Q1 2023 VAALCO Energy Inc Earnings Call
Ladies and gentlemen, thank you for standing by welcome to the VAALCO energy first quarter 2023 conference call. During today's call all parties will be in a listen only mode. Following the company's prepared remarks, the call will be opened for a question and answer session. During the question and answer session. We ask that you limit your.
<unk> to one and a follow up you can always rejoin the queue. This conference is being recorded and a replay will be made available on the company's website. Following the call I would now like to turn the conference over to Christina Land Investor Relations coordinator. Please go ahead.
Thank you operator, good morning, everyone and welcome to VAALCO Energy's first quarter 2023 conference call. After I cover the forward looking statement 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 would like to point out that we posted a first quarter 2023, a 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 board looking statement comments.
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.
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 filed with the SEC, including the Form 10-K and Form 10-Q.
Please note that this conference call is being recorded let me turn the call over to George.
Thank you Chris Good morning, everyone and welcome to our first quarter of 2023 earnings Conference call.
We have had a lot to review in each of our calls over the last year, but today's prepared comments, we'll be pleasantly short term.
We have made significant progress integrating transwell into volatile and are now focused on optimizing production managing our call fine tuning, our operations and allocating capital to drilling future growth plans and shareholder returns.
This was our first full quarter of reporting as a combined company. Following the transformational combination with transport, which has built a business of scale with a stronger balance sheet and a more diversified production base.
I would like to point out some key highlights and accomplishments for the first quarter.
We were at the high end of production and saw a quarterly increase of 27% to 18306 NRI barrels of oil equivalent per day or 23152 barrels of oil equivalent on a working interest basis.
You can truly see how we are growing when you compare first quarter production. This year with first quarter production last year, we are up 127%.
We generated $47 $8 million and adjusted EBITDA, which was only $2 million loss in Q4, despite lower sales due to lifting timing and lower realized pricing.
We also generated $42 million in cash from operations, which allowed us to get from $27 $7 million in Capex.
Still grew our cash balance at quarter end to $52 1 million with no debt.
We also paid a quarterly dividend in Q1, which was increased by 92% and continued to repurchase common stock to our buyback program.
We have positive momentum as we enter the second quarter of 2023, both operationally and financially.
We are building size and scale to substantially grow vocal.
Cause that diversified portfolio of assets across four countries, including the bone, Egypt, Equatorial Guinea, Canada.
I will spend a little time detailing operation activity in each area.
Let's begin with Egypt, where we have the largest amount of capital spending in the first quarter.
We are focused on drilling opportunities in Egypt, which included drilling the first ever nickel horizontal well on our acreage.
In the past our crossover acreage in Egypt, only vertical wells were drilled.
The recent Arca horizontal well.
Our 4400 foot lateral.
Well it was flowing at approximately 200 barrels of oil per day with minimal water.
Spec clean up on this felt to continue for an extended period of time.
We also use makes the seismic on the orca, well, which will give us additional information for future horizontal wells.
We're going to do as much data question undervaluation that'd be time before we'd do it drill additional horizontal wells in Egypt.
We plan to study the results refine the drilling and completion techniques and looked at potentially drill another lateral well either later in 2023 or 2024.
Yeah.
This initial horizontal well was initially designed and planned.
Before the transaction closed.
We believe we will be able to continue to make changes to future well and completion design and achieved better production results.
And overall basis, we are very pleased with the drilling performance on the vertical wells as we're seeing significantly faster drilling and completions performance overall moving from a 2022 average of roughly 30 days per well to eat to 15 days per well in 2023.
We believe that we can now drill future vertical wells and around 10 to 15 days, which is very positive for the overall economics compared to the 30 days that we had been seeing.
After completing the Altra 77 horizontal wells in January 2023, we drilled five vertical development wells in Q1 2023.
One well required in Frac stimulation and the other four vertical wells added over 700 barrels of oil per day at the end of Q1 and those wells continue to perform very well with early production from these wells nearly 1100 barrels of oil per day.
These additional wells and work over in conjunction with the work completed for production optimization and increasing production well in excess of our decline rates.
We have to spend meaningful time, and therefore in Egypt, reviewing the facilities and operations.
This additional cost and therefore have resulted in two meaningful changes, but whether or not it recently.
The first is that we took steps to relieve pressure bottleneck and back pressure.
Put it in a 500 barrel per day improvement in oil production.
The second was to improve our ability to prevent and capture potential still buy.
The improving well sites with secondary containment measures and increased use of composite school book tight for replacement of old lines and on the installation of new ones.
We believe that this will make a significant move towards eliminating uncontained. So.
In early April we had a two year record daily production level of over 11000 800000 of oil per day and Egypt.
Our drilling and completions program in Egypt is a significant part of our 2023 capital program as we continue to develop one of our core assets.
We still plan to drill 15 to 20 wells in Egypt, This year and expect about six to be drilled in the second quarter.
In Canada as you recall, we drilled several wells that completions were delayed and these wells came online in late December 2022, and January 2023.
We also drilled two additional wells in the first quarter and those wells were brought online and me.
Our Q1 drilling consisted of three wells with a one mile well.
A one five mile lateral and a three mile lateral.
