Good day, and welcome to the VAALCO Energy First Quarter 2024 Earnings Conference Call. [Operator Instructions] 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. Welcome to VAALCO Energy's first quarter 2024 conference call. After I cover the forward-looking statements, George Maxwell, our CEO, will review key highlights of the first quarter. 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 supplemental investor deck on our website 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 our earnings release, the presentation posted on our website and in the reports we filed 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 first quarter 2024 earnings conference call. We began 2024 with positive operational and financial results, including strong earnings and adjusted EBITDAX generation. In addition, we closed the Svenska acquisition at the end of April, ahead of schedule, and we're excited about incorporating those operational and financial results into our numbers for the rest of 2024 beginning in Q2. We returned over $12 million to shareholders in Q1 2024 through dividends and buyback. Let's begin our overview of VAALCO's assets with the new acquisition. We announced that we closed the Svenska acquisition in an all-cash deal for $40.2 million on April 30, 2024. This was done very quickly and efficiently and ahead of our internal expectations. Our team traveled to Cote d'Ivoire to meet directly with the Ministry of Hydrocarbons to officially introduce VAALCO as a new partner on Block CI-40. We are adding an asset with strong current production and reserves at a very attractive price. This acquisition is highly accretive on key shareholder metrics and provides another strong asset to support our future growth. It provides us with additional diversification and strategically expands our West African focus area. The Cote d'Ivoire Baobab field in Block CI-40 has strong production and reserves. We are excited to be partnering with Petroci and CNR International and believe the Baobab field, the next phase of drilling and the discovered yet undeveloped Kossipo field in Cote d'Ivoire is an outstanding asset with significant upside potential. In yesterday's earnings release, we updated our full year and second quarter 2024 guidance. Both of which reflects the positive impact to production and production expense per barrel, which should lead to improved margins and greater adjusted EBITDAX. Later this year, we expect to provide additional information on the…

Thank you, George, and good morning, everyone. I will provide some insight into the drivers for our financial results with a focus on the key points. Let me begin by echoing George's comments about our continued success into 2024, driven by strong operational performance, quickly closing on our highly accretive acquisition and solid financial results. In the first quarter, we generated $7.7 million in net income or $0.07 per share and 61.7 million in adjusted EBITDAX, both were ahead of consensus estimates. Let's turn to production and sales, which along with realized pricing drives our revenue. Production for the first quarter remains solid, and sales were almost 16,400 barrels of oil equivalent per day at the high end of our guidance, with our sales for the quarter also at the higher end of the guidance. We completed a lifting in Gabon in March, as you can see by the strong sales results. I'd like to reiterate that with a diversified portfolio of assets, we will have changes from quarter-to-quarter in the mix of sales from each of our producing areas. This change in mix impacts our realized pricing and ultimately, our revenue and earnings. But if you look at the bigger picture and over a full year, you will see impressive growth across our expanding portfolio of producing assets. We closed the Svenska acquisition on April 30, and this means that all production, sales and financial results for the assets will be incorporated into our results from May 1 forward. So the second quarter will have 2 months of Svenska impact and the full year numbers, 8 months of impact. Pricing remains strong and our hedging program has always looked to help mitigate risk and protect our commitment to shareholder return. We have costless colors in place for 2024, and…

Thanks, Ron. We will continue to execute our strategy, focused on operating efficiently, investing prudently and maximizing our asset base and looking for accretive opportunities. As you have heard this morning, we are off to a very strong start in 2024, both operationally and financially. With the closing of the Svenska acquisition at the end of April, we will see a positive impact to production, sales, OpEx per BOE, operational cash flow and adjusted EBITDAX. Additionally, we have the Canadian development wells coming online in the second quarter. We are planning a drilling campaign at Etame, and we are progressing the FEED study in Equatorial Guinea and optimizing production while executing workovers in Egypt. Our entire organization is actively working to deliver sustainable growth and strong results. I believe we have gained credibility over the past 2 years, having delivered on our commitments to the market and to our shareholders, and we will continue to deliver with the exciting slate of projects we have over the next few years. We are in an enviable financial position with no bank debt and an even stronger portfolio of producing assets with future potential upside. In addition to funding our capital program, we have remained focused on returning value to our shareholders. In Q1 2024, we returned $12 million to our shareholders through dividends and buybacks. We are on pace to deliver another $0.25 per share annual dividend for 2024, matching what we paid out in 2023, which our current share price has a dividend yield of about 4.5%. As Ron discussed, our 2024 guidance now has a Svenska acquisition incorporated, but I want to reiterate that the second quarter only has 2 months of Svenska incorporated and the full year only 8 months due to the April 30 closing date. Regardless, this…

[Operator Instructions] The first question is from Chris Wheaton with Stifel.

