Good morning and welcome to the Pharos Energy plc investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand 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 during the meeting itself; however, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would like to submit the following poll, and now I'd like to hand you over to CEO Jann Brown. Good morning to you.
Good morning, and thank you, everybody, for joining this webinar. As was said, I'm Jann Brown, CEO, and the presenting team with me are Sue Rivett, who's our CFO; Mohamed Sayed, who, as well as being in charge of our technical and operations, is also our country manager for the Middle East; we have Vinny Duignan, who is our country manager in Southeast Asia and also our group head of exploration; and finally, we have Minh Anh Nguyen, who, as well as our role in investor relations, also heads up our ESG efforts. So for those of you who are new to the story, just a few words about the business before we launch into the actual results presentation. We're obviously in the oil and gas business. We have assets in two very different countries, in Vietnam and in Egypt.
Both countries have producing assets which generate cash flow, and we also have a range of exploration opportunities, from the low-cost, lower-risk, right through to the potentially transformational. So that's our business in a nutshell. With that, Minh-Anh, could we have the first slide up, please? So we had a very strong performance, across both operations and corporate in 2023. In operations, we continued to deliver against the guidance that we set at the beginning of each year. In Vietnam, we made steady progress on getting the time-critical approvals, those being a license extension for Block 125, where we have the huge exploration potential, and an updated field development plan on the TGT field, which will allow us to recommence drilling this year.
On the CNV asset, we had the first lateral well drilled that finished at the beginning of 2023, and that was a big success, and, that success is now informing the updated field development plan for CNV asset, which is under discussion with our partners right now. Finally, in 2023, for Vietnam, we signed a life-of-license sales contract with a domestic refiner. The fact that it's domestic brings us some cost advantages, and the expectation is that when we secure license extensions on these producing assets, the sales contract with the refiner will also be extended to cover that longer period.
In Egypt, there was clearly a position where the government was unable to access dollars to pay the oil industry, including ourselves, so we maintained a very cautious investment program on El Fayum that was mainly to keep the reservoir pressure and keep production flowing, but also, of course, we honored commitments. One of those commitments was an exploration well on the North Beni Suef field, the very first well drilled on that concession, and that was a discovery. A mere nine months later, that first well is on production with a 20-year development lease, and we have a program to develop that concession further. Last year this time, North Beni Suef was a pure exploration gleam in the eye, so it's particularly satisfying that it's been drilled, discovered, and is now producing in such a short timescale.
On the corporate, we had operating cash flow of around $45 million, plus we had a one-off payment in as a part of the deal that we did with IPR to sell part of the Egyptian asset base a couple of years ago that brought in an additional $20 million. Now, despite the lag, the delay in being paid by the Egyptian government for our production there, we funded $27 million investment into assets. We've paid down $35 million into our reserve-based lending facility, and we've returned over $8 million to shareholders. We'll come back to what the reserve-based lending position is now because it's nearing the end of its life. We also published our net-zero roadmap. We recognize that this is a really important part of any oil and gas industry's ESG, particularly for institutional shareholders, and that was much welcomed when we published that.
We strengthened our board. We recognized that there was a need for more technical expertise in the non-exec component, and the successful candidate was announced at the beginning of this year, Bill Higgs. And as with a geoscience background, and following the very sad demise of our company's founder, Ed Story, Bill will be a strong ally for Vinny Duignan as they progress the work needed on our exploration asset in Block 125, which Vincent will talk about later. We also declared last week, when we announced our results, a dividend, bringing the total dividend for 2023 to GBP 1.1p per share, a 10% increase over the previous year's total dividend. So finally, what's going to drive net asset value and cash flow for the future? Well, in Vietnam, we're back to drilling this year, and we've got two TGT wells, and Mo will talk about these in his section.
We've also got license extensions underway. We have applied for these well in advance of needing them, and we will be disappointed if we don't get them this year, but again, more of these later. And on Block 125, the potentially transformational asset, the process to try to secure the right kind of rig to drill in the right location is ongoing, and Vinnie will talk more about that in his section. So that's in Vietnam. In Egypt, I talked about the discovery on the NBS development, that will continue with a program of wells this year, and over time, we'll add not just to 2P reserves but also to production. Now, the NBS development means that we now have two concessions in Egypt, El Fayum and NBS, which are both being managed by the same operating company, Petrosilah.
And that's prompted us to look at the concession terms with a view to taking a proposal to the government that we bring these two concessions together into one. We would ask for financial and commercial concessions for us to improve the returns that we get, and of course, what the government gets is, a commitment to more investment and a commitment to future energy security for the country. So it's a win-win situation and a well-trodden path in Egypt, and that work is underway, and Mo will talk a bit more about that in his section. Now finally, probably the biggest piece of news last week was that after nearly two years of a dearth of dollars in Egypt, the support package from international institutions and businesses, which a mere six months ago we'd estimated was going to be about $5 billion, is now $57 billion.
The government of Egypt immediately, on signing up to the $57 billion, announced that a significant portion of that would immediately be allocated to paying down foreign companies in the oil and gas sector. Last week, we received $10 million from EGPC, to whom we sell the oil. The government has also put out statements about committing to a schedule of paying down the foreign oil investors, and we look forward to a more stable position with the payments. So before we leave this slide, what we can say is that in the last four years, we've made huge strides to reduce the cost base to strengthen the financial position, and we've really got a grip of all the assets in our portfolio now and know exactly where to invest, unlock value, and drive net asset value from them.
So for the first time in four years, we are in a position to say that we can seriously consider M&A with a view to looking at combinations to create scale as well as value because we, like many others in our sector, our scale of the sector, are trading well below net asset value, and we firmly believe that scale is one of the keys to unlock that conversion of balance sheet value into share price. And that is really behind the announcement that we also made last week of my departure, not imminent. I will stay to oversee a managed handover to whoever is the successful candidate.
