Q1 2022 VAALCO Energy Inc Earnings Call
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Good morning, and welcome.
Oh energy first quarter 2020.
Earnings Conference call.
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Thank you operator, good morning, everyone and welcome to VAALCO Energy's first quarter 2022 earnings conference call. After I cover the forward looking statements George Maxwell Our CEO will review key highlights along with operational results.
Ron <unk>, our CFO will then provide a more in depth financial review George will then return for some 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 you can always reenter the queue with additional questions I'd like to point out that we posted a first quarter 2022 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 comments drew.
During the course of this conference call. The company will be making forward looking statements investors are cautioned 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 or 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 S. E C, including our Form 10-K. Please note that this conference call is being recorded let me now turn the call over to George.
Thank you al Good morning, everyone and welcome to our first quarter of 2022 earnings Conference call.
We continued to execute on our strategic vision built around a treated group were creating and returning value to our shareholders.
Production in Q1, 2022 was up 6% and adjusted EBITDA increased by 49% over fourth quarter of 2021.
We have now successfully drilled completed and placed on production the first two development wells.
Drilling campaign at Etame.
Our first well with a development well made Tommy each sidetrack.
Which was highly successful came online in February and exceeded our internal forecast.
We then move the rig from the Etame platform to the boom of platform drilled and brought online the boomer three eight sidetrack development well in late April also above our internal forecast.
We are now drilling the third well over four currently planned wells in mid 2021 'twenty to 'twenty two program.
We're also progressing the field reconfiguration and conversion to NFS or what's at Tommy on time and on budget.
In March we paid our first quarterly cash dividend and announced that we are paying our second quarterly cash dividend later with Qualcomm.
As you can see we are delivering on our strategic objectives and in many cases exceeding expectations, which was firmly placed vocal and are financially enviable position.
Turning to our first quarter 2022 operational and financial results. We produced an average of 8050 net barrels of oil per day we.
We had two listings in the quarter, which resulted in total oil sales of 616000 barrels so.
As we discussed on the last call due to operational and weather factors, we had some operational issues, which resulted in reduced production in February and lower lifting in the first quarter.
At the end of March with the recovery from the downtime and the addition of the successful Etame <unk> sidetrack well production rates increased to 9500 barrels of oil net per day and is well above that level now.
In the first quarter, we saw sustained higher oil prices, which drove revenue significantly higher as well.
Our adjusted net income excluding the impact of unrealized derivatives and deferred income taxes was a very strong $21 1 million or 36 cents per share.
Our adjusted EBITDA was $33 5 million in quarter, one 2022, compared with $22 6 million last quarter.
We are currently more than sufficient minus site to fund our 2021 2022 drilling campaign official conversion capital and dividend from cash on hand, and operational cash flow in 2022.
We continue to be focused on growing our production levels through this period of high oil prices.
Turning your attention to the future our strategic vision is built on accretive growth through organic drilling opportunities expanding our margins and accretive acquisitions.
We have used the three D seismic that we acquired with Tommy to maximize the impact over 2021 2022 drilling campaign.
Additionally, we are derisking future drilling locations and potentially identify new drilling locations with further three D processing.
In February we reported that we completed I'm pleased the Eth sidetrack well online at rates above our initial estimates.
In late April the Zuma three eight sidetrack development well was completed and brought on line again with initial rates above our internal estimates.
The rigs have stayed on the boom of platform and we have begun on the third well in the program the soap to below one HB sidetrack development well.
This well is targeting the gamba reservoir, but it's also had been drilled deeper to test the dental formation.
As a reminder, the dental as productive in another area of Etame and did this well has good shows we can potentially complete and produce from the dental and the gamba.
This well to move to P. Gamba reserves two P D Pete and as exciting as it could also bring contingent resources in the dental to PDP and potentially derisk additional dental resources.
For the second quarter 2022, we're estimating our production to be between 10000, and 10700 barrels of oil per day net.
At the midpoint of guidance this would be 29% increase compared to the first quarter.
In addition, we are forecasting a significant increase in sales between 10007 hundred 11300 net barrels of oil per day.
At the midpoint of guidance this would be a 61% increase compared to the first quarter.
This is a particularly opportune time to have a significantly increased sales at the prices we are seeing.
Hand in hand with production increase will be margin expansion on the per barrel cost reductions.
As we have previously advised but 90% of production costs are fixed and those production increases our bottle costs will decrease.
Every new bottle, we bring online is more economic because of the low variable cost. So as we grow production, we'd also growing our margin per barrel on reducing your cost per barrel.
For the second quarter, we expect a barrel production costs, excluding workovers to be between 20 to $25. This represents a 20% decrease at the midpoint of guidance compared to the first quarter.
