Good morning everyone. And welcome to the VAALCO Energy’s Second Quarter 2020 Earnings Conference Call. [Operator Instructions] Please also note, today’s event is being recorded. At this time I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Sir please go ahead.

Thank you, Jamie. Good morning, everyone, and welcome to VAALCO Energy's Second Quarter 2020 Conference Call. After I cover the forward-looking statements, Cary Bounds, our Chief Executive Officer, will review key highlights along with operational results. Liz Prochnow, our Chief Financial Officer, will then provide a more in-depth financial review. Cary will then return for some closing comments before we take your questions. [Operator Instructions] I'd like to point out that we posted an updated 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. 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. VAALCO 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 the reports we filed with the SEC, including the Form 10-Q that was filed yesterday. Please note that this call is being recorded. Let me now turn the call over to Cary.

Thank you, Al. Good morning, everyone. And welcome to our second quarter 2020 earnings conference call. Before I discuss our results, I would like to reflect on the extraordinary challenges that we are facing as an industry and how VAALCO is decisively responding to these challenges. Thus far, VAALCO's operations have not been materially disrupted by the global COVID-19 pandemic. We have managed through the logistical challenges that we have faced since the outbreak and continue to put the safety of our employees, contractors and local stakeholders first. We’re minimizing high risk activities while actively screening and monitoring employees and contractors, including testing and quarantines with onsite medical supervision before going off shore. We have contingency plans in place in the event; we are directly impacted by the pandemic. While the current pricing environment remains volatile, it has recovered from the lows we saw in April in response to the lower pricing environment. We have deferred all material discretionary CapEx. This will allow us to focus on cash flow generation, while preparing for the right market conditions to begin planning the next drilling campaign at Etame. We released the Vantage drilling rig in early April after completing the 2019, 2020 drilling program as planned, on time, within budget and with no safety or environmental incidents. In addition, we have deferred our next drilling campaign until the global oil pricing environment stabilizes at higher levels. Despite this lower pricing environment, we remain confident in the long-term viability of our inventory of drilling opportunities at Etame. Another action that we have taken is managing operating costs to preserve our balance sheet and maximize cash flow. We've worked with our vendors and suppliers to implement cost cutting measures, as well as partnered with other operators to reduce costs by sharing services and equipment…

Thanks, Liz. While the current pricing environment remains volatile, it has improved from the lows we saw in April 2020 and we believe that the current crisis will enable us to generate positive cash flow at current production levels. Over the past several years, we have worked diligently to build a solid foundation for the future. We've taken action to strengthen VAALCO operationally and financially, including eliminating all debt and growing our production base, which will allow us to better navigate cyclical energy markets and leave us uniquely placed to consider growth opportunities. VAALCO does not have any material non-discretionary capital expenditure requirements on the near-term – on the near-term horizon, allowing us to focus on cash flow generation while preparing for the right market conditions to begin planning the next drilling campaign at Etame. VAALCO has a strong producing asset in Gabon with significant upside. We hoped to repeat the success of the 2019/2020 drilling program and continue adding reserves and production through the life of our account license in Gabon. With a debt free balance sheet, approximately $45 million in cash on hand at June 30, and a strong asset base at a time that is generating free cash flow at today's pricing, we have positioned VAALCO to weather near-term uncertainties. We expect that 2020 will continue to be a challenging year for our industry, but we are carefully managing our business with a focus on protecting our balance sheet and optimizing cash flow. Additionally, we will continue to evaluate opportunities that are consistent with our inorganic growth strategy, and we believe that we are well positioned to deliver long term growth in line with our strategic objectives. Before closing our call, I would like to welcome three new members, Cathy Stubbs, George Maxwell, and Bradley Radoff to our Board of Directors. We believe there many years of experience in the energy industry will be very valuable for us as we move forward with our plans to position VAALCO for continued success. Thank you. And with that operator, we are ready to take questions,

[Operator Instructions] And our first question today comes from Bill Dezellem from Tieton Capital. Please go ahead with your question.

Thank you. I'd like to actually start with your next drilling campaign with the current oil prices, how are you thinking about that relative to the way you would have thought about your drilling campaign? Had Brent back stayed when it was $60?

Well, okay. So, good to hear from you Bill. So your question is how are we thinking about our next drilling campaign in light of today's prices versus historically when prices were $60 or higher? Did I hear your question correctly?

That's correct, Cary.

Okay. Right, right. So we've run through the economics on our – on all the wells in our portfolio. And we would like to see – well the wells and the investments are economic in, at with lower prices in the low-forties. And so, right now it looks like the drilling wells would be economic, but what we want to see is not just prices reached the lower forties. We want to see stability in oil prices, and so that that's our thinking is. Well, it makes sense probably to drill these wells, if we see oil prices stabilizing in the lower forties and growing over time,

And with what you know today, when are you thinking that you may begin the next drilling campaign?