But what's been needed in the business for the past four years plays exactly to my strengths: financial backgrounds, getting the company back on a financially sound footing, and what's needed to drive the company forward are different skill sets and fresh energy. So with that, can we turn to the next slide, please? This slide we prepared, before we received the $10 million from EGPC, but I think it's still important because it shows the thinking that we were doing to de-risk the lack of payments in Egypt, at a point where it was really unclear what the pattern of payments in the future was going to be. So we look at 2023, lack of hard currency to pay foreign investors. Our oil sales are USD denominated, so it was far better to leave them on the balance sheet as receivables to avoid the devaluation.
You'll see in the graph, just in the middle of the slide there, if we had drawn them down in Egyptian pounds, and just held them on our balance sheet, we would have been devaluing every single year. We did not have any U.S. dollar expenditure because as part of the deal when we sold half of the assets to IPR, they were paying all of our joint operating costs: OPEX, CAPEX, G&A. So there was no flow-through of any Egyptian pounds that we drew down, hence, as I said, the reason of keeping them on the balance sheet. Now, 2024, completely changed support packages in. Government has started paying down. We've seen a number of our peers in the sector, and of course, we continue our lobbying at every level to be front of the queue as more U.S. dollars are paid out.
However, what we had been doing to de-risk the situation in advance of knowing about these dollar payments was recognizing that at the end of the carry, we would have a substantial amount of joint operating expenditure where the end suppliers would be being paid in Egyptian pounds. So we have negotiated with our partner and the operator, IPR, that for every Egyptian pound that is being paid onto a supplier, we will pay that cash call to the operator also in Egyptian pounds. So we can draw down on our receivables, not using the cash in the bank, draw down on our receivables in Egyptian pounds and flow them through to the supply chain. The relatively small amounts of US dollars that will be needed for the current work program can be funded from the contingent payment from the IPR deal, which is due this June.
We've calculated that to be $3.6 million. So we can use that static pool of cash receivables, even if there was a further delay in getting dollars down, we can use that to fund the investment program. The liquidity last year, we were just marginally positive on liquidity. This year, it will be significantly better with the $10 million coming in and hopefully more. But the other point of this is about investment in the assets, and as payments for the oil sales really start to flow, the appetite to invest in these fields and really see the production levels pick up, will, will really start to flow as well. So very, very changed position from this time last year in Egypt. We really see that the corner's been turned and, that not only will the dollars start flowing in, but we can really start to invest.
With that, I will hand over to Sue on the financial slides.
Thanks, Jann. That's, that's great. If we could move to the next slide. Yep, that's great. So in terms of the revenues, so robust revenues, $168 million there, which represent strong operational and financial performance. They are down on 2022, but that largely reflects the 20% reduction in the Brent price there. So guidance met, in terms of production guidance. So by far, the most important element is in the middle there, the net debt position down 77% to $6.6 million. And obviously, as we, we've heard from Jann, $10 million in there, from EGPC, just on the day of the release of the results. However, the day before, the results release, we did actually go net cash.
So, you kn ow, we would have been able to announce net cash without that $10 million, but obviously, very welcome for that to come in. In terms of the debt itself, so two elements. We've got the RBL and the National Bank of Egypt. As Jann mentioned, the RBL is due to finish, it's mid-year, mid-year next year, as is the National Bank of Egypt. So as that debt rolls off, the balance sheet, then clearly that cash, will come freely available into the cash flow. Also in terms of the hedging, modestly hedged, just under 30% of the group production, so leaving the rest to float, with the commodity prices. And if I could move to the next slide, please. Thank you. So in terms of, strong cash flow here from operations, so $104 million coming in there.
Obviously, we've got payments to governments in terms of taxes, so $44 million going out there and working capital funding, that working capital. So, operating cash flow of just under $45 million. That number's important because that's the number that we use to calculate what we will return as a minimum on dividends. So we use a minimum of 10% of that number to return to shareholders in dividends. And as Jack mentioned, we've announced a 10% increase in those dividends from prior year. So we've invested $27 million in the assets, and you've got $6 million going out there in interest, which gets you to a free operating cash flow of just under $11 million. Jann also mentioned the funding from IPR on that deal that we've done a couple of years ago. So that gets us to $31 million ahead of distributions.
If I could move to the next slide, please. So two charts there. One, on the left-hand side, just showing you the strong cash position. We finished the year just under $33 million there, and that's after paying down $35 million of debt and distribution to shareholders of just over $8 million. So in terms of the right-hand side picture there, you've got the net debt finishing at 6.6%. Obviously, if we'd have had all of those Egyptian receivables in, so $37.4 million at the end of the year, we would have, you know, been sitting here on a cash pile of just under $31 million. But you know, at least we're seeing the recovery now of those Egyptian receivables start to come in. If I could move to slide 10, please.
So just picking up on the shareholder returns, which, as you know, is part of our DNA, so increasing the dividend there to 1.1% per share, so up 10%, that gives the dividend plus the share buyback, gives you just under an 8% yield, which is a great position to be in. And in terms of my last slide, slide 11, please. So just thinking about 2024 and what that might bring. So cash CapEx there, so program of $32 million. $5 million of that will be carried by our partner, IPR, as we finish the carry there. We've got a much stronger balance sheet, improved liquidity, and strong cash flow generation from our assets. Obviously, we're now in a net cash position as well.
