www.vaalco.com
Q1 2024 SUPPLEMENTAL INFORMATION
Profitably
and Sustainably
Growing Value
May 2024
SAFE HARBOR STATEMENT
Forward Looking Statements | www.vaalco.com |
This presentation includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created by those laws and other applicable laws and "forward-looking information" within the meaning of applicable Canadian securities laws. Where a forward-looking statement expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. All statements other than statements of historical fact may be forward-looking statements. The words "anticipate," "believe," "estimate," "expect," "intend," "forecast," "outlook," "aim," "target," "will," "could," "should," "may," "likely," "plan" and "probably" or similar words may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.Forward-looking statements in this press release include, but are not limited to, statements relating to (i) estimates of future drilling, production, sales and costs of acquiring crude oil, natural gas and natural gas liquids; (ii) expectations regarding VAALCO's ability to effectively integrate assets and properties it has acquired as a result of the Svenska acquisition into its operations; (iii) expectations regarding future exploration and the development, growth and potential of VAALCO's operations, project pipeline and investments, and schedule and anticipated benefits to be derived therefrom; (iv) expectations regarding future acquisitions, investments or divestitures; (v) expectations of future dividends, buybacks and other potential returns to stockholders; (vi) expectations of future balance sheet strength; (vii) expectations of future equity and enterprise value; and (viii) VAALCO's ability to finalize documents and effectively execute the POD for the Venus development in Block P.
Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to: risks relating to any unforeseen liabilities of VAALCO; the ability to generate cash flows that, along with cash on hand, will be sufficient to support operations and cash requirements; risks relating to the timing and costs of completion for scheduled maintenance of the FPSO servicing the Baobab field; and the risks described under the caption "Risk Factors" in VAALCO's 2023 Annual Report on Form 10-K filed with the SEC on March 15, 2024.
Dividends beyond the second quarter of 2024 have not yet been approved or declared by the Board of Directors for VAALCO. The declaration and payment of future dividends remains at the discretion of the Board and will be determined based on VAALCO's financial results, balance sheet strength, cash and liquidity requirements, future prospects, crude oil and natural gas prices, and other factors deemed relevant by the Board. The Board reserves all powers related to the declaration and payment of dividends. Consequently, in determining the dividend to be declared and paid on VAALCO common stock, the Board may revise or terminate the payment level at any time without prior notice.
Oil and Natural Gas Reserves
This announcement contains crude oil and natural gas metrics which do not have standardized meanings or standard methods of calculation as classified by the SEC and therefore such measures may not be comparable to similar measures used by other companies. Such metrics have been included herein to provide readers with additional measures to evaluate the proposed Acquisition; however, such measures may not be reliable indicators of the future performance of Svenska and future performance.
WI CPR Reserves
WI CPR reserves represent proved (1P) and proved plus probable (2P) estimates as reported by Petroleum Development Consultants Limited and prepared in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resources Management Systems approved by the Society of Petroleum Engineers. Reserve estimates for Svenska are as of October 1, 2023. The SEC definitions of proved and probable reserves are different from the definitions contained in the 2018 Petroleum Resources Management Systems approved by the Society of Petroleum Engineers. As a result, 1P and 2P WI CPR reserves may not be comparable to United States standards. The SEC requires United States oil and gas reporting companies, in their filings with the SEC, to disclose only proved reserves after the deduction of royalties and production due to others but permits the optional disclosure of probable and possible reserves in accordance with SEC definitions.
2P WI CPR reserves for VAALCO, as disclosed herein, may differ from the SEC definitions of proved and probable reserves because:
•Pricing for SEC is the average closing price on the first trading day of each month for the prior year which is then held flat in the future, while the 2P WI CPR pricing is based on management pricing assumptions for future Brent oil pricing for 2024 of $80.00 and $70.00 in 2025, escalated 2% per year thereafter and for Equatorial Guinea, given the expectation of first oil beginning in 2026, Brent oil pricing of $74.27 was assumed for 2026, escalated 2% per year thereafter;
•Lease operating expenses are not escalated in the SEC case, while for the 2P WI CPR reserves case they are escalated at 2% annually beginning on January 1, 2024.
1P and 2P WI CPR reserves for Svenska, as disclosed herein, may differ from the SEC definitions of proved and probable reserves because:
•Pricing for SEC is the average closing price on the first trading day of each month for the prior year which is then held flat in the future, while the 1P and 2P WI CPR pricing for Svenska is based on pricing assumptions for future Brent oil pricing for 2023 of $84.5 and up to 2030 the Brent Oil price follows the average of four available forecasts and assumes flat real thereafter. Oil price is escalated 2% per year;
•Lease operating expenses are typically not escalated under the SEC rules, while for the WI CPR reserve estimates they are escalated at 2% annually beginning in 2024.