It's there's always tension to move to longer three mile laterals exclusively proving the overall economics of future drilling programs.
We are currently evaluating our future drilling in Canada working on ways to further optimize both lateral lengths frac intensity and thought shortening cycle times.
If we combine this with facility on pad optimization, we believe that we can materially improve the production cycle times and overall economics of our drilling opportunities in Canada.
Who do we have an impressive two P resource base.
Turning to Gabon.
You know, we completed our 2021 2022 drilling campaign in the fourth quarter of 2022.
We are currently evaluating locations and planning for our next drilling campaign at Etame.
And we expect to complete distribute this summer and we will advise the market when we have more detail.
Also in the fourth quarter, we completed the SSO unfilled reconfiguration project, which is allowing us to operate more efficiently and economically.
Focusing operational excellence, including production uptime and enhancement in 2023 to minimize decline, including the next drilling campaign.
Overall, our fourth quarter saw strong production levels at the high end of our guidance driven by strong performance at Etame and overall, our production costs what are the lower end of our guidance.
We have seen the impact of the cost savings from the U S. S, though but they have been partially offset by some higher costs from inflation rate and industrial supply specialists.
We discussed during our last call.
We have some minor pipeline work underway, which has reduced the fuel gas supply normally used for power generation within the Etame field.
This has resulted in us using more diesel for a temporary period, adding about $1 million per month for Opex for the next few months.
Our second quarter production cost guidance reflects this temporary increase that we saw no need to adjust our full year production guidance.
Let me now turning to a discussion on Equatorial Guinea, another area of the whole significant future potential for vogtle.
Bulk also working interest in block P offshore Equatorial Guinea that.
There are previously discovered undeveloped resources as well as additional exploration potential.
In March 2023, and we have productive meetings with the M and H and its partners in Houston.
During these meetings, we finalized multiple substantive documents for block P, which included the Venus development relating to the production sharing contract.
Falling on the Kings of March we continue to work towards the Finalization of documents between the partners having completed the PSC documentation with the Ministry.
So now moving forward with the project subject to the Finalization of documentation with a more detailed review of the drilling and top sites development of the venous project with the objective of reducing the overall project costs in conjunction with our partners.
Following a detailed peer review, we're considering options with the drilling of all three wells two producers and one water injector are drilled as a single campaign, which will reduce the overall drilling costs through lower mobilization costs.
But also building detailed option for the production and evacuation facilities throughout Q2, and Q3 of 2023.
Bond activity included a detailed seabed survey to identify the prime location for the development facilities.
Upon completion of the daily documentation, we plan to move $4 million into capital expenditures for 2023.
But we believe that this amount will not impact our full year 2020 guidance.
Between $17 million to $19 million.
We are excited about the future at EG, and we anticipate a strong efficient and economic development of this discovery with first oil projected for 2026.
Additionally, there are clear strategic benefits and further diversifying the revenue generation on concrete focus of our portfolio.
We have a proven track records for the development of this kind and we look forward to demonstrating these capabilities as we progressed the Venus discovery into production.
In closing there are a lot of exciting projects and developments in 2023 and moving into 2024 that will continue to help vocal group production reserves and value for our shareholders.
I would like to thank our hard working team who continues to operate and execute our plans.
Perhaps a meaningful synergies of the trans pullback position already and continue to make progress towards capturing more all trial continued to build size and scale.
We are debt free and remain firmly focused on our strategic vision of accretive growth for 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 echoing George's comments about our continued strong performance and as we look to 2023 and beyond we are better positioned today to execute on our strategy of adding in returning value to our shareholders.
In the first quarter of this year, we generated adjusted EBITDAX of $47 $8 million.
This was slightly less than the $49 8 million in the fourth quarter of 2022.
43% from the $33 5 million in the first quarter of 2022.
We benefited from a full quarter of production from Egypt, and Canada, but had essentially no impact from derivatives compared with a large loss in the first quarter of 2022 revs.
Revenue declined from the fourth quarter due to lower sales volumes related to delay to the delayed lifting and lower realized pricing.
We reported net income of $3 $5 million or <unk> <unk> per diluted share in the first quarter of 2023, compared with $17 8 million or 17 cents per share in the fourth quarter of 2022.
This decline in earnings was mainly due to lower sales volumes and realized oil pricing.
Income taxes increased interest expense, mainly due to the <unk> lease and increased other income expense costs.
Other income expense net during the fourth quarter of 2022, we recorded a $10 8 million bargain purchase gain that was partially offset by $7 million of transaction costs.
During the first quarter of 2023, we reported that transition period adjustment related to the acquisition that reduced the original bargain purchase gain by $1 $4 million.
In regards to the higher effective tax rate during the first quarter of each year, we project our tax position for the full year are based on certain assumptions and then monitor it for the balance of the year.
We are forecasting there are companies tax rate will increase in this year's fourth quarter when our.
Cost pool is forecasted to be fully utilized.
This increases the profit all boroughs due to the company's government in Q4 2023.
We have a slide in our investment deck I discussed the impact of cost oil unprofitable accounts and how that affects our tax rate.
After normalizing for the transition period adjustment and deferred tax expense. Our adjusted net income for Q1, 2023 totaled $7 $3 million or seven cents per diluted share.
