VAALCO Energy, Inc.

Good day and welcome to the Valco Energy first quarter 2024 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. If at any time your question has been addressed and you would like 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 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 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 will caution 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. 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 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, 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 are 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 buybacks. Let's begin our overview of Valco'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 30th, 2024. This was done very quickly and efficiently and ahead of our internal expectations. Our team travelled to Côte d'Ivoire to meet directly with the Ministry of Hydrocarbons to officially introduce Valco as a new partner on Block CI40. 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 Côte d'Ivoire Baobab field in block CI40 has strong production and reserves. We are excited to be partnering with Petrocy and CNR International and believe the Baobab field, the next phase of drilling, and the discovered yet undeveloped Kisapo field in Côte 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 Baobab FPSO project planned in 2025 and future Baobab drilling plans after we have had time to further our relationship with CNR International and get a more detailed understanding of the operator's development plans. Turning to Egypt, as we disclosed last quarter, the first half of 2024 is focused on high rate of return capital workover projects to help mitigate decline. In the first quarter, we had six workovers, including five recompletions and fracs. This work added about 800 barrels of oil per day, helping to offset natural decline. In addition to the successful workovers, I am very proud of a major milestone that we accomplished in the first quarter of 2024 in Egypt. We have gone over 1 million man hours without a lost time incident. This is a testament to our commitment to safety, training and dedication of all of our people in the field. As I mentioned on our last call, we have a 10 to 15 well building programme that we are currently evaluating for the second half of this year. This program remains contingent on completion of the program evaluation and confirmation of a drilling rig for the period. We have not included this program in our 2024 CAPEX guidance and won't add it until confirmed. However, if we proceed with the program, we anticipate additional 2024 CAPEX of approximately $18 million, which will also generate additional production. We have seen some positive announcements from the government in 2024, in particular payment of age receivables, which is very encouraging. In Canada, we successfully drilled four wells in the first quarter of 2024, all 2.75 mile lateral wells. In late March, we released the drilling rig and we began completing all four wells. We have now successfully completed all four wells and two of the wells have been unloading fluid and are coming on production with encouraging results. The other two wells are expected to be placed online within the next 14 days and all four wells contributing production by the end of the month. You can see the impact in our production and sales guidance that we put out yesterday in our press release and that Ron will review in more detail later. In addition, we are also targeting an exploration appraisal well in the third quarter of 2024 in our southern acreage. In our southern acreage, we have minimal subsurface information and this exploration well, if successful, could prove up additional long lateral wells in the future with the potential to add proved undeveloped locations. Our existing well portfolio has an increasing gas-oil ratio and the new wells will rebalance this more in favour of liquids, which contributes to the strong production performance and to our overall profitability. Turning to Gabon, 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 positive overall production results since then with strong production uptime and improved decline curves on the wells. The FSO and field reconfiguration projects in 2022 have allowed us to minimise downtime, capture efficiency and reduce overall OPEX. Looking ahead to 2025, we are actively working on the final technical and commercial aspects of our next drilling campaign at Itami. Activities are planned at the Itame, Iburi, South East Itam and North Chibwela fields. We have a planned drilling campaign of between five and seven wells that includes a mix of development and exploration wells along with a gas well for infield power requirements that will substantially reduce fuel costs in the field going forward. As discussed previously, in 2014 at the Iburi field, we encountered increasing low levels of H2S in the three oil wells after they had been on production or tested. We were able to keep the well with the lowest levels of H2S, the Iburi 2H well, on production using a chemical treatment solution, but the 3H and 4H wells were shut in due to the high H2S levels that were trending to be too high for chemical treatment to be effective. As a result, we were left with between 8 to 12 million barrels of oil as contingent resource due to H2S contamination. We are currently re-measuring the H2S concentrations in the 2H and 4H wells to validate the field's current levels and expect to complete our H2S testing in the second quarter of 2024. The testing is being done to support our modelling efforts to assess and forecast future potential H2S levels in the 2H well and also other proposed wells. We continue to look for the most cost-effective path forward to increase production at Iburi. We are reviewing two methodologies to address and sweeten the oil at Iburi, mechanical and chemical treatment going forward. Once we determine the optimal solution going forward, we plan to conduct workovers of the 2H and 4H wells, and replace the 3H well with a more optimally located well. In addition, we will test an undrilled fault block in the field with a new well. Coupled with our plans to de-risk the crude sweetening process will result in an opportunity not only to commercialise the currently stranded H2S oil at Aburi, but also to potentially add resources with an exploration well. Our ability to use our engineering knowledge and new technologies to drive lower costs and access more oil has been paramount to extending the life of the TAMI field. In the TAMI field, we have just completed a revised evaluation of the field's potential. Based on the results of this new evaluation, we identified a number of opportunities. We are planning two additional production wells at TAMI and to test a nearby exploration prospect. The exploration prospect sits within reach of the ATAMI platform, therefore the well will be drilled from the platform and if the well is successful, it will be immediately brought online as a production well. We have three slots open at the ATAMI platform, so we have the option if both of the early pilot wells are attractive and the exploration well is successful, to drill a second production well from the ATAMI main fault block, resulting in a potential third well for the ATAMI platform. We continue to spend a lot of time examining our assets, how to make them more efficient and profitable. We are expecting to spend between $30 and $40 million in long-lead items in 2024, preparing for and in anticipation of the drilling campaign. Progress on blocks G and H is ongoing. PSC negotiations are continuing between the partnership and the governing government, and we have made some encouraging progress this quarter. On March 25th, 2024, we announced the finalisation of documents in Equatorial Guinea related to the Venus Block P plan of development. The finalisation of these agreements included a carry arrangement of the partners Atlas and G-Patrol. This arrangement is on commercial terms at so far plus 7%, a total of currently 12.5%. This improves our 1P economics on those previously announced, and we have included an illustration of this in our accompanying slide deck. We will now proceed with our front-end engineering design, or feed study. We anticipate the completion of the feed study will lead to an Economic Final Investment Decision, or FID, which will enable the development of Venus. We are very excited to proceed with our plans to develop, operate and begin producing from the discovery in Block P offshore Equatorial Guinea in the next few years. and we look forward to discussing this new area of operations in more detail once the feed study is complete. We have started 2024 by delivering on or exceeding our guidance operationally and with solid financial results that have outpaced analyst expectations. We remain focused on growing production, reserves and value for our shareholders. I would like to thank our hard-working team who continue to operate and execute our plans. Over the past two years, we have greatly diversified our portfolio, which has expanded our ability to generate operational cash flow while growing our cash position and remaining bank debt-free. We are well positioned to execute the projects within our enhanced portfolio, and our proven track record of success in these past few years should instil confidence for the future. With that, I'd like to turn the call over to Ron to share our financial results.

