Good day, and welcome to the VAALCO Energy Second Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to VAALCO Energy's second quarter 2022 conference call. After I cover the forward-looking statements, George Maxwell, our CEO will review key highlights along with operational results. Ron Bain, 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 second 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. 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 in the reports we file with the SEC, including our Form 10-K. Please note that this conference call is being recorded. And now, let me turn the call over to George.

Thank you, Al. Good morning, everyone and welcome to our second quarter 2022 earnings conference call. We had a very strong second quarter, which included record sales volumes of almost 1 million barrels. We also benefited from substantial high Brent pricing over $113 per barrel. This combination allowed us to generate significant cash flow, execute our accretive growth strategy and fully fund our capital commitments. We continue to pay out dividends to our shareholders and with a debt-free balance sheet, we are clearly in a very strong financial position. We delivered record adjusted EBITDAX, which grew 81% over the prior quarter to $60.8 million. To put this in perspective, we generated $79 million in all of 2021 and $22 million in 2020. We have now generated over $94 million in adjusted EBITDAX in the first six months of 2022, nearly as much as in the full year 2021 and 2020 combined. We have used this to pay two quarterly dividends thus far in 2022 and the Board approved a third dividend for the third quarter of this year. Our strong balance sheet remains debt-free, and our unrestricted cash balance grew to $53.1 million, which does not include $70.3 million in proceeds from May and June liftings that were received in July and August. We are also progressing the field reconfiguration and conversion to an FSO at Etame. The new FSO is arriving in offshore Gabon this week, and we are planning the full field turnaround and hookup in the third quarter. As we have said before, we expect to realize substantial and sustainable operating cost savings from this project that will begin in the fourth quarter and carry on through the remainder of the decade. We also announced that we are exercising our options on the rig in Etame to…

Thank you, George, and good morning, everyone. Let me begin by saying I'm very pleased with our operational and financial performance, and we remain very well positioned to execute on our strategy of accretive growth while adding and returning value to our shareholders. Turning to our record breaking quarterly financials. Adjusted EBITDAX rose 81% to $60.8 million in the second quarter of 2022 compared with $33.5 million in the prior quarter and nearly triple the $21.9 million in the same period of 2021.We've clearly benefited from our highest quarterly net sales volumes and sustained higher realized pricing. This has allowed us to fund our strategic initiatives with cash flow and cash on hand, including our 2021-2022 drilling campaign CapEx, FSO conversion and field reconfiguration costs. We also reported strong net income of $15.1 million or $0.25 per diluted share in the second quarter of 2022, which included a $25.9 million deferred tax expense and an $11.5 million non-cash unrealized derivative gain. After normalizing for the deferred tax charge on the unrealized derivative gain, our adjusted net income for the second quarter of 2022 totaled $30.7 million or $0.52 per diluted share as compared to an adjusted net income of $21.1 million or $0.36 per diluted share for the first quarter of 2022. In the second quarter of 2021, VAALCO reported $8.4 million in adjusted net income or $0.14 per diluted share. Production for the quarter of 9,211 net barrels of oil per day was higher compared to 8,051 net barrels of oil per day in the first quarter of 2022, which was expected due to the new wells coming online from the drilling program. Production was up 14% from the same period in 2021. Sales volumes in Q2 2022 were a record high and up 56% from the first quarter…

Thanks, Ron. As you heard this morning, the second quarter was a record breaking for VAALCO. With a successful FSO conversion and full field reconfiguration, additional successful drilling and sustained higher oil pricing, the fourth quarter could meet or exceed our second quarter's strong results. We are accretively growing production and cash flow while remaining focused on providing sustainable returns to our shareholders. We are excited by the organic opportunities in Etame with our remaining 2021-2022 drilling program wells and the positive impact of our field reconfiguration and FSO conversion. Block P and Equatorial Guinea provides an exciting opportunity once the plan of development is approved as it will establish another asset with a strong platform for organic growth. We are generating significant cash and have now paid two quarterly dividends thus far in 2022 and announced our third but will be paid in September of this quarter. We believe that prudently returning cash to shareholders is a great way to complement our accretive growth strategy. We have done an excellent job growing VAALCO, and I believe the next step is the accretive and transformational transaction that we are progressing forward with TransGlobe. We believe that by combining these two companies, we should be able to expand and diversify our African focused assets, both size, scale and market cap that should allow us to generate meaningful cash flow to fund expanded shareholder dividends, share buybacks and potential supplemental shareholder returns at a rate that would not be achievable on a stand-alone basis. As noted earlier, we have announced a target of $0.52 per share returned in dividends and buybacks beginning post-closing. Both companies have experienced teams that we believe will be complementary and help us to continue achieving our strategic vision. Most importantly, we will remain firmly focused on maximizing shareholder return opportunities and operating with the highest regard towards ESG. We are very excited for the future of the combined company and believe that it provides the opportunity to materially expand our ability to return value to our shareholders while also growing value in the underlying business at a rate that neither VAALCO or TransGlobe can provide on a stand-alone basis. Work in the transaction is proceeding as expected, and over the past couple of weeks, we've been in discussion with our various shareholders, and we appreciate the support that we've heard. We are confident that the combined company is stronger than either company on a stand-alone basis and will deliver superior long-term value to our shareholders. We expect to file our preliminary proxy statement asking stockholders to approve the arrangement later in August. Once the proxy statement is finalized, we will mail it to our stockholders and call a special meeting to vote on the transaction. We currently expect to close the transaction in the third or fourth quarters of 2022. Thank you for that. And operator, we're ready to take questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions]