So in terms of the capital allocation for the year, so we'll continue to pay down that RBL debt, so $30 million there. That's actually that paid down, effectively. And capital program, as I said, $27 million, out of our pocket and, obviously continuing to send those returns to shareholders, both in share buyback and in dividends. So from the operations perspective, so Vietnam continues to be very strong, US dollar inflows, low break-evens and high premiums to Brent. So, you know, great, great position there in Vietnam. Also, we've got the two wells, later this year to look forward to, to bring up the production level. And in terms of Egypt, so, you know, definitely turned the corner, with that $57 billion coming into a country to support the progress there.
So we should see an improving position on our receivables, not only just in terms of that $10 million coming in cash, but also, as Jann mentioned, we will now be drawing down EGP, so local pounds, to support the funding of our operations there as we move out of the carry period. We have just moved out of the carry period. And also, $3.6 million coming in there in US dollars from IPR in June. So I think a lot to look forward to in 2024 and a strong, stable base. And with that, I'll hand over to my colleague, Mo.
Thank you, Sue. Picking up on the last thing Sue said, 2023 had a stable, strong performance base. Minh-Anh, if you can go to the next slide, 13, please. Thank you. We'll go through the asset details, but before we go through the asset details, I want to share with you some of those key value projects that we have been working on and delivering to our shareholders and some of the exciting projects in 2024. Obviously, we have been able to deliver on guidance year on year, and thanks to the stable platform of production we have in the two countries, in Vietnam and in Egypt. One of the exciting projects or things that we've done in 2023, 2024 is the approval of the TGT fulfilled devevepment plan, and the importance of it is twofold.
Number 1, it enables the drilling of the two wells planned for the second half of 2024. The two wells will have an impact on production, potential impact on reserves. But also, this RFDP has gone through the new implemented drilling law. So it had gone through that learning curve, and it's important for the extension, which I'm going to talk about next. Blocks 125 & 126 extensions is another key important project. Again, it has twofold. Number 1 is it's important for the asset itself. It enables us longer time to secure the right rig and drill this huge exploration site. And also, again, it shows that we have a good strong relationship with the regulator in country. We've been able to secure the extensions. We have experience in getting those extensions through the system. Why it's important?
Because one of the most important projects Jann mentioned in 2024 is the license extension for the two producing assets, that TGT and CNV, and I will pick up on this a bit more and in relation to the ILX infrastructure-led exploration opportunity. Switching to Egypt, the payment of $10 million, it's significant. It's significant because it's more than 25%. Think about it. More than 25% of our receivable in country at that time. You may have seen other companies, and you may have seen from the news, the benchmark have been 20%. We've been paid promptly. We're being paid ahead of the benchmark. Again, it's a testament to the relationship we have with the regulator and in country and our presence there.
The second important project was the success of exploration, both in NBS and in Fayum, but in particular, NBS last time this year was 100% exploration with all the exploration risks that come with it. Today, we have the producing asset, for 20 years. And again, I'll show you some of this in my next slides. Lastly, what's important in 2024, one of them is building on the success of NBS. As Jann mentioned, we have now two concessions operated by the same joint operating company. We have a North Beni Suef concession, and we have a Fayum concession. Combining the two concessions is a project that is popular in Egypt, so similar companies have gone through similar exercise. I am in country talking to our partners for two things, taking advantage of that improved economic and also through this potential review of the concession terms and consultation.
Moving on to the assets themselves. Thank you, Minh-Anh. In Vietnam, always happy to say we delivered on guidance, and like I said, we've been doing this year on year. Starting with the production plot in the middle, you can see this is TGT performance in the dark green, and it's a very stable production in a year with no new wells being drilled, leading up to the annual field maintenance. As you can see in the last quarter, we take time to build production after the shutdown. We're back in March. This year, annual shutdown was delayed to October. The chart in the bottom shows the overall field performance in CNV. This is fracture basement, and you can see the performance of the field is highly influenced by the successful drilling of the first lateral in the fracture basement.
You can see the overall field production has gone up to 8,000 before it normalizes back down to the average field production. So again, just the success and learning from this first basement lateral. The CNV RFDP is currently being updated to include the successes and learning from the first lateral drilled in CNV. Moving on to the next slide, please, Minh-Anh. Thank you. So this one is to share with you some of the key projects that we're working on, and some of them are coming through from 2023 as well. I've mentioned the extension. It's important because we applied for them well in advance before we need them. We know there is a learning curve that we go through. We have gone through that with the approval of the Field Development Plan, and now we're going through that with the license extensions for the two producing assets.
The extension itself is important for two reasons. Because number one, it will add timing, pure timing, to the resource base. So again, two more years. So some of the 2C will move to 2P, which I will show you in my last slide on Vietnam. It also comes in with an investment program around ILX, which, again, I'll show you in the next slide. The project that carried forward with us is the ILX. It's the hybridizing and improving our understanding of those near field driven by around infrastructures, ILX exploration opportunities, and we hybridized our understanding in 2023 and continue to do so in 2024. The last block on the right-hand on the left-hand side is Blocks 125, 126, which Vinny is going to cover. The main message here is securing the rig and the farming discussions.
They go hand in hand, and Vinny will explain this in detail. On the right-hand side, you can see the guidance, but you can also see a healthy position of 2P and 2C, in Vietnam, both in TGT and CNV. It's worth noting, in 2023, the reserves in TGT was revised down, mainly to reflect the year-end position on production. There is a 9-month delay of the 2 wells to be drilled in 2024 and the lower workover benefits as you move up the clearing curve. Next slide, please, Minh-Anh. Thank you. So this is my last slide on Vietnam, and really, the key message is, mentioned the extension a couple of times. The third green bar, which shows you the what the 2 years' worth in terms of progression for reserve replacement coming from 2C to 2P just purely because of timing under the current license terms.
