Q2 2021 VAALCO Energy Inc Earnings Call
Good morning, and welcome to the VAALCO Energy second quarter earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation there'll be an opportunity to ask questions to ask a question you May press star.
And then one on your Touchtone phone.
Withdraw your question. Please press Star then two please note. This event is being recorded.
I'd now like to turn the conference over to Al Petrie Investor Relations coordinator. Please go ahead.
Thank you operator.
Everyone and welcome to VAALCO Energy's second quarter 2021 conference call.
After I cover the forward looking statements George Maxwell our CEO will review key highlights along with operational results Ron Bain, who was named CFO. In June will then provide a more in depth financial review George will then return because I'm closing comments before we take your questions.
During our question and answer session. We ask you to limit your questions to one and a follow up with you.
You can always reenter the queue with additional questions.
I'd like to point out that we posted a Q2.2021 supplemental investor deck on our website. This morning that has additional financial analysis comparisons and guidance that should be helpful. With that let me proceed with our forward looking statement comment.
During the course of this conference call the company, but we'll be making forward looking statements.
That shows are caution that forward looking statements are not guarantees of future performance.
And those actual results or developments may differ materially from those projected in the forward looking statements.
<unk> disclaims any intention or obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Accordingly, you should not place undue reliance on forward looking statements. These and other risks are described in yesterday's press release, the presentation posted on our website and in the reports we file with the SEC, including the form 10-Q that was filed yesterday.
Please note that this conference call is recorded let me now turn the call over to George.
Thank you al good.
Good morning, everyone and welcome to our second quarter 2021 earnings Conference call.
Thus far 2021 has been an exciting year for <unk>, where we have completed a very accretive acquisition opportunity and our rules in late 2020, we.
We closed the acquisition of <unk> 27, eight working interest in Etame to February 2021, with cash on hand, the accretive nature of the deal are very apparent in our first half 2021 result, with significant increased tour production adjusted EBITDAX and.
On cash flow.
In the second quarter, we produced an average of 8018 net barrels of oil per day, which was an increase of 55% over the first quarter driven by the inclusion of all three months of the increased NOI production due to the social acquisition.
The second quarter also reflect a stronger revenue due to higher realized pricing and strong to.
This helped to boost our adjusted EBITDAX to $21.9 million in Q2, 2021, and we have now generated $48 million and adjusted EBITDAX for the first half of 2021, which is more than either of the previous two full calendar years and over six times, what we generate.
In the fourth quarter of 2020.
We are happy with the ongoing strength of the oil price environment and with the significant increase in production. We wanted to lock in a meaningful portion of our free cash flow and adjusted EBITDAX to assure that we have the funds for our upcoming capital program later this year and into 2022.
Turning our attention to the future our strategic vision is built on accretive growth through organic drilling opportunities and through acquisitions.
As you saw in our Q2 results, we are generating significant cash flow in preparation for our 2021.2022 drilling campaign.
Also during the second quarter, we accelerated the processing over three D seismic in order to maximize the impact to the upcoming drilling campaign we.
Continue to expect all the data will be fully processed and analyzed by the fourth quarter and we are using the seismic to optimize our drilling locations for the drilling campaign.
Additionally, we are derisking future drilling locations and potentially identifying new drilling locations with the speedy processing.
June we secured a contract with boardroom limited to drill two development wells and two appraisal well bores with options to drill additional wells.
Depending on commitments related to the weak we believe that we can begin drilling as early as December of this year.
And the four well program is successful the estimated increase in gross field production is seven to 8000 barrels of oil per day or 3500 to 4100 net barrels of oil production per day to VAALCO. When the drilling campaign is completed in 2022.
Hand in hand, with the production increase will be the margin expansion on per barrel cost reductions.
About 90% of our production costs are fixed and those production increases for per barrel costs will decrease dramatically every new bar, who bring online is more economic because of the low variable costs. So as we grow production, while also growing our margin per barrel on reducing our cost per Boe from a capital standpoint, the estimated cost of the program.
Ms between 115, and $125 million growth or <unk> $73 million to $79 million net to VAALCO.
