EGY - Earnings call transcript Q3 2017

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Operator

Good morning. My name is Jennifer, and I will be your conference operator today. At this time, I would like to welcome everyone to the VAALCO Energy Third Quarter Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Liz Prochnow, Chief Accounting Officer. Ma'am, you may begin.

Elizabeth Prochnow

operator. Thanks, of conference I third call operating financial behalf you all quarter management and today's to to performance. the on welcome team, of XXXX And review VAALCO's Executive statements, third financial the along review. more Officer, with Patman, Bounds, forward-looking will highlights Phil quarter, the results; Chief cover review key I our After in-depth Chief our Officer, operating then will of a Cary Financial provide comments before will we your Cary some then for questions. closing return take posted like additional to be investor point and [Operator an Instructions] we this has updated on that that updated I financial website our would helpful. should deck out comparisons guidance morning that analysis, With that, comments. statement forward-looking proceed let with our me

During is making not that the company is the We a this statement any will call, of historical statement forward-looking forward-looking a course statement. fact be caution of conference statements. you that

future otherwise. a in those on subject we completion VAALCO will historical based and developments are Statements are forward-looking uncertainties, many parties, capital alternatives, Accordingly, a this Form you guarantees and should in or in are statements. assumptions, occur Commission, other being it or results are that the call are future statements. those which and to are and any forward-looking new VAALCO's conditions, with yesterday future call statements. statements of statements from result XXXX activities, factors expected based or conference that of current of that the in Such to disclaims forward-looking beyond are previously or with events believes trends, control. statements, materially made and Please future governments expected reports appropriate any concerning intention performance the whether the or obligation developments are in its risks These statements update experience, proposed not XX-K. reliance liquidity, assumptions quarter may revise These VAALCO by of the including of differ projected circumstances. events made VAALCO's address are expectations, future other or on release Securities anticipates information, expenditures, that forward-looking number expects, perception and future this developments operations. not XX-Q Exchange future growth strategic believes or and yesterday's VAALCO Form sources those other negotiations of funding the plans, drilling actual statements that activities, on during Forward-looking recorded. Investors may cautioned evaluations, reserve forward-looking and the capital file and place undue filed was filed note risks and conference third described press and as is third

turn me Cary. Let call to the over

Cary Bounds

to Thank you, good third quarter XXXX and our morning, Liz, call. everyone, conference earnings welcome

during financial quarter included delivered $XXX,XXX, million overcame at high-end quarter loss the of During loss solid the $X.X to we and comprised settlement of averaged challenges day of $X.X loss, third of reported related a of of third of Production range barrels operational guidance for the per day barrels X,XXX which oil to oil was the of X,XXX our per X,XXX XXXX, from results. realized puts continuing gain. We of $X.X small a was million which the mark-to-market of net. which and quarter XXXX, operations non-cash a million net,

of of million. $X.X More EBITDAX importantly, million adjusted income we generated operating and $X.X

was sales the of I second will a second VAALCO's go Avouma spend financial Our minutes in detail of total downtime July decreased barrels from platform. operational Bill higher of was oil turnaround asset quarter in due the and maintenance the near-term in XXXX. results to inspection we completed operational in at field per few work environmental primarily events, results with X-day integrity to to ESP third field in maintenance in and In days, primarily XX% Etame. results. quarter entire for production day and Etame are day plant were the costs regarding XXXX the planned The the X,XXX maintenance was failure undertook and expand be FPSO or and associated quarter on inspection maintenance our results planned to third the continue the safety facilities the and annual third X,XXX July; work more volumes at Avouma decline. our for next and few quarter of programs good will no effective. with order reviewing lower and the confirms barrels of natural platforms our recent six shutdown XXXX, XXXX The our per of due minutes Etame adverse quarter turnarounds unexpected in while of the the our coal into offline and that This then July, field and down incidents. our four working oil from

downtime. integrity unplanned minimizing programs maximize help asset our on production focus to continue to will We by

that The ESP mid-XXXX. As the in X-H we or our X,XX XXX oil in of ESP submersible platform Tchibala day prior experiencing which replace gross. restore of shut-in. day resulting gross to per failure. producing day barrels was well oil company. the well day production VAALCO an operations rate South approximately on year-end. the the Avouma Tchibala X-HB, the on ESP shut-in. to per begin South to in barrels over improvement in temporally X,XXX or prior underway the and production South the per oil after approximately work temporally the Operations per to system Tchibala Tchibala to well-being well Tchibala platform gross well of the ESP well company day the hydraulic per barrels was X,XXX mentioned prior and as X-HB XXX October The the on also oil gross call, oil pump in system the and versus the net barrels Avouma unit shut-in of approximately to to producing the producing failed, work electric of South or the to net of moved last mobilized of well was South in is X-H successfully the in an over work being over failure was well ESP are oil an the barrels barrels ESP failure X-H well completed was This the to Prior replace the day per X-HB as XXX

fourth for recently and restored account of Now the production minutes production into restoring I will South the about Taking timing a from Tchibala X-HB and year. talking full spend and the X-H few decline the natural well production guidance Tchibala South quarter well.