Production for the first quarter 2023 was 18306 net barrels of oil equivalent per day, a 27% increase from the 14th390 net barrels of oil equivalent per day in the fourth quarter of 2022.
127% from the first quarter of 2022.
We clearly benefited from a full quarter of production in Egypt, and Canada from the <unk> acquisition that closed on the tuber the 14th 2022.
As well as increases in Gabon from having the field back up and running for the entire quarter falling just following the successful FSU unfulfilled reconfiguration that occurred in Q4 2022.
Yeah.
Sales volumes in Q1, 2023, or 122 million barrels of oil equivalent, which was up 19, 9% compared with the first quarter of 2022, but down about 11% from the fourth quarter.
As we mentioned during our last call our 630000 barrel gross lifting in Gabon. Originally planned for March 2023 was delayed until April the third due to adverse weather conditions, which resulted in lower sales volumes.
These sales were added to the Q1 2023 sales.
<unk> sales volumes would have been one 6 million barrels of oil equivalent.
We expect second quarter, our total and utter icos to increase as a result of the lifting timing in Gabon.
And to be between 15000 617300 barrels of oil equivalent per day.
This is slightly less than that.
<unk> guidance and put it on a total basis for the quarter due to lifting time in Egypt, where the cargo is being moved from Q2 to Q3.
Realized commodity pricing in the first quarter was about 7% lower than the fourth quarter, but 40% below the first quarter of 2022.
Well commodity prices have fallen I'd also like to point out a year ago.
We had just oil from Gabon that traded in line with or slightly above Brent.
With Canadian production, including natural gas and natural gas liquids and Egyptian all driven by the RASK got a blend of pricing will be a blended price versus in the past when it was tied to only to Brent oil.
In regards to hedging a shooting or our earnings release yesterday and in our investment deck, we didnt add any new contracts since our last call. We will continue to implement a hedging program to help us mitigate risk and also to protect our commitment to shareholder return.
We've protected via Costless colors, a floor price of $65 for the percentage of work production through late summer of this year with an upside of around $100.
How should we look at 2023 and beyond we will continue to implement our strategy and examiner coupled with spending outlay in the near term and longer term.
Turning to costs production expense, excluding workovers and stock based compensation for the first quarter of 2023 was $29 $3 million, which was at the low end of our guidance.
<unk> cost decreased compared to the $40 8 million in the fourth quarter of 2022, primarily due to lower costs related to the completion of the <unk> conversion and few reconfiguration of lowered expense associated with lower sales volumes.
We recorded a credit of $1 $1 million in offshore Workover expense in the first quarter, a result of over accruals in 2020 to.
Workovers in Q4, 2022 to $4 $7 million.
As we have discussed this morning, we had lifting delays due to weather in Gabon, which did increase or Q1 boat cost due to having extra minutes reading equipment and field for the listing longer than planned.
We also have higher costs year on year in relation to personnel and commodity related operating costs due to inflation.
We are monitoring our operating costs and looking for ways to safely reduce expense, but believes that elevated cost levels driven by inflation will continue into 2023, unless oil prices prices weaken further slowdown activity levels.
Over the past two years, we saw a decrease in the number of overall service providers across the supply chain and.
In addition to these inflationary pressures we have some gas pipeline work underway to underwear Tommy temporary preventing the normal use of produced natural gas and resulting in higher diesel usage also driving costs higher in the near term we.
We believe this will continue into Q2 2023, but will be resolved in early Q3 with the completion of the gas pipeline work.
This is resulting in additional diesel costs of about a million dollars per month.
DD&A expense for the three months ended March 31st 2023 decreased $24 4 million from the $26 3 million in the fourth quarter of 2022 primary primarily due to lower sales volumes.
The rate per barrel of oil equivalent was up about 5%, which reflects additional capital costs incurred since year end 2022.
Yeah.
General and administrative expenses for the first quarter of 2023, excluding stock based compensation expense totaled $4 $6 million compared with a credit of 300000 in the fourth quarter of 2022.
The fourth quarter benefited from the large increase in operational projects during that period involving a majority of corporate resources, which realized a high percentage of cost charged to those projects.
Well first quarter 2023, G&A was within our guidance range. It did include higher audit costs associated with the year end audit.
G&A noncash stock based compensation expense for the first quarter of 2023 was 600000 compared with a negative 100000 in the fourth quarter.
Income tax expense for the three months ended March 31, 2023 was $14 8 million and is comprised of a $12 3 million of current tax expense on a deferred tax provision of $2 $5 million.
Yeah.
As explained previously from a cash tax standpoint, the only tax paid as on the profit Oh bottles, and both get Bowen and Egypt.
No cash taxes payable in Canada due to the availability of net operating losses.
The Gabonese government takes their taxes in kind through an annual listing they took their most recent listing last December we.
We accrue quarterly during the year for the estimated value of the bottles Lee will lift using quarter end oil pricing.
We then adjust for the actual cost based on the pricing at the time the lifting occurs.
I discussed earlier, while our estimated effective tax rate has increased.
In the first quarter, we funded all of our Capex quarterly dividends and share buybacks with cash flow and cash on hand and grew our cash position at the end of the first quarter to $52 $1 million.
