Pharos Energy farms out interests in El Fayum and North Beni Suef Concessions in Egypt
Pharos Energy, an independent oil and gas exploration and production company announced that Pharos Group has entered into conditional agreements for the farm-out and sale of a 55% working interest and operatorship in each of the Egyptian El Fayum and North Beni Suef Concessions (the “Assets”) to IPR Lake Qarun Petroleum Co. ("IPR Lake Qarun"), a wholly owned subsidiary of IPR Energy AG (“IPR”) (the “Transaction”).
The consideration implies a gross (100%) value of up to $115 million for the Assets and consists of $5 million cash at completion of the Transaction, funding of the Pharos Group's retained interest share of the cost of future activities on the Assets for $38.425 million net (subject to working capital and interim period adjustments from the economic effective date of 1 July 2020), and contingent consideration of up to $20 million dependent on Brent oil prices in each of the 4 calendar years from 2022 to 2025.
Ed Story, Chief Executive of Pharos said, “I am extremely pleased to be able to announce the farm-out of a 55% operated interest in each of our Egyptian Concessions, El Fayum and North Beni Suef, to IPR, a group which has extensive experience in Egypt. The farm-out, while instantly boosting our balance sheet, will allow the entry of a partner who has committed to carry Pharos on a capital programme on these Egyptian assets, which will in turn lead to increased production, helping to fulfil the full potential of the concessions.”
IPR has been present in Egypt for 40 years, currently with 8 concessions and operating 5 (both onshore and offshore) and active in all 4 key producing regions, namely the Western Desert, the Nile Delta, the Gulf of Suez and the Eastern Desert. IPR has proven itself to be both a technically proficient and effective and low-cost operator and has agreed to cap initial operator G&A to around half of current levels, saving $2 million gross per annum. IPR has achieved 90% growth in net production with reserve replacement ratios consistently exceeding 100% year on year since 2012.
IPR is well capitalised to fund the proposed work programme on both Concessions and its existing in-country presence and relationships with the Egyptian government and regulatory authorities are expected to facilitate a rapid expansion of operational activity following completion.
The wider IPR Energy group also owns oil and gas services businesses, which possess drilling and workover rigs that have the potential to be deployed on the El Fayum and North Beni Suef Concessions for both near and longer term operations.
The Transaction is a Class 1 transaction under the Listing Rules and accordingly subject to shareholder approval. Pharos will publish a circular to Shareholders in due course setting out further details of the Transaction and convening the General Meeting, at which shareholder approval will be sought for the Transaction.
Jefferies is acting as financial adviser and sponsor to Pharos in connection with the Transaction.