VAALCO Energy, Inc.

Ladies and gentlemen, thank you for standing by. Welcome to the Valco Energy first quarter 2023 conference call. During today's call, all parties will be in a listen-only mode. Following the company's prepared remarks, the call will be opened for a question and answer session. During the question and answer session, we ask that you limit your questions to one and a follow-up. You can always rejoin the queue. This conference is being recorded and a replay will be made available on the company's website following the call. I would now like to turn the conference over to Chris DeLange, investor relations coordinator. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to Valco Energy's first quarter 2023 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 re-enter the queue with additional questions. I would like to point out that we posted a first quarter 2023 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. DACO 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 pressure lead, the presentation posted on our website, and in the reports we filed with the SEC, including the Form 10-K and Form 10-Q. Please note that this conference call is being recorded. Let me turn the call over to George.

Thank you, Chris. Good morning, everyone, and welcome to our first quarter 2023 earnings conference call. We have had a lot to review in each of our calls over the last year, but today's prepared comments will be pleasantly shorter. We have made significant progress integrating Transglobe into Valco and are now focused on optimizing production, managing our costs, fine tuning our operations, and allocating capital to drilling, future growth plans, and shareholder returns. This was our first full quarter of reporting as a combined company. following the transformational combination with Transglobe, which has built a business of scale with a stronger balance sheet and a more diversified production base. I would like to point out some key highlights and accomplishments for the first quarter. We were at the high end of production and saw a quarterly increase of 27% to 18,306 NRI barrels of oil equivalent per day or 23,152 barrels of oil equivalent on a working interest basis. You can truly see how we have grown when you compare first quarter production this year with first quarter production last year, we are up 127%. We generated $47.8 million in adjusted EBITDAX, which was only $2 million lower than Q4, despite lower sales due to lifting timing and lower realized pricing. We also generated $42 million in cash flow operations, which allowed us to fund $27.7 million in CapEx and still grow our cash balance at quarter end to 52.1 million with no debt. We also paid our quarterly dividend in Q1, which was increased by 92% and continued to repurchase common stock through our buyback program. We have positive momentum as we enter the second quarter of 2023, both operationally and financially, and we are building size and scale to substantially grow Valco. With a diversified portfolio of assets across four countries, including Gabon, Egypt, Equatorial Guinea and Canada, I will spend a little time detailing operation activity in each area. Let's begin with Egypt, where we have the largest amount of capital spending in the first quarter. We are focused on drilling opportunities in Egypt, which included drilling the first ever nuchal horizontal well on our acreage. In the past, across our acreage in Egypt, only vertical wells were drilled. The recent Arta horizontal well was a 4,400 foot lateral. The well is flowing at approximately 200 barrels of oil per day with minimal water, and we expect cleanup on this well to continue for an extended period of time. We also use micro seismic on the Arta well, which will give us additional information for future horizontal wells. We're going to do as much data collection and evaluation as we can before we drill additional horizontal wells in Egypt. We plan to study the results refine the drilling and completion techniques and look to potentially drill another lateral well either later in 2023 or in 2024. This initial horizontal well was initially designed and planned before the transaction closed. We believe we will be able to continue to make changes to future well and completions design and achieve better production results. An overall basis, We are very pleased with the drilling performance on the vertical wells, as we are seeing significantly faster drilling and completions performance overall, moving from a 2022 average of roughly 38 days per well to 8 to 15 days per well in 2023. We believe that we can now drill future vertical wells in around 10 to 15 days, which is very positive for the overall economics compared to the 38 days that we had been seeing. After completing the ARTA 77 horizontal well in January 2023, we drilled five vertical development wells in Q1 2023. One well required a frac stimulation and the other four vertical wells added over 700 barrels of oil per day at the end of Q1 and those wells continue to perform very well with early May production from these wells at nearly 1100 barrels of oil per day. These additional wells and work over in conjunction with the work completed for production optimization are increasing production well in excess of our decline rates. We have spent meaningful time and effort in Egypt reviewing the facilities and operations. This additional cost and effort have resulted in two meaningful changes that were enacted recently. The first is that we took steps to relieve pressure bottlenecks and back pressure which resulted in a 500-barrel-per-day improvement in oil production. The second was to improve our ability