Adjusted working capital at quarter end declined slightly to $40 2 million from $42 2 million at year end 2022, well working capital totaled $35 million at March 31st compared with $38 million by year end 2022.
Other balance sheet items worth highlighting include other assets, where we hold about <unk> entitlement receivable with <unk> of approximately $51 million and continued to work closely with <unk> on collection.
Also has been the case since the third quarter of 2018 were cutting new bank debt and credit facilities available to utilize for additional accretive acquisition opportunities to continue to build value.
Yeah.
For the first quarter net capital expenditures totaled $27 7 million on a cash basis and $25 4 million on an accrual basis.
These expenditures were primarily related to our drilling programs in Egypt and Canada.
In 2022 focal paid quarterly cash dividends of three and a quarter cents per common share beginning in Q1 2022 for a total of <unk> 13 per share annually.
Equates to about $9 3 million in cash returned to shareholders through dividends in 2022.
In addition for 2023 the board approved nearly doubling the dividend two six in a quarter cents per share quarterly or 25 per share annually.
The Q1 2023 dividend was paid on March 31, 2023, and yesterday, we announced the same dividend debate for the second quarter of 2023 to stockholders of record on May the 24th and payable on June 23rd.
Stated previously growing our dividend as a direct result of our expanded asset base and cash flow generation ability as it is.
Out of the trance global acquisition.
Additionally in November 2022, the board approved a share buyback program that provides for an aggregate purchase are currently expanding common stock to <unk>.
$30 million.
Through may the 19th 2023 focus repurchased a total of $10 $4 million worth of shares or about $2 2 million shares.
Let me now turn to guidance.
As a reminder, we report all of our production with both working interest net revenue interest the difference between production work can interest and.
<unk> represents royalties Pete are taken in bottles.
Since we have not changed.
The full year guidance, we provided during our recent year end 2022 coal I will only discuss our Q2 guidance.
For the total company. We are forecasting Q2 2023 production to be between 22000 624600, working interest barrels of oil equivalent per day.
Between 17300, 19000, and they're all eight barrels of oil equivalent per day.
Looking at anaerobic production by asset we would expect in Gabon to be between 8000, 309000, and Leroy barrels of oil per day.
Egypt to be between 6000, 907700, NRI barrels of oil per day.
On a debt to be between 2000, 102300, NRI barrels of oil equivalent per day.
For the second quarter of 2023, we are expecting our sales volumes to be 15600, 70300 barrels equivalent per day, reflecting the delayed March lifting of 630000 barrels that will benefit the second quarter.
As discussed earlier. This also includes lowering listings in Egypt due to timing.
Turning to costs for the second quarter 2023, we expect production expense, excluding workover and stock compensation to be between $32 five to $2 5 million and $39 million on an absolute basis.
Between $15 50, and $20 50 on a working interest per BOE basis are between $22 and $29. One and then and are on a per Boe basis.
We also expect offshore workovers to be between zero and $1 million.
Cash G&A for the combined company is expected to be between three and a half and five and a half million dollars.
Finally, looking at Capex for the second quarter 2023, we are forecasting modestly lowered investment compared with the first quarter and should be in the range between 18 and $28 million.
We're still expecting full year 2023 capital spending to be between 70 and $90 million.
As you can see by our Q1 capital spend on our Q2 forecast. There are two a couple of spending this year is heavily weighted towards the first half of 2023.
In 2023, our drilling and completions program is focused in Egypt and Canada.
In addition, we have some long lead items for the future drilling campaign in Gabon, and some maintenance capital.
Approximately 50% of our 2023 capital is earmarked for Egypt with the remaining 50% split between Canada long lead items and maintenance capital.
We have 15% to 20 wells planned in Egypt, and in Canada, We are planning to drill between three and four wells.
You can see our full year and second quarter of 2023 guidance in the supplemental slide deck on our website.
I'd like to point out that last quarter, we developed a netback slides in the presentation that shows net box for each of the areas broken out by liquids and natural gas and we've included it again this quarter for reference.
There is also a total company blended netback of different realized pricing, where we break out the major cash cost to approximate our free cash flow before capex and working capital changes.
One of the costs shown as a differential.
Traditionally vocal sold in Gabon based on dated Brent with the differential that was sometimes a premium and sometimes a discount but overall it was negligible.
Now, we have Canadian oil natural gas and Ngls, all of which trade on a discount based on the market that they are sold at.
Also in Egypt, we have Mark Tarr for Us got a blend which is generally a discount to Brent with a further discount for the quality of our crude.
We are hoping that this additional information on transparency will provide better clarity to the profitability of our producing areas and company in total of different pricing scenarios.
Yeah.
With our recent stock price around $4 25, we continue to trade at very low multiples of EBITDAX, despite paying a strong dividend yield I'm being bank debt free.
Additionally, with <unk> with the <unk> combination, we should see a step up in adjusted EBITDAX in 2023, depending on commodity prices.
Our increased market cap in place that we should be trading at a much higher multiple but similar sized companies enjoy.
We believe that we are truly undervalued and that is another reason that we're excited about the share buyback program.
We believe right now is an excellent opportunity to buy our common shares at a discount to their intrinsic value and a very attractive investment of our cash balance.