From a capital standpoint, we continue to see our capital expenditures related to the <unk> 2021 2022 drilling program the field reconfiguration at Etame and the FSU conversion to be in the range of $90 million to $110 million for the full year 2022.
We expect to spend about $40 million to $50 million in capex in the second quarter of this year.
We continue to forecast the all of our capital commitment in 2022 as well as our dividend will be fully funded from cash on hand and cash from operations.
With the drilling program at Etame progressing forward nicely. We're also monitoring our <unk> solution projects simultaneously at Etame, which will reduce costs and improve margins.
Last August we announced that we had signed him to see part of the approval for the new <unk> solution.
And U S. S. All will significantly reduce storage and offloading cost by about 50% increase effective capacity for storage by over 50% and lead to an extension of economic field life, resulting in a corresponding increase in recovery and reserves at Etame.
During the second quarter, we signed a major construction contract with Dow for the field reconfiguration and upgrade this.
This secured a significant portion of the work scope for the overall lift vessel project.
The field reconfiguration work has begun on the diamond conversion are on schedule and on budget.
We're expecting that the vessel will begin sea trials in late June before being mobilized to Gabon.
As a reminder, our estimated capital cost associated with the official conversion on field reconfiguration in 2022.
It could be between 25 to 30 million net to VAALCO and are included in our Capex guidance.
This capital investment is projected to save approximately 13 to 16 million net to VAALCO and operational costs through 2013, given the crude at a very attractive payback period of only about two years.
We will continue to keep our shareholders apprised of the progress of both the field reconfiguration M. D episodes conversion through our press releases.
In October we announced exciting new opportunities in Gabon vocal has entered into a consortium with BW energy in Panera to energy. The consortium has been provisionally awarded two blocks from the 12 boat show license you mined in Gabon with two exploration periods totaling eight years, which may be extended by a further two years.
The two books G 12, and 13 in each 12 13 or adjacent to vocals Etame PSC as well as BW energy on Pinos disapprove P. S C offshore southern Gabon.
The majority of these two blocks are in water depths similar to Etame.
And Tommy and discipline have been highly successful exploration development and production projects undertaken by the consortium members over the past 20 years with approximately 250 million barrels discovered to date.
The consortium is working through detailed production sharing contract discussions with the Gabonese government.
Another area that holds significant future potential for beaucoup as Equatorial Guinea.
We have a substantial working interest in block P. And we are evaluating several developments debt paid on exploration opportunities on our acreage.
We are excited about our opportunities in the block and believe it makes sense to move this project forward with a more definable timeline and potential development.
Last summer, we completed a feasibility study for the Standalone development of the Venus discovery in block P and we're moving forward now with the field development concept.
We are in advanced discussions with our partners I'm government and anticipate making significant progress towards the new agreement Tullow approval within the second quarter 2022.
We are committed to profitably exploiting the resource potential of our assets and EG could become a significant operational asset moving forward.
Turning to our ESG efforts.
We recently recruited a full time ESG manager, who will be based in Houston.
We are in the process of completing our annual ESG report and it should be published in the second quarter ahead of our annual General meeting.
What do you mean focused on showing progress and improvement in our environmental social and governance metrics.
In summary, there is a lot to be excited about as we enter the second quarter of 2022.
We are a critically growing production at etame through our successful drilling campaign, while continuing to progress forward exciting projects in Gabon, and Equatorial Guinea.
I would like to thank our hard working team here at VAALCO, who continue to operate and execute our strategic vision.
As you can see we are firmly focused on maximizing shareholder return opportunities and operating with the highest regards towards ESG.
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 also pleased with our operational and financial performance and we remain very well positioned to execute on our strategy of accretive growth, while adding in returning value to your shareholders.
Turning to our financials.
Adjusted EBIT Darts rose, 49% to $33 $5 million in the first quarter 2022, compared with $22 $6 million in the prior quarter and nearly double the $18 million in the same period of 2021.
We've clearly benefited from sustained higher realized pricing.
This has allowed us to fund our strategic initiatives with cash flow and cash on hand, including their 2021 'twenty two drilling campaign Capex episode conversion and field reconfiguration costs.
We also reported strong net income of $12 $2 million or 20 cents per diluted share in the first quarter of 2022, which included a $19 3 million noncash unrealized derivative loss of $10 3 million deferred tax benefit.
After normalizing for the deferred tax benefit and unrealized loss, our adjusted net income for the first quarter of 2022 totaled $21 $1 million or 36 cents per diluted share as.
Compared to an adjusted net income of $12 $5 million or 21 cents per diluted share for the fourth quarter of 2021.
In the first quarter of 2021 bulk reported $8 $7 million and adjusted net income of 15 cents per diluted share.
