EGY - Earnings call transcript Q3 2019

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Hello, and welcome to the VAALCO Energy, Inc.'s Third Quarter 2019 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead, sir.

Al Petrie

Thank you, Operator. welcome Energy's and Conference Quarter everyone, Call. morning, to Third VAALCO XXXX Good the Bounds, quarter statements, Officer, I forward-looking After cover Cary results. key of operational will highlights our the with third along review Executive Chief Liz Prochnow, then more financial in-depth Officer, provide a review. Chief our Financial will will for comments some Cary before questions. your take then return closing we

During session, you ask X we our to follow-up. a to and question-and-answer limit your questions

questions. You with re-enter always can additional the queue

morning deck to has point we on out analysis, our and additional that investor comparisons be this like financial I'd helpful. should posted website that that an guidance

With statement that, let me proceed with our comments. forward-looking

Accordingly, the developments During cautioned obligation whether be information, disseminated that risks as not conference any today. differ projected and those are may those new other and of Securities forward-looking the a the yesterday's are making are revise forward-looking statements statements, company and not guarantees materially VAALCO or reliance result from described and course will intention including this we the disclaims place of Commission, presentation XX-Q of any or the in future reports our with forward-looking press file you future forward-looking These in to website was in on undue Investors Exchange or forward-looking statements. or results statements. the update release, should performance call, on statements. posted that otherwise. our events, earlier actual

And being let Cary. the is Please now call over recorded. now note this that conference to call me turn

Cary Bounds

few have several August, our at our We've restored maintenance a Earnings annual Call. Etame In Al. incidents. Thank had and we with Third welcome safety everyone, achieved past Quarter exciting planned Good no you, or XXXX milestones. production completed shutdown to environment morning, and and significant very Conference months

expected campaign Dentale drilling the reservoirs. In were than XP better results, recently XXXX-XXXX announced we kicked off the Etame for Gamba appraisal our drilling and which September, and

on listing complements raise and additional also Stock to by London grow attract capital on to the business the providing Stock research Exchange Exchange, in opportunity new XX, to future. us base our we the The trading began shareholder September options the new listing New additional coverage. On which York our our us gives diversify

began Etame plan October, update the well results you targeting reservoir. In the the horizontal Gamba XH drilling the development to in we coming weeks. We on

on of to Turning restarted barrels August, average of the production. shutdown in for was We subsequently per our maintenance planned and Etame our an X,XXX completed day, oil operational and quarter. guidance range. produced at results budget third within We which annual schedule on net

quarter the Production the volumes and this of XXH pump the were net also operating electric Tchibala in wells to temporarily Etame well year, well shut-in. Production barrels XXH, that per pump net the due of Etame failed lower per to was Earlier the X.X for temporary the sales after barrels are was and Etame loss failure, in the shutdown. of XH approximately day. submersible the XXX producing years. oil XXH Prior by by oil Etame XH impacted about North XXX day

in wells. Vantage XXX due failed of oil barrels XXH the a net down production drilling utilizing rig considering day perform and these replace approximately the are is the We pump to to per workover total, X In well. Etame

from Taking Looking well production ahead to expected to are producing uplift which the XH start the fourth the is into the well, XH account quarter, Etame currently December. drilling we Etame in to range of I from be X,XXX in mentioned, deferrals the X,XXX expect quarter production for of we and X oil fourth per barrels the net just day. the production to wells

of our to should Etame production. is XXXX on significantly X,XXX the the of estimate rate We XH oil is the XXXX completed net assuming expected exit rate to to a day, from and and production X,XXX XXXX online. our XXXX-XXXX currently range greater our per exit campaign As impact a reminder, have barrels increase drilling be impact in

give you the that would on now. like Now additional drilling I details to campaign is underway

As to least at part X development by extension and wellbores September wells XXXX. Gabon, of drilling appraisal in X we PSC committed the

the Etame XP development result wellbore well announced, drilling thicker expectations drill shortly well and Based Etame column both XH. wellbore, recovery development depths successfully Etame we from XXH are targeted reservoirs and drilled encountered Dentale Gamba Gamba field, previously currently after Etame the is the ultimate higher the as oil Etame and As as appraisal that XP as predrill which than plan in was the the anticipated. may the information on at oil in the Etame the including to we well, we gathered XH