Overall, we've had a good quarter to start the year with and are benefiting from relatively stable activity levels with a more diverse portfolio that allows us to generate significant free cash flow and invest in the long term sustainability of our business.
With that I will now turn the call back over to George.
Thanks, Ron.
I heard this morning, 2023 is off to a strong start.
We were able to generate strong adjusted EBITDAX hole funding all of our Capex quarterly dividends and share buybacks with cash flow and cash on hand and grew our cash position at the end of the first quarter to $52 $1 million.
We accomplished all of this was slightly lower sales and realized commodity pricing, which shows our continued efforts towards capturing synergies and increasing margins have begun to positively impact 2023 results already.
We continue to expect additional cost savings being captured in 2023, and we are projecting increased quarterly sales in Q2.
Additionally, we have remained focused on returning value to our shareholders.
In Q1, 2023, we nearly doubled the quarterly dividend and our ninth the Q2 dividend payment, which remains at six and a quarter cents per share level.
We also continued to repurchase common shares through the buyback program approved in 2022.
Through the first seven months of the program. We have returned approximately $10 5 million to shareholders and return repurchased two 2 million common shares through buybacks.
We are delivering on what we committed to the market onto our shareholders and we are in a solid financial position with no debt and a growing cash balance.
Our strategy remains unchanged operate efficiently invest prudently.
Increase and return value to shareholders maximize our asset base and look for accretive opportunities.
And the first quarter, you saw a capital spend dropped ramped down significantly as we have finished the drilling and facilities projects in Gabon.
And we are focused on drilling in Egypt, and Canada in 2023.
The lower capital spend profile should allow us to build meaningful cash throughout the year.
So as we mentioned last quarter, our forecasted capex range of $17 million to $19 million is heavily weighted in the first half of 2023.
Based on current commodity prices, we are forecasting returning about $45 million to our shareholders in 2023 through dividends and share buybacks.
This is a significant percentage of our projected operating cash flow at current strip pricing, which demonstrates our ongoing commitment to our shareholders.
The plans for the significant cash flow generated throughout 2023 above our existing obligations are to build up a cash reserve for future drilling campaigns on developments.
We are working with our partners they need G. On the hiking development plan for the Venus discovery at block P as well as evaluating locations and planning for the next drilling campaign at Tommy.
Both should see significant increases in activity in 2024, which will continue to grow production and reserves.
We're very excited for the future of Baltimore and remain confident that we will continue to deliver superior long term value to our shareholders.
Yeah.
Before I open the call for questions I would like to point out that as part of our commitment to environmental stewardship, social awareness and good corporate governance.
We have made a concerted effort in addressing and improving our ESG transparency and reporting.
During 2020 to be completed materiality study led by our ESG engineer.
With input from key personnel across the organization with responsibility for engaging with key stakeholder groups.
Working with an external consultancy Taco created an ESG materiality framework against which reported material topics informed by the global reporting initiative G O Ray and the sustainability accounting standards Board Saturday.
Additionally, we adopted the framework of the task force on climate related financial disclosures Tcf D to drive our focus on response to climate change risks and opportunities.
In accordance with our objectives to reduce our emissions footprint, we have taken significant steps to progress our approach.
We have developed a decarbonization program, which once received and reviewed by our board.
This was established a decarbonization steering group, which is comprised of senior management that is responsible for setting the direction of our carbon reduction efforts.
Early stage projects are currently being scoped, and we look forward to updating our stakeholders on progress in due course.
Everything that I've mentioned can be found in our most recent annual ESG report that was published in April of 2023.
The report covers volatile its ESG initiatives and related key performance indicators and they serve billable on their web site under the sustainability tab.
Thank you and with that operator, we are ready to take questions.
We will now begin the question and answer session.
A question you may quite sorry, then one on your Touchtone phone.
If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then two as a reminder, we ask that you limit your questions to one and a follow up if you have additional questions you can rejoin the question queue.
My first question.
It's from John White of Roth Capital. Please go ahead.
Yeah.
Yes. Good good morning, My question was about.
The split on Capex drilling and completion capex between your three regions and.
Mr. Beyen covered that in his remarks, so I'll pass it back to the operator and say congratulations on the quarter.
Thanks, John .
The next question is from sustained Mackay.
<unk> advisors. Please go ahead.
Good morning, guys.
As well a few question for me and thanks for taking my question.
The first one is on Egypt and against the receivable.
And I'm trying to see what I'm comparing apples with apples. So at the end of December we had 140 million total receivable and I think 100 of that was Egypt, including the receivable.
At the end of Q1, it seems we have about 100 total.
50, or we simply pulled forward you pause that would suggest you got 50 million payment of receivables in Q1, which is the case is fantastic.
My first question and my second question is could you talk about the difference in economics between that you called and horizontally when Egypt Pops in terms of cost IP rate and recovery. Thank you.
Okay, Yeah, thanks for that Stefan it's Ron here I'll take the <unk>.
Part of that question on liquidity around receivables.
On Egypt, if I understand your question correctly.
First thing to bear in mind is in Q1, we actually had a cargo.
450000 barrels listed.
Obviously taken out of country.
Oh sure.
