VAALCO Energy, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Valco Energy third quarter 2024 conference call. During today's call, all parties will be in a listen-only mode. And following the company's prepared comments, the call will be open for questions and answers. During the question and answer session, we ask that you please limit yourself to one question and one follow-up. You may rejoin the queue if you have additional questions. 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, and welcome to Valco Energy's third quarter 2024 conference call. After I cover the forward-looking statements, George Maxwell, our CEO, will review key highlights of the third 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 section, We ask you limit your questions to one and a follow-up. You can always reenter the queue with additional questions. I would 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. Zalco 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 turn the call over to George.

Thank you, Chris. Good morning, everyone, and welcome to our third quarter 2024 earnings conference call. For the past two years, we have met or exceeded our quarterly production guidance, leading to consistently strong operational and financial results, including net income, adjusted EBITDAX, and cash flow generation. Retaining operational excellence and consistent production across our portfolio is essential to expanding adjusted EBITDAX, which will enable us to fund organic growth initiatives and position us as a larger player in the industry. We are executing at a high level and continue to deliver results in line with or above our guidance. In the third quarter, we experienced quarterly results that fully incorporated the Svenska acquisition, which occurred at the end of April. For Q3, we increased our adjusted EBITDAX to $92.8 million and through the first nine months of 2024 have delivered $227 million of adjusted EBITDAX. We sustained our commitment to returning cash to shareholders in Q3 2024 through our regular quarterly dividend and have also announced the dividend for Q4. I would now like to go through and give a quick update on our diverse portfolio of high-quality assets, beginning with our newest asset in Cote d'Ivoire. We swiftly and efficiently completed the Svenska acquisition in April 2024, securing a valuable asset with reserves surpassing our initial expectations, all at a highly attractive price. Based on the results of our third party reserves engineers, we have SEC net proved reserves as of year end 2023 of 16.9 million barrels of oil equivalent, with 93% being oil. Our previous 1P working interest CPR reserves were 13 million barrels of oil equivalent. This 30% increase in reserves further justifies the acquisition and improves the metrics associated with the purchase. In Q3, we had three shared liftings in Côte d'Ivoire, driving our total VALCO sales 20% higher overall versus Q2. The timing of the FPSO shutdown and sale away remains scheduled for Q1, with these plans now becoming more firm as we move closer to the shutdown-targeted dates. We are collaborating with our operator at Cote d'Ivoire and will provide additional information on the Baobab FPSO project and future drilling plans when we issue our 2025 guidance in Q1. Turning to Canada, we successfully drilled four wells in the first quarter of 2024, completed these wells in March and April, and brought the wells online. As a reminder, we drilled longer laterals to improve the economics of the program, and all four wells are 2.75-mile laterals. We are very pleased with the production results from our drilling program, and as you can see that in the production mix in Canada. In Q1, our Canadian production was about 60% liquids, and in Q2 and Q3, our Canadian production was approximately 75% liquids from the new wells coming online with a lower GOR. This strong oil production has rebalanced production in Canada more in favour of liquids, which contributes to the strong production performance and our overall profitability. As the wells continue to produce, they are in line with our type serve and we are optimistic about the future drilling potential in Canada. As I mentioned in the last call, we are also currently drilling an exploration appraisal well in the southern acreage, for which we hope to have results prior to year-end. In our southern acreage, we have minimal horizontal 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. In Egypt, as we disclosed last quarter, our focus in 2024 has been on high rate of return capital work over projects to help mitigate decline. As you have seen in the earnings release, we had three re-completions in the third quarter. In addition to the successful workovers, I am proud of a major milestone that we accomplished in Egypt. We have gone over 2.9 million man-hours without a lost time incident this year. This is a testament to our commitment to safety, training and dedication of all of our people in the operation. As I mentioned in the last call, we have a 10 to 15 well programme and in the fourth quarter, We have contracted the rig and will commence at least two of these wells this year. We expect to drill and complete at least a single well prior to year end and complete the drilling of the second well. However, the second well is not expected to provide production until January 2025. We continue to engage with the Ministry and EGPC on the backdated receivables issue. We are balancing our working capital position between a limited but necessary drilling programme with the indication from EGPC of a programme to address the backdated position. We also plan to fracture one of our wells in South Gazalat in the Western Desert late in the fourth quarter. Results will be available in Q1 2025 and, if encouraging, will have a positive impact on our development opportunities in this area for the future. Moving to Gabon, given that we haven't drilled a well in Gabon for over a year, We are pleased with the positive overall production results 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. Currently, despite not initiating the planned drilling in 2024, our production guidance remains firm for the year, which is a testament to the quality of the Italian field and how the reservoir has positively responded to the reconfiguration. Looking ahead to 2025, as I stated last quarter, we initiated a bidding process for the 2025 growing program. We're almost complete on the bid evaluation and contractor selection. It is intended that we will announce results of this evaluation in the very near future. However, I can confirm that the timing of this project remains on schedule for mid-2025. Since our last communication, we have continued to review the well sequencing of the program and the testing of the Iburi shut-in wells. When finalized, this will provide greater analysis for the equipment selection required for the Iburi wells and the timing of the wells within the program sequence. The other planned wells, two infill wells within Itamie, a gas well and an exploration well, remain in the plan. This is in addition to the potential of a small workover program at Itamie. We will provide more detail on CAPEX and volumes when we present our 2025 budget and guidance. Our expected CAPEX spend for 2024 on long lead items remains, as previously noted, between $30 and $40 million. Regarding blocks G and H recently, the Government of Gabon signed these PSEs for exploration blocks, which they requested be renamed Niossi Marine and Gaduma Ravines. This follows the Technical Provisional Award announced in October 2021 granting Valco a 37.5% non-operating working interest with BW Energy as operator, also holding a 37.5% working interest, and Panoro Energy as a non-operating joint owner with a 25% working interest. Given the proximity of these blocks to the prolific producing fields of Itami and Disipu, we are excited to begin working with our partners to begin examining the possibilities for these blocks. In Equatorial Guinea in March 2024, we announced the finalization of the documents related to the Venus Block P plan of development. This summer, we began our front-end engineering design, or FEED study. We anticipate the completion of this 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 over the next few years. We look forward to discussing this new area of operations in more detail once the FEED study is complete. Throughout 2024, we have delivered on or exceeded our guidance operationally, and our solid financial results continue to outpace analysts' expectations. We remain focused on growing production reserves and value for our shareholders. I would like to thank our hardworking team who continue to operate and execute our plans. Over the past two years, we have significantly diversified our portfolio, enhancing our capacity to generate operational cash flow and adjusted EBITDAX, return capital to shareholders, grow our cash reserves while maintaining a bank debt-free position. We are well positioned to execute the project in our enhanced portfolio and our proven track record of success these past two years should instil confidence for our future. With that, I would like to turn the call over to Ron to share our financial results. Thank you, George.