Serica Energy Announces £145.7 Million Cash Acquisition of Pharos Energy at 32.67p per Share, Expanding Operations to Vietnam and Egypt

Acquisition Terms and Transaction Structure

As announced on 26 July 2026, Pharos shareholders will receive 28.6683 pence in cash per ordinary share as the primary consideration. Additionally, Pharos intends to pay a 4.0 pence special dividend per share, funded from existing cash reserves, with record and payment dates aligned with the cash consideration. Together, these components provide 32.6683 pence per share, ensuring coordinated and certain payments.

Shareholders entitled to the 0.9317 pence final dividend for the year ended 31 December 2025 (declared 25 March 2026, paid 17 July 2026) will retain this payment. Combining the total consideration with this final dividend results in an aggregate value of 33.6 pence per share. The entire issued and to-be-issued ordinary share capital of Pharos is valued at approximately A3145.7 million based on cash consideration plus special dividend. This all-cash approach mitigates share price volatility risk and provides immediate liquidity upon completion, subject to regulatory and shareholder approvals.

Premium Over Previous Ratio Offer and Market Price

The offer represents a significant uplift compared to the competing Ratio proposal. The total consideration of 32.6683 pence per share (cash plus special dividend) is 20.7% higher than Ratio's combined cash and special dividend offer of 27.0683 pence per share announced on 24 June 2026. Including the 2025 final dividend, Serica's 33.6 pence offer surpasses Ratio's 28 pence total offer by 20.0%.

Furthermore, Serica's offer is 28.6% above Pharos's undisturbed closing price of 25.4 pence on 23 June 2026, underscoring the value delivered to shareholders. The certainty of all-cash payment, the premium scale, and superior value relative to the rival bid were key factors in Pharos Board's unanimous recommendation to accept Serica's offer. Consequently, the Pharos Board withdrew its prior support for the Ratio Offer and adjourned the Ratio Offer shareholder meetings scheduled for 17 August 2026.

Strategic Expansion into Vietnam and Egypt

Serica Energy, a UK-focused independent oil and gas company, is expanding internationally by acquiring Pharos, fulfilling a strategic objective to diversify and scale operations. Pharos brings established, cash-generative production assets in Vietnam and Egypt, complementing Serica's subsurface expertise and leveraging Pharos's local teams and government relationships.

The acquisition creates a platform with multiple growth opportunities, including infill drilling at Vietnam's TGT and CNV fields and high-impact exploration in Blocks 125 and 126. In Egypt, development drilling benefits from improved fiscal terms. This geographic diversification reduces Serica's UK North Sea concentration risk while capturing growth in regions with rising energy demand. Serica plans to continue investing in the UK North Sea, with a multi-well rapid return drilling programme commencing in 2027, ensuring focus on existing assets alongside new ventures.

Pharos Asset Profile and Financial Strength

Pharos Energy operates with a debt-free balance sheet and held approximately $45 million in cash as of 30 June 2026, providing a solid financial base for the combined group. Its operational model aligns with Serica's, emphasizing cash generation from production to finance growth and shareholder returns. Pharos's cash-generative operations in Vietnam and Egypt offer immediate cash flows enhancing financial flexibility.

The combined group is expected to reach a pro forma 2026 exit production of about 70,000 boepd. Pro forma 2P reserves are projected to increase by 13% to 156.8 mmboe, and 2C resources by 15% to 129.4 mmboe, significantly augmenting Serica's reserves and resource base. The acquisition cost equates to $8.4 per 2P barrel of oil equivalent ($4.4 per barrel including 2C resources), favorably comparing to sector precedents.

Financial Impact and Pro Forma Benefits

Serica's management anticipates the transaction to be accretive per share across production, reserves, and financial metrics immediately. The quality and cash-generative nature of Pharos's assets, combined with its strong balance sheet and disciplined valuation, underpin this accretion. The enlarged group will benefit from economies of scale, reduced corporate overheads, and enhanced competitiveness across multiple regions.

Post-acquisition, Serica expects robust cash generation to fund infill drilling in Vietnam and Egypt. The company is exploring further M&A opportunities and plans to seek a farm-out partner for the high-impact drill-ready prospects in Blocks 125 and 126 in Vietnam, aiming to optimize returns and limit capital exposure while retaining upside.

Regulatory Approvals and Conditions in Vietnam and Egypt

The acquisition depends on satisfying regulatory conditions in Vietnam and Egypt, considered fundamental by Serica due to Pharos's operations in these jurisdictions. Failure to obtain necessary consents or approvals would undermine the acquisition rationale, and Serica has stated it will not proceed without them.

These regulatory conditions were negotiated between Serica and Pharos to ensure host-country support. Serica intends to seek the Takeover Panel's consent to invoke these conditions if required under Rule 13.5(a) of the City Code on Takeovers and Mergers. While these conditions introduce execution risk, both companies have accepted them as essential.

Shareholder Support and Voting Undertakings

Aberforth Partners LLP has provided an irrevocable undertaking to vote in favor of the scheme for 59,357,027 Pharos shares, representing approximately 14.26% of issued shares. This support is critical for achieving the required majorities at the Court and General Meetings. The undertaking is binding, subject to terms outlined in the announcement's Appendix III.

The announcement also clarifies that irrevocable undertakings linked to the previous Ratio Offer will lapse unless Ratio matches Serica's offer within specified timeframes (10 business days for some shareholders, 15 for others). This creates a competitive window for Ratio to retain shareholder support by matching or exceeding Serica's superior offer.

Implementation Process and Expected Timeline

The acquisition will be executed via a scheme of arrangement under Part 26 of the Companies Act 2006, though Serica may opt for a takeover offer subject to regulatory consent. The scheme ensures equal treatment of shareholders and requires approvals from scheme shareholders, regulatory authorities, and the Court.

Completion is anticipated in H1 2027, subject to conditions. The Scheme Document detailing terms, meeting notices, and proxy forms will be distributed within 28 days of the announcement. Pharos will publish the document on its investor website at https://www.pharos.energy/investors/. This phased approach ensures shareholders receive comprehensive information to make informed voting decisions.

Pharos Board Endorses Serica Offer, Withdraws Support for Ratio

Advised by Rothschild & Co, the Pharos Board unanimously considers Serica's terms fair and reasonable, recommending acceptance and withdrawing its prior unanimous recommendation of the Ratio Offer. The enhanced consideration, Serica's proven regulatory and execution track record, and the certainty of an all-cash offer were decisive factors.

Consequently, the Pharos Board has adjourned the Ratio Offer shareholder meetings originally set for 17 August 2026 and urges shareholders to take no action regarding the Ratio Offer. Rothschild & Co continues to advise Pharos Directors under Rule 3 of the City Code. The combined board recommendation and Aberforth's irrevocable support provide strong momentum for shareholder approval.

Strategic Insights and Executive Statements

Chris Cox, Serica's CEO, described the acquisition as a strategic milestone enabling international diversification with accretive benefits across key metrics and embedded growth opportunities. The transaction enhances reserves, resources, and cash-generative production while offering liquidity to Pharos shareholders. Cox emphasized the complementary nature of Pharos's experienced regional team and operating model, alongside Serica's ongoing UK North Sea investments, including a 2027 drilling programme.

Katherine Roe, Pharos's CEO, highlighted strong operational momentum and expressed the Board's satisfaction with Serica's cash premium offer compared to Ratio. She affirmed the strategic fit and financial strength of the combined group, which will support further M&A and value creation.