Well, we are – that's a discussion underway, internally in VAALCO and with our partners. And we cannot, logistically we can't start a drilling campaign immediately. It takes time to go out and find a drilling rig and purchase all of the equipment we would need for drilling campaign. So it's 12 to 18 months out at best, but we are talking to our partners about, when is the right time to start making these early investments ahead of a drilling campaign, again, which includes equipment that we need where there's long lead times for manufacturing. And then again, finding a drilling rig. So we're talking to our partners about what is the right time to start that process.

Great. Thank you. And then when was the last time that VAALCO was impacted by OPEC production cuts?

To my knowledge VAALCO has never been impacted by OPEC production cuts. In a couple of years ago, Gabon rejoined OPEC as they had left, and then a couple of years ago they rejoined and we were not impacted. In 2018, when OPEC was forcing some production cuts, it did not impact VAALCO at that point, and so this is really the first time that we've actually curtailed production in order to allow Gabon to meet their OPEC quota.

Absolutely. And then lastly, would you please talk through your view of your acquisition pipeline and how those opportunities are looking today relative to how they may have – how you may have viewed them in the past?

Well, a couple of things, the – I would say the pipeline is more active than we've seen in the past, which is obviously very positive for us. So we are looking at opportunities that fit us strategically. We do screen the opportunities. We look for opportunities that fit us strategically. And so I think there's a couple of things happening. Number one, it's our reputation as an operator. We've demonstrated, we can execute a drilling program for example on-time on-budget we've positioned ourselves well to whether through the current downturn in prices. And so we're actually an attractive buyer, I think, and I think that has helped generate some or increase the pipeline, I should say of opportunities that we're seeing. And then second, we are seeing companies that are rationalizing their portfolios in West Africa and choosing to divest of non-core assets. And that would fit us very well, assets that might not make sense for a large company, the assets are producing, they might have some development opportunities, but it just doesn't fit a large company, but that fits us very well. And so we are seeing some of those opportunities come our way. So I say the – in terms of the acquisition pipeline, it's as good – it's much better than it was before for those reasons.

In which you said that some of these opportunities would come to fruition and/or closure, earning you would either write a check or pass on those assets by the end of the year, or just for COVID and other reasons would discussions be slower than that?

It could happen by the end of the year. I'm not, I have nothing to announce right now, but I think that the industry has learned to work through and work together in spite of the challenges that we faced with the pandemic. So something could happen this year, I'm not – I'm not saying, Bill, that there's anything to announce, but yes, there's still time for something to happen this year.

Great. Thank you.

Okay. Thank you, Bill.

And our next question comes from Charlie Sharp from Canaccord. Please go ahead with your question.

Yes. Thank you very much for taking my question. I think the previous caller asked most of the, sort of big picture questions I would have. Just one detail, if I may. The listings that you made in Q2, the four listings, did you notice I'm sure you did is there was. But was there a change in the differential to Brent at those particularly low oil prices that were around in sort of April, May?

Yep. I'll take that, Charlie. The April 1st lifting was done by the government. So they might have a differential of grant because they value that at the TCO price, which is there in Gabon probably a slight change there. For the other lifting’s, those are going to be exactly the same differential of Brent because – because of the way our current lifting contract works.

Okay. Thank you.

And our next question comes from Jamie Wilen with Wilen Management. Please go ahead with your question.

Hi guys. First on the timing for the FPSO redo, is that related to the OPEC curtailment or is this coincidental?

Okay. And Jamie, good to hear from you. And so you're asking about the timing of the full field shut down for maintenance including the FPSO. Is that correct? And does it relate into the OPEC curtailment? The timing of the shutdown is late September, and the OPEC curtailment will lift, we hope by the end of September, but yes, the shutdown was included as part of our contribution to the reduction in our production volumes to help this Gabon meet their production quotas. But it was really just coincidental. But anyway, yes, but the timing of the shutdown is late September and it will help contribute to the curtailed production.

Okay. In terms of the $100,000 you spent on the COVID cost during the quarters, is that an ongoing or a onetime shot?

No, it's ongoing and we're finding ways to reduce that. And so those, the extra costs that we're burdened with because of the COVID-19 pandemic are related to the quarantines and the medical screening that I've talked about, where – when people – when our employees are headed off shore, we have to put them in quarantine for two weeks ahead of their offshore trip. And so we have to pay for housing for two weeks, and then we paid for the medical services to monitor them. And there's additional salaries that are paid. So those are the additional costs. But we're finding ways to reduce that 14-day period. Well, it was originally 14-day quarantine we think we've gotten it down to maybe a seven-day quarantine. So anyway, those costs will be ongoing, but we're looking for ways to reduce those.