So you can see about 0.1%, 0.2%, and about 0.6% moving from 2C- 2P, and that additional 2C will have a pathway to monetize it through additional drilling. But the investment programme that comes with the extension, that's the second fold, is centered around those ILX opportunities. You can see the two blue bars, which more or less tie in with the map on the bottom left. You can see the different colours shows you undrilled, structures undrilled, prospects within the TGT field. We have the same thing for CNV field. Cannot leave this slide without mentioning and show, this huge upside potential with the asymmetric opportunity in Blocks 125, 126. Again, Vinny will cover this in more details. Switching gears to Egypt. Minh Anh, yes. Thank you. So as you know, Egypt is a large acreage with exploration potential, onshore, low-cost, low-risk exploration, low-cost development overall.
The well cost is about $1.2 million-$1.8 million. So again, Egypt is good that we delivered on guidance. The chart on the top right shows you very stable production from El Fayum in dark green, and we had a very modest capital investment program, two producers and one injector. What you will notice in this top chart is the introduction of the new light green wedge. This is the discovery well we had in NBS, which took us nine months from discovery to put it on production. We think we could have done it faster. We know how to do those projects and accelerate production, but again, it's something we're very proud of. A year ago, we had it under exploration. Today, we have a 20-year concession agreement to go after developing this field, and we have a plan for that.
In 2023, in NBS, we acquired 3D seismic, and it's important for the program in 2024 and onwards. My last comment on this slide is the chart at the bottom, and it's very important. The reason why it's important, it shows you when we took over, this is the first callout, we got on this asset, ramping activities, and we were able to ramp up relatively quickly. You can see the quickest we've done this, increase in production. Took the production to 7,000 barrel, and we would have continued to grow production if we did not have to shut down for COVID to protect the balance sheet. So we can ramp up quickly. We can ramp down quickly. We've gone through this. 7,000 is something that's within reach, so we know how to get, some of this, activities back.
Again, that's why partially I'm here in country now talking to our partners. Next slide, please. Thank you, Minh-Anh. So in the same fashion, in 2024, we've been working on some of the projects that carried forward with us for 2023. This slide was put in before the improvement in the commercial terms in the economic situation, I should say. So in here, in the guidance was just a very modest program of care and maintenance in El Fayum and centered the development around NBS, which will be driven by the 3D seismic that we acquired. On the right-hand side, you can see the production guidance, and you can also see a very strong position 2P and 2C. And this year, NBS have contributed to the reserves in a very small way because it's just one well on production for three weeks.
We expect that contribution from NBS to the reserve base in Egypt to grow as we develop in 2024. Moving on to the last slide. Thank you, Minh-Anh. So for those of you who follow our story, this slide would have been very familiar for you. It would have been exactly the same as Vietnam a year ago with the large exploration wedge, which would be North Beni Suef. This exploration, which now moved to 2P and somewhat become near field ILX opportunity, which we plan to exploit in 2024 onwards. The ILXs in Egypt are pretty significant. We have deep. We have shallow. We have unconventional. So there is a buffet of opportunities of investments available for us on Egypt. And the map on the left shows you the variety of different prospects that have been mapped during 2023 and in 2024.
With that, I leave you with Vinny, who will talk you through 125.
Thank you, Mo, and good morning to you all. You all know the old adage in our business that says the best place to find a big new oily basin is right next door to an existing big oily basin. The Phu Khanh Basin is right next door to the Cuu Long Basin where we have over 25 years' exploration production experience, as Mo has just been talking about. The Phu Khanh Basin is essentially unexplored, mainly because it is in present-day mostly deep waters. However, there is an oil discovery made by a small American company, Plains, in the shallow shelf area, highlighting the yellow there, back in 2009, which is very insignificant in proving up the working petroleum system. We have a large acreage position in the basin with Blocks 125, 126, in which we have a 70% working interest.
Eni has the blocks to the north of us, and Murphy Oil has some of the blocks to the northeast. So we have acquired a lot of good quality 2D and 3D seismic over our acreage in the past five years. We have now mapped out all of this data, and we have a large portfolio of significant prospects and leads at multiple structural and stratigraphic levels. The map in the lower center of the slide shows the north just the northwest part of Block 125 where we currently have 3D seismic and shows the results of our mapping to date. We have a very experienced geoscience team here in Vietnam, and we often reach out to some of the well-known geoscience consultancy groups in order to peer review our work.
In this case, we gave all of our data to ERCE in the U.K. in order for them to conduct their own interpretation of our acreage and they essentially agreed with all our work and results. Shown here and in the appendix are ERCE's independent and probabilistic volumetrics assessment of our main prospects in the northwest part of Block 125. Specifically for Prospect A and Lead A South, which are essentially one structure, we are looking at a mean of over 40 billion barrels of oil in place. Yes, that's billions with a B. So we have a transformational potential in a substantially unexplored basin. We want to drill as soon as possible, and we have had a lot of interest from experienced deep-water operators in the region in farm-in to our blocks.
The terms of farming are dependent on understanding the well cost and the actual timing of drilling our well, both of which are dependent on contracting a deep-water drilling rig. As you all know, deep-water rigs are in high demand at the moment after the huge recent discoveries in Namibia, TotalEnergies, and others in Guyana by ExxonMobil, and most recently in Indonesia by Eni. We tendered in 2022 and in 2023 for a drilling our well for a rig for drilling our well in Block 125, but we were unsuccessful in attracting any meaningful bids. The rig companies are currently only interested in 1-2-year firm contracts, not single 40-day well contracts. So we are now in discussions with the regional operator who has a multi-well deep-water drilling programme in Indonesia and Vietnam.