to prevent and capture potential spills by improving well sites with secondary containment measures and increased use of composite spoolable pipe for replacement of old lines and on the installation of new lines. We believe that this will make a significant move towards eliminating uncontained spills. In early April, we hit a two-year record daily production level of over 11,800 barrels of oil per day in Egypt. Our drilling and completions program in Egypt is a significant part of our 2023 capital program as we continue to develop one of our core assets. We still plan to drill 15 to 20 wells in Egypt this year and expect about six to be drilled in the second quarter. In Canada, as you recall, We drilled several wells but completions were delayed and these wells came online in late December 2022 and January 2023. We also drilled two additional wells in the first quarter and those wells were brought online in May. Our Q1 drilling consisted of three wells with a one mile later and a 1.5 mile lateral and a three mile lateral. It is our intention to move to longer three-mile laterals, exclusively improving the overall economics of future drilling programs. We are currently evaluating our future drilling in Canada, working on ways to further optimize both lateral lengths, track intensity, and shortening cycle times. If we combine this with facility and pad optimization, we believe that we can materially improve the production cycle times and overall economics of our drilling opportunities in Canada, where we have an impressive 2P resource base. Turning to Gabon, as you know, we completed our 2021-2022 drilling campaign in the fourth quarter of 2022. We are currently evaluating locations and planning for our next drilling campaign at Itami and expect to complete this review this summer and will advise the market when we have more details. Also in the fourth quarter, we completed the SSO and field reconfiguration project, which is allowing us to operate more efficiently and economically while focusing operational excellence, including production uptime and enhancement in 2023 to minimise decline, including the next drilling campaign. Overall, our first quarter saw strong production levels at the high end of our guidance, driven by strong performance at the TAMI And overall, our production costs were at the lower end of our guidance. We're seeing the impact of the cost savings from the new FSO, but they have been partially offset by some higher costs from inflationary and industry supply pressures that we discussed during our last call. This has resulted in us using more diesel for a temporary period, adding about $1 million per month for OPEX for the next few months. Our second quarter production cost guidance reflects this temporary increase, but we saw no need to adjust our full year production guidance. Let me now turn to a discussion on Equatorial Guinea, another area that holds significant future potential for Valco. FALCA owns a working interest in Block P offshore Equatorial Guinea, where there are previously discovered and undeveloped resources, as well as additional exploration potential. In March 2023, we held productive meetings with the MMH and its partners in Houston. During these meetings, we finalised multiple substantive documents for Block P, which included the Venus development relating to the production sharing contract. Following our meetings in March, we continue to work towards the finalisation of documents between the partners, having completed the PSC documentation with the Ministry. We are now moving forward with the project, subject to the finalisation of JOA documentation, with a more detailed review of the drilling and top-size development of the Venus project, with the objective of reducing the overall project cost in conjunction with our partners. Following a detailed peer review, we are considering options for the drilling of all three wells, two producers and one water injector, are drilled as a single campaign, which will reduce the overall drilling costs through lower mobilization costs. We're also building detailed options for the production and evacuation facilities throughout Q2 and Q3 of 2023. Planned activity include a detailed seabed survey to identify the prime location for the development facilities. Upon completion of the JOA documentation, we plan to move $4 million into capital expenditures for 2023, but we believe that this amount will not impact our full year 2023 guidance of between $70 to $90 million. We are excited about the future at EG and we anticipate a strong, efficient and economic development of this discovery with first oil projected for 2026. Additionally, there are clear strategic benefits in further diversifying the revenue generation and country focus of our portfolio. We have a proven track record for a development of this kind, and we look forward to demonstrating these capabilities as we progress the Venus Discovery into production. In closing, there are a lot of exciting projects and developments in 2023 and moving into 2024 that will continue to help Valco grow production, reserves and value for our shareholders. I would like to thank our hardworking team who continue to operate and execute our plans. We have captured meaningful synergies of the transport acquisition already and continue to make progress towards capturing more, all while continuing to build size and scale. We are debt-free and remain firmly focused on our strategic vision of accretive growth while maximising shareholder return opportunities and operating with the highest regards towards ESG. With that, I would like to turn the call over to Ron to share our financial results.