Management uses 1P and 2P WI CPR reserves as a measurement of operating performance because it assists management in strategic planning, budgeting and economic evaluations and in comparing the operating performance of VAALCO and Svenska to other companies. Management believes that the presentation of 1P and 2P WI CPR reserves is useful to its international investors, particularly those that invest in companies trading on the London Stock Exchange, in order to better compare reserve information to other London Stock Exchange-traded companies that report similar measures. However, 1P and 2P WI CPR reserves should not be used as a substitute for proved reserves calculated in accordance with the definitions prescribed by the SEC. In evaluating VAALCO's business, investors should rely on VAALCO's SEC proved reserves and consider 1P and 2P WI CPR reserves only supplementally. Following consummation of the Acquisition, VAACLO will report Svenska's reserves in accordance with the definitions and regulations promulgated by the SEC.
Other Oil and Gas Advisories
Investors are cautioned when viewing BOEs in isolation. A BOE conversation ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 MCF: 1 Bbl) is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. Given that the value ratio based on the current price of crude oil as compared to natural gas is significantly different from the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be an incomplete as an indication of value.
Slide 2
Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024
Q1 2024 KEY METRICS
www.vaalco.com
Q1 2024
Change1
Reported Production | 21,807 BOEPD | -6% |
(Avg. WI Daily Production Volumes) | ||
Adjusted EBITDAX2 | $61.7 million | 29% |
Adjusted Net Income per Share2 | 6 cents | -14% |
Diluted Net Income per Share | 7 cents | 133% |
Cash flow from Operations | $21.8 million | -48% |
Cash Capital Expenditures | $16.6 million | -40% |
Free Cash Flow 2 | $2.5 million | -78% |
Shareholder Return (Dividend and Buyback) | $12.0 million | 7% |
Solid Operational and Financial Results Met or Exceeded Guidance and Consensus
Slide 3 Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024
- % Change from Q1 2023 to Q1 2024
- Adjusted EBITDAX, Adjusted Net Income, Adjusted Net Income per share and Free Cash Flow are Non- GAAP financial measures and are described and reconciled to the closest GAAP measure in the Appendix or in the Q1 2024 earnings release
Q1 2024 GLOBAL PORTFOLIO
Canada
Egypt
Cote d'Ivoire
Eq. Guinea
Global | Gabon | |
21,807 BOEPD | 92% / 4% / 4% | |
WI Production | Oil | NGL Gas |
1,490,000 BOE | $16.6 million | |
WI Sales | Capex (cash) |
Slide 4 | Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024 |
www.vaalco.com
- Diversified and de-risked portfolio of producing assets with individual routes to market and realizations
- African focused business with strong management experience in this market
- Concessions have recently been extended
▪ Oil & Gas friendly fiscal systems
- Strong financial position with no debt and ~$113 mm in cash
- Opportunities to expand our borrowing base allowingfor continued growth
- Closed Cote d'Ivoire non- operating acquisition on April 30, 2024
STRATEGICALLY EXPANDING OUR | |
DIVERSIFIED AFRICAN-FOCUSED PORTFOLIO | www.vaalco.com |
Building Scale and Diversification with a Full-cycle,Low-risk, High Return Portfolio
A Growing, Diversified Footprint in Africa | Supported by High-Quality | |
Canadian Acreage | ||
Immediately Accretive Acquisition
Operated ✓ |
Non-Operated |
Non-Operated |
Operated ✓
> Full-cycle portfolio with material | Operated ✓ |
production and cash flows |
- Critical mass of operations with running room for growth
> Highly capable subsurface/technical, operational and business development teams supporting growth
Operated ✓
- Majority operated assets
- Significant near-term growth potential through large drilling inventory
- Highly cash generative in current price environment
Current | ~5,000 WI BOEPD (99% oil) |
Production | |
Reserves1,2 | 1P WI CPR reserves of 13.0 MMBOE (99% oil) |
2P WI CPR reserves of 21.7 MMBOE (97% oil) | |
All Cash | No issuance of debt or equity |
Purchase | Gross consideration $66.5 mm |
Net purchase price of ~$40.2 mm | |
Closed April 30, 2024 | |
Significant | FPSO maintenance and upgrades starting in 2025 |
Upside | enables future drilling and development; |
expected to restart in 2026 | |
Development drilling campaign planned in 2026 | |
Additional future upside in Kossipo development | |
that has been appraised by two wells drilled in | |
2002 and 2019 | |
Quickly Closed Accretive Svenska Acquisition, Adding Meaningful Production, Reserves and Upside
Slide 5 | Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024 |
- Reserves only include currently sanctioned work, excluding future development opportunities
-
Reserves estimates were prepared in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resources Management Systems approved by the Society of
Petroleum Engineers and are as of 10/1/2023. See "Oil and Natural Gas Reserves" in the Safe Harbor Statements for further information.
