VAALCO Energy, Inc.

Good day and welcome to the Valco Energy First Quarter 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star and then one. And to withdraw your question, please press star then two. 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, Alison. Good morning, everyone, and welcome to Valco Energy's first quarter 2020 conference call. After I cover the far-looking statements, Kerry Bounds, our Chief Executive Officer, We'll review key highlights along with operational results. Liz Prochnow, our Chief Financial Officer, will then provide a more in-depth financial review. Terry 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 re-enter the queue with additional questions. 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 guaranteed that future performance and those actual results or developments may differ materially from those projected in the forward-looking statements. Valco 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 Kerry.

Thank you, Al. Good morning, everyone, and welcome to our first 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 Valco is decisively responding to these challenges. Thus far, Valco'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. Back in March, we implemented stay-at-home initiatives for all but critical staff and put into place social distancing measures. In addition, we actively screen and monitor employees and contractors that come on to our facilities in Gabon. In accordance with government guidelines, all our workers in Gabon must undergo a 14-day quarantine before going offshore. We are also engaging in regular company-wide COVID-19 updates to keep employees informed of key developments. Finally, we have contingency plans in place in the event we are directly impacted. The combination of the worldwide shutdown due to COVID-19 and its impact on oil demands coupled with the Saudi and Russian supply disagreements have driven oil prices to historic lows. In response to the decline in Brent pricing, we are taking action to minimize capital expenditures and lower operating costs to preserve our balance sheet and maximize cash flow. We are working with our vendors and suppliers to implement cost-cutting measures and we are partnering with other operators to reduce costs by sharing services and equipment such as support vessels and helicopters. We have reduced compensation for our directors by 25%, executive compensation by 20%, and non-executive employee compensation by an average of 8%. We released the Vantage Rig in early April following the completion of our successful 2019-2020 drilling campaign, and we have no material capital expenditures remaining in 2020. While we have deferred all discretionary capital expenditures, including drilling, until the global oil pricing environment improves, we remain confident in the long-term viability of our inventory of drilling opportunities. Despite this uncertain environment, we remain focused on operational excellence, which was demonstrated in our first quarter 2020 results, which I will turn to now. In the first quarter, we produced an average of 4,944 net barrels of oil per day, which was near the high end of our guidance range of 4,700 to 5,000 net barrels of oil per day, as a result of strong production from the 2019-2020 drilling program. The first quarter benefited from having three full months of production from the Atom 9H well, nearly three months of production from the Atom 11H well, and a few weeks of production from the southeast of Tom 4 H well. The first quarter production volumes from the new wells demonstrate the considerable impact that the drilling program has had on our overall production. This increase in volume has helped drive down our unit operating costs per barrel and improve our break-even margins. As we've said before, approximately 90% of our costs are fixed, and we can add production with minimal increase in costs. which significantly improves our overall margins and will help generate cash flow in a low price environment. In the first quarter, we reported adjusted EBITDAX of $6 million. The first quarter also marked the culmination of our successful 2019-2020 drilling campaign. We released the Vantage rig on April 9th, and as part of the drilling campaign, we brought online three new horizontal development wells, drilled two successful appraisal wellbores, and completed two workovers. The drilling campaign had a 100% success rate and has increased production by 35% in the first quarter of 2020 compared to the fourth quarter of 2019. The entire program was completed as planned, on time, within budget, and with no safety or environmental incidents. Unfortunately, in mid-April 2020, the South Shabala 2H well was shut in due to a downhole mechanical failure not related to the electric submersible pump. Prior to going offline, the well was producing approximately 830 gross barrels of oil per day or 225 net barrels of oil per day. Given the nature of the mechanical failure, it is unlikely that we will be able to repair the well until the next drilling campaign whenever it is on location. Taking into account all of the production from the drilling campaign and the South Chabala 2-H well, we believe that our second quarter production will be approximately 5,000 to 5,400 barrels of oil per day net. For the full year 2020, we are reaffirming the guidance we gave you earlier this year, which was 4,400 to 5,000 barrels of oil per day net. At this point in time, We have not curtailed any production and we will keep the market informed of any material changes in that regard. I would now like to give you a quick update on our activity in Equatorial Guinea. On November 12, 2019, the Equatorial Guinea Ministry of Mines and Hydrocarbons approved Valco's appointment as operator of Block P. We are currently awaiting an amendment to our production sharing contract to finalize our appointment as operator and begin activities in Block P. In the first quarter, Valco acquired additional working interest from Atlas Petroleum, which increased our working interest from 31% to 43%. The cost for acquiring the additional Block P working interest is a potential future payment of $3.1 million dollars that will only be made if there is commercial production from Block P. The Equatorial Ghanaian Ministry of Mines and Hydrocarbons has already approved this assignment of interest to Valco. We are having ongoing discussions with Levine Hydrocarbon Limited on a potential farm out. Under the farm-out terms, Labine will potentially cover all, or substantially all, of Valco's costs to drill an exploratory well in exchange for an assignment of a portion of Valco's working interest in Block P to Labine. Valco would also serve as a non-owner-operator under a service agreement with Labine on Blocks 3, 4, and 19 in Equatorial Guinea. We have executed a non-binding memorandum of understanding with Levine regarding the commercial discussions. However, we did not have binding agreements in place, and government approval of the agreements between Valco and Levine must be obtained prior to completing the transactions. Given the current pricing environment, we have asked the Equatorial Guinea government for an extension to the contractual requirement to either drill a well by December 31, 2021, or relinquish the license. We are optimistic that we will finalize the agreements with Levine and prepare for a drilling campaign in the next couple of years with minimal financial exposure to Valco. In summary, we are committed to maintaining business continuity in these challenging times. We have a strong debt-free balance sheet, $61 million in cash, and a stable production base, all of which provides stability in the near term and flexibility for the future. Before I turn the call over to Liz to share our financial results, I would like to mention that we have published our inaugural sustainability report, and it is available on our website. We believe the sustainability report reflects our commitment to our employees, to the people who live in the communities where we operate, and to the environment. With that, I will turn the call over to Liz.