EGYPT: Pharos Energy Provides Operational Update

El Fayum Production

Production for 2020 from the El Fayum Concession averaged 5,270 bopd. This is in line with the Egypt 2020 production guidance given on 12 May 2020 of 5,000-6,000 bopd.

El Fayum Development and Operations

Prior to the COVID-19 pandemic and the oil price shock, three drilling rigs and three workover rigs were operating through Q1 2020. Seven wells (five producers and two injectors) were drilled through to April 2020 in El Fayum.

Due to the uncertain macro-economic environment resulting from the global impact of COVID-19 and the oil price shock, the discretionary drilling programme in Egypt was scaled back to preserve capital with termination notices issued on five of the six rigs retaining just one workover rig, on a call out contract, for ongoing maintenance. Production operations in the field since, have been centred on well maintenance interventions and water-flood implementation. During the hiatus in drilling operations, Pharos has:

• Benefited from improved commercial terms with EGPC regarding the Western Desert discount and negotiated a reduction on the El Fayum discount. The Western Desert discount reduced in stages, from a high of $2.90/bbl in April to $0.60/bbl by October. In addition, we have agreed reductions with EGPC, effective 1 August 2020, on both the price discount applied specifically to the El Fayum crude ($1/bbl reduction) and on the crude handling fees paid at the refinery ($0.80/bbl reduction). Both of these reductions are in place for an initial period of six months while the Company continues its joint review with EGPC on the specification of the crude oil, on which the discount and fees are applied.
• Progressed negotiations with EGPC concerning potential improvements in the Concession Agreement terms in order to support a return to operational investment. If successful, these negotiations could lead to an improvement of up to $6/bbl in the breakeven price. These discussions with EGPC should be seen in the context of the positive progress made by certain other companies in the region.
• Reprocessed the 3D seismic data across El Fayum, for better subsurface definition.
• Conducted a waterflood evaluation for the phase implementation of a secondary recovery programme.
• Updated the sub-surface static model and creating field dynamic models to optimise the location of future wells, both oil producers and water injectors, as the development programme is implemented.

Exploration

Exploration drilling activity is currently on hold while the Company focuses on development, production, and cash flow.

Egypt – North Beni Suef (NBS)

During 2020, work focused on technical and investigative work on wells previously drilled on the concession. Interpretation of the large pre-existing 3D seismic survey on the NBS concession continues and a number of low-risk prospects and potential producing field extensions extending from third party Development Leases to NBS area have been identified.