hope to be able to talk about in the coming months. That's Vietnam. We also have producing assets in Egypt. Egypt, while less of a core to the overall business, is self-financed. It is a self-contained part of the business, so it does fund itself.
I think that's an important part because it contributes at group level while also being a profitable entity in its own right. However, in order to move forward and increase volumes, we're currently producing 1,400-1,500 bbl a day from Egypt. We'd like to see that increase materially. In order to do that, we need increased time on our existing license, and we also need improved fiscal terms. How we're trying to achieve those is through a consolidation of the two existing license concessions into one agreement. This is a well-trodden path. There are precedents in country of this having happened. There are other conversations with other companies in country going on in the same vein. It's well understood by EGPC, who is our government partner.
Again, in order to demonstrate that we're making tangible progress on this, we were able to sign a memorandum of understanding with EGPC last month at the annual conference. That's a critical milestone for us because it's not only dictated some of the key commercial terms, but also showing that the government is moving forward in a meaningful way with our discussions. Once those discussions have concluded, it will incentivize both ourselves and our partner to reinvest in the assets in a very meaningful way and hopefully deliver those incremental volumes that we're trying to do. Again, just to remind everybody, we are non-operator in Egypt, so we do follow our operator IPR in order to get further reinvestment coming through. We've got plans and work programs identified in both Vietnam and Egypt to move our business forward.
The ability to do so is also helped by the financial performance that we see with the business today. We're able to reinvest back into our assets because we're financially capable and able to do so. That's really helped by removing the leverage that the historical debt—we repaid that fully last year, so we sit here debt-free today with cash and a healthy operating cash flow from last year, as you can see, of that $54 million. That does also allow us to continue our sustainable dividend policy. The dividend policy has been in place for several years. It's an important part of our investment proposition. It does protect the downside. It does deliver a tangible income return to shareholders whilst we're trying to create capital return as well through the assets. We feel like we're getting a healthy balance of allocating capital towards the ongoing dividend.
We do have a policy, a set policy of no less than 10% of operating cash flow. But we announced last week that we've increased that, and we were able to increase the 10% year-on-year dividend last week. So we're pleased about that. And I have now been in seat at Pharos as a relatively new CEO for nearly nine months. And it's really enabled me to have a very good understanding of the assets, the opportunities, and how we grow this business. I've spent a lot of time in Vietnam and Egypt getting to know our stakeholders, better understanding of our assets, better understanding of the economics, and really what we can do to allocate capital to drive the best returns for shareholders. So that's really been my priority.
As I say, we're working on some of those immediate near-term priorities, such as the extensions, such as the consolidation in Egypt, and now moving forward to how do we grow our business. And this is one of the first times in a company's last few years where we've really been able to look at new opportunities, not just within the existing assets, but possibly outside and adding to the portfolio and having the financial ability to do so. So really strong position. I'll just move briefly on to slide four here. Just gives you an overview for those not so familiar. As I say, Vietnam is very much the core part of this business, very much where we prioritize and allocate capital. And Sue will be talking a little bit about this in a moment. Egypt, again, contributes to group. Lots of opportunity.
There's a lot to like about Egypt. We do have a legacy receivables position because payment risk is still one of the concerns. But we are very clear that unless we can see a reduction in those receivables or reuse them in country, that's what we mean by sort of self-funded growth in Egypt. So we work every day to reduce that receivable balance. And last year, we received $26 million from EGPC, which enabled us to reduce and take out our existing debt. So there is still opportunity to recover those receivables. And again, we'd like to see that coming through later this year. And Vietnam, I've talked about mostly in terms of the key catalysts. So I'll come back a little bit later on just to talk about the activity predominantly in Vietnam for this year.
But at the moment, I'll hand over to Sue for a more in-depth review of our financial results. Thanks, Sue.
Thank you, Katherine. I'll just move over to my slides. So just picking up on the 24 results position, so strong revenues there, $136 million coming into the group. As Katherine mentioned, the hub of the group, if you like, or the core is Vietnam. So 85% of that coming from our Vietnam assets there. I think the key for us was moving to a debt-free position during the year. So $16.5 million in cash as we finished the year. I mean, that was very much ably assisted by the Egyptian receivables, as Katherine mentioned, just under $26 million that we received from the government there. I mean, we do still have $29.5 million at the end of the year that was outstanding to us.