Upcoming drilling campaign has the potential to generate significant additional free cash flow, especially when you combined the sustained higher oil prices with our low cost operating structure.
Strategy is to utilize the additional free cash flow to fund organic and potentially inorganic accretive growth opportunities in the future.
In line with our strategy to be a low cost operator, we're constantly looking at ways to minimize cost and improve margins.
From an operating cost standpoint, our current F. P. S. <unk> are about 40% of our total production expense.
The nonbinding, LOI, which VAALCO announced in April of this year expired without any mutually agreeable contract being reached.
We are in advanced talks to finalize a binding agreement with other parties that will reduce of course and mutual schedule in line with what we previously announced.
We expect to update the market at the earliest opportunity and we still expect that the project will be fully operational before or if peso contract and.
This will dramatically improve our margin per barrel and we will be able to deliver more free cash flow to fund our future growth opportunities.
Looking at the second half of 2021, we have several operational events coming up we're now planning on completing two workovers during the third quarter. When we initially had planned can you just won in the second half of 2021, we.
We believe there is significant cost savings associated with performing the two workovers sequentially.
One of the Workovers are expected to provide potential production uplift while the second is to install an updated ESP design on a world where the existing ESP is showing signs of potential failure.
As a result, our guidance for work over cost was slightly higher than before but given the cost savings benefit of doing two workovers sequentially. Our expected costs are not going to double when compared to the cost of completing just one.
We're also planning on new 70 field maintenance turnaround, which is expected to take place in September.
We completed by the end of the quarter.
As always our annual production guidance included the planned turnaround. Unfortunately, the Fps, who will not be able to performance full annual maintenance turnaround at the same time GT safety protocols.
As a result, we have to schedule, an additional 60 turnaround in the fourth quarter to accommodate the additional lift PSU maintenance.
Taking into account the planned and unplanned turnarounds potential uplift from the Workovers of natural decline.
Production in the second half of 2021 to average between 7000 and 7800 net barrels of oil per day.
This is just a bit lower than we had estimated earlier this year for the second half of the year before when you have the additional quarter for Fps or maintenance event.
Our annual guidance hasn't changed and we still expect to be within the range of $6800 to 7400 barrels of oil per day.
With the unplanned SEC and maintenance event, we believe we would have been well above the mid point over 2021 full year guidance.
As a reminder, since our 2021.2022 drilling campaign doesn't begin until late this year. We are not currently forecasting any material production uplift from that drilling campaign in 2021, but we should see significant uplift in 2022.
For sales volume, we haven't changed around new guidance of 7100 to 8000 barrels of oil per day.
We expect third quarter sales to be in the range of 7800 to 8500 barrels of oil per day.
We have discussed before sales volumes do not always equal production volumes due to the timing and size of lifting.
Going forward, we plan to continue to provide sales volumes guidance on an annual and quarterly basis.
We expect a material change in our actual sales volume compared to guidance, we will inform the market.
As a result going forward, we will no longer post monthly listings on our website.
We are in the timing and size of listings to optimize revenue, which means that we will not always how free listings per quarter and the size can change somewhat from lifting to lifting.
Posting listings is not a common occurrence in the industry and we believe our investors will be better served with was giving quarterly sales guidance with material updates provided by us as needed.
I would now like to give you a quick update on some exciting new developments in Equatorial Guinea.
We have a substantial working interest in block P. And we are evaluating several development step out exploration opportunities in our acreage.
We are excited about the opportunities on the block and believe it makes sense to move this project forward with a more definable timeline and potential development.
We have recently completed a drilling feasibility study for the Standalone development of the Venus discovery in block P. And we are moving forward now with a field development concept.
As we walked through the development, we will provide more details about potential timing capital cost on reserves and production estimates were.
We are committed to profitably exploiting the resource potential of our assets and Equatorial Guinea could become a significant operational asset moving forward.
In summary, our outstanding employees continue to operate and execute on the Alco strategy of accretive growth and free cash flow generation through cost effectively maintaining core production.
I have a strong balance sheet and with our increased production base on new hedges, we have locked in sufficient cash flow to fund our upcoming capital obligations close to maintaining upside.