We have an option slot in their program for 2025, and we are close to finalizing the details of this rig assignment to us. Potential farming needs are fully aware of the situation and are keen for the final details such as the specific well cost and the specific timing of drilling our exploration well in Block 125. So the key message is securing a rig is key to securing a farming partner for drilling in 2025. So to conclude, we believe that the Cuu Long Basin, whose petroleum system we understand very well, is an excellent analogue to the Phu Khanh Basin. We have mapped a series of world-class prospects in the Phu Khanh, where we hold a prime acreage position. We are in discussions with several experienced deep-water operators with the goal of them funding our exploration well, some of whom already have a drillship currently on long-term contract.
In the event of success, which would be a true company maker for Pharos and would have a huge impact to Vietnam, the long-term relationships we've already established here would enable us to fast-track any development. So it's exciting times for us here in Vietnam, and watch this space. Let me now hand you over to Minh-Anh.
Thank you, Vinny. So in 2023, we made good progress on our ESG efforts, and I'm happy to walk you through these achievements in the next two slides. So we report against our corporate responsibility framework at every half-year and full-year results in full spirit of transparency. I'm not going to go through everything on this slide, but I do want to highlight our efforts on the social side, which is something that has been a key part of our sustainability journey for 20-plus years.
We work closely with our local partners and joint ventures to make sure that our operations continue to bring positive long-term impact to the region. In 2023, in addition to the $500,000 training levy dedicated to develop industry talent, Pharos also invested a further $247,000 towards the local communities across all of our assets, supporting 22 projects including healthcare, education, and infrastructure. On the environment side, our total CO2 emission has decreased by 18% compared to last year thanks to proactive management to reduce gas flaring. We are on track to meet our net-zero target by 2050, which we announced in 2022, and recently took this commitment to the next step by publishing the net-zero roadmap, which established our emission profile, interim targets, and the decarbonization levers that can get us there, such as insulation of flare stacks, process optimization, and gas utilization.
We are proud that we produce energy that drives positive socioeconomic impact, and environmental stewardship is at the very heart of that purpose, and we aim to manage all of our assets in a responsible and transparent manner. We have in place a strong governance structure that aligns our operating model with our net-zero ambition, but we cannot realize our ambition on our own. We need support from our partners, suppliers, and host governments, and we stand ready to help them achieve their socioeconomic and environmental COP ambitions. And with that, I will hand it back to Jann.
Thanks, Minh-Anh. Thanks, IR team. Can we go to this? This is my final slide just to wrap up, and then we'll go straight to Q&A.
Hopefully, what you've heard from the team is our financial strength and the deep understanding of the assets we have in our portfolio and where to invest to drive out net asset value and cash flow going forward. Some of the highlights for the outlook, first of all, you've heard about the Vietnam license extensions, really important to replace 2P reserves there, to underpin our production and our longer-term cash flows. Then you've heard about the near exploration opportunities and those that can tie into existing infrastructure and therefore minimal development costs. We have these in both Egypt and Vietnam, and these are where the longer-term value growth is coming from, from within the portfolio. You've also heard about the reserve-based lending facility and how much we paid, in both capital and interest last year, over $40 million.
There's $30 million outstanding on that facility, and it is our intention by this time next year to have paid that down fully. We'll look to accelerate that paydown if we can. And what that does is it releases additional liquidity into the business, absent the needs to service that debt to either invest in our asset base or return to shareholders. And just as a reference point in terms of the liquidity that we're generating, if you take our free cash flow, you take off the $30 million that we need to repay to the banks, and you take off our dividend commitments, we will generate our entire market cap in cash flow in less than 36 months. So then we come to our commitment to shareholder returns. That is a big part of our capital allocation.
And as I said, when the RBL is paid down, that increases our ability to access liquidity to do that, both, the dividend where we have an intention to grow that over time, and also the, the share buyback where we have a rolling program. And finally, you heard about Block 125. This truly is a transformational potential, asset. You've heard about the scale of it. It's really important with this scale of opportunity in our portfolio that we take our time to do this properly and carefully, and that's exactly what we're doing. So in short, we've got robust cash flow. We have capital discipline in all our spends targeting NAV per share, cash flow per share.
We've got a commitment to an annual dividend with an intention to grow these over time, and we have growth opportunities ranging from the smaller scale, lower cost, lower risk, right through to the truly transformational. So in short, what the company has is downside protection and upside potential. With that, we will finish and go to Q&A.
That's great. Thank you, Jann, and to the rest of the team for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company takes a few moments to review those questions submitted today, I would like to remind you that a 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 can see, we have received a number of questions throughout today's presentation. Minh-Anh, if I may now hand back to you to chair the Q&A, read out the questions to the team, and I'll pick up from you at the end. Thank you.
Thanks, Alex. I'll now read out the questions that were submitted to the company. The first question is, Block 125, you repeat the same statement time after time. When will something meaningful happen, and what's the danger of Pharos losing the license rights to drill?
I'll take that one, Minh-Anh. The issue has been that the drilling contractors are in the driving seat at the moment. There's a huge demand, as I mentioned, for drillships right across the world, and we're trying to secure a slot for just one 40-day well, and they're not interested.
They're looking for 1- 2-year contracts as a minimum. So as I mentioned, we are in discussions. We went out for tender twice already but received no meaningful bids. But we are now in discussions with a regional operator who has just signed up a rig on a long-term contract, and we have a slot in that contract. We are just finalizing the details with that operator. And when we have that finalized, then we can approach our several farming partners who are very interested in coming in. Before we can negotiate a deal, we need to know the specific well cost and the timing of the drilling the well. Once we have them, we can start negotiations. I think they can go pretty quickly. In terms of the licensing issues, there are no issues.