I know Al said only one question. I'll do one question in 2 parts, maybe. Firstly, could you perhaps outline a bit more the $40 million [indiscernible] with the CapEx in the year? How much that breaks down between additional spending on Canada or additional spending on Cote d'Ivoire? And also maybe if you could identify what's in that additional Cote d'Ivoire CapEx, that would be really helpful because that's quite a bit of CapEx to be spending ahead of the FPSO shutdown next year. There's also a question I had on Egyptian oil price realizations, which seemed a bit low in the quarter. I wonder if that was related to the receivables payment that Ron, you referred to in your discussion earlier, it's about $10 lower quarter-on-quarter, and I just wondered why that was. That would be my questions.

Chris, it's George. On the CapEx side, obviously, we've given a little bit of detail as to what has caused the increase in the CapEx guidance position initially. Obviously, we're now doing a 5th well in Canada in the southern part of the Harmattan area to prove out the opportunity to increase reserves and resources there. So that's part of it. We've also added in the FEED study for Equatorial Guinea to get to the FID position for first quarter 2025. And obviously, with regard to the investment inside Baobab, we're looking at a number of forecasts coming out right now relating to LLIs that aren't purely for LLIs on the FPSO refurbishment but also relate to the potential drilling campaign in Phase 5 at Baobab. So primarily, it's a mixture of the FPSO requirements and also for the potential drilling program that are increasing the main part of the $40 million on LLIs.

Chris, it's Ron. I'll take the question on Egyptian oil price realization between Q1 and Q4. The first part, I would say it's got nothing to do with the related payments. The related payments you [indiscernible] you may have heard from a number of companies that EGPC started to pay down some of its outstanding receivables as of the 31st of December 2023. And we were also party to that. We got about 25% of our aged receivables as of the 31st of December on their books paid. So that was the first thing. The second thing in relation to the average realized price, it did come down about $11. In Q4, effectively, we sold domestically, but domestically in Egypt, there was cargoes that EGPC had. So that was obviously within the price that everyone was provided. In Q1, we basically are in a situation where they're utilizing the blend now for the refineries locally, so they've been trialing that out. And that was the market at price domestically to those refineries. So that's really the difference in pricing. It's down about $11 quarter-on-quarter.

Just kind of one follow-up if possible. Does that mean if a new blend is being trialed with the domestic refineries, does that mean this $10 delta is more likely to be where the realization is going to be in the forthcoming quarters? Or is it still going to be dependent on that mix of domestic versus international sales?

I think it will be very much dependent, Chris. At the end of the day, it was a trialing that they went through in Q1. So we cannot say that, that's locked in. And we're continuing to talk locally with EGPC's key marketing department in relation to obtaining our own cargoes too. So no, I wouldn't take that as being a locked in price.

The next question is from Stephane Foucaud with Auctus Advisors.

Question is on Cote d'Ivoire, and I appreciate that it's early stage, but I was trying to understand the order of magnitude of production when things come back in 2026. Are we talking of 50% increase? Are we talking of something similar than we have today, double -- so that sort of magnitude. And likewise, also in order of magnitude of the CapEx [Technical Difficulty]. So that's my first question. My second question is also on Cote d'Ivoire. Now that the transaction is closed, I was wondering whether you could provide perhaps some further detail on the fiscal term you're exposed to. So I think looking at C&I, it looks that the royalty is 9%. But I was wondering whether you pay a corporate tax or whether the government pays the corporate tax sometimes in the case in Cote d'Ivoire. And lastly, if there is any cost pool that you could benefit from?

So with regard to the FPSO schedule going offline, obviously, we're looking at that right now, with the information received from the operator, we're reviewing that. It's absolutely impossible for us to say what the position would be coming on post the refurbishment of the FPSO. One would expect that the existing production would have some flush production coming back into it. But that's -- there's quite a lot of work to do on the subsurface side to understand exactly how that would take place and the timing of that. But that would be our expectation. But at this point in time, we've yet to sit down with the operator and get our understanding of both the time lines and the projections around that. Obviously, there's also the potential of that drilling program happening concurrently, which would also increase the volumes. But we obviously have a model that works with that and that's still subject to discussions and validations with the operator.