As you can see we are firmly focused on maximizing shareholder return opportunities and operating with the highest regard off towards ESG, while we progress our strategic objectives focused on accretive growth.
I would now like to introduce Ron being our new Chief Financial Officer, I've, known and worked with Rome for many years in his guidance has been an integral part of our success in the past his leadership of large geographically diverse financial teams listed in both the U S and UK and strong ties to the London investment in banking community is making them an important Andy.
Tobacco.
With that I would like to turn the call over to Ron to share our financial results.
Thank you George and good morning, everyone.
Let me begin by saying I'm very pleased to have recently joined the VAALCO management team like George and you vocal well from my days working with them at you and you can see the significant potential we have a powerpoint, both Gabon and Equatorial Guinea.
I look forward to get to know our shareholders and analysts over the coming months.
Turning to our financials adjusted EBITDAX totaled $21.9 million in the second quarter of 2021, compared with $18 million in the prior quarter and more than double the $10.1 million in the same period of 2020.
Adjusted EBITDAX for the second quarter of 2021 was higher than both prior periods, primarily due to the increased sales volumes and higher realized prices.
Our adjusted net income for the second quarter of 2021 totaled $8.4 million or <unk> 14 cents per diluted share as compared to an adjusted net income of $8.7 million or <unk> 15 cents per diluted share for the first quarter of 2021.
Higher sales and realized pricing were offset by higher DD&A due to the bargain purchase price accounting associated with the software acquisition and one time severance costs.
In the second quarter of 2020, VAALCO reported $5.3 million and adjusted net income or nine cents per diluted share.
Additionally, we reported strong net income of $5.9 million or 10 cents per diluted share in the second quarter of 'twenty 'twenty, one which included a $10 million loss on derivative instruments of which $5.7 million was an unrealized loss.
As George mentioned, our second quarter reflect the significant increases in sales and continued strong realized pricing.
Turning to production so production for the second quarter from 8018 net barrels of oil per day increased 55% from 5180 net barrels of oil per day in the first quarter 'twenty 'twenty, one driven by the social acquisition volumes being included in the company's results for all three months of.
Q2, compared to only about one month in Q1.
Second quarter 2021 production was up 48% from the second quarter of 2020.
Sales volumes in Q2, 'twenty 'twenty, one we're up 4% from the first quarter and up 2% compared to the same period in 2020 the.
The increase in volumes is primarily due to the additional sasol interest.
Our crude oil price realizations increased 14% to $69.61 per barrel in the second quarter of 2021 versus $61.31 per barrel in the first quarter of 2021 and was up 146% compared to the $28.31 per barrel in the second quarter of 2020.
Our hedging strategy for 2021 has been to lock in a majority of our 2021 production volumes to protect cash flows and assure funding of our capital program in 2021, and 2022, but still allow for some additional upside and.
In January 2021, we entered into a crude oil commodity swap arrangement for a total of 709262 bottles at a dated Brent weighted average price of $53.10 per barrel for the period from and including February 'twenty 'twenty one through January 2022.
These swaps settled on a monthly basis.
In May we added more crude oil swaps of 672533 bottles of dated Brent weighted average price of $66.51 per barrel for the period from and including May 'twenty 'twenty, one through October 2021, and.
And last week, we entered into additional commodity swap dated Brent weighted average of $67.70 per barrel on the PDP from and including November 'twenty 'twenty, one through February 2022 for a quantity of 314420 barrels.
After entering into this latest hedge VAALCO now has 70% of its production hedged through October 'twenty, 'twenty, one and 50% of its production hedged from November 2021 through February 2022.
We took similar actions in 2019 before we began our 2019.2020 program and we will continue to assess our needs to mitigate price risk and protect cash flow in the future as we consider any additional future derivative contracts.
Turning to our expenses.
Production expense, excluding workovers for the second quarters, 2021 was $16.1 million, which was flat with the first quarter of 'twenty 'twenty, one despite the higher sales and $3.9 million higher than in the second quarter of 2020 due to higher sales and the increase in working interest associated with the Sasol acquisition.