Production for the quarter of 8051 net barrels of oil per day was higher compared to 7554 net barrels of oil per day in the fourth quarter of 2021, which was expected due to the first well of the drilling program being brought online in February but was partially offset by deferred production.
Due to temporary operational issues in February .
Production was up 55% from the same period in 2021.
Sales volumes in quarter, one 2022 were down 13% in the fourth quarter, but were within guidance and slot with the same periods in 2021.
The decrease in volumes is primarily due to only having two listings in the first quarter 2022.
As we discussed in the Q4 earnings call. This was due to timing issues from the temporary operational challenges in February which resulted in lower listing volumes.
This will be a timing difference with reduction of stripping seals Williams and will result in higher sales volumes in the second quarter of 2022, which you can see in our Q2 sales guidance of between 10007 hundred 11300 barrels of oil per day.
Acuity all price realization increased 42% to 100 965 per barrel in the first quarter of 2022 versus $77.31 per barrel in the fourth quarter of 2021.
Up 17, 9% compared to $61 41 per barrel in the first quarter of 2021.
At the end of 2021 and the beginning of 2022, we hedged a portion of our expected production in 2022 to walk and strong cash flow generation to assist in funding our capital program and dividend commitments.
That's it.
March we have 954000 barrels hedged for the remainder of the year and average price of $76 97.
Total we currently have about one third of our full year 2022 guided production hedged.
Full derivative position can be found in yesterday's earnings release as well as in our Q1 supplemental information presentation on our website.
Turning to expenses.
<unk> expense, excluding workovers for the first quarter of 2022 was within guidance at $18 $4 million.
This was slightly lower on an absolute basis compared to the fourth quarter of 2021.
Pulse were 14% higher than the same period in 2021, primarily driven by a full quarter of production in quarter. One 2022 from the acquisition of <unk> interest in the Tommy that closed in February 2021, compared with just over one month in Q1 2021.
The per unit production expense excluding workovers.
$89.83 per barrel in the first quarter 2022 increased as compared to $26.
Eight two per barrel in the fourth quarter of 2021, and $26 a point or two in quarter, one 2021, primarily due to lower sales volumes.
Given the expected increase in sales for the second quarter, our guidance range for production expense, excluding workovers for second quarter 2022 is expected to be 23 million to $24 $5 million or between $22 to $25 per barrel of oil sales.
We're not changing our full year 2022 production guidance of $73 million to $83 million or 19.50 to 20 250 per bottle.
We had new workovers in the first quarter of 2022, but based on timing we are forecasting a potential workover towards the end of the second quarter of 2022.
Depreciation depletion and amortization for the first quarter of 'twenty join EG was $4 $7 million or $7 0.59 per net barrel of oil sales compared to $4 1 million or $5 83 per barrel in the fourth quarter of 2021.
And $4 $1 million or 670 per barrel in the first quarter 2021.
DD&A expense in the first quarter of 'twenty, two or net realizable barrel of crude oil sales basis was higher compared to the prior periods presented G to hard to <unk> costs associated with the 'twenty one 'twenty two drilling campaign we.
We anticipate D D need to be in the range of $7 75 to 950 per barrel for the second quarter 2022.
General and administrative expense for the first quarter of 2022, excluding stock based compensation expense was $3 $6 million slightly above our guidance compared with $2 2 million in the fourth quarter 2021, 3 million in the first quarter 2021 the increased compared to prior periods was the result.
Higher salary and wages costs and audit related costs, partially offset by lower legal fees.
The per unit G&A rate, excluding stock based compensation in the first quarter of 'twenty, two or $5 80 per barrel of oil sales was higher than both the fourth quarter of 'twenty. One on the first quarter of 'twenty, one due to lower sales and higher expense.
For the second quarter of 2022 we expect cash G&A to be in the range of two five to $3 $5 million.
Not changing our full year 2022 cash G&A guidance of nine five to $12 $5 million.
Noncash stock based compensation expense for the first quarter of 2022 was $1 $4 million and was comprised of non Sars related expense of 400000, and SASSA related expense of Vermilion.
For the fourth quarter of 'twenty, one stock based compensation was 400000 after the first quarter 2021 stock based compensation expense was $1 $6 million.
Turning now to taxes foreign income taxes are attributable to Gabon and are settled by the government, taking their oil and kind <unk>.
Income tax expense for the three months ended March 31st 2022 was a benefit of $4 $6 billion. This is comprised of a $10 3 million deferred tax benefit and a current tax expense of $5 7 million.
Income tax expense for the three months ended December 31st 2021 was a benefit of $10 $9 million. This was comprised of a $16 $1 million of deferred tax benefit and a current tax expense of $5 2 million Inc.
Income tax expense for the three months ended March 31, 2021 was $3 1 million and included 300000 of deferred tax benefits and a current tax expense of $3 4 million.