And so very much something for us to go after and bring into the balance sheet. I think also important there in the left-hand side, the OCF, so the operating cash flow, $54 million. That's important because that's the criteria that we use for dividend setting. So it's a minimum of 10% of that number. So important there. If I move to slide seven, so strong cash flow from operations there. So $80-odd million. And then you've got, obviously, taxes to government coming out there. So getting to your $54 million of OCF. We've invested circa $26 million into the assets themselves. So that two well program in Vietnam taking up roughly two-thirds of that position. And indeed, in Egypt, where we've been able to utilize some of our Egyptian pounds there to invest in the assets and continue to keep those stable.
Also worth noting, so you've got $24.6 million there, the operating free cash flow before distributions. But you've got the $8.2. That continues to be important. That was the carry to do with the farm out to IPR. So $5 million, roughly, of that is to do with the carry, which finished in the first quarter last year. And then you've got $3.2, which was to do with the contingent consideration. So we've still got two more years of that contingent consideration to run. So again, so part of that still to look forward to, but the carry is now finished. Moving on to slide eight. So a couple of charts there just on the cash. So we went from $33 million at the end of the previous year to $16.5 million at the end of this year.
But of course, we've paid down that big wedge of debt, essentially, on the RBL and National Bank of Egypt. So $41 million going out there. We've also indeed spent just under $10 million in share buyback and dividends to shareholders, etc. So a good position. And just pointing out on the right-hand side there, if we'd have got the money in from the Egyptian receivables or more money in, I should say, then we could have ended the year just under $50 million. So again, something to look forward to as we move forward. Just to give you a bit more color on the split between Vietnam and Egypt and what they both bring into the party. So Vietnam itself, $27 million there coming in from the asset. And indeed, Egypt adjusted of $17 million. And that's got that $8.2 million in, which I spoke about earlier.
Part of that will continue into the next two years, say the three level. But the five has now gone, which was the carry position. Again, you can see that both jurisdictions bringing free cash flow into the business. Of course, the $52 million at the end there, that's the repayment of debt and indeed dividends and share buybacks to our shareholders. Just pulling out again, the point, the sustainable dividend shareholders, very important to part of our DNA. As Katherine announced, we have declared a 10% increase in the dividend to 121 from 110 last year. Obviously, that has to be ratified at the AGM, which is in May. As we move forward to the next slide. Just telling you a bit about the spread of possible capital spend this year. We've got a range there.
So a smaller end here of $37 million, top end of $66 million. And very much that's driven by sort of an ambition, if you like, to go after the top end. Just to explain what's in the bottom end there, we've got a commitment well on 18X in Vietnam, TGT, which is to do with the license extensions. And we've also got long lead items in there for five additional wells in Vietnam and plus a modest program of work in Egypt. So that's the lower end of the scale. What we really want to go after is that top end. And what that means effectively is that we would be drilling six wells in Vietnam. So four on TGT, two on CNV. And we would be looking for a sort of simultaneous program of work with one rig on CNV and one on TGT. So running those together.
So as I say, so that's our ambition. Why would we want to go after that spend? You won't see the production this year. It will, of course, come into next year and beyond. So what we're actually aiming for is something in the order of 20% increase in production for next year and into the next three-to-four years. So that's the prize there. Also in Egypt, as Katherine mentioned, we've got the consolidation discussions ongoing with the government. Again, we would like to do a more ambitious program and bring the number of wells up there, but also, obviously, that production target. So again, a bit more of an aggressive position there. So I think that's great for us to go for.
The bids in Vietnam are being opened currently by the JOC, so we'll be able to give more information on that in the next few weeks. Just going over to slide 12 there. So just trying to give you the valuation of the company. As you all know, the market cap, very modest, 119. The assets themselves, 264, that's your build-up from Vietnam, Egypt, plus the working capital and cash balance there. But indeed, other things to go after. On the right-hand side, you've got the commitment appraisal wells, which we'll be doing hopefully later this year on both CNV and TGT. The Egyptian consolidation to go after, that will give us longevity of the license, which will actually, obviously, increase the value plus increase in fiscal terms.
And then we're looking to move 2C into 2P on all of our assets and indeed 125, 126, which we talk about there. So hopefully, lots to look forward to as we move forward. And with that, I will hand back to Katherine.