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 seven cents per share, and $61.7 million in adjusted EBIT DAX. Both were ahead of consensus estimates. Let's turn to production and sales, which along with the realized pricing, drives our revenue. Production for the first quarter remained 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 realised 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 30th and this means that all production, sales and financial results for the assets will be incorporated into our results from May 1st 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 programme has always looked to help mitigate risk and protect our commitment to shareholder return. We have costless callers in place for 2024 and our current hedge positions were disclosed in the earnings release. Realised hedge costs in the quarter were $24,000. Turning to costs, our production costs for the first quarter of 2024 were below the low end of guidance on an absolute basis and at the bottom end of guidance on a per-barrel basis. While we remained focused on capturing synergies and keeping our costs low to enable us to maximise margins and increase our cash flow, some of the lower costs were driven by timing of projects across our assets. G and A costs were also in line with guidance. When compared to the combined G&A costs seen in 2022 by both Valco and Transglobe, we've seen meaningful reductions in costs well ahead of our target synergies. The final integration and reorganization of the business is behind us, and we have commenced a back office process improvement project with the implementation of a single cloud-based ERP across the whole company. Non-cash DD&A costs increased quarter over quarter, primarily due to year-end depletion adjustments, mostly in Egypt, that were made in the fourth quarter once we completed our reserves evaluation and 2023 CPR. Compared to the prior year, in 2023, we've seen an increase in absolute DD&A costs because of the additional investment in new wells brought online for both Egypt and in Canada in 2023. Year-on-year DD&A costs on a per-barrel basis are down 13%. In November 2023, we agreed on a protocol with the Gabonese state for a long-standing debt on TVA, together with an outstanding debt from the government-owned Sagara Refinery. This was by way of transfer of state profitable barrels to the TAMI contractors in settlement of its debts. This reduced the quantity of barrels we are holding as foreign taxes payable, and this will be settled with a state lifting of the remaining barrels in May 2024. We had no Gabonese state lifting in 2023, primarily due to the protocol agreement, but had a state lifting in 2022 of approximately 600,000 barrels. Tax costs in the first quarter of about $22.2 million resulted in an effective tax rate of about 74% in the quarter. This was higher than prior quarters and driven by both re-evaluation of tax all boroughs held for Gabon as well as some discrete permanent differences at corporate for deal costs for Svenska and an increase in our overall credit loss reserve. As I've stated before, in Gabon, our foreign income taxes are settled by the government through in-kind oil payments. At the end of each quarter, we have to mark to market the in-kind oil. So in general, when prices rise, it has a negative impact to our accrued taxes, and if prices fall, we see a benefit, thus reducing our tax liability. We cannot control the movement of the underlying commodity price to which this in-kind oil is marked to. We continue to guide that 60% to 65% effective tax rate is the correct effective tax rate over the long term, excluding discrete items. Turning now to the balance sheet and cash flow statement. Unrestricted cash was down slightly to $113 million as of March 31, 2024. Also, in April, we used about $40 million of this cash to fund the Svenska acquisition. In the last call, we discussed likely working capital movements, some of which occurred in the fourth quarter of 2023 related to the reduction in accounts payable associated with the 2023 capital programme. In the first quarter of 2024, we experienced a small decrease in Egyptian accounts receivable. We sold all production as domestic sales in the first quarter, but we also had multiple offsets including our annual modernisation payment. The 10 million annual modernisation payment was negotiated as an offset against EGPC accounts