XP preliminary us, feet X.X of million oil estimate as the in predrill the Etame XX to barrels of for our with quality positive addition, estimated at recoverable million of wellbore oil was barrels Dentale XX.X analysis indicates Dentale oil resources least very that gross encountered This of million X.X is news sands oil. reservoir. good In the

we did encounter in HXS either anticipated, reservoir. As not

the After As depth are the nearly Etame you development we in imagine, the drill wellbore, Etame while XP cut Dentale shallower assembly then the plugged the We in attempts bottom for not in pipe, well became to planned. drill we and drilling the a can to break and future horizontal to plan After could XH stuck of excited reservoir. depth hole pipe as about drill recovered. development results but be free, Dentale the several lying wells as the very began the reaching pipe section. total we back in decided portion pull a

$X to program. bottom the on the will drill in early add the likely Etame issues any development the to $X While drilling the million pipe coupled the of well. loss spent have million hole we XH time significant not in net additional cost we overall are assembly campaign, Thus XP, of the far, encountered with still ultimate drilling the drilling

of gross barrels expect of oil oil X,XXX December barrels to online rate in We to production XXX day. come or X,XXX a of per per stabilized to day, XXX net at approximately

extension Etame drilling commitment Tchibala considering last we XXH replace Gamba the well, complete same reservoir. to XH the the drill Southeast wellbore drill Gamba Etame pump workover to area platform we the Etame to year of appraisal in a in are we second move to XXH executing Etame then we plan as out a will North XXH the well the platform. We to which Southeast on evaluate plan Upon be electric Etame well, is the step development the rig well, our signed into XP wellbore, same Southeast appraisal Etame. the to part complete. PSC that Following drilling submersible the the the After

if plan want that XP appraisal as and I wellbore well then drill point third the development in Southeast this joint campaign. approvals, out we area, Gamba our Etame up part proves of government a to owners to with interest the do that drilling

and at from hand cash at capital continue So great can't years operations. generate vision to drilling far, repeat campaigns next a cash production. continue discipline stress operational our importance and programs balance flow, cash several and off build us from of our it execution, allows to capital on enough cash and start is adding over we similar are our fund I as the Etame Etame the flow to our to and free and reserves significant

our to are program common share program the repurchase is value, at our our opportunity share the to funding value value proposition the reflects current of program. to discount a stock. a confidence returning we repurchase actively through drilling board's and addition We excellent an buy to significant their program, shareholders the believe In intrinsic shares also in our also

campaign confident are and plan. provide additional we XXXX-XXXX and drilling that We to cash program can our execute hand share share continue cash details the Later from Liz operations. from repurchase on fund regarding on, our fully repurchase will

that Liz, turn companies strong in We the the audience have oil in Africa. story discuss the operate in call to over gas interest interest generated research investor and investors. U.K. resonates would well type equity I assets like already to to our coverage with access increased who the a U.K. It has international in Before believe with of our VAALCO and new I with listing we

need additional to a can inorganic of objectives, pool have funding, we compelling don't particularly with into use a current growth our deeper accretive listing something we While our should capital. and potentially for and line tap in London find we

can very busy a productive had we've you XXXX. and see, As

our financial and come. enhanced operational to positioned years many have for capabilities We corporate, succeed and VAALCO to

like would I our discuss over that, turn the to to to With Liz results. call financial

Elizabeth Prochnow

Thank you, everyone. and morning, Cary, good

it's positive results. mentioned, an with drilling time Cary with As us program early VAALCO, underway at well our the exciting and for

London we now analysts new research pleased our the we coverage our company. to have on very on are listing Stock Exchange, Additionally, completed X providing and

benefit $X.XX oil by swaps. was share $X.X the third noncash totaling crude per $X.XX per related Adjusting per impacted loss tax, unrealized items a million, million $X.XX net loss of expense which on third net $X.X was of million related million of partially for quarter of $X.X $X.X or quarter, net these noncash share. or adjusted offset or million reported deferred the diluted to or per impact share. a diluted gains was by to This income In we share $X.XX $X.X

well net revenues $X.X $X.XX XXXX appreciation lower restricted volumes and stock for million as quarter per share stock Third or rights. was loss reflecting diluted options, a expense by lower stock noncash sales also as impacted