Thank you, Sue. We're just moving a little bit more just about activity for this year in Vietnam, which ties into Sue's discussion on capital allocation and really where the capital is allocated and what do we hope to achieve by doing so. Just starting with TGT, as a consequence of the license extensions, and just for clarity, this license extension was extended to 2031. I think some of the questions we've had is, what is the new expiry post-extensions? So TGT was 2027. It is now 2031.
You can see that we've got some time to reinvest, recover the costs, and obviously see the benefit of those additional production volumes. What I'd like to point out here is 18X appraisal well. It's that bottom left yellow box. That is our commitment well. And that's the first well that we'll be drilling later this year with guided Q4 for that. But as Sue said, bids are out. We're starting to plan for that and see if we can drill that as soon as possible. What's really important about this is that it's potentially opening up a new part of our existing block. Obviously, you can see our existing production here in the green. But what we're targeting is that pale pink part of the concession, which opens up a potential new area. And that's what 18X appraisal well is really designed to do.
If that is successful, which we hope it will be, it opens up a whole new development program here on the left-hand side. And that's what we want to try to go after because that will deliver incremental volumes rather than just sustaining the current production. In parallel, and unrelated, but as part of an important piece of work on the asset, is also our infill wells. And you can see those green infill wells identified there. And those are the long lead items that we need to commit to in order to see those drills that Sue just referenced as part of our capital allocation. The beauty of this is that the infrastructure is in place. Again, on the right-hand side, you can see our existing infrastructure. We do not require additional wellhead platform.
This ties in, as you can see, that gray outlined box to our existing platform. Very, very quick and easy to get on stream in a successful situation. Absolutely the right thing for us to be going after, the right thing to be reinvesting back into the assets and the right deployment of our capital priority. That's really important and made possible, obviously, with the extensions because, obviously, we've got further time on the license to recover those costs and make the economics work for us. We are in a JOC. Again, just a reminder, we're in a JOC type structure in Vietnam. We have ourselves, PetroVietnam, our government stakeholder, and our Thai partner, PTTEP. We are fully aligned to move as quickly as possible with that drilling program.
If we can run as fast as possible, you'll see some of that lower band CapEx move into the upper band that Sue's just talked about. That's what we want to get after. It's a similar story in CNV. Again, just to remind everybody that the license term now extends to 2032. Well, 28, no, 32. We've got additional time here to pursue the same story. We have 5X, as you can see there, is our commitment appraisal well. That's designed to appraise Block B here on the right-hand side of our block. Again, with well design, we do not need a new platform in order to tie this in. That's made the economics improve quite significantly for us. We're planning for that. Hopefully, we can also drill this well later this year, if not early next year.
So hopefully, that gives a little bit more color on what we're trying to achieve in Vietnam with the existing license and existing production. In Egypt, again, we have a work program that is relatively minimal at the lower band in Sue's CapEx lower band. That's really based on the existing environment, the existing commercial environment with the existing terms. When we are able to conclude the consolidation discussions, we will then look to accelerate an investment program. And that would move some of that investment into that upper band. And that's really based on, as I say, increased time, which will give us an immediate uplift, a bit like we saw in Vietnam, but also that motivation and incentive and improved economics to reinvest. But critically for Pharos, again, we're very clear that this has to be self-funded growth.
We will not deploy dollars that we earn in Vietnam into Egypt. It will be self-funded, any growth there. We are making progress. It is part of a process in terms of government approvals. So we've attempted to give some indicative timing here. It is a bit unknown, but we are making progress. And as I say, I think that MOU signature last month, we were one of the few to sign an MOU in that vein. So that does demonstrate that there's alignment from all parties. And again, our operator IPR is driving this process as operator, but we're very much sort of on the same page in terms of what we're looking to achieve because it works for all parties. So that helps to explain the difference between the lower band and the upper band in terms of CapEx.
We do think the upper band is ambitious in terms of just how much activity we can physically do this year. But we really want to demonstrate that we're able to fund even that more aggressive CapEx budget through internally generated cash flow. Also worth saying that we assume, we make a conservative assumption, that we have not recovered any additional receivables from Egypt, which we clearly hope will be the case this year. We'd like to see that $30 million balance coming down, but we don't assume that for the purposes of funding our CapEx program or indeed the shareholder return through the dividend. So I think just in order to sort of maybe round up before we take some of the questions and try to answer those, I think this is a real turning point for Pharos. We're really looking forward. We're looking at growth.
