VAALCO Energy, Inc.

Good morning and welcome to the Valco Energy, Inc. Third 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. 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, Alyssa. Good morning, everyone, and welcome to Valco Energy's third quarter 2020 conference call. After I cover the forward-looking statements, Kerry 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 Kerry will then return for some closing comments before we take your questions. During our Q&A session, we asked 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 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 that 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 this morning, and in the reports we filed with the SEC, including the Form 10-Q that was filed yesterday. Please note that this conference call is being recorded. Let me turn the call over to Kerry.

Thank you, Al. Good morning, everyone, and welcome to our third quarter 2020 earnings conference call. This year has been difficult for the energy industry as we have faced many extraordinary challenges. From COVID-19 to supply and demand imbalances to low commodity prices, Valco has responded well to all of these challenges. Thus far, Valco's operations have not been materially impacted by the global COVID-19 pandemic which is a testament to our dedicated workforce, given that we have operated our platforms under the precautionary measures for approximately eight months now. We have managed through the logistical challenges that we have faced since the outbreak occurred and continue to put the safety of our employees, contractors, and local stakeholders first. We are minimizing high-risk activities and using on-site medical supervision to screen test, and monitor employees and contractors while in quarantine before going offshore. We have contingency plans in place in the event we are directly impacted by the pandemic. We continue to work with our vendors and suppliers to implement cost-cutting measures and partner with other operators to reduce costs by sharing services and equipment such as support vessels and helicopters. As we've said before, approximately 90% of our costs are fixed and we can add production and improve our margins with minimal increasing costs. Our strong production and lower costs have helped us to continue to generate solid cash flow and adjusted EBITDAX. We remain focused on operational excellence, which will lead to cash flow generation, allowing us to prepare for future drilling campaigns at a time. In the third quarter, we produced an average of 4,405 net barrel point of our guidance range. Our third quarter 2020 production was up 43% from the same quarter in 2019 as a result of the three new wells that came online as part of our successful 2019-2020 drilling program. However, our third quarter 2020 production was below our second quarter average of 5,410 net barrels of ore per day due to the planned full field maintenance shutdown in September and the production curtailment in Gabon due to an OPEC Plus mandate. As we discussed in our last conference call, we were asked to assist Gabon in meeting its OPEC Plus production quota by temporarily curtailing production at its top. In September, we performed our planned five-day full-field turnaround to perform maintenance on the Natipa FPSO and all four production platforms. The turnaround was performed on time, on budget, and most importantly, with no safety or environmental incidents. Looking ahead, we expect to produce somewhere between 4,600 and 5,000 barrels of oil per day net tobacco in the fourth quarter, which is up 200 to 600 barrels of oil per day versus the third quarter. You will note that we have increased the lower end of the range for for the fourth quarter in our new guidance of 4,600 to 5,000 barrels of oil per day from the 4,300 to 5,000 barrels of oil per day net fourth quarter estimate we gave during our last call. We continue to see strong production uplift from better than expected performance from the three new development wells drilled and brought online as part of the 2019-2020 drilling campaign. In the third quarter, despite continued low realized crude oil prices, and production curtailments, we reported an adjusted EBITDAX of $7 million, which brings our year-to-date adjusted EBITDAX to $23.1 million. And we have only spent about $10 million in CapEx thus far this year, thereby confirming our ability to generate free cash flow even in this difficult environment. In addition to managing our capital spending, we have also reduced our operating and G&A expenses, Liz will give more detail on this, but driving down our costs maximizes our ability to generate free cash flow. In September, we announced that we are acquiring and processing new proprietary 3D seismic data over the entire ATOM license. We believe the seismic data will help improve capital efficiency at ATOM by allowing us to select drilling locations that maximize oil recovery and it will also allow us to identify new locations to add to our portfolio of drilling prospects. We expect to complete the seismic acquisition in the fourth quarter of this year with full processing completed by this time next year. When acquisition and processing are complete, this will be the first continuous 3D seismic survey to cover the entire ATOM license, which will allow for a more robust subsurface interpretation than ever before. We are proud of the highly successful and transformational drilling program that we completed earlier this year, and we believe that a new 3D seismic survey will build on that success as we plan for future drilling programs at ATOM. Now, I'd like to give you a quick update on our activity in Equatorial Guinea. In the first quarter of 2020, BALPA required additional working interest from Atlas Petroleum thereby increasing our working interest from 31% to 43%. The cost for acquiring the additional Block P working interest is a future payment of $3.1 million that will only be made if there is commercial production from Block P. In August, an amendment to our production sharing contract of Mines and Hydrocarbons. We're excited about the future at Block P, and we are having ongoing farm-out discussions with Levine Hydrocarbon. Under the farm-out terms, Levine will potentially cover all, or substantially all, about those costs to drill an exploratory well in Block P. We are optimistic that we will finalize the agreements with Levine and prepare for a drilling campaign that will commence in the next couple of years with minimal financial exposure to Valco. This is a challenging time in the energy industry, but we believe that we are well positioned with a strong debt-free balance sheet, $42 million in cash, and a stable production base that is free cash flow positive at current prices. Going forward, we will maintain our focus on free cash flow and operational excellence to deliver both near-term and long-term performance With that, I will turn the call over to Liz.