$XX.X X and pricing Adjusted was the XXXX, of lower by program capital third EBITDAX positive. the quarter have flow remain Through cash generated EBITDAX, our $X.X months which helped million has free of XXXX, which adjusted us first in we million of impacted totaled likewise production. and fund

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

Third volumes the XXXX result which the currently planned in shutdown production the impact from full well occurred quarter, the the as were August that volumes maintenance wells shut-in. lower field quarter impacted during XXXX as was of sales by

quarter the in which XH estimated expect currently higher as of is fourth production being and we drilled, to expected of to the December. which online from come a For well, sales is increase result XXXX, Etame

$XX.XX Our of realized XXXX and third down price XX% third quarter XXXX from the quarter in of second oil XXXX. down for barrel, from in the $XX.XX averaged per $XX.XX XX% quarter the

to quarter, barrel. of we settled mark-to-market These million, swaps third a on unrealized gains realized of related recorded million a price $X.X the of swap per weighted quarter. the are crude which $XX.XX our oil Brent during the cash at while $X.X agreements Dated In we swaps average noncash gain

XXX,XXX XX, swaps for June As there outstanding XXXX. period XXXX October of and September from for the including XXXX, through barrels were

mitigate for evaluate commodity our allow drilling and We flows price will future hedging risk, continue rising through to program our for upside ensure program. cash to ways to prices

the in expense, excluding barrel in XXXX. per workovers, Total the compares quarter barrel per million per $X.X $X.X third Turning second with XXXX, $XX.XX sales. XXXX, oil quarter or for the same of expenses. or $XX.XX and $XX.XX or This barrel to was million million of production quarter $X.X of

For continue fourth expense the workovers, $X is we a fourth to be barrel. million, and quarter planned production for expect XXXX, or quarter to between of $XX expected the million to $XX expense, to maintenance. excluding Production of somewhat result preventative be high as $XX per

of was barrel year-over-year the the December million XXXX. quarter to impact reserves third XXXX upward $X.X for or per a The barrel barrel extension, oil. at partially of quarter with in per the quarter DD&A associated of costs an $X.XX in oil in per million This XXXX. $X.XX per $X.XX of to in compares million or offset third increase increase reflects second by PSC revisions depletable XX, DD&A favorable and of XXXX or barrel $X.X the $X.X

million rate $X.XX million General per oil and of compensation barrel continue to or noncash quarter $XX.XX of for per $X.XX of XXXX, expect quarter $X.X be per of third of $X.X of barrel third or the sales. to of barrel in in of quarter in expense barrel We stock was DD&A year the excluding $X.XX administrative oil or XXXX. $X.XX and oil full the our to XXXX, to $X.X range as per million the second compared

was our Exchange The expense as growth listing Stock professional for fees as third the to increased initiatives. the due associated higher on London quarter well our the with

$X million. expect be fourth our and compensation, $X excluding G&A, quarter between to noncash We million

appreciation Noncash second quarter third expense comparable on compared are associated the the the X at SARs, the with ended the an quarter XX, or price SARs. of every and was in quarter, booked versus million the per Stock June $X.XX share of a $X fair rights, credit which the the to expense of to related during there the be at closing $X.XX SARs value value credit charge or XXXX. of end of XXXX. of compensation the stock and variability the SARs, stock-based million stock XX, on end the based will greatly a XXXX, price in a was September impacts $X.X quarter of period revalued XXXX quarterly XXXX of charge $X.X months as million mark-to-market

expense for million. tax of This of XXXX and tax $X.X million X months of $X.X tax XX, Income was deferred ended a comprised September provision the million. expense current is $X.X