Stephane, it's Ron. I'll take the second part of your question. And if I heard you correctly on the fiscal terms in Cote d'Ivoire. In our supplemental deck, you'll see in Slide 9, we've given elements of the PSC's physical terms there. I'm happy to go through that with you outside of the call to make sure that your model is up to date.

[Operator Instructions] The next question is from Bill Dezellem with Eaton (sic) [ Tieton ] Capital.

That's Tieton Capital. May I start with Svenska also. And given that, that is non-operated, I guess the question is, when are you ready for the next transaction, the next acquisition? And with that in mind, what does the pipeline look like?

A difficult one to answer. I mean, obviously, the opportunity set for growth is something we've been focused on. And I think our track record in the last 3 years demonstrates the market that was serious about the growth opportunities for this company and where we're taking it. Of course, there are many, many transactions around that -- that can fit into our portfolios. Yes, we have to carefully consider post the Cote d'Ivoire acquisition, how the cash flow profiles fit into the growth opportunities because it's absolutely paramount that we maximize the opportunity from our existing portfolio before we start looking over the fence at something else. But in this business, in this industry, there's always a very steady pipeline of opportunities that are always under evaluation.

And then the BW consortium was not referenced in the press release or your opening remarks. Could you please update us relative to what's happening there?

Yes, of course, I will. I mean -- and the reason we didn't update is there's basically been no movement. There's been a lot of discussions with the partners and the DGH and those [ discussions ] are ongoing. I think we have a few points still to resolve. But as I said in the last call, I mean, given that we've been on this mouse wheel for about 18 months with [ G&A ] the activity levels in the last 6 to 8 weeks have certainly intensified. There's been multiple meetings between the partners and with the DGH and we had follow-up meetings in the last week or so. So I'm still confident that we'll come to a resolution in the very near future over the outstanding issues, which are surrounding some of the legal and contractual terms. And be hopeful to be able to give an announcement on that soon. The only reason we didn't give an update is there hasn't been any significant movement other than additional meetings.

And the 10-K gave the impression that the government seems far more interested in interacting than they have in the past?

I would say that's probably true. I mean, since the -- there has been, obviously, as everyone is aware of, a change in the administration and our interaction with the new administration at the most senior level has been more than it had been in the past. So to the point where we as a company have met directly with the head of state that has happened, and we have had dialogue at that level. So yes, there is a lot more activity with the governmental institutions in the last 6 months than perhaps we've seen previously.

Great. And then one additional question. You referenced the Equatorial Guinea and having made some good progress there. I don't think that I appreciate now the amount of time it takes to go from where you're at today through the next stages. Would you walk us through time line, if you would, please?

Yes, I can do that. So obviously, we've been -- as a company, we've been ready to start this journey for some 18 months since we've been trying to get resolution in the partner group. And that has been partly facilitated by the MMH in Equatorial Guinea. That resolution has now been completed, as I outlined with a change in commercial terms, which included ceding additional equity to VAALCO in that process. So in that time line, we'd always plan from the plan of development to then go into a detailed engineering study. And there's 2 purposes for that study. One is to -- plans of development are conceptually based on both our subsurface analysis and the cost price analysis that are done at a desktop level for the engineering side. The FEED study will then go out and test those concepts in the marketplace, both from a time line and a cost perspective and look to optimize both the CapEx spend and/or reduce the CapEx spend with other mediums of how we can source the equipment at a lower cost or at a least cost, so we reduce our CapEx sync. And that's certainly part of the plan for the FEED study. We estimate to get there would take us about 8 to 10 months to complete the FEED. And that gets us to a final FID position. And at that point, we're locking in not just the detailed steps forward for development, but also locking in the contracts and all the economics for the development. It's -- as equipment and as our -- the industrial environment changes around us, FEED studies are almost essential before you make commitments to major projects such as Venus. The objective we're trying to get to is to reduce the CapEx spend, replace that CapEx potentially with OpEx on a lease basis and therefore, make the project even more attractive from a return standpoint. So that's the main objective of the FEED study in addition to ensuring that the equipment we require to execute the project is available.

Next, we have a follow-up question from Stephane Foucaud with Auctus Advisors.

It's a bit of a follow-on on the question from Bill about acquisition and cash available. So Cote d'Ivoire would be CapEx intensive for me in the coming years. But I guess EG as well. So how are you thinking about cash deployments or cash resources in the context of Part 2, very large projects having to be developed at the same time?