That was $28 5 million.
Receivables.
Which which is great because obviously there is no in GPC involved there we are.
We're dealing.
With a trader.
With regards to the receivable from DTC.
Generally obviously, we've heard some of the issues that the other companies are having but we certainly did not see it.
Q1 <unk>.
Cash collections and offsets in.
In Q1, we're about 19 and a half million dollars.
Stefan.
We sold directly.
Domestic sales of our January sales of about $11 5 million. So we actually had a reduction.
Our receivable from year end through to Q1.
Where we ended up in Q1 with about 26, and a half million dollars worth of receivables in <unk> and then of course, we still got the $51 million receivable, which is is the tighter back due to the typhoon model that we continue to have discussions with.
<unk> and the Ministry on two realized cargos based on now.
No that's not a problem.
Giving you some color to Q1 and the liquidity there.
With regard.
With regards to the comparable components.
George can jump on this one but the vertical wells themselves are obviously.
Just want to affirm our guidance, especially our own local guys, who are used to seeing wells being drilled offshore at 25 $75 million.
The vertical well and <unk> is typically under a million bucks or around about 1 million Bucks.
<unk> seen some some obviously increases in costs over the last six months just again due to the the supply chain issues that you see.
Globally on the fact that Theres not many service providers actually all producing in Egypt.
The <unk> well that was drilled at the beginning of Q1 that was a long lateral.
We've drilled a long lateral and in Egypt.
<unk> not where it is probably coming in about three three and a half million dollars. So not not to differentiation between the well cost. These wells are very economic although you may see.
Discussions about.
100, 200 barrels of oil.
Oil Purdue coming out to these wells because of such a low cost.
We're looking at internal rates of return well above 100% so again.
We're quite happy to continue to invest in Egypt.
Those economic criteria.
As long as we continue to crystallize on the cash position.
The only the only negative part from Q2 going forward is that we don't have a lifting in Q2 and export lifting in Q2, but we are building up our inventory we will have enough inventory as we exit Q2.
To push for the QC cargo.
Thank you and with regards to product I'll just add.
Hi, Joe.
On.
On to two point.
<unk> within the drilling campaign.
In Egypt.
As I mentioned earlier in the call we've seen significant improvements in the production.
The needs that we have seen considerable success in the drilling campaign not just from the.
The vertical wells, obviously, the complexity and the first nickel also well up from 77.
It's a well that particular well.
Producing around 200 barrels a day.
It's still cleaning up so we expect it to that to continue that clean up over the next.
A few months, but we also because of the length of the lateral.
Yes, a very a very low decline rate on that well.
So that well as difficult.
Difficult to so bad economic well.
But it was a well just keep them they went with.
Some time to drill and complete.
When we look at the cycle times now that we're achieving in Egypt.
From the traditional other historic position between drilling complete.
We are really pushing the efficiencies to the maximum on that drilling campaign for example.
The costs are relatively low with a million a million dollars.
Well what else is driving more cost more because where we're basically managing to drill and complete about one and a half wells of the month overbought embedded hopefully getting to.
Getting to that drilling program and uncomfortably skiing.
The topics Rainbow apparently below the property claims in Q2.
Great. Thank you.
Thanks, Kevin.
The next question is from Charlie Sharp Canaccord. Please go ahead.
Yes, thank you very much and good evening.
Appreciate it.
Oh great.
Q1 numbers on the operations.
Wonder if you can.
Hi, Mike high level.
Next let's say over the next six months the key internal and external.
Good morning.
Vivek.
In Gabon.
You need to sort of a burden.
For our return to.
Capital expenditures rising again next year. Thank you.
But I probably missed that question Charlie was up for Equatorial Guinea in Gabon, the key points.
Yes, yes.
The sort of high level.
Key points that you need to get in place internally.
Holly.
Before we know exactly.
Yes, it will look like.
Cool.
Okay. So let me start with the with Gabon.
All of his blade from the drilling campaign last year.
The.
A mixed bag of results, we had some very strong performance.
In the fourth.
Meanwhile, in the Gamba sands.
Then on the loss of two wells, we didnt find the gamba sand on the third well had a success on the dental exploration leg from a from a restaurant standpoint, and then I'll just say from the fourth well Didnt we.
We had modeled.
And we've been told well there.
Hum sneak them always geological data points and are in addition to the new seismic analysis that was acquired in 2020 and temperature.
One.
We looked at the opportunities for the drilling campaign in the pardon me unclear, we reduced the overall risk of the campaign.
For either.
No gamba targets for accelerants.
But also looking at a step out opportunities on what they are.
Risk factors are elements that are opportunities to continue to fill the OLED.
So for the law.
One for one.
For the next few months one of the key analysis is going to be.
The subsurface analysis on mapping of rain, the etame field and leasing them up as well as key for us to understand the geological. Please.
We put a campaign together for 2024 25, we are looking at the lower risk prospects to increase the production an increase the drilling success.
The key focus in our in the Gabon right now is.
A deep dive into into the subsurface structure and the risk profiles.
With regard to Equatorial Guinea.
As I mentioned earlier on the call.
Got it got to get to the point of them.
Finalizing the documentation of apartments.
Once we do anticipate that to be to be completed by the summer.