The per unit production expense, excluding workover of $25 two per barrel in the second quarter of 2021 decreased as compared to 20.602 per barrel in the first quarter of 2021 and $19.31 in Q2.2020.
The per unit production expense, excluding workovers decreased 4% as compared to the first quarter of 2021 due to the increased sales, but flat actual cost per <unk>.
Unit rate in the second quarter of 2021 increased 30% from the REIT in the year ago quarter, primarily due to the increase in working interest costs associated with the software acquisition, but sales were nearly flat year over year.
The second quarter of 2020 included four listings. The increase sales included in total production expense of Covid 19 related costs incurred to protect the health and safety of the company's employees, which totaled approximately 800000 in the second quarter of 2021.
<unk> expense for the third quarter 2021, excluding workovers is projected to be between 20 million and $22 million or $27 to $30 per barrel of oil sales.
Keep in mind that Q3, 2021 is an increase in absolute and per barrel cost compared to the second quarter of 'twenty 'twenty, one due to the seven day planned maintenance turnaround.
As George mentioned, we are now applying them completing two workovers students third quarter. When we initially planned to do just one in the second half of 'twenty 'twenty. One we've adjusted our guidance for Workover cost two 8 million to $10 million net vocal from 5 million to 6 million previously we do get the benefit of doing the two <unk>.
Workovers in succession.
Expected cost and not double the cost of just completing one.
DD&A for the second quarter of 2021 was $5.8 million or $9 five per net barrel of oil sales compared to $4.1 million or $6.70 per barrel in the first quarter of 'twenty, 'twenty, one and $2.8 million or $4.44 per barrel in the second quarter of 2020.
<unk> was higher comparable to the prior periods due to the higher depreciable cost associated with the shuttle acquisition.
Our asset base for the social acquisition was valued at fair market for you and a stronger pricing environment, which we negotiated the deal price.
General and administrative expense for the second quarter of 2021, excluding stock based compensation expense was $4.2 million compared with 3 million in the first quarter 'twenty 'twenty, one and $2.3 million in the second quarter of 2020.
The increase in Q2.2021 compared to Q1 'twenty 'twenty. One was a result of additional severance costs associated with changes in key personnel.
Per unit G&A rate, excluding stock based compensation in the second quarter of 'twenty, 'twenty, one or $6.57 per barrel of oil sales was higher than both the first quarter 2021 on the second quarter of 2020 due to higher severance costs was relatively small changes in sales.
For the third quarter, we are forecasting G&A, excluding stock based compensation to be between 2 million and $3 million, which is more consistent with our expected run rate without these one time costs.
Non cash stock based compensation expense was impacted by the change in the Sars liability as a result of changes in the company's stock price during the quarter for the second quarter of 'twenty 'twenty, one and the stock based compensation expense related to Sars was an expense of 400000 compared to an expense of $1.2 million for the first quarter 'twenty and 'twenty one.
For the second quarter 'twenty 'twenty, there was expense of 700000 related to Sars.
Turning now to taxes income tax expense for the three months ended June 30, 'twenty 'twenty, one was $2.8 million.
This is comprised of a $3.3 million of a deferred tax benefit and a current tax expense of $6.1 million the.
The income $2.2 million income tax benefit for the three months ended June 32020 included a $3.4 million deferred tax benefit and a current tax expense of $1.2 million for both Q2, 2021, and 2020 vocals overall effective tax rate was impacted by non deductible items.
Associated with operations and deduct in foreign taxes, rather than credit and then for United States tax purposes.
At June 32021, we had an unrestricted cash balance of $22.9 million, which included 2 million of net joint venture owner advances working capital at June 32021 was negative 9 million compared with a negative $15.8 million at March 31.2021.
While adjusted working capital at June 30 of 2021 turned positive to $4.3 million compared to negative $2.7 million at March 31, 2021 for the second quarter 2021, net capital expenditures, excluding acquisitions totaled $3.1 million on a cash basis and $1.
8 million, new non accrual basis.
These expenditures were primarily related to the purchase of our mobile Workover unit equipment and enhancements as well as early cost associated with a 'twenty 'twenty, one 'twenty 'twenty two drilling program.
