Pharos Energy Hikes Dividend 10% as H1 2025 Delivers Stable Cash Flow and Egyptian Reserves Boost

Why it matters: based on the Competent Person’s Reports at 31 December 2024, the new terms are expected to move c. 3.1 MMstb from contingent resources into 2P reserves – a 25% increase from year-end 2024, net to Pharos. The new terms start imminently, although full ratification by the Egyptian Parliament is still expected in late 2025 or early 2026.

Operationally, El Fayum’s East Saad-1X, a February discovery, came onstream from 1 July and a two-well programme is planned for Q4. On NBS, processing of c.130 km² of 3D seismic is progressing with interpretation to follow.

Financials – revenues resilient despite lower oil prices

Sales volumes did the heavy lifting

Group revenue held at $65.6m, essentially flat year on year, even though the average realised oil and gas price fell to $68.48/boe. The difference was sales volumes – up 13% thanks to additional cargo liftings from Vietnam inventories. Vietnam revenue was $56.2m with an average realised crude price of $77.25/bbl including a $5.67/bbl premium to Brent. Egypt revenue was $9.4m, reflecting an average realised price of $65.85/bbl after EGPC-set discounts.

Costs under control, but taxes and lower prices hit profits

• Cash operating costs were $17.04/boe, essentially unchanged.
• DD&A eased to $21.8m as volumes dipped slightly.
• The bottom line was a post-tax loss of $(2.8)m, driven in part by a $13.3m tax charge, mainly in Vietnam’s 50% regime, and lower commodity prices.

Crucially, the balance sheet remained strong and debt free, with $22.6m net cash at period end. Operating cash flow of $16.1m funded ongoing work and dividends. The dividend framework remains to return no less than 10% of OCF each year, split between an interim (January) and final (July) payment.

Receivables – still a watch point in Egypt

Egypt receivables stood at $33.5m at 30 June, with $5.5m received in H1 and a further $5.6m received post period as at 23 September 2025. Pharos continues a cautious capital allocation stance in Egypt until receivable recoveries improve.

Guidance, capex and hedging – 2025 is about set-up, not surge

• Production guidance narrowed to 5,200 – 6,000 boepd for 2025, reflecting steady Vietnam and softer Egypt.
• Forecast 2025 cash capex is c.$35m, with $8.2m spent in H1. About $22m linked to the Vietnam campaign will fall into H1 2026 as activity ramps.
• Hedging: 26% of H2 2025 oil entitlement is protected with zero-cost collars – average floor $61.3/bbl, ceiling $84.5/bbl. That puts a safety net under cash flows if prices wobble.

ESG and safety – good record, one incident addressed

The company reports a continued zero Lost Time Injury frequency rate in H1 across Vietnam and Egypt. A July truck incident in Egypt led to a spill of 178 barrels with no injuries; Pharos says the spill was cleaned with limited environmental impact and procedures have been tightened. Scope 1 and 2 emissions were flat year on year, with Egypt fields now connected to the national grid to lower diesel use.

My take – what’s positive, what needs watching

What looks positive

• Dividend increased 10% and a clean, debt-free balance sheet with $22.6m net cash gives flexibility.
• Vietnam drill programme is meaningful – six wells with appraisal upside that could move the needle in 2026.
• Egypt concession consolidation improves economics and is expected to lift 2P reserves by 25% from year-end 2024, net to Pharos – an important value signal.
• Cash costs held at $17.04/boe despite inflationary pressures.

What to monitor

• Egypt receivable collections – $33.5m is material; post-period receipts help, but the balance remains elevated.
• Commodity price sensitivity – realised prices fell notably versus last year; hedging softens but does not remove risk.
• Execution on Vietnam – rig schedules, appraisal results and conversion of optional wells will set the 2026 production trajectory.
• Parliamentary ratification in Egypt – terms “start imminently”, but full ratification is expected late 2025 or early 2026.

Investment view – steady today, catalysts queuing up

H1 shows a company doing the basics well: stable operations, contained costs and cash generation sufficient to fund a progressive dividend while staying debt free. The real upside, in my view, sits in two places. First, the Vietnam campaign that should feed 2026 volumes and potentially open new parts of TGT and CNV. Second, the improved fiscal terms in Egypt that are expected to add c. 3.1 MMstb to 2P reserves and refresh investment incentives.

Set against that are the familiar risks: receivable timing in Egypt, commodity prices, and operational delivery on the six-well programme. On balance, this reads as a disciplined, option-rich set-up for 2026, with a 2025 dividend uplift as a decent sweetener while we wait for the drill bit.