Yes, if I got your question, correctly, sorry, your line is a little bit vague. Basically, obviously, operating cash flow for us this year before FPSO goes off-station. Our operating cash flows should be strong between now and the end of the year. Yes, we got CapEx in there, but we're more than covering those CapEx spends. At the same point in time, we are talking to a number of different financial institutions in relation to your facilities. We've got a facility in place, but we're looking -- we're 3 years up the track in that. We're looking at new facilities. And I basically see a mixture of both operational cash flow, first and foremost, being utilized as well as financing cash flow for these development projects. Because there will be time periods through '25 or '26 where we're going to have some spiky CapEx spend. So that's what we're looking at Stephane, I can't really go into the detail of that at the moment. We're still working with those institutions.

Operator, I have a question that I received by email that I pose to George and Thor. And that is, when do we expect to get the results on the new wells that we drilled in Canada that we said we're coming online soon?

Yes. So I can answer that. So the drilling program completed -- the completions program has completed first 2 wells. Actually, the first 3 wells are online, 2 wells are cleaned up and are flowing, the third well is on cleanup flow, and the fourth well we expect on in about a week. Both 2 wells that are stabilized are above tight curves -- type curves. The third well is still in cleanup and the fourth well, we'll know a bit more in about a week.

This concludes our question-and-answer session. I would like to turn the conference back over to George Maxwell, CEO, for any closing remarks.

Thank you, operator. I think it's -- I'm very pleased to be [ parted ] to another successful set of results for Q1, where the company has performed well. Our assets are performing well. We continue to streamline and become more efficient in each of our areas of operation. And as asked by a couple of question -- questionnaires, we continue to look at opportunities in the marketplace where we can see where the skill sets that we have inside the company of operational excellence can add value to our shareholder base. With that in mind, when we look through the guidance for 2024, we see that guidance levels being maintained. We see the production in each of our areas of operation in Gabon and in Egypt and as Thor just mentioned in Canada improving. We'll be able to talk more about Cote d'Ivoire in the coming quarters and how that's performing and what the longer-term plans are once we've had discussions with the operator. And to that end, we're starting to build a much more diversified portfolio company that is able to be much more sustainable on its delivery. And for that, thank you very much.

We do have one more question from Charlie Sharp with Canaccord.

Just one very quick follow-up question and a sort of slightly longer element to it, if I may. In Egypt, the results of the workovers in Q1, 1 or 2 of them have been quite good, others less good. I guess, the first question really is, what is it that you look for that might make you commit to the second half workover program? And then the bigger question is really given the range of projects that you now have, particularly in West Africa and in Canada in terms of capital allocation, is Egypt looking particularly with the issues there and uncertainties? Is Egypt looking less compelling to you than perhaps it did 12 months ago?

Let me take it in a number of parts there, Charlie. The first thing with regard to the drilling campaign in Egypt. So we have the potential of a 12 to 15 well drilling campaign with an additional CapEx spend of around $18 million as we execute that campaign. The key contingency around that campaign right now is access to the drilling rig and the availability of equipment as opposed to the availability of target opportunities to drill. So where we are for this year, primarily in 2024, if we can secure and overcome those contingent elements, we will drill in Egypt because it will add additional production and that will -- even with the capital allocation issues will improve the PSC positions inside Egypt. Now obviously, if we become more restricted in capital allocation, then the economic returns would be far more compelling, and that will start to be some of the drivers in capital allocation. And I'll pass over to Ron.

Charlie, what I would add to that -- I mean, George is exactly right. We've got a number of things going on. As you know, Egypt, it's a liquidity problem -- liquidity problem, this liquidity issue is certainly improving. You saw the World Bank, you saw the land sales that they had the [ UAE ], they devalued the currency, obviously, trying to control inflation on the interest rates as well. So there's a number of things there that certainly looks more positive and where we were looking maybe in Q3, Q4 2023. But it's going to be a bit of a slow ride there. It's not going to be as quick as everyone would want it to be. And obviously, we're working with state and EGPCs closely as all our peer group are. The other thing I would add in relation to the production decline in Egypt is that we are imminently taking in a second workover unit. So we sourced a second workover unit. That will be taken in, in Q2. So we'll have 2 workover units working through effectively through the next 3 months. So regardless of the discussion on the drilling campaign, 2 workover units will certainly help arrest production decline.

If I can just add to that, when we're drilling in Egypt, the drilling rig actually only does the drilling and the workover rig does the workovers. So in order to minimize downtime on wells that need workovers, we're bringing in the second rig, the workover rig for that exact purpose to support the drilling rig when the drilling program starts up.

That is the last question. So the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.