We're looking at scale. We're looking at delivering more and more returns to shareholders in the best possible way. Vietnam is absolutely core to our business. It underpins our long-term cash flows. It's the right place to deploy capital for the reasons I just explained. We have high premiums to Brent. It's more profitable oil production than perhaps we see in Egypt. Having said that, Egypt can fund itself and can deliver incremental volumes if we ensure we have the right commercial framework. We're very disciplined about that, but also clear that it contributes at group level as well. Partly, obviously, as we've mentioned before, those recovery of receivables from Egypt, which have come through, albeit lumpy, but they did come through last year. That allowed us to deleverage the balance sheet.
So we sit here today with an unlevered balance sheet and firepower that in itself gives us financial flexibility and firepower to go after growth, not just for the existing assets, but possibly outside of the existing portfolio. So I think that's really important that for the first time in a while, not only do we have accessible opportunities, but we have the ability to be a credible counterparty to be funded and to have the strength to be part of those conversations. And again, just to touch on 125 and 126 again, because I know for some of you longer-term shareholders, this has been an important part of the investment proposition. We are taking a fresh look at that. And that was something that I was able to do coming in new. Is this an important part of the portfolio? Should it be here?
Should we be moving this forward? And we all feel that the answer is yes. And we do need to buy extra time. We need additional optionality to progress those discussions. And we do feel that the overall macro sentiment for frontier exploration is certainly improved than perhaps a few years ago. It's a strategically important basin in that region. If it unlocks, we saw exploration success towards the end of last year in the Cuu Long Basin, the southern part. We saw an exploration success with Murphy, who are now moving forward with an accelerated appraisal program. So we have an opportunity, and we need a fresh approach. And that's very much the next priority that we're working on.
We are trying to deliver a balanced portfolio of stable, healthy, profitable production with some exploration upside, all of which is underpinned with a very strong balance sheet and a shareholder return through the dividend. And hopefully, we can deliver shareholders an income return as well as a capital return over the coming year or two. So I think with that, I thank you very much for listening. We tried to keep it as succinct and efficient as possible. And obviously, we can address some of the questions. So thank you.
Perfect. And thank you very much for your presentation. Ladies and gentlemen, please do continue to submit your questions. And you can do so just by using the Q&A tab that's situated on the top right-hand corner of your screen. But just while the company takes a few moments, the questions have been submitted today.
I'd like to remind you that the recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. As you know, we have received a number of pre-submitted questions, and we have received questions throughout today's live event, and Manal, at this point, if I could just hand over to you to share the Q&A, that would be great, and then I'll pick up from you at the end.
That's great. Thank you. Thank you, Katherine and Sue, for your presentation. The company has received a number of pre-submitted questions ahead of today's presentation. For ease of reference, we've grouped them into relevant categories. The first one is about Block 125 and 126. What happened to the farm-in partners who were actively engaged in the farm-out process for Block 125, 126 for more than two years?
If I recall correctly, one potential partner even had a deep water rig in the area ready to meet the 2025 deadline. Can you reassure investors about the quality of these exploration assets?
Yeah. Thanks, Manal. And I think it's without dwelling on sort of previous discussions that the company has had on the exploration prospect. I think having had a review, a fresh review with the team, there is confidence. There is confidence in the opportunity. Even on a P90, we have a billion barrels of oil. We have a full CPR that's available on the website, so you can see some of the results of that CPR. So yes, it is technically interesting, and it's strategically interesting. And it's one of the few frontier basins left underexplored. So we feel confident.
But what we can't do is risk the entire Pharos business based on sustainable cash flows, on drilling a deep water, high-risk exploration prospect by ourselves. So I think that's been clear over the years. It's still very clear, even with a refreshed view of strategy, that we cannot do that on our own. We do need a partner to do that. And we need a partner that is not only willing and able to fund an exploration well, but also has the potential for developing that in a success case. So there aren't 100 different potential farm-in partners. It is relatively bespoke in terms of people that would be interested. But there are discussions. And I think one of the questions we had, which might be related, is why have we not achieved success thus far? And there's a number of reasons for that. Sometimes it doesn't fit portfolios.