receivable. We also had cash collections and other available EGPC sister company offsets, more than recovering a full quarter of domestic sales. Additionally, in Q1, we had certain annual cash payments that tend to be paid early in the new year, including our domestic market obligation in Gabon and our annual energy package insurance renewal and annual staff costs. Finally, as part of being a responsible operator and a community partner in Gabon, we are executing on community engagement projects sanctioned by the PSE that were previously accrued. These items also reduce cash in the first quarter of 2024. With that said, we are pleased that the Egyptian government has made a concerted effort to reduce its backdated billed payables. In the first quarter, it reduced its backdated billed payables with Valco by about 25% of its agreed outstanding age receivables as of the 31st of December, 2023. As has been the case since the third quarter of 2018, we are carrying no bank debt and have credit facilities available to utilize for additional accretive acquisition opportunities continue to build value. In Q1, 2024, Valco paid a quarterly cash dividend of 6.25 cents per common share, or $6.5 million, and our share buyback was about $5.5 million, over $12 million in shareholder returns in the quarter. We also announced the second dividend payment of the year, which will be paid in June. Let me now turn to guidance, where I will give you some key highlights and updates. I want to remind you that guidance now includes a recently closed Svenska acquisition for the second quarter and for the full year 2024. Also, our full guidance breakout is in the earnings release under our supplemental slide deck on our website with production breakout of both working interest and net revenue interest. For the total company, we are forecasting Q2 2024 production to be between 23,800 and 27,000 working interest barrels of oil equivalent per day, and between 19,000 and 21,800 net revenue interest barrels of oil equivalent per day. This is up significantly from the first quarter due to the Svenska acquisition, expected new wells in Canada and slightly offset by natural decline. For the full year 2024, we're now forecasting our total company production to be between 23,600 and 26,500 work and interest barrels of oil equivalent per day, and between 18,900 and 21,400 net revenue interest barrels of oil equivalent per day. Looking at production by asset, we're expecting natural decline in Gabon and Egypt, although we do have a capital workover program in Egypt in the first half of 2024 that should help mitigate decline. In Canada, as I mentioned, we expect year-over-year growth from our drilling campaign, and in Côte d'Ivoire, we're reflecting operations from May through to December in our full year numbers. For the second quarter and for full year 2024, we're assuming our sales will be more or less in line with our production. In Gabon, we're expecting two liftings in the quarter, with one of them being a government lifting. The government lifting flows through our sales and is offset by settling the accrued tax liability that we're holding on the balance sheet. It's net cash neutral for Valco in the quarter. Our absolute operating costs are expected to go up with the Svenska addition, but we are projecting our per barrel of oil equivalent range to decrease due to the Svenska volume. We're also expecting small increases in absolute G&A as we noted previously. Finally, looking at our CAPEX, our 2024 capital spend has increased to be between 115 and 140 million as we prepare for the 2025 Svenska FPSO change-out, the anticipated next drilling campaigns in both Gabon, Ivory Coast and the Canadian 2024 drilling programme. For the second quarter, we're expecting a range of between $30 million and $50 million for our CapEx. In closing, despite our recent strong stock price performance, we believe that we continue to trade at a low multiple of EBITDAX, despite having a driven yield and being bank debt-free. With the Svenska acquisition, we are forecasting a meaningful increase in production and sales, which should also increase our ability to generate adjusted EBITDAX and operational cash flow in 2024. We are very well positioned to execute and fund a CAPEX program across multiple producing assets over the next several years. With that, I will now turn the call back over to George.