range production of barrels in net. XXXX, to the of per X,XXX the our of For X,XXX to fourth be quarter expect oil day we

Given XXXX the the first strong account nine into remaining overall quarter. months production of taking the we have in and

Later XXXX full guidance previous guidance of X,XXX of our X,XXX the X,XXX towards narrowing range per X,XXX are our near-term believe of day. will to reserves barrels high-end at barrels discuss add of oil and call, value to to opportunities includes We from our production year day per the Etame company. which that oil the growth in I we objectives, development can our at potential

to million production the primarily in planned $XX.X costs quarter absolute XXXX. let our costs, XXXX, excluding in expenses. from asset increase third quarter the cost increase second to from in was increase production third production $X.X the in production to The related with million contributed quarter review expense Total $XX.XX sales in XXXX. and in of BOE per the Now initiatives, of second BOE integrity of turnaround of an the of XXXX have expense $XX.XX work in maintenance declines due to coupled per the unit BOE to increased quarter per up over additional me our costs

capital for operational for million at Our is and that remained small projects. approximately enhancement expectations XXXX $X earmarked

over remains key to to goal enhancing by of and our our financial results. every that, cash Phil discuss to I to business minimizing will capturing costs. Our a operational dedicated we continuing in the commitment turn With flows aspect savings are call

Philip Patman

you, everyone. good Thank Cary, morning,

third Our from $X.X million. and income XXXX was $X.X Adjusted continuing quarter $X.X totaled operating operations million EBITDAX million. was loss

loss XXXX, included comprised which non-cash $X.X settlement puts loss third at Our a a million was the the net of other mark-to-market of quarter realized QX million $X.X $X.X during gain. of related XXXX a to loss and million

primarily reported For continuing the the was as continuing planned decreased main loss, the XXXX revenue, the from volume was operations the caused driver second the to expense and related from of quarter field the income company failure and of million, of due lower by The also as $X.X million. planned non-cash third quarter the besides in in turnaround. $X.X ESP derivatives of to income higher operations production maintenance sales maintenance quarter-over-quarter, turnaround Avouma the well XXXX, earnings reduced

of year net XXXX. the ago barrels totaled with compared barrels XXX,XXX the Third second in quarter sales period quarter oil same net XXX,XXX and a net barrels in XXX,XXX

to the withdraw result sharing earnings; decision the Our in have $XX.XX for in of of XX% This September XXXX. our our barrel, our financial operations segment operating in quarter agreement. $XX of the XXXX operations classified as third and third statements. the third Beginning realized $XX.XX of was production per oil been from up Angola of price Angola quarter of discontinue results and in with XXXX averaged the second quarter from our in from quarter up discontinued X% XXXX XXXX our

oil hedged loss limit by the In of its totaled puts. in VAALCO's operations company to third quarter $XXX,XXX. discontinued price from sales risk, Our order commodity in purchasing the XXXX XXXX oil

other contracts put the XXX,XXX a will XX, average XX, during a by operations. on million As statements of at VAALCO company is our the of December to $X.X hedges. company for the covering XXXX; evaluate into weighted volumes a we comprised extending provided from anticipated loss which $X.X unexpired million and of $X.X of the however, desirability and oil has XXXX, barrels XXXX contracts net a of The $XX. loss crude The of period recorded not consolidated puts derivatives The settlement third of XXXX, XXXX, quarter the in loss was non-cash of October entered realized the to additional related included actively sale through increasing December September million protection gain. had derivative in since price mark-to-market continue condensed

was production $X.X XXXX. quarter $XX.XX $X.X Turning overs the of BOE third to XXXX compared with quarter sales expense, BOE of per in $XX.X million second and XXXX million $XX.XX work same with the of including BOE per per for or expenses; in the or quarter $XX.XX total million

work related excluding costs expense, XXXX quarter-over-quarter, the primarily to production due to turnaround. increased overs, planned quarter maintenance Third

fourth ESP of be the overs, This production BOE. associated production $XX our failures. wells excluding had expect timing that resuming of to the approximately the per reflects Avouma XXXX, $XX quarter costs, work to the For we with

full $XX BOE. the work average excluding year, production we to For overs, to $XX per now costs, expect