It's oil, not gas. So there were a few discussions who would prefer a gas play. It hasn't fit exploration budgets to date because of other priorities. I think certainly with the recent discovery in the southern basin, that's changing a little bit. I think certainly with Vietnam's increased attraction or ability to attract international capital. We have new legislation in Vietnam as of last year, a new Petroleum Act, which is designed to streamline the approval process, attract additional capital. And there's certainly an impetus from PetroVietnam to be opening up. If they see more activity in the region, they also want to be part of that. So I think things are changing in terms of that respect. We are taking a revised approach to the process. I would say that's something that we're putting in place that we've done differently from previous.
And I'd say we've given ourselves extra time on the license with that extension request to enable those discussions to continue. So we do feel confident, but we're not going to do this without a partner. And those discussions take a bit of time, but it is a high priority. So in terms of giving shareholders confidence, we will make sure we owe it to ourselves to give this the best possible opportunity for a successful partnership. And we believe it's good enough. But as I say, it's not a wide number of companies that would have the ability to fund such a program.
Thank you, Katherine. Do you think you're applying for an extension of the license for blocks 125, 126, or at the ask that is being granted? Are you just kicking the can down the road?
Yeah. I mean, it's a good question.
We saw Eni just had the block above us. We saw they just secured an extension in January. So there's recent precedent. And obviously, there's always that argument of you just kicking the can down the road. I think for Pharos, it's different because we have made that commitment to the long lead items. We committed $5 million worth of drill kit last year. And those items will be delivered this year. So we do have some tangible ability to say, "Look, we were serious." We've also got a lot of activity in TGT and CNV with PetroVietnam. So that all very much helps, demonstrates to government that this is our priority. This is fundamentally the majority part of our core business. So we do feel confident. It's not done until it's done. And I think we're very clear about trying to manage expectations.
It will take a few months to go through the process. We've received some positive feedback. So that gives us an element of confidence. But we'll be announcing when those extensions are secured.
That's great. Thanks, Katherine. What are the top three lessons that we have learned as a company from the farm-out process for blocks 125, 126 that we can use in the future?
I think we've realized that it's technically interesting. A lot of the feedback has been about strategic fitting that into strategic exploration budgets and priorities. And I think that's the piece that we see changing with a more favorable macro environment, I would say.
Fantastic. Thanks, Katherine. Moving on to M&A. Where does M&A currently sit within the company's capital allocation priority? Is it something that's actively being pursued?
Katherine, can you add some color and give private investors some idea of the efforts you're making in the M&A front, e.g., how many assets you're screening per quarter, and how many make it to due diligence? Also, please provide some color on scale and size of potential acquisitions.
Okay. Well, just sort of stepping back on strategy, I think what's really important is we extract and deliver as much value as possible from the existing assets. So the number one priority that I saw when I joined, and I see even more clearly now, is the need to reinvest into those existing assets because of the high net back, the profitability, and leveraging the strength of the government. We've been in country in Vietnam for decades, and we have a really long-standing relationship with PetroVietnam. So if we can't leverage that, then we're doing something wrong.
But we can leverage that, and we've demonstrated that already. We identified that we needed extra time on the licenses. We've secured those, and we're moving forward with an investment drilling program. So gross initially, very near-term growth is coming from the existing assets. However, we would like more in the portfolio, and we would like to do more in Vietnam if possible because we know our way around. We have a strong relationship with the government. These are relationship-driven environments and relationship-driven jurisdictions. So that's the advantage we've got. But would we look more regionally at accretive asset additions? Absolutely. But then I would also say that anything that can deliver shareholder return is something worth us looking at. I think given the strength of the business now, we are cautious about just not doing something for the sake of it. It would need to stand.
It would need to give a return. It would need to be accretive. So whilst it's quite hard to sit here today and say it looks like sort of this or that, it probably is. We probably are looking at additional production, I would say, because the reason I say that is because we've already got our own exploration upside in the portfolio. And again, priority is to move that forward rather than looking at funding exploration elsewhere. We absolutely have to look after our homegrown assets first and then add to that as we see. But we are looking for opportunities. We would like to scale and grow the business. We think we can do that a little bit organically, and we think we can also do it inorganically.
I think that at least gives a bit of a flavor as to how we look at growth.
Really helpful. Thanks, Katherine. How are you planning to fund acquisitions? Have you had any discussions with lenders regarding potential M&A capital that could be provided? What scale of debt would you be comfortable taking on? Will you be issuing bonds or RBL?