For all three periods. The overall effective tax rate was impacted by nondeductible items associated with operations and deduct in foreign taxes, rather than credit them for United States tax purposes.
I'd like to refer you to our supplemental information deck that we posted to our website. We've updated our netback slide that shows the strong cash flow, we're generating at current prices.
We've incorporated the midpoint of our 2022 guidance using a 90 box realized oil price.
We've seen exceptional early results in our drilling campaign and remain on track to deliver our lower cost <unk> solution on time, which will result in substantial savings on an absolute and per barrel basis, despite inflationary pressures.
On the same slide we showed an indicative quarter for 2022 net back assuming continued success in the drilling campaign and a full conversion of our <unk> solution or.
Our sales guidance for the rest of the year is meaningfully higher than what we realized in the first quarter 2022.
Even with our lower sales volume for this first quarter. Our Q1 2020 to annualized EBITDA is about $134 million or $2 28 per share annualized or the recent stock price in the range of $6 57 box, we're trading at a low multiple of EBITDA.
About three times, despite paying a dividend on being debt free.
At March 31st 2021, we had an unrestricted cash balance of $18 $9 million. This does not include the proceeds from the March lifting of $44 6 million, which were received in April 'twenty, two plus $3 8 million of nonoperating joint owner receivables working capital at March 31 2020.
<unk> was negative $21 3 million compared to $4 million at December 31, 2021.
The decrease in working capital is related in large part due to the crude capital costs associated with the drilling program and derivatives.
For the first quarter 2022, net capital expenditures, excluding acquisitions totaled $23 $1 million on a cash basis and $31 8 million on an accrual basis. These.
These expenditures were primarily related to costs associated with the 'twenty one 'twenty two drilling program, the <unk> conversion and the Etame field reconfiguration.
As George mentioned for the second quarter of 2022, we estimate our net capex to be approximately $40 million to $50 million and continue to expect our full year capex to be in the range of $90 million to $110 million.
Also has been the case since in second quarter of 2018, we're cutting no debt.
Last week the board of directors approved a cash dividend of 325 cents per common share payable on June 24th 2022 to stockholders on record at the close of business on May 25th 2022.
This equates to a full year 2022 annualized cash dividend of <unk> 13 per share.
With that I'll now turn the call back over to George Thanks, Ron.
The future remains very bright for VAALCO and this is a very dynamic time in the energy industry.
We are increasingly growing production and cash flow through organic drilling and continue to evaluate additional opportunities with a focus on providing sustainable returns to our shareholders.
We've already seen the successful initial results in a drilling campaign with the combined production of Etame <unk> sidetrack, well under boom of three eight sidetrack well, both exceeding our internal expectations.
Additionally, we are on schedule and on budget for the Etame field reconfiguration and the FSU conversion.
With the higher sustained commodity pricing, we are confident that our 'twenty to 'twenty, one 2022 drilling program, our field reconfiguration, and therefore conversion and the dividend. We instituted this year will be fully funded by cash on hand, and internally generated cash flow.
The Etame block P and potential now for the new blocks in Gabon can enhance our business and provide a strong platform for organic group, allowing VAALCO to build size and scale in West Africa.
We believe that with a strong cash position and our increasing size and scale, we can volume and more easily incorporate accretive acquisitions that meet our stringent investment criteria and strategic vision.
Finally, as part of our value creation strategy moving forward, we paid our first quarterly dividend in March and announced our next dividend will be paid later this quarter.
We believe that prudently returning cash to shareholders is a great way to complement our accretive growth strategy.
As you can see we are firmly focused on ways to increase total shareholder return, while operating with the highest regard towards ESG we.
We are executing our strategic objectives and are excited about the near term and long term opportunities for VAALCO.
Thank you and with that operator, we're ready to take questions.
We will now begin question and answer session.
Good question.
I'll start.
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At this time, we will pause momentarily to assemble our roster.
And our first question will come from John White.
Capital. Please go ahead.
Good morning, and congratulations.
Very nice results.
And everything.
Everything is going smoothly.
Okay.
I'll skip that.
Go to the.
The new blocks.
Well.
Block G 12, 13, and age 12 13.
Can you update us on that in terms of the <unk>.
The official awarding in the blocks.
PSC and your seismic program.
Yes, Jonathan I mean at the moment, we continue to be in negotiations with the with the Gabonese government.
Around the commercial terms of both both are big blocks with our partners. So those discussions where we have been taking place through Q1 and continuing into Q2.
We are hopeful to see a resolution towards a formal award of the block from completion of the commercial discussions.
I'm, hoping we can see that in Q2, but it may stretch into Q3.
If it does come into Q3 then.
The seismic acquisition will definitely not happen in 2022.