Cary $X.X material work fourth two million associated XXXX, we in of incurred BOE or months was of first XXXX. the any While expect BOE. that This or for $X.X quarter per over we compares the and $X.XX $X.XX per to have the $X.X $X.XX quarter second million work quarter to overs now quarter total work nine costs the through the the or platform with in discussed. not XXXX BOE per million $X.X Avouma third expenses DD&A over third XXXX $X.X in million of million to

to same in compensation quarter of a expense per million believe non-cash an same per in the in $X.X BOE costs of second or second the million third continue and the totaling the compared of full million in for in the quarter $X.XX expense of the the quarter administrative G&A quarter in $X be will of BOE or XXXX, million to BOE DD&A were recorded $X.X credit $X.X of one per We ago, this or $X.XX in quarter $X.X of third XXXX. General BOE $X $X.X the and XXXX range million year and include per expenses million year. $X.XX XXXX. XXXX $X.X period for to year These

continue and lower $X.X We a for $X.X second reducing to $XX the third million $XX same million of $X in XXXX non-cash, our to our G&A year the is of was million guidance full million, quarter and $X compared overall in made in G&A have XXXX million which good $X.X estimate. of the expense in million tax of million rate XXXX. will XXXX to strides believe quarter period to Income still for be

Gabon. in Our income our tax is expense revenue determined based on

back as Turning $X.X deferred which XXXX, costs net terms XX, I agreement the XXXX. cash and in over the totaled XX, payments of call since to of million term the million, of Corporation, Cary. June reflects to in September the now $XX.X as sheet; International repayment loan IFC, with provided will executed XX, June the under current. Finance This With September $X.X was At equivalents $XX.X balance XXXX. financing principal million million amended turn of debt cash this, totaled of

Cary Bounds

Thanks, Phil.

asset trading by look Brent, are highs. As which drilling. sustainable we particularly confident through value future, believe We Etame oil in in that multiyear prices, encouraged the remain is strong to have can development our and the strengthening we at premier we

One is key unlocking offshore asset extension of is potential our primary existing our Etame on license goals Gabon to to our in which Gabon. the secure in an

the While June the Etame in prices the block with believe for the oil that recovery additional for current and license potential XXXX. expires development XXXX. We years beyond many in could produce drilling,

We constructive government decision are are with on and continue sessions making. encouraged matters within discussions the Gabonese by to progress have and working these the makers we

infrastructure development extend drilling evaluating at the near-term several and that We economic current are life our and reserves opportunities offshore Etame. economic utilize will

to cash the and sheet, coming be license when months to will a we the balance increase drilling creation for the flow, As program. solid appropriate the in our begin next over additional drilling evaluate we and oil The Etame pricing time XXXX value foundation opportunities development adding extension our our with of might combined beyond. manage seriously will with establish

exit looking we and are progress is full final key forward Angola. to from strategic Another step the

quarter cost the with on come productive can continue an potential would XXXX of early question quickly so remaining to officials assessed that meetings the resolve we Gabon we that focus targeting not to like to have Angolan agreement and We are that or issue the in to XXXX opportunities wells. We commitment could for to this development settle last operator, and will drilling to and continues of value on be shareholders you, could its allow million VAALCO sheet poised significant This balance would and $XX Thank our and strengthen remove an our ready to our to to to sheet. strategy to XXXX the from are increase in questions. with us we lead balance add borrowing take liability in remains that, potentially execute capacity. beyond. our any

Operator

from comes And Bill our with Instructions] Dezellem first [Operator Tieton of Capital. question the line

WilliamDezellem

I of group have a questions.

a First the XH simply of all, higher leading having Or higher to on function the is production pressure different something production? of that there and about shut-in it equipment the the Is that's rebuilt? well. been

Cary Bounds

the Bill, thanks question. for

correct. seeing saw we about past. and today It's well is assumption an about first not correct. as higher more period, and volumes build up Your so is changes really the we did performance, equipment shut-in was for so That are slightly extended the reservoir than pressure in

William Dezellem

additional and since you did And some about was have do then an front, implications you remaining and analysis on that there the -- failures equipment for a information taking the wells? the place. have What