It is too early to say the structure, but we do sit here with an unlevered balance sheet, and the best time to secure good terms for firepower is when you don't need it. That is something that we're looking at, absolutely. We would use our balance sheet to fund the right transaction if we found it. By that, I mean something that pays back producing assets that our cash flow generates in order to repay.
The level of debt depends on the size of the opportunity that we'd be comfortable with, and we do have the ability to support RBL because of the stable production and cash flow, so we could look at a number of different things, and again, the RBL versus bond plays in a little bit to how much we would be comfortable in terms of facility that we could take on at this stage, but it's conversations we're certainly having at the moment. Sue, I don't know if you wanted to add anything to that.
No, I think that's absolutely right, Katherine. It'll depend on the size of the prize that we're after, and therefore, we'll look at it from there, but yes, as you say, we are actively in discussions with things, so.
I think it helps our position as well as the counterpart if we can go into discussions with a strong balance sheet plus the firepower, as I say. That puts us in a very healthy position when looking at opportunities.
Thank you, Katherine. Sue, does the company consider the recent assets sold by Harbour Energy in Vietnam? They appear to be value accretive to Pharos at the price they were sold at. If we did not participate, why not?
You might have said Sue. Sorry, I can take that. Yeah, absolutely. I mean, that's a great question because it's a great example of something that we would like to do. We were not in a position to do it this time last year when those discussions were ongoing. But that is a really good example of an accretive transaction that we'd like to be involved in.
That was interesting to see. Again, good read across for us. Seeing EnQuest coming in as a new country entry, which is the first time Vietnam's seen a new country entry for a little while, is all positive. But yes, that's the sort of transaction that's interesting.
Great. Have we participated or considered participating in the upcoming Malaysia bid round? They have exploration, discovered resources, and late-life assets in these rounds with favorable PSC terms. If not, why?
I would say, again, just to reiterate, we've got to leverage what we've got, what we're good at. We're really good at ensuring stable production in Vietnam, and now we've got a chance to grow. Whilst we would look more regionally, I would say Vietnam is the priority. In terms of exploration, as I said previously, we've got our own very exciting frontier exploration.
And that's got to be the priority if we're looking at funding a moving exploration program forward.
That's great. Thank you, Katherine. The next few questions are with regards to Egypt. Has the receivable situation in Egypt continued to improve in 2025?
Do you want me to take that?
Yeah.
Yeah. I mean, I would say it's been quite a slow quarter in 2025, but I think we would expect to see that pick up. We did very well last year with the $25.5 million. So over and above what our revenues were. So we actually clawed back a bit of our receivable position there. And what is good is that we now start to see monthly payments coming in.
So whereas last year, some of the amounts were quite lumpy, what we are seeing now, sort of in the last six months or so, is that there are monthly payments coming through. Also, we are now able to accept Egyptian pounds. Having got out of that carry position, we will accept some Egyptian pounds in order to fund in-country expenditure. So that's also helpful. And what I would also say is that we are now seeing for the first time for probably a couple of years that we're able to exchange some Egyptian pounds into U.S. dollars. So I think the country is improving, but there's still a way to go. Anything else to add on that, Katherine?
I think so, Sue.
Only just that confirmation that we don't assume that we've reduced that balance for the purposes of our CapEx program for this year, which I think is a good point.
Yeah, absolutely.
For us to have that discourse.
That's great. Thank you. Sue, thank you, Katherine. Does the company say it's feasible that Egypt production can be increased back to the early 2020 levels in the short to medium term? Can we expect a multi-well drilling program in Egypt?
Yeah. Well, I certainly think we can see a multi-well drilling program. That's absolutely part of the consolidation discussion. So obviously, the quid pro quo for us in increasing our economics in the consolidation of the licenses is a work program, an investment program. And Egypt, one traditional investment, they need every single barrel, additional incremental barrel produced.
So what comes with that is a commitment for an investment program and a drilling program designed to increase volumes from where they are today. Do I think they'll get back to those 2019, 2020 volumes? That's hard in the short term. But do I think we've got an opportunity to at least double existing production in Egypt? That, I think, is achievable.