And in Q3 is probably going to wait to even get some of the reprocessing down in 2022. So most of that will slip into 2023.
Okay, well, thanks, very much and good luck with all of that and.
Any update on E G block P.
Yes on the G block P.
We've been in discussions with the partners.
And we are I.
I think.
I'm confident we could get to a resolution.
Yeah.
On an arrangement with our partners in block P. During Q2.
And certainly that's what we're planning and I think as soon as we come to that.
That resolution and.
Confidence.
<unk> with the with the Minister.
We'll get the approval that we require to block P forward.
For the P O D drop that we have at the moment.
Yeah.
We mentioned previously we've completed the feasibility studies, we've looked at how are we going to execute this first well and from a planning standpoint, we're looking at that first well.
Early 2020 for probably the January February 2024 subject to the PUC approval.
Yeah.
Okay, Thanks, very much and I'll pass it along.
Thanks, Joe.
The next question comes from Charlie Sharp of Canaccord. Please go ahead.
Thank you very much gentlemen, appreciate your time this afternoon or this morning U S time.
Just a question actually on the current well and then Tal.
Formation on the plans to test that how important do you think.
Test results from this well is in trying to determine what you think the license why potentially at some point in time.
That's a good question Charlie I don't think it's.
It's not a make or break position on the dental for this well so I don't think so.
It gives us a benchmark for the overall performance of that particular fund.
This does didn't fall school is and this is why we're doing the test is it does give us that opportunity to convert the contingent resource direct them to one P reserves and now with the when we looked at this auction.
The original well.
But it's only going to go down as far as the gamba.
But we like what we see in the in the deeper position in the dental.
These commodity prices it made sense to increase the well cost and at this time and take that opportunity. So.
We deliberately positioned to test in case down to the dental so that if we find what we hope to find us.
A good, albeit and found.
That we can immediately make a producer and then at some point in the future come back shallow and then produced from the Gamba.
I see thank you.
This was a successful well do you think that they're all.
In the near term opportunities for you to pursue the gentile.
There are there I mean.
Next well in this program is also going to look at the desktop target.
Okay, great. Thank you.
The next question comes from Steven Cod.
Please go ahead.
Good morning, Gents and thanks for taking my question bidding up on what are the question from Charlie.
So if we look at these ongoing dental Wow.
How much do you think.
Contingent resources might be converted.
In the success case.
Two two piece and then.
This again on diesel.
Oh Wow.
If we look at the gamba.
Weeks would you expect that these the gamba reservoir, we believe all four rate similar to the first wave of the shaft. The second trial these shell or something else just wondering.
What would be your expectations. Thank you.
Okay.
In regard to what the prostate Timothy.
Paul I mean.
We have one well just see from the dental moment for defense platform.
I think we.
This opportunity will start to increase our knowledge of.
The dental area in the next well will expand even more.
How much we can move from contingent resource into into two P. M. Obviously that it's been purely going to be based on the well results.
But I mean, we are we're hopeful and we're encouraged by the opportunity to go into an additional sanguine about the gamba.
So I don't have an exact number for you Stefan because it would be based on what we see from the from the logs on the results we get from this past them.
Well, we're drilling now in the second well drilling.
Next in the north to below.
With regard to them.
What we expect from this well do we expect the kind of results. We saw in AP. So can we expect the kind of results we saw on the three H.
Again looking at the location.
What we've seen in the past I would.
Why isn't it more towards the.
Three eight position however.
However.
We were actually well if we're successful in the dental we wont know what that's going to be until sometime in the future because they will be producing from the dental before between shallow and the gamba, but if the dental is unsuccessful will become shallower we would expect the rates.
Similar to what we're seeing on three eight.
Thank you.
Okay.
The next question comes from Bill gentlemen.
So on capital. Please go ahead.
Thank you let me start with your Oh, the two wells of this program that you have completed both came in better than expectations is that because the rock is just a higher quality.
And then you are recognized or where your where your expectations just simply are being modest.
[laughter].
I want to be modest but.
But no I think there's two factors.
It gave us a better results than we anticipated obviously I mean, we announced from the wells, both the government and mobility and the properties where were better than anticipated and so.
We did see better reservoir characteristics than.
Initially forecast, but in addition to that we got to also thank our drillers because we've also seen excellent well, placing that both on the Etame and one of whom most of the world placing position is also critical.
To well performance as you know.
Alright, okay. Thank you.
And can.
Can we read anything into that permeability and porosity being better than anticipated with your.
With your remaining locations or is is there enough of a difference.
Between the locations that we shouldn't be reading reading too much into it too early.
I certainly wouldn't read too much into the next two well two earlier, primarily because both wells are initially targeting the dental which is completely separate from the science to produce income in the first two wells.
There's not a direct read across there.