PetroVietnam and the authorities here in Vietnam are fully aware of our situation, the fact that we've been very actively looking for a rig, and due to global demand, we have been unsuccessful so far. Now that we have potentially a secured slot, they are fully supportive of us, and whatever license extensions we may need in the future, they will be forthcoming. Back to you, Minh Anh.
That's great. Thank you, Vinny. The second question is, reported Pharos production has fallen by 22% in 2021, 21% in 2022, 9% in 2023, and is expected to fall 10% at mid-range in 2024. What does the company plan to do in order to halt this spiral?
I'll answer that, Minh Anh. So basically, starting with Vietnam, those are mature assets, and we do not expect them to grow without exploration.
We talked about the license extension as an enabler for those exploration opportunities. So we expect the production trend from the producing asset to continue. With the license extension, we have this upside in the exploration which we plan to materialize. Egypt has always been sought after to backfill the production decline in Vietnam. We have been just maintaining the production in Egypt because of the economic situation. With the change in the economic environment, we can see potential ramp-up of activities in Egypt. In addition, the consolidation project, the revision of the concession terms, combining them into one, will come in with an improved, potentially commercial terms. We'll have access to large gas pool, and we'll have unconventional potential with improved terms specified for those unconventional reservoirs. So the potential in Egypt is back on the table, and we have a few opportunities to go after.
Blocks 125. Sorry, Minh-Anh, the last thing is, obviously, we still have that Blocks 125 & 126, which would be a transformational on the production potential of the company going forward. But this is a long-term objective, obviously.
That's great. Thank you, Mo. The next question is, the company has spent $26.7 million in 2023, $31.9 million in 2022, and $41.8 million in 2021 over the past three years in CAPEX, including the carry from IPR, and production has continued to fall. What approximate level of annual CAPEX would need to be spent in order to maintain production levels flat? I'm trying to get a better understanding of the sustaining CAPEX required.
Okay. So I take that, Minh-Anh. So as Mo has just mentioned, the Vietnam assets are mature and are in a managed decline. but given the high value that we get for every barrel, it's definitely worth continuing to explore, and to go after the license extensions, etc. So if we think about the operating cash flow that we've announced of $45 million, essentially, that has all come from Vietnam. And in fact, in 2023, we spent $5.9 million on production CAPEX. So in terms of next year, so 2024, we've got those two wells in TGT. So we've got $12 million of CAPEX spend expected for this year. In Egypt, we're not comparing like for like, really, because until March 2022, we had 100% of the asset, and then we farmed down 55% of it. So there's a reduction there. And of course, in Egypt, we've deliberately run a cautious investment program, really seeing what happened with the receivables.
But obviously, as that pattern changes, and we've seen that, funding coming in there, support packages of $57 billion coming into country. So we're seeing that position change. Then obviously, we'll look to increase the activity there. Also, the numbers that were quoted, they do actually include exploration and abandonment CAPEX. So those numbers that were noted earlier in the question cover other things as well. With that, Minh-Anh, I'll hand back to you.
Thank you, Sue. The next question is, we are highly exposed to Vietnam production. If the company was to encounter a black swan that shuts down field production for an extended period of time, this could have disastrous consequences for us. How are we managing this risk? Do the board of directors agree that we need to diversify ASAP away from Egypt and Vietnam?
We have loss of production insurance in place, which basically would protect us in a black swan type event, with the risks sort of transferred to the insurers. We've got a focused and complementary portfolio with Egypt and Vietnam, so Egypt onshore, Vietnam offshore, and totally different geopolitical environments. And I guess at the balance sheet, we've reached a position where that is particularly strong now. So, you know, obviously, that helps. And obviously, diversification is one of the reasons that we went into Egypt in the first place. And obviously, with those improvements in the payments situation, then hopefully that diverse income stream starts to flow through.
That's great. Thank you, Sue. The next question is, for whatever reasons, whether it was the war in Ukraine, COVID, or the fact that we overpaid for it, Egypt hasn't worked out.
Is it not better to sell it on, even if that means crystallizing a large loss, rather than continuing to invest management's time and money into it? I'm sure we won't mind receiving a large special dividend from the sale proceeds.
So I'll take that one. Look, deals work out differently to how they were anticipated for all sorts of different reasons. The ones that are really critical are where they're binary. You know, the subsurface doesn't work. There's no oil there. Or the infrastructure can't be secured around any discovery within any commercial development. That is not the situation that we've got in Egypt. We know that the oil is in the ground. We know that the reserves are there. We've got the license terms. The subsurface is good. The infrastructure and supply chain is good. The terms work. The regulator's responsive.
So what's happened here is a series of global and local geopolitical events, and clearly, it hasn't worked out as we had intended. Now, you won't be surprised to know that we did test the market quite hard, throughout last year. And again, you probably won't be surprised to know that there were absolutely no buyers. So, you know, any aspiration to return large special dividends to shareholders would, definitely not have been met, in the environment last year. So the environment has completely changed, largely because of the support package. Our liquidity was never under pressure last year because of the carry, this year because, you know, we've got this pot of receivables that we can draw down in Egyptian pounds. So it's fundamentally about, as Mo talked about, changing the terms of the licenses, and the regulator in Egypt is really responsive. They want investment.
They want energy security and also getting after the sorts of production levels that you saw have been achieved historically when investment is made. Now, if that fleshed out an offer for the asset that was acceptable, we've made it very clear we never fall in love with our own assets. There are no sacred cows. If it's worth more to somebody else than it is to us, then, yes, we'll take the money and move on. We would be having a big internal debate about whether we use that cash to immediately pay down the debt before returning a special dividend. But, you know, all of that would depend on having an acceptable offer coming in. I hope that answers the question. We can only answer the questions that we think are being asked.