As has been the case since the second quarter of 2018, we're carrying no debt.
With that I'll now turn the call back over to George.
Thanks, Ron.
If we look at 2021 and beyond this is a very exciting time for VAALCO I believe it is paramount that businesses are sustainable in order to provide benefits to all stakeholders with a focus on growth and investor returns.
Simon I am pleased to announce that we have completed our second ESG report that was primarily developed in close alignment with the recommendations of FASB as we significantly enhanced our disclosures and related discussions.
The core volumes as outlined in our report on our part of our culture and provides a solid foundation the assurance of success as a trusted operator, a generous partner to the communities, where we operate and as good stewards to the environment. We have a strong asset base in etame that is generating meaningful free cash flow and adjusted EBITDAX.
And the current pricing environment, which is evident in our first half 2021 results.
The $40 million that we have generated an adjusted EBITDAX in the first half of 2021 is more than VAALCO generated in either of the full years 2019 or 2020.
Sustained operational excellence and robust financial performance at Etame serves as the foundation for growing barco through organic drilling and future accretive acquisition opportunities in line with our strategy.
In April we also purchased a hydraulic workover unit that we have used in the past for less than $2 million in total consideration.
This unit is in Gabon, and is being deployed in the third quarter to perform two workovers that should increase production having.
Having a workover unit in country will allow us to respond to any well downtime issues quickly and we will see them a significant time production and cash flow when addressing workover requirement of an ESP unit goes down.
Scott we are not simply looking to maintain production in Gabon, there are meaningful development opportunities across our assets.
We have completed a feasibility study for the Standalone development of the Venus discovery in block P and Equatorial Guinea, and we are moving forward now with a field development concept etame.
And potentially now block P can enhance our business and provide a strong platform for organic growth and increased future cash flow.
As we continue to generate significant cash flows to fund our capital expenditures. We continue to volume we used to return some of that free cash flow to our shareholders.
VAALCO has adopted share repurchase programs in the past and we will consider similar programs in the future to complement our growth strategy.
In the fourth quarter, we will begin another drilling campaign at Etame and with our recent additional hedges we have locked in sufficient cash flow generation from operations to fund this program and desensitize the risk of oil price movement.
As you can see we are firmly focused on maximizing shareholder return opportunities and operating with the highest regards towards ESG, while we progress our refreshed strategic objectives focused on accretive growth.
Thank you with that operator, we're now ready to take questions.
Thank you we will now.
The question and answers.
Session two.
I ask a question you May press Star then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
First question will be from John White of Roth capital.
Good morning.
George.
Good morning, John.
Mr Bain.
Congratulations again on your recent appointment.
Thank you.
Well congratulations on the quarter.
It looks like everything went.
A little better than planned so a very very nice to see that and thanks for the detail.
Operations update.
I'm excited about.
Equatorial Guinea.
Announcement, there and block P.
That was a Devon discovery I believe is that correct.
That's correct.
We're currently positioned.
Net until CPR report to.
<unk> seen basis of around 16 million bottles on the discovery.
Thanks for that.
And would.
Would you want to say who are your partners in block P.
And in block P. We go deep patrol and Atlas and partners.
All right.
And the anticipated debt as the target zone.
Well, it's a good question.
I think hitting it.
This is the target zone subsurface out where we're planning to drill from the surface.
A true vertical depth.
Two vertical that I believe is around about 3000 meters.
Thank you.
And sandstone limestone could you talk a little bit about the lithology.
We don't have much detail at the moment I think it is a sandstone play, but I can come back to you on that one John.
Okay now.
Thank you.
Is it too early to talk about.
Timing is the potential while getting started.
Yeah, well I think the key the key.
We performed in Q2 was.
As we mentioned the gilead visibility so we have to try and determine.
Was it possible to meet the target zone from the shelf.
Opposed to trying to drill in a deeper walking location and that was really a paramount and added to the SaaS and then we could get an economic development for nine that level of.
Oil accumulations at 16 million barrels.
Having established that that was possible well trajectories and the annual floor sufficient waste coming in from a jackup.