But certainly there is there is a degree of some correlation between that and.
And this well if we were in the gamba.
And what is your suspicion [noise] just relative to the to the dental sands versus the Gamba sands.
And in terms of their there.
Flow rates production potential for the field et cetera, et cetera, similar law.
Less than or more than or or unknown truly in neutral and you need to figure it out.
Well I think from what they know what the producing well.
We will see similar to what the key areas, where we're going into right now with whether it be going into.
As a prolific hydrocarbon EMEA or whether we go into <unk>.
Water wet area.
There is not sufficient to hydrocarbons, there too to to make it work, especially in this cluster.
Opportunity so.
I think it's.
The overall fans.
We experience between the gamba and <unk>.
Got it.
Yeah.
Yeah.
Our producers in the area that produced from the Dentelle I think we're certainly excited by the opportunity to test the dental or we wouldn't it wouldn't be doing it so our position as well.
But.
Subject to the Hmm.
The.
Hydrocarbon position on.
Not being working with I think it's a it's.
We have to see what we would expect similar characteristics.
That's very helpful allow me to shift if I may to.
To your tanker Oh, offloading or loading.
What is your production increases what are you considering.
Considering just philosophically considering the normal cadence of of off loads to be is it to a quarter is it three a quarter where does it go back in for a J.
Between two and three.
I'm trying to get my head wrapped around this higher production and what that ultimately means.
Hey, Phil it's Ron here I'll step in on this one.
On the scheduling will generally we would schedule one less.
Per month outside of obviously.
The <unk> gone tougher oil they take that once a year generally but it all will all depends on.
Production volumes.
Entities as the year progresses.
Generally that lifting has happened yeah Q3 in the last two years. So yeah, we're looking at something similar.
And in 2022.
The other part and the other variable opex as we get through Q3 in the U S. We will continue to play it has a much larger capacity, which has allowed us to do that.
To look at.
Let's say better optimization of loading.
From a from a vessel.
Language is also to ensure that there's no stoppage from a production point of view.
Terry.
Its being held to soon.
The capacity goes up quite considerably from the existing at PSX to show them. What I would say is in Q2, we're looking at a little bit over one for prolonged because we had the last lets say kind of slip into April 2nd from from Q1. So you will definitely see from us.
Guidance, our sales guidance is way up in Q1, I think is about 60% apart on Q1.
It really reflects I would see an extra or less than that.
So basically the starting point is is a one off loading per month.
And then you have to bring operational realities into it that will adjust that up or down depending on.
Exactly yeah.
That's helpful. And then one additional question that place earlier on the question was asked about the BW energy, our Gabon block and and I'd like to take that question one step further.
With what you know today when would you anticipate production coming.
I mean from that block benefiting the Alco.
Wow.
Okay, well, what we know today.
I'll go back to my earlier answer, but it's unlikely, we'll even get a reprocessing of existing parts of seismic done in 'twenty. Two so we're looking at capture and interpretation in 'twenty three and then the commitment of an explanation well probably 'twenty four 'twenty five.
Pending on the location of the exploration well this proximity to existing infrastructure Ethernet discipline all the Tommy.
May be an opportunity for a tie back on our production well in 'twenty five 'twenty six.
But.
It's really down to the location.
A commercial find and how to allocate to each of our infrastructures, but certainly nothing I would say in my mind before the 425 and even 25, we'd be looking at a single well tie back to either disappear or at Etame.
Something more substantive respond.
Justifies and separate structures inside each of the blocks and then that will push the production data for the rate.
Great. That's that's very helpful. Thank you. Thank you both and congratulations on a great quarter.
Yes Bill.
Our next question comes from Jamie Wilen.
Management. Please go ahead.
Oh, yes, there's one more question about the about the new drilling could you tell us about the timing for how long it would be too.
Yes, the the Gamba and then how much longer to go to the dental and where you wish you the result.
From the gamba prior to we do that all at one time.
Okay, we're looking to drill through I believe it's mid June .
Towards the end of June .
We will be issuing the results.
Same time, so we'll be drilling through.
Through the Gamba and we know we've got proven oil bearing sands and and then deeper into the dental.
And.
Obviously, the current well designs and looking for us to.
Ooh basically.
Perforate and Dan how should we find a seat.
Commercial volumes.
Hydrocarbons.
We would get.
It immediately announced that or we would then announce that they're not commercial volumes of hydrocarbons in that particular location of the dental and we will be pulling back to its appropriate in the gamba uncompleted.
Gotcha.
As I look at the chart that you provided for your netback for 2022. The first layer is the 2022 margins at $90 realized oil.
Is that for the fourth quarter or is that for the entire year. When you talk about the $53.83.
Per barrel of free cash flow.