XXXX, by benefit tax X XX, income $XX.X the quarter the a respect full tax in revenues. income recognition of $X X. of provision third assets the income assets. a between tax X which allowances months attributable quarter September primarily of the months is periods assets, benefit the and decrease reversal company $XX.X evaluation XXXX on current to a ended in prior in For Gabon valuation million. third provision deferred XXXX The deferred decrease third of of quarter September tax, the related company to deferred The for million tax net the the the had tax deferred of income deferred tax taxes of deferred were the impacted on XXXX deferred ended and had and current and to allowances the million its With was XXXX, other to current XX,

lower quarter result U.S. XXXX, respect million allowance earnings, deferred in deferred $X.X a to which million With on expense valuation assets, third tax $X.X taxable the a decrease to a increase tax of as the estimated quarter third prices. future XXXX the was of charge due includes in primarily primarily of the oil to of

approximately approximately barrel posted our of we on including website, this XX sales Slide oil is per breakeven VAALCO's that and cash As XXXX morning deck breakeven flow oil detailed operational currently is XXXX estimate with the sales, barrel $XX workover presentation expense. free $XX in our of in both per on in amounts

million. realized the end clearly adjusted general oil our annual estimate of shows EBITDAX that the This leverage quarter, At third oil increases our increase of had terms, $X to $X higher in strong we a At to $XX.X million, balance cash In the each we amounts prices to by operations. nonoperating had discontinued the million end which joint included excludes of and attributable $XX.X from capital attributable advances. This liabilities owner working operations. lease cash continuing million metric of of quarter, VAALCO venture $XX third prices.

XX, very program Etame our stock XX, average of outstanding stock our the also of the of have representing fund June We announced drilling implementing flow cash to Despite of position program. prior at just prices, remains execute in program VAALCO's as to million On and opportunistically oil through hand November VAALCO the a Board a X, continue and buyback cash total implementing the on we approximately our from shares program fully program. post This June its weakness of strong. program of Directors planned can an nearly cash had XXXX-XXXX $X.XX, price at just operations. XXXX, inception purchased -- of XXXX, stock XX.X this investment repurchase that shares $X.X X.X authorized of million. million Since common X.X% common represents from

September $XX months drilling and to primarily in program for XX, million The capital XXXX, is expenditures, range to capital be program, X million. expenditure associated current equipment expected and, for $XX XXXX, we our at invested is net ended the the million estimated accrual other. $X.X for to lesser a For which basis drilling primarily with degree,

million half the of original anticipate XXXX. will include million mentioned, XXXX-XXXX $X full in the XXXX-XXXX $XX XP costs the now well. that due than program three and approximately higher drilling However, be and estimate wells wellbores. will total $XX cost completed of up as it to to is two the to be rig to million associated Cary We the additional $X drilling development estimate with to program first The million appraisal service

With call will to this, I over now turn Cary. the

Cary Bounds

Thanks, Liz.

strengthen past create our several years, position growth. opportunities we the Over have to diligently worked and financial for

generating and strong free program. million we excluding our We used cash owner fund cash advances, drilling are to flow $XX to on over are debt that with can in cash joint hand, operational be attributable

value. program pleased we than well am the seen first appraisal we The create are where the first hope results that I program. have significant expected of that a series in is to from campaigns XXXX-XXXX better in drilling the drilling already

expected looking wells the with the drilling potential schedule, increase on forward Etame production Etame the Southeast reserves. an by the next development are to from at We appraisal meaningful X to add followed wellbore

our I believe and create substantial acquisitions. asset mergers that and shareholders by moving forward, will for Etame and we through value building reserves our at production growing portfolio

take exciting to that, with are very a is accretive this for and well-positioned VAALCO, short, we Thank and we growth. deliver questions. ready time operator, In to profitable And you. are

Operator

[Operator Instructions].

from comes Charlie with first question Sharp The Canaccord.

Charlie Sharp

quick one question. Just

successful the how the had and and something Etame outlined license, You XH might implication the is across that's or wider impact well any XXH. work in that chance to yet a XP assess from train? results that you perhaps Have in

Cary Bounds

work we And question. say is right, it I results great a in Etame the That affect, and you're And But affects Right. saw XH the the XXH. Gamba progress, Charlie. will in entire the That's better-than-expected field. field. that

You the we XX then Etame but, XX now, the anyway, is is there's There producing right the the X X of and wells Or license X. from XX, the the also in shut-in, know Etame and Gamba platform. and and X them that are have are on fields, the the the other X Subsea the wells, field reservoir.

spreads saw probably work and So the reserve we'll we think we the impact, year-end when wells across Gamba of our we finish all and reserves. evaluating are we're announcement news and and results actually our make an those with in the good -- the auditors