If it's not answered your specific point, then feel free to ask another one. If we can't get to the questions verbally in this session, we always do written responses that are posted up a few days after these sessions.
Thank you, Jann. Another. Egypt. Has the company considered an asset swap using the Egyptian assets?
Yeah. We, I mean, we've considered everything. We've done quite a lot of background work. Egyptian assets last year were simply unattractive. I mean, I'm sure people who follow the oil and gas industry on this call realize, you know, there's quite a large parcel of assets that have been up for sale throughout 2023, with no takers as yet. How quickly that changes. Now, the payment situation is really starting to flow through. We'll wait and see.
Thank you.
The next question is, can we repay a proportion of the remaining debt early, over and above the standard amortization schedule, in order to save some of the $6 million in annual interest payments?
Yeah. I'll, I'll take that, Minh-Anh. Yes. Clearly, repayment of the full RBL, in fact, is under consideration. So obviously, we've now moved into a net cash position. We particularly with that $10 million coming in, the other day. So yes, is, is the answer.
Fantastic. The next question is, would moving to AIM not potentially increase the company's share price liquidity, bring in new investors, save cost, and add the benefits that come with an AIM listing, such as inheritance tax management? Is this something the company can consider?
I'll take that as well, Minh-Anh. I mean, we, we did look at this a great deal, a couple of years ago.
Of course, there are upfront costs to doing this, so they're quite prohibitive. You know, there's limited advantages that we can see and restrictions for E&Ps. And obviously, there is an advantage to having a full premium list as we are. You know, it does have a value in itself. And I guess the key is the main market is there to support longer-term growth and provide access to capital from the investor base. And, as such, main market listed companies commit to a deeper level of governance and transparency. So I think that's, you know, part of our DNA.
That's great. Thank you, Sue. The next question is, what was the reason behind the sudden, unexpected departure of Jann Brown without having any form of CEO succession planning? This adds to the uncertainty surrounding the company.
Okay.
So maybe a couple of clarifications to what's dated in the question before diving into answering. I'm well past retirement age, so, you know, it can't have been that unexpected. And secondly, we have less than 40 people worldwide in our entire staff base. So, you know, we're not a BP or a Shell where we're constantly growing a throughput of future C-suite executives. Having said that, it's not a true statement that we have no form of succession planning in place. I mean, as the questioner will be aware, you cannot go out to headhunters well in advance of any announcement being made about a departure to look for a successor. But we do have a list of names, and that will be acted on relatively quickly. I'm here to oversee the transition. So, you know, hopefully, that minimizes the uncertainty.
As I said in the actual presentation, I am moving on because I believe that the company is now strong enough in a strong enough financial position to absorb that and move on to the next stage with fresh energy and fresh ideas.
That's great. Thank you, Jann. The next question is, now that we are net cash, where does M&A and growth rank on the agenda? We haven't seen any real sustainable growth in over a decade.
Okay. I'll, I'll take that one as well. I mean, I actually did spend quite a lot of my time, the whole C-suite did, on, on M&A last year. We came quite close, to one deal. Geopolitics got in the way of that.
I think I said quite clearly that combinations to create scale are one of the main ways that we see of converting what is clearly balance sheet value into a more a closer parallel in terms of market cap. And that would be where we would be focusing our attention. But M&A definitely this is the first time in a number of years where we really feel that we've got this so-so solid platform, the strength and financial base. We recognise the opportunity within our own portfolio. It's absolutely there. But scale does matter.
Okay. Thank you, Jann. Why is the lower end of the Vietnam production guidance so low? What factors are being taken into consideration to produce the lower end of guidance?
I'll take that, Minh-Anh.
So generally, as you fully asked, we start with a wide range on guidance, and then we narrow down as things become more certain. In the lower end of the guidance this year, we factor three things. Number one is the timing of drilling of the two new wells in 2024. And the second one is the timing of the field annual field maintenance. And the third one was where we ended the year in 2023 in terms of production. So those were some of the three key factors, controlled the lower end of the guidance. And as I said, we start with a wider range and narrow down as we go through the year.
Thank you, Mo. The next question is, Vietnam, despite the declining production, seems to be the cash cow of the portfolio.
Why haven't we invested more in Vietnam in order to improve production and cash flow, especially at a time when oil prices are relatively high?
Taking that one. Yes. You can hear me? Take this one. Okay. So basically, in Vietnam, we can only drill what's in an approved full field development plan. So that's why we're very happy with the approval of the TGT field plan, which includes two new wells that will be drilled in 2024. The CNV RFDP is currently being updated. And again, it will go through the normal approval process. And, to answer a bit more, to give you a bit more color, in Vietnam, we have different phases of development. So we finished the first phase. All the wells have been drilled. So that was the initial RFDP. Then the second RFDP with the six wells, which was in 2021.
We drilled those in 2021, in 2022. The wells have been successful. The results have been encouraging. So we went on the third phase of development NDGs, and now we are into this interim RFDP, which takes us through until we get the license extension. With the license extension, there will be another RFDP to cover the period until the license term, basically. So that's how it goes. It's not that we're doing one, and then in a year, we do two. It just goes by different phases of development and the encouragement we get from the development program that we have at the point in time. So the 2021, 2022 drilling has been encouraging. And as a result, we embarked on this second third phase of development. Now we're in 2024. So that's the same applicable for TGT and for CNV. Hopefully, that answered the question.
Thank you, Mo. The next question is, can we continue with the share buyback program until at least the share count is down to 400 million shares? This will undo the negative effects of the 2021 placing.
