VAALCO Energy, Inc.

Good morning and welcome to the Valco Energy fourth quarter 2023 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, you may press star then one on your telephone keypad. 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, Operator. Welcome to Valco Energy's fourth quarter and full year 2023 conference call. After I cover the forward-looking statements, George Maxwell, our CEO, will review key highlights of the fourth quarter and full year 2023. 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 asked 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 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. BALCO 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 file with the SEC, including our Form 10-K. Please note that this conference call is being recorded. Let me now turn the call over to George.

Thank you, Al. Good morning, everyone, and welcome to our fourth quarter and full year 2023 earnings conference call. I am very pleased with our ability to deliver exceptional operational and financial results in 2023, exceeding our guidance and expectations following the translobe combination that occurred in late 2022. Our focus has been on optimising production, managing our costs and capturing operational and cost synergies, all while executing capital drilling campaigns to enhance profitability and growth. Through the execution of this strategy, we have significantly grown our cash position, while fully funding our capital programme, shareholder dividends and buybacks, all while remaining bank debt free. We returned over $50 million to shareholders in 2023 through dividends and buybacks. And in 2024, we have already announced an acquisition that will utilize a portion of that $121 million in cash on the balance sheet to add 4,500 working interest barrels per day and 13 million barrels of 1P working interest CPR reserves. Before I go into more detail on our many accomplishments over the past year and upcoming 2024 key items, let me first summarise some high-level financial and operational results that led to a record-breaking year. We grew production by 83% year-over-year, which helped us deliver record-breaking adjusted EBITDAX of $218 million in 2023. This was a 50% increase over 2022 despite a 26% decrease in realised commodity pricing. Our record production levels were driven by our successful drilling campaign programmes in Egypt and Canada as well as high operational uptime in Gabon. At mid-year, we increased our production guidance given the strong performance that we had experienced in the first half of 2023 and we finished the year at the top end of our increased production guidance with 18,710 NRI barrels of oil equivalent per day or 23,946 barrels on a working interest basis. The diversity of our asset base has allowed us to grow and generate significant operational cash flow to fund our activities. In 2023, we generated almost $120 million in free cash flow and returned over $50 million of that free cash flow back to shareholders through dividends and buybacks. After fully funding our capital program and paying dividends and buyback, we grew unrestricted cash to over $120 million at the end of 2023. We have positive momentum as we enter 2024, both operationally and financially. and we are building size, scale and profitability to sustainably grow Valco. We recently announced an accretive all-cash acquisition of Civenska that expands our diversified portfolio of assets to include offshore Côte d'Ivoire. Let's begin our overview of Valco's assets with the new acquisition. A few weeks ago, we announced that we were acquiring Civenska Petroleum Exploration in an all-cash deal with no issuance of debt or equity. The gross purchase price of $66.5 million has an effective date of October 1, 2023 and is subject to customary closing adjustments. We believe that the net cash we will need to pay at closing, which we expect to occur in the second quarter of 2024, will be between $30 and $40 million. We are adding an asset with strong current production and reserves at a very attractive price. This acquisition is highly accretive on key metrics to our shareholder base and provides another strong asset to support future growth. It provides us with additional diversification and strategically expands our West African focus area. The Côte d'Ivoire Baobab field in Block CI40 has strong production of about 4,500 working interest barrel of oil equivalent and is 99% oil. The 1p working interest CPR reserves from this proven producing asset are 13 million barrels at October 1, 2023, and the 2p working interest CPR reserves are 21.7 million barrels. We are very excited about the significant organic upside opportunity that is well defined in the potential 2026 drilling campaign at Baobab and the future Kisapo development opportunity. The Baobab field has many parallels with the TAMI in terms of the historic production profile and how the upside is realised through development drilling campaigns, meaning this is an asset type that we understand well. The field has been significantly de-risked through the drilling of 24 production wells, 5 injection wells and a near 20 year production history. The planned dry docking and upgrading of the FPSO in 2025 will position the field for the expected production growth from the potential 2026 drilling programme and for future drilling campaigns for many years to come. We are partnering with a great operator and believe our significant development experience offshore West Africa and the successful managing of our FPSO changeover in 2022 will provide insight and experience to help enhance future success at Beobab. This acquisition contributes to our ability to generate sustainable cash flow for many years and provides another producing asset base that should enhance our ability to continue to return cash to shareholders. As some condition precedents remain outstanding, we have not included production from Svenska in our 2024 guidance or any capital expenditures in our 2024 capital budget. Turning to Egypt, our 2023 drilling campaign saw some very positive results. We completed our 2023 campaign faster and at lower cost than we originally planned, which allowed us to increase the drilling programme from the original 2023 budgeted position. We finalised the last well in the programme in October, and in 2023 we drilled 18 vertical wells, including one injector well and two exploration wells, as well as a horizontal well. Overall, we had a very economic drilling program with strong production performance, and we are very pleased with our drilling performance in 2023. On the vertical wells, we are seeing significantly faster drilling performance, moving from a 2022 average of about three wells drilled every four months to now drilling two wells per month, which is a 60% reduction in cycle times. By drilling the wells faster, we are cutting costs meaningfully and improving the economics of our wells in Egypt. In addition to the drilling efficiencies, we have also spent time and effort in Egypt reviewing the facilities and overall production operations. These efforts resulted in increased production, lower costs and