One of your partners in Gabon is divesting some of their assets in the territory. Can you tell us what that means for us and other opportunities for us to purchase theirs? And have you had discussions with them?

Well, I cannot talk about any negotiations until we have something to announce. And so you are right, Sasol has announced that they are selling their upstream operations in West Africa. And presumably that will include Sasol’s interest in Etame. And so what I will say is of course, we are very pleased with the Etame assets. And if we – if possible, we would talk to Sasol about buying their interest, but of course at the right price. So, we're very happy with the Etame asset. We would consider buying more again at the right price. But I can't speak to any ongoing negotiations.

Okay. And in Equatorial Guinea, what is the long-term holdup for getting – moving from a memorandum of understanding to a final agreement? What is the process? It seems like everything's ready to go and you can straight into the terms? And then the second part of that is you were talking about a multi-year point in time before we began the drilling program, have we selected territories? And is there a price point at which that the oil prices would have to stabilize for you to being that process, once obviously all agreements are reached?

Okay, let me talk about the agreements that we're negotiating. And so the process we're going through is Levene and their technical team are conducting due diligence on our technical work. So all of our mapping and our cost estimates and so that process is ongoing. And in parallel, we're negotiating with their commercial people around the farm-out agreement. And so there's key terms in the farm-out agreement that need to be negotiated. And so that process is moving along not as quickly as I had hoped, but it is still moving along. And in terms of predicting when we will finalize agreements, that's very difficult for me to estimate. But it is – we are in progress and it is a high priority for us. So we're pushing this along as quickly as we can. And so those, I will report that the discussions are ongoing, the negotiations are ongoing, it's a high priority for us. I can't predict really when we will finalize those agreements. But in terms of what oil price is required to justify exploration on Block P, for Block P again, it's exploration, and then hopefully a combined development with the discovery that's already on the block Venus. And that will take several years until first production. And so we have to take a view on long-term oil pricing, not near turmoil pricing. And right now it makes sense, I would think that if there is a negative view on long-term oil pricing, when we make a decision to drill a well saying in 12 months, 18 months, that's the only way we would not make the decision, but I can't envision that the long-term view would be so negative that we wouldn't drill an exploration well.

Okay. Thanks for your excellent progress on managing the company to [indiscernible] our future growth. Thank you.

Alright, thank you, Jamie.

[Operator Instructions] Our next question comes from [indiscernible] from RBC. Please go ahead with your question.

Yes, hi, thanks. My question is obviously we're in a good position from the perspective that we don't have any debt right now. But to the extent that a couple of the things you are working on, either as it relates to an acquisition or a discretionary drilling campaign of whatever magnitude it may be. To the extent that that capital is going to be required, can you speak a little bit to some of the funding mechanisms to get that done at this time? Thanks.

Sure, sure. So let me take that in pieces. For the organic growth that we're targeting from Etame and drilling wells at Etame, we believe we can fund the drilling from cash on hand or cash from operations. So the only extra funding or external funding we might require is if we do – is if we execute on an acquisition. And so not only the purchase price, but potentially these acquisitions will require capital or drilling after we close the transaction. And so we, of course, look at what cash we have available to put towards an acquisition. And then we are in touch with the debt markets and looking at what the debt would cost. And then the other tool we have is of course equity. But I think I would – we want to raise funds in a way that makes sense. But anyway, we're considering for an acquisition using some of our cash on hand debt at a reasonable cost and then if we need to, possibly raising equity.

Okay. I mean, so obviously all avenues are open, but at this time you are sort of – I mean, I guess it depends on the acquisition. But you are not leaning one way or another towards a particular funding mechanism that you think is attractive from a general perspective, versus what else is available out there.

Right, no we're not necessarily leaning one way or the other. We're looking, I think, I would rank things in the order that I gave you for an acquisition. First we'll use cash on hand, but preserving of cash to fund our investments at Etame. And then second is debt. And then third is raising equity. But we're not leading, any one way. I think that's a fair statement.

Okay. Thank you.

And ladies and gentlemen at this time I’m showing no additional questions. I'd like to turn the conference call back over to management for any closing remarks.

All right, well, I would like to thank everyone for participating in our call. And we look forward to speaking with you next quarter. Goodbye.

And ladies and gentlemen, with that, we'll conclude today's conference call. Thank you for attending. You may now disconnect your lines.