We're now looking at how we can have an efficient field development concept again from on the shelf.
Yeah.
Fetching into the deeper water locations were of course as you know.
GAAP.
Very very quickly.
And I'm, hoping to be in a position towards the year end to have a much firmer.
Lying on a timetable and amongst pharma technical.
Certain patient on housing requirement to evacuate all.
Okay very good it's exciting and I'm looking forward to learning more.
I'll turn it back to the operator now.
Thanks again.
The next question will be from Bill <unk> of <unk>.
Capital. Please go ahead.
Thank you would you. Please that first of all are continuing on EG update us with the production.
Sharing contract update and what's going on with the Ministry is that now complete or is there still more steps that you are waiting for it.
It's more or less complete I mean, what was happening there.
We had one partner.
Basically coming to defaulting. So those amendments were taken place and we get an incomplete towards the beginning of Q2 and.
That was that was kind of good to go but then we have one more amendment with another partner exiting at a very small percentage.
The amendments are going through now we don't have any issues around those amendments.
Purely just an administrative process and in the discussions we've had with with the Egfr <unk>.
We're seeing it in a positive aspect.
And so were now as soon as those contracts are inked. You'll then have 25 years is that correct is that when the clock begins.
We are currently in an exploration position. So we have to we have to look at and as you know we had an obligation for an exploration well and what we're looking to do is get into the discussion around the Venus development business development to fully Mount obligation and once we get that position agreed at that point.
The tenor of the PSC will be extended.
Alright, Thank you and then relative to your comment in the release that you're accelerating the seismic processing.
Can you discuss kind of what it is that you are doing.
More quickly in the end what that will actually do for you.
Given that it doesn't sound like the rig will be coming on any any more.
Any sooner than originally discussed.
Yes, what we do there is basically we're pulling forward.
What we call the whole package of the package.
The seismic.
<unk> petition that we'd have a random drilling locations that we can get better clarity around where our subsurface well problem gets solved.
And what we wanted to do is basically make sure we have.
The scene imaging so the better imaging from what we had previously to just confirm bottom hole locations for the targeted drilling. So the reason we pulled that forward is basically to either derisking to the drilling program to remove some uncertainty. So we're not chasing appealed closer to execution.
Great. Thank you.
Once again, if you have a question you can press Star then one the next question comes from Charlie Sharp of Canaccord.
Yes. Thank you very much for taking my question good morning, gentlemen.
Just a couple of questions firstly around the work over and then the forthcoming drilling.
<unk>.
And then a bit of a follow up on the U S. P. S O if I may.
Firstly in terms of the work of the extra work.
You'll have the Q3.
Should I assume that that's the brewery to H work off of that.
I think had originally been planned as part of his life.
Selling program.
And secondly on the drilling.
Given the extra work that you're putting into the new three D seismic.
What what's your position at the moment in terms of possibly adding an additional well to the program.
And then on the Sps so.
I understand that maybe it's too soon to disclose details, but would you expect to see the same sort of.
Annual reduction in operating costs that you've cited before using the old Navy proposed.
So with whatever it is that you plan to use instead.
Yeah.
Thank you Charlie.
I'm walking for Nymex.
And this one but the second walk over I believe it's rich.
The reason, we had to come into that second workovers due to the failure of the Luo ESP well still performing at the moment, but it's performing on the OPEC ESP.
We don't want to take the risk of being there with the Workover unit dealing to reach and then all of a sudden leaving the walkaway Walkaway unit and 12 H <unk> field. So that said, it's really just to make sure we have.
Turning to the redundancy that we have on these wells with PSP.
And like I say, we're not seeing it seeing slight fluctuations in 12, which but we're not seeing a complete failure on the wall yet, but it is the result of the more ESP failing.
We've got that scheduled and in Q3.
With regard to the <unk>.
Drilling program as you know we continually looking at the options. We've got additional five options on the drilling program.
And that will be subject to.
Exciting target locations that we have availability of long lead items, and obviously, making sure we can get into.
Our existing cash forecast, but yes, we are continuously volume evaluate a fifth well opportunity.
No.
The seismic vessels will be in a position.