Cary Bounds

determine as Right. the corrosion the we're was defect failures environment. Well, on trying the I've to or to the of due the past, ESP Avouma operating corrosion, a the mentioned platform whether of was still cause the manufacturing cause in

so the equipment And to the of original the manufacturer we're with regardless working but equipment that cause -- the corrosion. determination, of make

different And using again. closely will the working in that going we're the mitigate reliability And taking certain and corrosion. reduce will when We also forward. of corrosion have with systems happen we're ensure the and steps our reliability materials putting manufacture to components taken not increase not only steps We're costs place Schlumberger costs. all also to improve but ESP to measures of reduce we

Operator

have do And question from from response our of comes that line, Bill Dezellem there and Joe Capital. from And another the Pratt Stifel. Tieton with is we with no next line question

William Dezellem

too agreement? we extending Gabon prices jump your focus you offshore low? production Are be -- really oil at conversations progressing is if let's Or So on are could those the sharing the all? And having. onshore that might conversations onshore to still

Cary Bounds

contract, the Guinea. our the Etame in extending Gabon but -- first, mentioned opportunity production you Equatorial offshore also sharing onshore in the offshore we and is development the have on focus Well,

but Right And if those and offshore making so we those evaluating like we at projects right move Gabon, projects technical on is projects, those -- we're determine focus to are are doing forward we're the you pricing. viable are to work current a the not our we at commitment will time. now, said,

will do right recognize, anyway, those a evaluation. Now make is under projects might -- point But there technical not time, we come the sense. still they're when

William Dezellem

thing also, Gabon? are the in you Guinea just you same so And said, as Equatorial doing not

Cary Bounds

is correct. that Yes,

William Dezellem

those two attention focus in the our progressed, And right that do see of we area? which you further so

Cary Bounds

still, that and further is I but of opportunity progressed. still have Equatorial it bit would it's say Guinea -- -- do, we the progressed, the and quite further that's a -- work to but technical is

William Dezellem

part on you the the that or the scope up are you to have degree Angola -- Great, had acquisition the arena and counterparties opportunities then here or mentioned oil liability -- with potential thank your about would that is clearing the to more And that which does less prices and in talk call willing of to conversations? whole which degree you. process changed

Cary Bounds

me Right, and with so Angola. start let

in Sonangol. both -- where so sides conversations it makes to reduce that, to that. There's through and are trying We we're work Sonangol and sense we've sees penalty had the multiple reasons on

you've where over nothing opportunities that, looking we opportunities where on so already mentioned but look that there. it's we team from development have technical we have bring great separate have or are our at without and in that a the announce West we're our so we we I'll increasing in -- can that, got Gabon -- similar of acquisitions, can use utilize we -- looked a team also We've would overhead, to our focused Africa. can variety Etame infrastructure now, operating and we And that opportunities say really and in right to

I all release. we announce today, at But I sorry, at looking Bill. overhead. we nothing will say we're and can in conversations soon as I'm can, discuss, looking as do, a press those nothing opportunities multiple And issue without and increasing now, So confidential to that again, we're have right to things bring are we is,

William Dezellem

appropriate And would link that flexibility Angola to I might those you be wanted having. independent or relate them to conversations to to additional conversation? that want that the you Is meaning financial the conversations really to rather have

Cary Bounds

it and fronts. our the drilling wells Improving link so acquisition not rather I moving year. help resolution I fronts. Angola would to up -- potentially resolving opening really improves both multiple whether the many that are opportunities. We're on put liquidity liquidity which independent. development opportunities I'll issue next They or really acquisitions would clearly up Angola forward it's on our way, opens

William Dezellem

what point, offshore given drilling to about still would them you're this that like conversations agreement? opportunities, Gabon lastly, that say you at extending about And in with

Cary Bounds

I but that would aware the and say again, extension. past, issues, announce really a are of drilling linked We clearly with the near the and way would we're longer the to there and Gabonese the future, investment that a the we're return very are -- have I've our progressing we today's like pricing. said they horizon something are to moving see at in -- our understand wells I and to extension well the on hope in make opportunities sense that in some

want we a where have So we can capture time that those from investments. is horizon we the sure do we -- what to make value shareholders for

Operator

questions And and time, presenters. queue this at we like the would back to to over no turn conference our have further in I

Cary Bounds

more questions; call in everybody All are today right. Well, if next no look call to we quarter. our participating Bye. next the forward and there appreciate

Operator

now you conclude does disconnect. your for may and conference This today's call, you participation. Thank

VAALCO Energy (EGY) 12 Nov 172017 Q3 Earnings call transcript