Great. Thank you. In the recent results, you referenced in-country experience when talking about inorganic growth. This suggests you have a focus on existing geography. How do you feel about the Egypt assets? Can you please reassure shareholders we're not going to double down in Egypt and repeat the Merlon situation, at least not before EGPC has cleared their 2018 arrears?
Yes. It's a short answer. Yes. We are very, very clear.
And as I say, I think that's why it's been very, very important for us to take a hard look at Egypt. And as I say, to the extent that it's self-funding and it finances itself, it contributes at the group level. And I think that's what we've tried to show today with some of Sue's slides, the contribution that Egypt makes. But because of the receivables, because of the payment risk, it's partly why we use that high discount rate as well. I mean, you will see some of our peers using a discount rate of 10% for Egypt. We're using just below 15% because we take a conservative approach on the valuation, but also in terms of what we do with that receivable position. So until we see that balance and that payment risk reducing, it makes us cautious on reinvestment, absolutely.
And as I say, what we're very clear about is not utilizing Vietnam-generated free cash flow for further investment in Egypt. So really hope that's clear.
Thank you, Katherine. Moving on to strategy. Have you considered a dual listing in an exchange that's more welcoming and receptive to your resources company, e.g., in North America, to get the share price closer to NAV? One of your U.K.-listed peers has recently moved to Canada and grown multiple.
I think a dual listing in itself is not a silver bullet. Yes, valuations in North America tend to be healthier and the discount slightly less. I mean, we do see that discount here as we identified. And again, we're not alone in that. But at this stage, there are no plans to do that, certainly not at the size that we are.
It makes more sense when we have achieved some scale and growth, and we just have to focus on that in terms of our strategy at this point in time. And as I say, having an unlevered balance sheet allows us to fund that growth without having to rely on equity and without having to be effectively restricted by that NAV discount with our share price. So no plans at this stage for a business our size, but always a possibility as we move forward and grow.
Thank you. Why are we still mentioning COVID-19 in the annual results in March 2025? Can you confirm that working-from-home measures have now ceased?
Yes. Yes. I think for this business, COVID was quite fundamental in terms of shaping the future. But as far as I'm concerned and the management and board are concerned, we look forward. We are very active.
We've got a lot of opportunity to go after, and we're all working hard, and we don't have working-from-home measures in place anymore.
That's great. Thank you. With regards to shareholder returns, a shareholder asked, "The dividend yield is only 5% this year. Many of your peers are yielding 15%-20%. Could this be one of the reasons that we trade at a larger discount to NAV versus our peer?"
I think different shareholders want different things. We have some shareholders who value the dividend, and I think that's important for us. As Sue says it's been part of our investment proposition for a number of years, but also I think demonstrates the quality of the asset that they're capable of supporting a sustainable dividend. So it's important to us, but actually also important is the capital growth.
So we can't allocate all our capital back into a double-digit dividend at this point in time where the assets need reinvestment. Peers are doing different things, and there might come a point where we're in a position to increase that return. But at the moment, the balance is about achieving a sustainable dividend that is long-term sustainable, so not just here one year, not the next, but also allows us that reinvestment back into the assets. And these are oil and gas assets. So they do need reinvesting. And we're at that point now where we need reinvesting back into the assets, which for us is great because that demonstrates growth and a future for the business. So that works for our strategy right now.
Thank you, Katherine.
Why do you not expect the share buyback program, given the fact that the shares are currently 10% lower than the average purchase price and also lower than when you stated they were undervalued in July 2022 prior to the program? Do you now see them as fairly valued? Is the current shareholder register part of the reason for stopping?
The share buyback program was considered several years ago when there wasn't the level of investment activity, and obviously the share price was lower as well. So I think to answer the question, do we feel we're fully valued? No. We've tried to demonstrate that in our valuation slides that Su presented, and I think there's lots of upside for our business that's not captured. And even on just a trading, even just on a production trading basis today, there's clearly a gap. So that's not the case.
But what we have done is, again, looking at where do we prioritize capital for the best return for shareholders. And given the low liquidity in our stocks and given the need for growth and scale, it's better use of our capital at this point in time to put that back into the assets and the buyback whilst keeping the dividend. So it's clear that we also want to sustain that tangible income return to shareholders. But again, the buyback is just partly a function of the low liquidity, not necessarily the makeup of the register, but just the fact that it is relatively liquid and tightly held. Now, we will keep an eye on the buyback. We look for additional buyback authority.