As I also mentioned on the call. We've got about six and seven are detailed studies kicking off on completion of that documentation, which will move into <unk>.
Opex.
And that's one of the survey.
Sterno element that you mentioned would be the finalization of the documents and sitting down and agreeing with our partners in the <unk>.
<unk> upcoming <unk> meeting.
On the internal side is with the work schedule going through and optimizing.
The top sides analysis.
Within the within the program.
Venus looking at the.
As I mentioned the effectiveness of doing a a dedicated campaign of three wells draw.
The rig and the ninth in the economic efficiencies that are that come with that.
And the.
Optical piece of work that we'll be doing this year is obviously conducting our seabed survey.
The shelf theater for the location of the folks that proposal.
Great. Thank you.
The next question is from Jeff Robertson of Lager Tower Research. Please go ahead.
Thank you George on slide five of the deck you taught you show the benefits that you all have seen in production in Egypt from optimization efforts.
Can you talk about how much more heavy lifting there is to do just trying to improve field operations and what that could mean for production.
Yeah, I mean, we've we've done that.
Suitable amount of work in a very short period of time as I mentioned the bank, reducing the back pressure.
And eliminating the blockage is that where we are in the production facilities.
Yep.
We've got.
We will be putting together a presentation for <unk> and the Ministry to show a before and after scenario both on the field locations and in the production locations, but when I look at the the heavy lift on production optimization.
I think and I know I know floors in the building.
Besides growing but but my view is I think we've done a lot of the heavy lifting in relation to production optimization and we're reaping the benefits of bone.
And.
Mentioned, we're really focused right now on the on the drilling optimization. So we bought when speaking of growing pains.
Well one of the other items, we're looking at Asa.
What <unk> does a lot well to see if we can bring that well back on production.
Bob.
A few hundred barrels per day.
To the to the field.
The key the other key elements there that we'd been working on as I mentioned earlier.
And what we are.
True.
Yes.
Okay.
For venting.
Sure.
The reducing the opportunity for uncontested stove.
It's been a big program with us going through the field operations in the first quarter and into the second quarter I think we still have more to do there.
But I'll pass over to Thor and he wants to add any color to that operation.
Yeah.
Thanks.
George.
I mean, we've put we've sort of set the stage for a lot of the big.
Projects, I think that that'll impact us and provide a good positive results going forward.
There is.
There are still a large inventory of smaller items that we're looking at.
Specifically around downtime.
Pipeline integrity.
Facility integrity emissions electrification and crude oil Paul is saying that we think we can make a significant significant impact ongoing forward.
But I think you've covered most of the other ones are.
And in Canada, I think you all talked about improving <unk>.
Operating and operating efficiency, as well, including pad designs and facilities.
Well the outcome of that work have an impact on how you think about 2024 capital program.
Yeah.
Well most definitely.
And I'll, let Bob jump in in a minute, but we have always said that we need to try and ensure that will reduce the timeline between drilling and complete and we need to think about within.
Within the existing environmental conditions will happen in Canada, So how do we drill and complete and that same cycle.
Wells basically suspended for months on end I think.
What we've seen in Q1 and coming into Q2.
Significant improvement in those cycle times as mentioned.
Earlier on the call we've seen a the two wells that were delayed from 2022.
<unk> come on line in Q1.
And we've seen another two wells coming online in Q2 to the point, where we've got the.
Production on a Boe basis income above well above.
3000 barrels a day at the moment, so almost all of it.
Not a record production level for that operation.
So we are we are driving those efficiencies, while reducing those cycle times and we are starting to see the dividends both in Canada, and then in Egypt with the with the increased production. So when we look at our guidance position in Q1 and the production levels.
We've actually achieved we're right up there where we would plan to be did you can you want to add to that Paul.
Yeah.
I think the key to Canada as you know as you mentioned it already Georgia and cycle times are.
Canada is unique in a sense that you have access to a lot of the technology and the infrastructure and it's being able to I guess engaged.
Those services and technology and time.
What what causes the long cycle times is predominantly surrounding the weather. So these are your breakup periods in the spring and in the fall and its building a program.
Got it.
I guess fits into that weather window that allows you to those faster cycle times.
From a drilling perspective.
The Canadian oilfield is an experienced.
Segment when it comes to drilling.
Horizontals along the long Horizontals.
And again, you know our focus needs to be on drilling long laterals not short lateral so.
Looking at the three mile laterals versus a one and a half mile laterals.
And then the other thing is it is doing pre facility work ahead of the drilling campaign.
So that when it comes time to tie and you've already got the pipelines in place and you've already got the facilities geared up to do that so it's.
It's a combination of those things that will make Canada successful.
Thank you.
We have time for questions from one more person.
Next question comes from Darren <unk> Zeller of Teton capital. Please go ahead. Thank.
Thank you that's a Titan capital Oh, let me start with the.
With the timing of the lifting.
Hi, I need a little clarification, because I was thinking that the move to the F. S. O tele that that was going to give you a lot more consistent lifting.
What am I missing or what was different in this quarter.
Okay.
George I can take that one if you if you want.
Yes, No go ahead.
Yeah. So.
Generally we target are lifting to be roughly of reef.