<unk>, it's Ron again, not say, that's a full year. So it's not it's not Q4 so.
Well, we wanted to do and there was kind of demonstrate.
Some of that pricing out 22 lining up nine versus 2021 after 90 gold price environment.
Okay. So let me run through some numbers and tell me how far off I am if you are going to do.
Let's just say a million barrels in the fourth quarter.
And youre going to be realizing.
55 to $60 per barrel of free cash flow, we're looking at.
Somewhere in the neighborhood of a dollar per share.
Free cash flow in the fourth just in that fourth quarter alone.
Again.
What to do really pointed to the guidance there Jamie.
I would say Q2.
Where we have given you the guidance for our sales.
It's going to be it's probably going to be one of the strongest quarters, we've ever seen at local.
And if you look at the on the base itself.
8 million bottles, which is the midpoint.
Our forecast for Q2, yeah, that's gonna be.
Not a million miles off of what you're talking about on a per share basis based on.
Cheers.
The loan matures.
Okay.
And then Glenn.
Lastly, could you talk about your hedging strategy.
Obviously, you needed to secure your drilling program, that's now more wellness more.
Very well secured.
You have hedged a portion of your of your.
Of your production are you looking to hedge any or do we not need to do that since we are.
Playing offense as opposed to defense.
That's a great analogy.
And all I would say Jimmy we got about a third of our production.
Hedged for this year.
Our forecasts are basically saying that we are well covered for our commitments.
There has been no approach from our signal into Q4.
Obviously, we take a look at the hedge position at any point in China. There is obviously still.
A large degree of volatility in the marketplace overall, which impacts obviously forward positions.
Yeah, we've taken a look at Q4 always taking a look ahead to Q1 2023.
Aware of all of our capital expenditures and commitments for a walk through Q3 of this year Q4 will have some but not not the level of spending that we got through the first three quarters. This year. So we've not we've not felt the necessity of the need to go in on Hey, Gena at these prices I mean Q4 hedges at this point in time.
If we're doing a simple swaps that we've done in the past.
You're talking about high <unk> to 90 Bucks.
And I don't want to win.
Not speculating, but we don't want to rush in and lock into that when theres not necessarily a need but its certainly something Jamie that we will always keep a lookout unless you're aware at our commitment is always to look at our overall cash flow to meet our capital and operational requirements as well.
Our dividend position and one of the things I would say.
We have had a look at that cost.
Yes.
Certainly.
If we got a bottom number they are from a position that covers our commitments.
This is to get much of the upside as possible.
May well be something that we look at going into 'twenty 'twenty three.
Okay, and then and then also another lastly, when you first announced the dividend program.
Rice of oil was obviously much much lower.
And this was prior to two successful runs with the drill bit what is your policy with the.
With raising that dividend given the cash flow that you're looking at moving forward is monstrously higher than what you would achieve what were you were achieving.
When you initially announced the formation of the dividend policy.
Yes.
We can make with R. R.
Inaugural dividend.
Just this this Q1 policy was derived from our Q4 position on a 2023, sorry 2022 budget.
And if you recall, what we said that dividend is that we put a dividend in place that we regard as fully sustainable through.
We committed to that through 2025 at this particular level obviously.
We as a board continue to monitor.
Opportunities to amend that position through additional windfall.
Cash.
Christian that we've seen with the higher commodity prices.
And that's balanced with other opportunities that we may be considering.
That cash can be deployed partly through dividends, partly through additional program activities, partly through that trying to increase production further so there's a balance to be hard.
Got it.
The question is have we as a board directly are reviewed and address that.
This point, we have not.
But I think it's all the same what we said when we put the inaugural dividend in place was that there was always scope for that to be amended but that was most likely to be in a position. Once we got through the significant capex expenditures, we have in the first week of August .
Okay. Thank you phenomenal results fellas.
Thank you.
Okay.
Okay.
The next question comes from Robert Carlson of Janney. Please go ahead.
Yes, Thanks for taking my call you covered my question on his drink in the last call. So congratulations and keep up the good work you're.
You're doing great.
Thanks, Rob Thank you Robert.
Okay.
The next question comes from Kenneth pounds Casselberry Advisory. Please go ahead.
Hi, yes, good morning.
I mean, putting together a drilling plan for next year, yet and is that going to be Gabon also in addition to our.
Block P.
Yes, well, we havent, we havent land.
Landed on our drilling plans as of yet but.
Well.
What we're trying to get to with the with them.
In Gabon with retirement.
A plateau level of production that fully utilizes our knowledge and <unk>.
That means that we.
We have to look at a more.
Continuous drilling program, rather than a cyclical drilling program, where we are.
Seeing opportunities that will increase the overall production to utilize the outlet, but at the same time.
Decline that we see in the existing <unk>.
