Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VAALCO Energy Inc (EGY, Financial) reported strong operational and financial results for the first quarter of 2024, including robust earnings and adjusted EBITDA.
- The company successfully closed the Svenska acquisition ahead of schedule, which is expected to be highly accretive and enhance shareholder value.
- VAALCO Energy Inc (EGY) returned over $12 million to shareholders through dividends and buybacks in Q1 2024.
- The company has maintained a strong safety record, achieving over 1 million man-hours without a lost-time incident in Egypt.
- VAALCO Energy Inc (EGY) has a diversified portfolio and is bank debt-free, positioning it well for future growth and operational cash flow generation.
Negative Points
- The company faces challenges with the H2S contamination in the Etame field, which has left 8 to 12 million barrels of oil as contingent resources.
- VAALCO Energy Inc (EGY) has not yet included a potential 10 to 15 well drilling program in its 2024 CapEx guidance, pending rig confirmation and program evaluation.
- The company experienced a higher effective tax rate of about 74% in the quarter, driven by revaluation of tax allowances and discrete permanent differences.
- VAALCO Energy Inc (EGY) is dealing with uncertainties in Egypt, including low oil price realizations and the need for significant workovers to mitigate production decline.
- There are ongoing negotiations and unresolved issues with the BW consortium, which have not seen significant movement, affecting project timelines.
Q & A Highlights
Q: Could you outline the EUR 40 million delta in CapEx for the year and how it breaks down between additional spending in Canada and Cote d'Ivoire?
A: (George Maxwell - CEO) The increase in CapEx is due to a fifth well in Canada to increase reserves, the FEED study for Equatorial Guinea, and potential drilling in Phase five at Bell Bob. The main parts are the FPSO requirements and the potential drilling program.
Q: Why were Egyptian oil price realizations low this quarter?
A: (Ronald Bain - CFO) The lower price realization was due to domestic sales within Egypt, where a new blend for local refineries was trialed, resulting in a lower market price domestically.
Q: What is the order of magnitude prediction for production when operations resume in Cote d'Ivoire in 2026?
A: (George Maxwell - CEO) It's too early to provide specific projections as discussions with the operator are still needed to understand timelines and projections. There might be flush production post-refurbishment, but detailed subsurface analysis is required.
Q: When are you ready for the next acquisition, and what does the pipeline look like?
A: (George Maxwell - CEO) The focus is on maximizing opportunities from the current portfolio before considering new acquisitions. However, the industry always offers a steady pipeline of opportunities, which are continuously evaluated.
Q: Could you update us on the BW consortium?
A: (George Maxwell - CEO) There has been no significant movement, but discussions with partners and the DGH are ongoing, with recent intensified activities and meetings.
Q: What might make you commit to the second half workover program in Egypt?
A: (George Maxwell - CEO) The key factor is securing a drilling rig and availability of equipment. If these contingencies are met, the campaign will proceed as it will add production and improve economic returns.
Q: How are you managing capital allocation given the range of projects, especially with the uncertainties in Egypt?
A: (Ronald Bain - CFO) The situation in Egypt is improving, and a second workover unit will be brought in to help arrest production decline. The focus remains on optimizing returns and managing capital efficiently across all projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