Four to five weeks.
And in the winter months, particularly in the Gabon segment.
West Africa, you see a lot of heavy currents that impact I guess the ability for for vessels to more adjacent to the tanker safely.
We had a lifting scheduled for late in March.
I think it was around 26 27th of March.
And you know basically for five or six consecutive days.
Due to the heavy currents, we were unable to actually hookup.
Look up the tanker and proceed with that lifting so what happened is that lifting got moved into early April I think April 3rd So it was delayed by about six days, but it did miss <unk>.
The first quarter cut off.
Yeah.
The peso.
Has the ability.
Contrary to what we previously had with ESP, so as to continue producing into the peso.
Due to the additional cargo volume that we have now so normally in the past, we would've had to probably shut in.
Because we would've been at tank tops because of the listing has been delayed.
What happens now is that.
Because of the additional cargo volume, we can continue producing and then the sale or the movement of the cargo if it's delayed a couple of days, it's delayed but it doesn't impact our production.
Sure that's really helpful. So.
It was also my impression that D. S. S show was was positioned in such a way to minimize the impact of the poor weather.
Is the implication that the occurrence where were really really strong or did you did you find that is that that positioning maybe wasn't exactly what you were originally oh.
Hope for.
Well I guess the positioning of the AR.
So.
With any vessel is.
As I said.
There is a judgment call between.
Trying to mitigate a I guess the currency for most of the time. So we know that January February March are generally times of the year. When there is the massive current swing.
In Gabon.
Star.
Starting in sort of April that current swing goes a 180 degrees. The other way so it's trying to come up with a location in a mooring.
Location that sort of.
It gives you the best odds for the most listings on time.
So for instance.
Had another lifting that was scheduled to start a couple of days ago. It started on time.
It's underway no issues with clearance.
So it's really you know what.
Do you do you set your lifting up so you can only do those three guaranteed or do you set it up so that your vessel can handle most of the things most of the time.
To really well prepared for nine out of 12 months and the other three that's going to be a little more up to mother nature.
Exactly and with the additional capacity we have now in the peso.
It doesn't actually impact our production just impacts with sales from quarter to quarter as this quarter and listening.
Great.
That's really helpful. Thank you and then would you discuss the field gas line work, that's being done and Tom I didn't fully understand.
What what was actually being done and and ultimately the end goal of that of that project.
Sure. So there's a low pressure fuel gas line that runs from the same platform to the E comm platform supplying fuel gas.
To the <unk> platform power generation and process.
I know that that also supplies gas from <unk> to the new episodes for border service.
We during one of our routine inspections picked up a flange leak or.
Or what we've now identified as a financially.
It's a very small leak, but nevertheless, it is a small a small plant adjacent to the <unk> platform.
That'll require diver intervention. So at this point, we're essentially scoping out.
Boats that are in the area and Windows go through available.
Because we're obviously trying to tie that in with some additional work with some of the other operators to mitigate the cost of that.
The impact of not having fuel gas essentially means that the tele or so.
Is burning liquid fuel and the boilers and thats the additional costs that we're seeing.
That's helpful. Thank you and then one final question if I may.
If I recall correctly.
You all were looking.
At potential adjacent field too.
Tom.
Yeah.
In conjunction with another.
New partner.
<unk>.
To develop what is the update on that.
I guess I guess about one bill.
We actually did have some good discussions with the Gabonese government in Q1.
The data.
In conjunction with our partners, which are BW.
No.
We were hopeful because this has been going on now for some 12 15 months.
But we are hopeful but your conclusion is right.
Arriving relatively soon certainly.
Hopefully in the next few months at <unk>.
Key to see that they there.
Has it been more progression in this last six week period to deal with G&A.
And we are very encouraged with the adjacent block to Tony and then there has been in the previous six or seven months. So.
Hopefully hopefully we will see some more movement and the next time, we report that.
So George the issue is with the Gabonese government as opposed to amongst the amongst the partners.
I've met with the partners.
Directly one of them directly.
There's no issues between the partners are issues directly with the.
The Dth and the Japanese government.
Great. Thank you both.
This concludes our question and answer session I would like to turn the conference back over to George Makris for closing remarks.
Thank you very much operator.
All I can say that.
We got back on track for Q1, we had a very strong performance.
On the production side in Q1, we.
We've seen some sensitivity around commodity pricing, but we've maintained.
But it needs to the market with regards to buyback and with hard to dividend because the commodity prices have remained above the levels on book, which we and we made those commitments.
The company's operating performance is strong.
Albeit that we have to acknowledge that as Ron mentioned the stock price performance.
Not being strong and that's something we will have to wrestle with and something we have to look at when we're looking at how we are conducting our share buyback program at the moment, we remain restricted in a blackout period, but it is something that we will be addressing and how we.
Accurately adjusting these levels.
To maximize the opportunity for for repurchase on the on the undervalued stock position.
As always.
At the end of every call anyone that we Havent take walk to who was in the Q&A. We can see the Q today, but anyone who haven't walked you or anyone that wants to meet tight and.
How 'bout discussion please contact our crystal right, there and we'll make sure that that can be arranged for you.
In the meantime, thank you very much for your time taken listening to the call today.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.