Yeah. Okay. I mean, firstly, at the time of the placing in 2021, obviously, we were in survival mode. So important to note that. We will obviously continue with the buyback program for as long as we see value in doing the exercise. And obviously, at these prices, you know, it makes sense to invest capital there. So a further GBP 3 million has been committed for 2024, following the programs of 2023 and 2022. So yes, is the short answer.
That's great. Thank you, Sue.
The next question is, the continuing stake-building by a large activist investor seems ominous and concerning to us private investors without knowing his intentions. These activists rarely act to the benefit of the wider shareholder base and like to make unnecessary management changes. These changes rarely result in a good outcome for other shareholders or existing management. Can you please assure us that the board of directors won't let an activist take over control of the company without paying the required takeover premium?
So let me take this one. Look, the U.K. has got quite a range of protections in its regulatory framework that the board of directors would use absolutely rigorously. 'Cause we completely agree with you that, you know, no one should be able to take over a company by stealth, without paying a premium.
So clearly, if there were any suggestion of acting in concert to try to subvert the mandatory offer threshold of 30%, we would be right on top of that. But I mean, in terms of this particular situation, we are in regular contact, just as we are with other large shareholders. I think any activist situation is ultimately going to depend on their activist having a very clear position and gaining significant support across the rest of the shareholder base because fundamentally, most of these things come down to a shareholder vote. And although, you know, we won't comment on any other specific recent activist situations, that's exactly what happened there. So it's about gaining momentum.
All we can do as a board is know what the regulatory framework is, use every tool that there is in that to make sure that all shareholders are treated fairly and properly. And we will do that.
So that's great. Thank you, Jann. In the presentation, it is mentioned CNV and TGT have the potential to get bigger with exploration and appraisal ILX opportunities. What is the current timeline on pursuing ILX in this field? Is this contingent on getting the license extensions approved?
I'll take it. Yes, it is. Sure. The answer is the ILX is a contingent on approving the license extension because that gives us a longer a longer tenure, basically. So yes, sure. The answer, the exploration ILX opportunities in Vietnam are dependent on the license extension. Very clear.
Thank you, Mo.
To date, there has been no confirmation of the lease extensions of the TGT floating production platform. Is the purchase of the TGT floating production platform an option that has been discussed by the JOC partners?
Let me take that one, Minh-Anh. So there's no issue in securing the lease extension. We're currently in negotiations with the FPSO owners. We expect to sign the next extension period by the middle of next month. In terms of the FPSO purchase, it's certainly been a discussion topic among the partners. All partners agree that this is something that we'll review in more detail once we have secured the license extension for that block. Hope that answers the question.
Thank you, Vinny. A question from Sam S. Why does Vietnam need constant revisions of the FFDP?
Why can't the FDP be submitted once to cover all the potential wells to be drilled during the life of the asset?
I answered this partially in my answer to the question, but I'll reiterate. We go in development phases. So the first phase of development has been completed. Second phase of development was 2021 with 6 wells drilled, 4 in 2021, 2 in 2023. The results of the wells have been encouraging. So we went for additional infill drilling. And this is, like I said, an interim RFDP takes us through to get the license extensions, 2 new infill wells in TGT. And then the second one will be after the license extension are secured. And it's already progressing in the background. The same thing is applicable for CNV. We drilled the first phase. We have been lobbying to drill the lateral for a very long time.
We co nvinced the operator, worked with our partners, that we basically reinitiated this development in CNV with the drilling in 2022. We expect, again, now, based on the lateral successes in CNV, we have an FDP currently been progressing in the system to incorporate those successes and include potentially two wells. And again, another one will be after the development. So we're following what the regulations in country is, and that's the way the things proceed through the system.
That's great. Thank you, Mo. Another question by Sam S.
Sorry. Can I jump in here? We're coming up to 10:40 A.M. We do have other investor meetings that we need to go to. So can we make this the last question, Minh-Anh?
Yes.
I do commit, as always, that we will provide written responses to the ones that we haven't managed to address in this session.
Yes. So this would be our final questions. Since we're now getting paid in Egypt, why not significantly increase the Egypt investment program and try and turn around the asset?
I, I will take this one too. I think, first of all, we're all ambitious to do that, but we're not alone. We're not 100% in the asset as we used to. We showed you when we were 100% how quickly we got on it and increased our production, and when we needed to, how quickly we ramped down. So we see the improvements. We're here. I'm here in country talking to our partners who are also aligned. So we're, we're going to be looking at what the best way to do that.
We're obviously very, very happy with the one lump sum payment. I have gone through this building up and blowing down receivable at least twice in my 20 years' career. What we want to see is a continuous trend of those payments coming through monthly, not necessarily significant payment, but a consistent payment trend coming through before committing to a more meaningful ramp-up and investment. But what we're doing is gearing up, getting ready, having the supply chain, having the program to go, and we're monitoring that situation. So watch that sp ace.
That's great, Mohamed, Minh-Anh, and to the rest of the team, thank you for addressing all those questions for investors today. Of course, as Jann mentioned, the company can view all questions submitted today, and we'll publish those responses on the Investor Meet Company platform.
But before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Jann, could I please ask you for a few closing comments?
Sure. So just a reminder of what we're about. We're about robust cash flow, capital discipline, targeting NAV and cash flow per share. We commit to an annual dividend with the intention to grow over time. The growth opportunities in the portfolio range from the low cost, lower risk, through to the potentially transformational. That's our story. Thank you very much for your time for listening.
That's great. Thank you once again, Jann and the team, for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations?
This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Pharos Energy plc, we would like to thank you for attending today's presentation, and good morning to you all.
Goodbye.
Thank you.
Thank you, bye.