Jason, while we're waiting for questions, I wanted to point out to anyone who may have joined us from the webcast. There was a technical problem where the service provider had the link going to a different conference call. That was corrected about midway through the webcast. And so anyone that wants to listen to the whole thing again, they will be able to do so a little bit later when the full recording is back on the website.

All right. Our first question comes from Bill Dezellem from Tieton Capital. Please go ahead.

Tieton Capital. I have two questions today to start with. First of all, your D2 well that you said you will look at completing in the next drilling campaign. Why wait? Why not just go ahead, while you were in the wellbore? I don't think I understand technically the realities around that.

Okay. And primarily, Bill, that's driven by the availability of completion equipment. We'd already moved off the well site and had also already selected the additional options that we have for the rig at this current program. So when we were looking at -- and I think there's a slide in the supplemental part that gives some good information, I think it's Slide 7 on the differentiation between the phases we were going through on the South Tchibala well for the D1 and the D9 opportunity and then we're planning to take the rig post that. So the rig was already off the well site and away from the platform by the time we were continuing to evaluate the D1 productivity. By the time, we came to the conclusion of that analysis, the rig is actually then on the SEENT platform and performing production drilling operations in the next well. So basically, we have utilized all of our options. We will continue to obviously evaluate the D9 and put the planning in place for going back into that wellbore to look at the D9 in the 2023 campaign.

That's helpful, George. Thank you. And then how does extending the drilling program, this current drilling program alter your original plan for the next drilling plan program or is that less relevant than how the TransGlobe acquisition will ultimately alter that program?

Well, I mean, obviously, we look at -- we've been looking at the programs in isolation of the TransGlobe opportunity. It hasn't really impacted at all other than we had -- we see the opportunity to take forward the two wells that we have highlighted, the Ebouri 4H workover and the Northeast Avouma exploration well. These were the most mature targets that we had from our seismic analysis that we did from the analysis of the reprocessed and reevaluate seismic that we did in 2020 and 2021. And from our side, as we continue to evaluate that seismic, it continues to give us additional targets that we will mature in time for the 2023 program. So when we look at the amount of targets that we have in that program, it is not diminished by what we've pulled forward because the opportunities continue to increase as we continue to evaluate the seismic.

And finally, how many wells are you planning on drilling in the next drilling campaign?

At the moment, we have a range of wells between four and six. This will obviously be subject to a ranking exercise that we will do over our whole CapEx program subject to the combination being approved by our shareholders because one of the key elements that we have and this opportunity with increased acreage and increased capital investment opportunity is to evaluate where the fastest and most efficient economic returns are coming from the dollars that we invest in the ground.

Thank you and congratulations on a great quarter.

Thank you.

We will have no more questions. And with that, I will turn the call back over to George Maxwell, VAALCO's CEO, for closing comments.

Thank you very much, operator. I think it's a testament to the strategy and the work and the effort of all the staff at VAALCO both in the administrative side and the operational side and the geological side that has given -- starting to pay dividends through quarter -- the second quarter, and that's very evident. We have considerable work going on in the third quarter, undertaking some of the biggest changes that VAALCO have done in a number of years in the field reconfiguration please have a look at the additional deck that we've added on to this conference call, and you'll see some of the exciting work that is ongoing in the field. As I mentioned, 5 times the number of personnel currently active in the field at this time gives you a sense of scale as to the kind of reconfiguration operations that we're undertaking. We have a number of exciting opportunities coming forward in Q4 and completion of that. We continue to focus on the transaction. And again, I would direct you to the additional materials that we've included in our podcast and slide deck that was issued on Monday in relation to the combination opportunity. And with, I think I'd like to thank our shareholders for the support we've received over the last -- since I came on board in the last 15 months. We've seen the market is responding to our strategy. It is responding to how we are executing our business, and it's responding to the levels of transparency that we continue to communicate to the market. So with that, I thank you very much for listening to our call today, and I look forward to providing you an update in Q3.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.