better safety and environmental performance in Egypt. In addition, we achieved a major milestone in the first quarter of 2024 with 1 million man-hours without a lost time incident. The improvement in process flow and the drilling program resulted in SEC 1P additions of 4.8 million barrels on an NRI basis. As we look to 2024, we are currently planning to reduce capital spend as we evaluate a potential drilling program. We are focusing on the first half of the year on capital workovers that are forecasted to offset decline rates for the first half of this year. We have a 10 to 15 well drilling program that we are currently evaluating for the second half of the year. This program remains contingent on completion of the program evaluation and confirmation of a drilling rig for this period. We have not included this program within our firm CAPEX guidance until confirmed. However, if successful, we anticipate additional CAPEX of approximately $18 million, which will also generate additional production. The macroeconomic position in Egypt has seen some headwinds recently. However, we have seen some positive announcements from the government over the past few weeks, which are encouraging. In Canada, we drilled two wells in the first quarter of 2023, a 1.5-mile lateral and a 3-mile lateral. Both wells were drilled and completed safely and cost-effectively without incident. The wells were tied in and equipped in April and early May with overall cycle times that were significantly less than historical cycle times. The wells began flowing in May with good production rates and in early July the pump and rods were run on both wells. Both wells' initial production rates exceeded expectations and we are now continuing to produce at slightly above the expected type curves. Canada set a production record for us in 2023 by eclipsing 3,000 barrels per day working equivalent and working interest in Q2. Another reason we performed so well in Canada and exceeded our production targets. We are using the results and learnings from our 2023 drilling and completions programme to enhance our 2024 drilling. We believe that to better optimise our Canadian prospects going forward, we will move to 2.5 and 3-mile laterals almost exclusively, which we believe will further improve the economics of our development programme. In addition, we have optimised facilities and pads while also refining our completion technique. We have continued to add acreage around their existing land footprint to help extend the lateral length of our wells. We had a small increase in year-end proved reserves in Canada tied to additional proved undeveloped locations from these acquisitions. In the first half of 2024, we are drilling four wells in the northern part of our lease holdings that are 2.5 and 3-mile laterals and anticipate having them all completed and flowing in the second quarter. In addition, We are also targeting an exploration appraisal well in the south after completing these development wells. This should provide a strong production boost in Canada, and as you can see from our guidance, we expect our production in Canada to increase in 2024. Our Canadian assets continue to produce strong production and contribute to our overall ability to generate strong operational cash flow. Turning to Gabon. As you know, we completed a previous drilling campaign in the fourth quarter of 2022 and invested only minimal capex dollars in Gabon in 2023, primarily related to maintenance capex and long lead drilling equipment. We have seen strong overall production results in 2023 through reduced maintenance requirements and improved decline curves on the wells. The FSO and field reconfiguration projects in 2022 have allowed us to capture the efficiency and OPEC savings in the full year 2023, while enhancing production uptime and minimising field decline prior to the next drilling campaign. Looking at 2024 and into 2025, we are preparing for our next drilling campaign at Atami. We initially have planned a three to four well campaign in Gabon with a mix of development, appraisal wells, and a gas well for infield power requirements. We also initiated a review of an Iburi field with a view to development opportunities to drill additional wells and workovers, which will target between 8 to 12 million barrels of oil. This is currently in our 1C and 2C reserve numbers. This will require some enhancements of the Iburi platform to handle crude sweetening equipment. Our engineering and subsurface plans are nearing completion to allow a move towards FID later this year, which if approved will enhance the planned drilling programme in Gabon. Some technical and regulatory approvals are still to be obtained in addition to completing the evaluation and we will provide a further update on this exciting project when we confirm the scope and timing of our Gabon drilling programme. We're expecting to spend between $30 and $40 million in long lead items in 2024, preparing for and in anticipation of the drilling campaign. Turning to blocks G and H, we held some discussions with our partners and have made some encouraging progress this quarter and plan to move towards further discussions and negotiations in the second quarter of this year, where we will provide a further update. On Equatorial Guinea, Efforts have continued and have intensified to finalise the JOA with our partners. I am pleased to say that we have only some confirmatory details remaining outstanding and upon receipt we expect to move this project into firm capex feed study in the very near future. Turning to reserves, we are very pleased with the growth of our SEC approved reserve base despite a significant decline in pricing. Our positive reserve revisions due to positive field performance in Gabon and drilling results in Egypt and Canada, coupled with the reserves added with some land purchases in Canada, helped to more than offset production and downward pricing. SEC-approved reserves at year-end increased by 3% to 28.6 million barrels of oil equivalent. The lower SEC pricing impacted our PV10 values for 2023 despite the slight increase in 1p barrels. Overall, our PV10 decreased 45% from $624 million to $342 million. Our 2P CPR estimate, which includes proven and probable reserves using Valco's management assumptions for future pricing and costs, reported on our working interest basis prior to deductions for government royalties, saw a year-over-year increase of 1% to 77.3 million barrels of oil equivalent. Once again, strong operational performance and reserves additions outweighed the impact of lower pricing and production. The 2P CPR NPV10 value was impacted mainly by pricing and cost inflation, as we saw a 23% decrease to $631 million at year-end 2023. In closing, we delivered outstanding results in 2023 and I'm excited about 2024 and beyond. We are focused on growing production, reserves and value for our shareholders. We have delivered significant shareholder returns during 2023 and have retained a strong balance sheet. I would like to thank our hard-working team who continue to operate and execute our plans. We are bank 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.