Thanks, Ron. We will continue to execute our strategy focused on operating efficiently, investing prudently, maximising 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 the drilling campaign at Atami, and we are progressing the feed study in Equatorial Guinea and optimising production while executing workovers in Egypt. Our entire organisation is actively working to deliver sustainable growth and strong results. I believe we have gained credibility over the past two 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 back debt and an even stronger portfolio of producing assets with future potential upside. In addition to funding our capital programme, 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 25 cents per share annual dividend for 2024, matching what we paid out in 2023, which at our current share price is a dividend yield of about 4.5%. As Ron discussed, our 2024 guidance now has the Svenska acquisition incorporated, but I want to reiterate that the second quarter only has two months of Svenska Incorporated and the full year only eight months due to the April 30th closing date. Regardless, this highly accretive acquisition will materially increase our operational and financial results. Before I open up the call to questions, I would like to point out that as part of our commitment to environmental stewardship, social awareness and good corporate governance, We have made a concerted effort in addressing and improving our ESG transparency and reporting, which can be seen in the sustainability report that we published in April 2024. During 2023, we greatly enhanced our leadership team, appointing new group-level heads of functions to centralise accountability and set global standards, processes and plans for the business that align with industry best practices. Furthermore, the appointment of a Director of Sustainability and Regulatory Reporting has enabled a holistic approach to ESG management, performance and disclosure. This sustainability report represents our most detailed report in accordance with the Task Force on Climate-Related Financial Disclosures, TCFD, to date, including assessment of the business resilience and impact of physical climate risk. As we continue to drive our decarbonisation programme, we are pleased to report a 19% reduction in scope 1 emissions from the previous year. The 2023 sustainability report is available on our website under the sustainability tab. We are truly excited about the future and Valco now has multiple producing areas and future prospects that have completely diversified our risk profile and our sources of income. Even though we have been highly successful over the past two years developing and growing our assets, we remain disciplined in our approach to maximizing value for our shareholders by delivering growth in production, reserves, and cash flow. Thank you, and with that, operator, we're ready to take questions.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question is from Chris Wheaton with Stifel. Please go ahead.

