Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- VAALCO Energy Inc (EGY, Financial) increased its adjusted EBITDA to $92.8 million in Q3 2024, contributing to a total of $227 million for the first nine months of the year.
- The company successfully completed the Svenska acquisition, which added valuable reserves and increased net proved reserves by 30%.
- VAALCO Energy Inc (EGY) maintained its commitment to returning cash to shareholders through regular quarterly dividends.
- The company achieved a significant milestone in Egypt, surpassing 2.9 million man-hours without a lost time incident, highlighting its commitment to safety.
- VAALCO Energy Inc (EGY) remains debt-free, with a strong cash position of $89.1 million at the end of Q3 2024, enabling it to fund future growth initiatives.
Negative Points
- The timing of the FPSO shutdown and sail away in Cote d'Ivoire remains uncertain, with potential impacts on production schedules.
- The company faces challenges with backdated receivables in Egypt, which could affect cash flow and working capital management.
- Production in Gabon has not seen new drilling for over a year, leading to concerns about natural production decline.
- There is a potential increase in production costs per barrel due to fewer offshore liftings expected in Q4 2024.
- The company experienced working capital outflows in each quarter of 2024, impacting free cash flow generation.
Q & A Highlights
Q: In Gabon, where do you see the natural production decline going in 2025 since it's been a year and a half since your last well completion?
A: George Maxwell, CEO: We've seen improvements in reservoir performance and reduced decline due to reconfiguration, which reduced back pressure and downtime. For 2025, we expect a decline of 7-9% and plan maintenance in Q1 before the drilling campaign starts around May or June, depending on rig availability.
Q: Does reducing the back pressure and the performance gained from that have an impact on how you booked reserves there?
A: George Maxwell, CEO: We are considering this and will complete a review in time for the CPR report in January to determine if we are underestimating the size of the tank or the recovery factor.
Q: Regarding the drilling campaign, if you start in late Q2, would you anticipate production contribution in the back half of 2025 or more in 2026?
A: George Maxwell, CEO: We will definitely start with production wells. The debate is whether to start on the Bori or ITAM side of the campaign, depending on testing and evaluation. Production wells will be at the front of the sequence.
Q: When can we expect more clarity on the timing and CapEx spend for the FBSO restart and ongoing drilling campaign in Cote d'Ivoire?
A: George Maxwell, CEO: We expect to provide a detailed project breakdown with timelines and costings late this year or early next year. We are adequately funded for the campaigns, and the FBSO sail away is confirmed for Q1.
Q: Can you explain the higher DD&A costs, as I thought Cote d'Ivoire would have lower unit DD&A?
A: Ronald Bain, CFO: The valuation of the acquisition was primarily on proven developed and producing reserves, which are amortized until the FBSO disconnect in Q1 2025. This results in higher DD&A due to accelerated depletion.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