Operator

next Dezellem Capital. with Bill comes from Tieton question The

William Dezellem

expecting sands out, originally you least column. the the you I in the actually thickness? terms was What at path. Gamba wanted your this for in? feet said terms of mind oil same going down came XX in in to What It were continue of

Cary Bounds

Well, probably And a feet. that's at say I range, low really between somewhere and XX of half the that the would XX range. but thickness, end

William Dezellem

also with your so the What led intervening the in second the Dentale feet. Dentale that out in XX of you thinking sands then were that release, with time? release And that XX the it neighborhood at out were came that to in you with least somewhere the you said was And sands initial press came and feet. upgrade

Cary Bounds

gathered XP. Right. as a -- the Etame that's to information We we question, we that led Bill. Right. drilled mainly What good well information The gathered logs. was

it and was we logs. to quickly get took after very to another improved, geoscientists interpretation, the wanted time news initial There to an our so our study interpret some and made And engineers more time initial with those logs, so we announcement. and interpretation And then the out interpretation. the had

William Dezellem

Gamba. on you underneath correctly, the Congratulations Gamba, which, understand talk, the entire sand, and if the if I much Great. about has from production that. please, the would, Dentale And been is then implications of pretty your

we at Gamba? now if how So reservoir, this the new this correctly, is think I do Dentale, the entirely about thickness that same as the understand an which being

Cary Bounds

found Oil call Well, we To. what is Down what we

there's be could So XX thicker. oil; that of we it least know at feet

what's so driving million range of million. barrels; to million X And the million million, part mentioned to that's of XX XX reserves. I X XX

does So X How is that range what's to It what X analysis a oil to range X recoverable. going there's right thickness take oil, to now. recover wide a million that's but and range cover? on all then around around area barrels that aerial of the there's million XX wells So extent. driving may the of Dentale or

with development the So best where and mapping up combining we drill that that our learned took, seismic we estimate coming interpretation with wells. our wellbore what logs the we're and combining from to and of our well

William Dezellem

that you just that is as of you with than And it on assets Gamba. Dentale, did? it verge I'm same you that double your the are what Cary, you are that have previously that oil finding possible the if what thinking is the is the the thinking

Cary Bounds

it's different. structurally, Well,

in When the the opportunities. Gamba. like I another would of not have but I that And license, think over across investor in you not quality the said we our same a deck And it's we've potential of It's back. on different. would very a future potential line And of the we've what sight XXX. good I so, Gamba. say all point sand, field, XXX But the or of is at said, to I our the no, resources. the as should as as is good structurally, Dentale produced reserves million look our And barrels to and on date, website I

through the field. works say everything out the life the license. Or life I if halfway So the as should of planned, of we're

William Dezellem

would was paid? you Great. the relative what to repurchase, your to Thank ask like highest you. then And I price share that

Elizabeth Prochnow

was We of the the around haven't or have we're we $X.XX disclosed of really at the think that kind disclosed can I some But I gather around you quarter $X.XX. separately. now that mean, we information. so. average Cumulatively, -- last price

the has bit up during a past kicked So which expect. you this quarter, price would

William Dezellem

question. then And you. X Thank Great. additional

As think your cash about I this. drilling had program, coming built you into

back develop. out production, and You be cash cash inferred, it to drilling then, a program. build seems and be you're given almost production, -- that increased you produce, for you'll suspect, from program have Then I benefiting with process flow. paying cash though it guess you repeat And to starting of coming another increase though I me generation. as cash as are cash the build have or drill, what And that appears you'll

philosophically about this? how Are we thinking understanding you're

Cary Bounds

That exactly to have That's what correct. exactly are is we I that, add Bill. to nothing doing.

William Dezellem

this help congratulations Thank quarter. through on you and the Okay. making it for

Operator

[Operator Instructions].

present closing else Bounds nothing like is floor comments. Cary I would there As the any to at to the time, return for

Cary Bounds

Yes. thank we today, another next joining to good call our our and to forward like look everybody call. I'd quarter and conference for

Operator

Thank conference presentation. attending The now has for today's concluded. you

lines. your You may now disconnect

VAALCO Energy (EGY) 7 Nov 192019 Q3 Earnings call transcript