Well inventory.
So we are closely looking at are the targets for 2023.
We are closely looking at opportunities that we have within existing contractual positions in 2022.
And we're very also very conscious that Oh.
The pricing of.
The drilling unit and the long lead equipment is currently increasing.
Both in terms of cost.
In terms of timeframe to secure these so that's something we are very focused on and we will do.
They're looking at block P. I think I heard dimension, what people what people would be.
If we can secure a drilling program for 2023 block P would be at the end of that program.
January 2024.
But as.
As of right now, we're continuing to mature targets for those for those programs.
Alright that was my next idea I'm sure our day rates are starting to go up.
I suppose there is an opportunity if you like than some rigs now for next year that that might be better.
Yeah.
Yes.
Certainly on our agenda as well.
And once we answer the last question when regarding the excess cash generation that we possibly will see in Q4 should commodity prices hold.
There's a lot of opportunity to perhaps.
<unk> utilized that at our existing drilling.
Drilling rig rates as opposed to having to.
Look at the higher rates.
Okay, maybe you can remind us again the S. P. S L. It sounds like Oh.
Great advantage, there some production limiting factor to that down the road.
Absolutely not.
There's no no production limiting factor moving from the.
The PSV.
So to the SSO.
We currently have between 2016 50000 bottles of Orange and that that will not change with the <unk>.
With the <unk> coming in where we're putting additional equipment.
And deck space onto it told me to allow that processing.
To continue by reversing the flow of a couple of the line to make sure they're directed back towards platforms instead of the existing F PSL and the episodes itself.
It is located in a different location from the peso more central in the field between the existing platform. So there.
There will be no constraint.
Forward on and always position with the episodes.
Great well have a great job and I. Thank you very much.
Okay.
Yes.
Yeah.
Our next question comes from Richard Dearnley.
Partners. Please go ahead.
Good morning.
What what is the the IP of the Dentelle Oh for the for BW and Panora.
And is that a guide for what you're looking for.
Yeah.
You're well.
Yeah, So hopefully I got that right I mean, right now I don't think the distance is too far and I'd have to defer to my my Geo guys, but I think the distances too far for us.
A correlation between the dental that's being produced disappeared in the dental fans we have in Etame.
I don't think there's an opportunity to quarterly Ips in that one.
And then I'm sorry, forgive me I missed the second part of your question.
Oh, no that that's that answers. Thank you.
Okay. Thank you.
Yeah.
Okay.
Our next question is a follow up from Stefan for Cod of.
Please go ahead.
Yes, I get it.
Picking up on some of the comments you made about the ongoing negotiation for the exploration Gabardines broke and all the people all queasy E G with.
Now.
Could you, perhaps give me a sense of what I'll just sticking points in both situations on a basically.
Basically weapon to be resolved as it for instance for the company's brokers you do question about coastal the true cost recovery that you're discussing in something else and likewise with the with a partner for the P. Block are there any release Allianz.
Sticking both of them to be resold. Thank you.
Thanks, Jeff and I'll start with the.
The gabonese blocks.
There are.
I'm not going to go into the detail of what the commercial discussions are with with with the government and our partners, but they cover it.
Sweet.
The school and coastal terms.
Where we're at.
In the in the licensing round in Gabon.
This particular license around you know you have the opportunity to build both the the thing to price and the terms around which you wish to operate in the block.
It was slightly different from some other jurisdictions, where you get the terms through legislation and U S.
And you've just been it's been a signature bonus so.
It is it is the best.
The suite of PSC.
Conditions that are being negotiated some may be.
We.
I can see the one with their partners.
Obtaining others, but I can't really go into the specifics so with points when negotiating on.
With regards to bulk P.
There's no real sticking point at all.
The real issue around around block P.
With our partners is more but.
The project ranking.
In portfolio as opposed to specific tissues.
The economic viability in block P. So.
And any.
Oil company Operation, where you have partners and we have multiple assets and multiple blocks, we all have.
<unk> being ramped and different ways to have demands on our cash and it's just coming to an equilibrium will be compiling those rankings between our portfolio and our partner's portfolio.
Understood. Thank you.
Yeah.
Okay.
This concludes our question and answer session I would like to turn the conference.
George Makris for any closing remarks.
Thank you operator.
I.
The Q1 has been a very very strong quarter for four vertical I think that you know.
We.
We've come across a couple of operational issues in Q1, which we've already highlighted which allows us to really come out come out with the gate in Q2 and below Q2 away.
All indications are that we will.
And I am increasingly pleased with the attendance on coal and the quality of the questions that we're receiving.
Encourage me that we know we're getting an investor based on anonymous decent really getting into.
The activities of the company and falling along with US. So thank you for the call to your questions and thank you for listening to us today.
Yeah.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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