For a more complete evaluations towards beginning in mid March Q4.
With regards to the <unk>.
Date of the SPX flow to the SSO.
Yes, you can.
But we'll be looking at this opportunity.
And.
We've expanded the.
The reach of potential suppliers on an episode concept.
Two things in mind, when we've been looking at the first is schedule, it's absolutely critical that any contract we enter into.
High confidence levels of being able to hit the delivery schedule.
Well ahead of the contract end date of September 2022 for the existing Fps and.
And secondly, we're looking at the cost opportunity.
Currently.
This additional expanded view of suppliers maintain the indicative cost savings that we.
I mentioned that in June of this year and the answer to both of those is yes schedule lifted priority, we cannot miss it in the warm up Miss it but we are also.
On track for those moves indicative profit.
The next question will be from Richard Dearnley of long Port partners.
Good morning.
The question about.
Reaching the zone from the shelf.
I take it that that means you expect that you'll be able to reach it from the shelf for what are the odds of the feasibility study.
Being positive.
The feasibility study has been completed the drilling the drilling team looked at various options.
What it would take to reach the target zones are the key aspects there are how high risk the well is the angle of attack that.
The well design is taking to get to the targeted the terms did some surface location and we went through a number of aspects, including the well design, whether we had to do a rotating casing program, which of course is a higher risk position and.
The results of those.
Just on starting the drilling.
Various water depth depth.
The water depth between 120 and 140 meters.
And the deeper we go the shallower the angle of attack for the well in the shallower we go the higher the angle of attack and we come to the conclusion that the.
<unk>, producing wells were well within the spectrum and the angle of attack too.
To get these wells completed so theres not theres not really a significant.
But we see a significant drilling were suffering.
From memory again, we're looking at the two airlines.
Then in the 40 to 50 degree positions.
I say, thank you and then.
The accelerated three D.
The acceleration of the three D program.
Did that have a meaningful cost impact in the second quarter.
Yeah.
So I think all of them yet.
Our guidance, but its about 600000 in total expense.
Yes.
I would suggest that Q3 will be similar to Q2.
I see.
Yes.
Okay, George I would think about two questions from Stephane to hardwood August you've got 37, Joe with his phone line. So the first one what is the latest of the PSL contract win.
Okay well.
As I mentioned earlier in one of the questions I answered we expanded in the supplier base that we contacted to really hate to have a much better and review of our options.
Specifically with the discussions around domain and we failed to meet commercial commercially acceptable settlement, which we can go forward and contract.
In discussions with a number of.
Providers and.
I would anticipate within the next two weeks, we'll be able to come to market and advise them exactly.
Shifting position.
Okay, Great George and Ron This is more for you would be a good guidance for the future in future years for Workover.
Yearly expense. He said he noticed that there was $8 million to $10 million that we said for the third quarter.
Yes.
I believe we generally look at one to two Workovers a year.
Around the country.
Our guidance generally being.
Regionally.
Million.
I haven't looked at that.
International revenue.
One planned Workover, we had for 2020 and accelerated into 2021.
In 2022 will be more.
$5 million range.
It's something that we'll take a look at it from a budgeting process, which we are reviewing now in August.
Thank you Ron.
Operator any other questions.
There are no other questions at this time I'll turn it back to George Maxwell for any closing remarks.
Well I would like to again, thank the audience.
Q2, and first half results.
Thanks.
The positions that we're presenting for the company going forward in 2021 are very exciting to have the opportunity.
Potentially opening up.
Significant second.
Leg of production.
Opportunities in Equatorial Guinea, we have an extensive drilling program to try and fill the OLED of processing positions, we have in Gabon.
And all of that being self funded inside the company. So I think it's.
For second half 2021, albeit.
We do have a second.
Unplanned shutdown.
Safety reasons in Q4, I still think it will take a very exciting second half and that leads us into the position for 2022.
The continuation of the drilling program and further enhancement of production.
Leave us very very positive aspects towards the cash flow generation and profitability of the company and going forward.
Thank you very much for everyone who has listened in.
Thank you. The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines have a great day.
[music].
Sure.