Pharos Energy H1 2026: Cash Flow Strengthens as Ratio Takeover Advances

Pharos Energy PLC has reported stronger revenue and cash generation for the first half of 2026, helped by higher oil prices, increased Vietnamese output and the collection of Egyptian receivables.

The operational picture was more mixed. Group production remained broadly flat at 5,650 barrels of oil equivalent per day (boepd), with growth in Vietnam offset by a decline in Egypt.

Meanwhile, the recommended takeover by Ratio Petroleum continues to shape the investment case. Shareholders approved the deal in August, but regulatory and court conditions remain outstanding.

Pharos Energy's key H1 2026 figures

Metric	H1 2026	H1 2025
Working interest production	5,650 boepd	5,642 boepd
Oil and gas sales	$85.5 million	$65.6 million
Total revenue after hedging	$81.8 million	$65.6 million
Cash generated by operations	$50.6 million	$31.9 million
Net cash from operating activities	$34.9 million	$16.1 million
Net loss	$0.4 million	$2.8 million
Cash operating cost	$18.38/boe	$17.04/boe
Period-end cash	$45.4 million	$22.6 million

Oil and gas sales rose by 30% to $85.5 million. After a $3.7 million realised hedging loss, statutory revenue was $81.8 million.

Net cash from operating activities more than doubled to $34.9 million. That allowed Pharos to fund a sizeable drilling programme while increasing cash from $40.2 million at the end of 2025 to $45.4 million at 30 June 2026. The group remained debt-free.

The bottom of the income statement was less impressive. Pharos still recorded a $0.4 million net loss, although that was an improvement from the $2.8 million loss a year earlier. A $16.6 million tax charge absorbed the company's $16.2 million pre-tax profit.

Vietnam delivered the operational progress

Vietnamese production averaged 4,583 boepd, up from 4,183 boepd in H1 2025. This was supported by Pharos's six-well offshore drilling campaign across the TGT and CNV fields.

The four TGT wells contributed 3,800 barrels of oil per day gross, or 1,130 barrels net to Pharos, during June. The CNV infill well added around 700 barrels gross and 175 barrels net.

The CNV-5X appraisal well was completed on 30 July and was undergoing production testing when the results were published. Pharos has also secured approval to drill an additional sidetrack appraisal well, TGT-20X, from late September.

Vietnam was also the main beneficiary of stronger pricing. The average realised crude oil price reached $99.10 per barrel, including premiums to Brent, compared with $77.25 per barrel last year.

Premiums have strengthened further for agreed second-half cargoes. TGT premiums for July to October average $12.26 per barrel, while the September CNV cargo achieved a $13.78 premium.

That is valuable because it means Pharos is receiving more than the benchmark Brent oil price for its Vietnamese crude.

Egypt remains the weaker part of the portfolio

Egyptian production fell to 1,067 barrels of oil per day from 1,459 barrels a year earlier. This decline explains why group production barely moved despite the improvement in Vietnam.

Egyptian cash operating costs also rose sharply to $26.93 per barrel from $18.18. Reduced production meant fixed costs were spread across fewer barrels, while a greater proportion of expenditure was allocated to operations.

There are early signs of a potential recovery. Drilling has restarted under a six-well programme, with the first two wells completed and a second rig moving to drill the third.

Production testing at Aboud 1-5 indicated an initial rate of approximately 300 barrels per day, in line with expectations. It was expected to enter production in early October.

The financial position in Egypt has improved too. Pharos received $13.7 million during the half, reducing its Egyptian receivables balance from $7.4 million to $1.7 million.

Guidance is tighter, but the midpoint is lower

Pharos narrowed its 2026 production guidance from 5,200-6,400 boepd to 5,300-5,900 boepd.

The tighter range provides more visibility after the Vietnamese drilling campaign. However, the midpoint has moved from 5,800 boepd to 5,600 boepd, reflecting lower-than-expected Egyptian production.

Estimated 2026 cash capital expenditure is now approximately $54 million. This includes around $4 million for the additional TGT-20X appraisal well. First-half expenditure was $29.2 million, of which $27 million related to Vietnam.

Hedging offers protection at a cost

Pharos has hedged approximately 58% of forecast entitlement production for the second half of 2026 using collars, swaps and put options.

A zero-cost collar provides protection below an agreed floor but limits gains above a ceiling. For the second half, the hedging portfolio has average floor and ceiling prices of $60.70 and $81.50 per barrel, alongside swaps fixed at an average $88.40 per barrel.

This provides useful downside protection if oil prices weaken. The trade-off is that hedging can reduce exposure to price spikes, as demonstrated by the $3.7 million realised loss recorded in the first half.

The Ratio takeover is now the main event

Ratio's increased offer gives Pharos shareholders 28.8183 pence per share in cash, plus a proposed 4 pence special dividend. Shareholders approved the scheme on 28 August.

Completion still requires the remaining regulatory approvals in Vietnam and Egypt, as well as court sanction. Pharos currently expects the scheme to become effective during the first half of 2027.

The board has not declared a normal interim dividend for 2026. Instead, it intends to declare the 4 pence dividend with record and payment dates aligned with the takeover scheme.

The auditor highlighted a material uncertainty over Pharos continuing as a standalone company following a change of control. This relates to Ratio's stated intention to integrate the operations, delist the shares and re-register Pharos as a private company. It is not the same as saying the operating business lacks near-term liquidity.

Management's forecasts indicate sufficient financial headroom for at least 12 months from approval of the interim results.

Investors can read the original company announcement for the complete financial statements and scheme disclosures.

What matters now for Pharos shareholders

The first-half figures show a financially stronger business. Cash generation improved materially, the balance sheet remained debt-free and Vietnamese drilling delivered additional production.

The main operational concern is Egypt, where lower output and higher unit costs offset much of Vietnam's progress. The narrower guidance range is helpful, but its lower midpoint underlines that uneven performance.

For shareholders, however, the takeover process is likely to matter more than another quarter of production movements. The key remaining questions are whether Ratio secures the necessary approvals, when the court sanctions the scheme and whether completion occurs within the expected first-half 2027 timetable.