We will be doing that as ordinary course business at the AGM because we like the flexibility of being able to reinstate that policy if we feel that's the best use of capital. But that's the reason we've paused it at this point in time because of that CapEx program and the assets that we've got this year.
That's great. Thank you, Katherine. We will now move on to the live questions that were submitted during this presentation. The first question is from Andrew S. How progressed are the JOC's plans for Vietnam to deliver the upper-band CapEx program? Have separate rig tenders commenced?
They are well progressed, and the rig tenders are part of one discussion. So they're not separate discussions. They're not separate tenders. They're together. And obviously, the reason for that is for better commercial terms. So yeah, we're getting really good support.
We're getting really healthy pressure, I would say, from PetroVietnam to run quickly and to move as quickly as possible. I mean, we do have some lead time because of certain items. We have weather windows, etc. So that's all part of the process. But I'd say that the JOC is really very aligned and wanting to move as quickly as possible.
That's really helpful. Thank you. Question from Anthony V. What are the liabilities linked to License 125 and 126? If farm-out is unsuccessful, is there a commitment from the company, or can the company simply relinquish the license and walk away?
Okay. Thanks for your question. Yes, there is a financial commitment linked to 125 and 126. They're together. Just again, to be clear, 125 and 126 are together essentially as one license. And there is a financial commitment. Obviously, that's designed to encourage drilling.
In the event of no drilling, that's a dollar commitment of $15 million. Having said that, obviously, that will be moved with the extensions. So if we're granted those term extensions that we've discussed, that liability will be moved. In the event of an unsuccessful farm-out and we're unable, then we are thinking of other ways to maybe work with PetroVietnam, possibly in the producing assets, to see what we can do about that liability. But in the short term, we are moving that to 2027 with the extension of the term license approval.
Thank you. On the same topic of 125, 126, Sam S. asked, "Can you clarify what exactly you have changed about the farm-out process and why you deem following a different process is important?"
We've reviewed the process given the lack of partners to date.
Just the fact that we're here still in discussions with potential partners has highlighted the need for a fresh approach. And that's something we're working internally. I think we'll share more details of that when we've formalized it.
That's great. Thank you. Due to the interests of time, we will take one more question before handing it back to the investor and the company team. Omar S. and Nigel G. asked, "When do you expect to receive the $29.5 million owed in Egypt? What will be the plan for Egypt if payments from governments doesn't come through or slow down?"
Really good questions. As I say, we would have liked to have seen a little bit more reduction in the balance of those receivables in Q1 in our first quarter. As Sue mentioned earlier, we are seeing regular monthly payments for sales.
But what we haven't seen yet this year is a reduction in those historical invoices, which we're continuing to chase. And this is all part of the discussion of further reinvestment in Egypt. So it's all linked. The question of what would be the plan, what would be the plan for Egypt if payments don't come through, then we just slow down investment or we make sure that investment is just in maintenance of the existing production. But again, there's real emphasis from the government that they want to see further investment, further production, and that's got to come with a reduction in those receivables balance. And we're all, as I said, there's a number of us, the peer group in Egypt, that are saying the same thing. So it's full awareness by the government. It's not lack of understanding on their part. It's just the ability.
And as more bailout funding comes through to the government, the more flexibility financially they'll have to hopefully settle those receivables. So in really short summary, we don't have perfect visibility, but we do know that the wherewithal is there to reduce that balance. Certainly, we'd like to see that reduced throughout this year.
That's great. Thank you very much for answering all of those questions from investors. Of course, the company can review all the questions submitted today, and we will publish those responses out on the Investor Meet Company platform. But perhaps just before redirecting investors for their feedback, Katherine, could I just ask you for a few closing comments?
Thank you.
Yes, I would just like to say thanks again for everybody for taking the time and how busy things are and for listening to the propositions this morning and letting Sue and I present our investment case to you. We do feel that we have a number of catalysts this year, a number of new flow items that we look forward to delivering and ensuring that we can deliver on those items that we've talked about today. So please do continue to follow us and take an interest. We really appreciate the support and look forward to a successful year. So, for us. Thank you.
Katherine Roe, thank you once again for updating investors today. Could I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order for the management team to better understand your views and expectations.
On behalf of the management team of Pharos Energy PLC, we'd like to thank you for attending today's presentation. Good morning to you all.