Thank you very much. Good afternoon or good morning, guys. Thank you very much indeed for the call today. I know Al said only one question. I'll do one question in two parts maybe. Firstly, could you perhaps outline a bit more the 40 million or so dealt to the CapEx in the year? How much that breaks down between additional spending on Canada, 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 question. Thank you.

Thanks, Chris. This is 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 fifth well in Canada in the southern part of the Hamilton 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 also 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 realisation between Q1 and Q4. The first part, I would say, it's got nothing to do with the related payments. The related payments, 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. We were also party to that. We got about 25% of our range receivables as of the 31st of December on their books page. So that was the first thing. The second thing in relation to the average realized price, it did come down about 11 bucks. In Q4, Effectively, we sold domestically, but domestically in Egypt, there was cargo that EGPC had. So that was obviously within the price that everyone was provided. In Q1, we basically are in the situation where they're utilizing the blend now for the refineries locally. So they've been trialing that out. And that was the market price domestically to those refineries. So that's really the difference in pricing. It's down about 11 bucks quarter and a 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 forthcoming quarters? Or is it still going to be dependent on that mix of domestic versus international sales?

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

The next question is from Stefan Foucault with Octus Advisors. Please go ahead.

Good morning, guys. Thanks for taking my question. The question is on Côte 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 about something similar than we have today? Double, so that sort of magnitude. And likewise, also an order of magnitude of the capex in between. Again, it's two other cents. So that's my first question. My second question is also in Côte d'Ivoire. Now that the transaction is closed, I was wondering whether you could provide some further detail on the fiscal term you're exposed to. So I think Looking at CNR, it looks like the royalty is 9%. But I was wondering whether you pay the 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. Thank you.

Thanks, Stefan. 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 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 an understanding of both the timelines 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.

Stefan, it's Ron. I'll take the second part of your question, if I heard you correctly, on the physical 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. Okay. Thank you.

Again, if you have a question, please press star then 1. The next question is from Bill Duzzlem with Eaton Capital. Please go ahead.

Thank you. That's Cuyahoga Capital. May I start with also, 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?

Thanks, Bill. 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 three years demonstrates the market that we're serious about the growth opportunities for this company and where we're taking it. Of course, there are many, many transactions around 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.

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

Yeah, of course I will. 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&H, the activity levels in the last six to eight 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 will come to 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 10K 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. Since there has been obviously, as everyone's aware, 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 yeah, there is a lot more activity with the governmental institutions in the last six months than perhaps we'd seen previously.

Great, thank you. And 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 timeline, if you would, please?

Yeah, I can do that. So Obviously, 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 Valco in that process. So in that timeline, we'd always plan from the plan of development to then go into a detailed engineering study. And there's two 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 timeline 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 sink. And that's certainly part of the plan for the feed study. We estimate to get there would take us about eight to ten 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. As equipment and as the industrial environment changes around us, feed studies are always 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.

Great. Thank you, and appreciate you letting me ask more than a couple questions. That's great, Bill.

Next, we have a follow-up question from Stefan Foucault with Octus Advisors. Go right ahead, please.

Thank you. It's a bit of a follow-on on the question from Bill about acquisition and cash available. So, what you are would be capex-intensive for the coming years, but I guess EG as well. So, how are you thinking about cash deployment cash resources in the context of Prop 2, very large projects having to be developed at the same time.

Hi, Stefan. Yeah, if I got your question clearly, sorry, your line's a little bit vague. Basically, obviously operating cash flow for us this year before FBSO goes off station, our operating cash flows should be strong between now and the end of the year. Yeah, we've 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. You know, we've got a facility in place, but we're looking, you know, we're three 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 utilised, 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 cap expense. So that's what we're looking at, Steph. I can't really go into the detail of that at the moment. We're still working with those institutions.

Thank you. Operator, I have a question that I received by email that I'm opposed 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 were coming online soon?

Yes, I can answer that. So the drilling program completed, the completions program has completed the first two wells. Actually, the first three wells are online. Two 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 two wells that are stabilized are above tight curves. The third well is still in cleanup, and the fourth well we'll know a bit more in about a week.

Okay. Thank you, Thor. Operator?

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 I'm very pleased to be parted to another successful set of results for Q1 where the companies 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 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.

Yes, we do have one more question from Charlie Sharp with Canaccord. Please go ahead.

Gentlemen, I do apologize. I had some phone problems, so I had to redial. 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, one or two 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 if 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 will be far more compelling. 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. You know, we've got a number of things going on. As you know, you get this liquidity problem. This liquidity issue is certainly improving. You know, you saw the World Bank, you saw the land sales that they had, the UE, 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 of 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. Obviously, we're working with the 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 two workover units working effectively through the next three months. Regardless of the discussion on the drilling campaign, two 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's very helpful. Thank you.

Okay, I think that was your last question, correct?

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