SVENSKA ACQUISITION HIGHLIGHTS
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Utilizing strong balance sheet to
deliver value
accretive M&A
No issuance of debt or equity; acquisition funded with a portion of cash on hand
VAALCO has recent experience with FPSO project and operating similar asset
Ability to enhance value
through expertise
Cote d'Ivoire diversifies portfolio
with new country
entry in West Africa
Strategically complementary assets add material production and reserves
Aligning with a respected operator with proven track record of success
Planned development drilling and Kossipo upside provide sustainable longevity
FPSO Baobab Ivoirien MV10
Aligns with Strategic Vision, Provides Strong Cash Flow in 2024 and Material Long-Term Upside Potential
Slide 6 Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024
KEY FINANCIAL HIGHLIGHTS
Svenska Acquisition Immediately Accretive to Shareholders | www.vaalco.com |
Adding Value to VAALCO's Portfolio
> Current production ~ 5,000 WI BOEPD (99% oil) |
> Strong realizations closely aligned with Brent pricing |
> Accretive across key per share metrics |
> Low expected operating costs per BOE |
> Expect minimal additional G&A costs moving forward |
as VAALCO's existing operational and management |
teams will assume the majority of responsibilities |
following a short transitional period |
> Forecasted to add cash flow from operating activities |
Value Per Flowing WI ($/BOEPD)
25,000 | ||
20,000 | ||
$19,100 | ||
15,000 | ||
$14,800 | ||
10,000 | ||
$8,900 | ||
5,000 | ||
0 | ||
EGY at (2/26/24) | Gross Consideration ($66.5 mm) | Net Consideration ($40.2mm) |
Cost Per BOE of 2P WI CPR Reserves1 ($/BOE)
$3.50
$3.00
$3.06
post closing |
> Production and other metrics are now included in |
2024 updated guidance |
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
$1.84
Slide 7 Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024
Gross Consideration ($66.5 mm) | Net Consideration ($40.2mm) |
- Reserves estimates were prepared in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resources Management Systems approved by the Society of
Petroleum Engineers and are as of 10/1/2023. See "Oil and Natural Gas Reserves" in the Safe Harbor Statements for further information.
SIGNIFICANT ADDITIONS TO PRODUCTION AND RESERVES
Compelling Valuation Metrics at Highly Attractive Pricing | www.vaalco.com |
WI Production (BOEPD)
CI-40 Subsea Configuration
30,000
20,000
10,00022,100
0
25,050
Prior 2024 Guidance | Updated 2024 Guidance |
Note: 2024 guidance is midpoint production range before and after the Svenska acquisition
Acquisition WI CPR Reserves1 (MMBOE)
25
20
15
10 | 21.7 |
13.0 | |
5 | |
0 | |
1P | 2P |
- Reserves estimates were prepared in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resources Management Systems approved by the
Society of Petroleum Engineers. See "Oil and Natural Gas Reserves" in the Safe Harbor Statements for further information.
Slide 8 Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024
COTE D'IVOIRE: CI-40LICENSE
Production from Multiple Reservoirs, and 9 Subsea Wells, with Upside from Identified Prospects | www.vaalco.com |
CNR InternationalVAALCOPetroci Holding
57.61% WI | 27.39% WI | 15.00% WI | ||
Operator | (10% carried by license | |||
partners) | ||||
Asset Overview
- CI-40Baobab field was discovered in 2001 and is located in the western half of the CI-40 license, 30km offshore Côte d'Ivoire
- Baobab field is a low opex, highly cash generative asset with material reserves and upside resource base
- The field has been developed with 24 subsea production wells and 5 water injector wells tied back to a leased FPSO
- PSC license with initial term until April 11, 2028 with a 10-year extension option until April 2038
- Attractive fiscal terms with an 80% cost recovery cap, a 25% cost recovery uplift on development expenditures, and a 53% contractor profit oil take
- Industry friendly government with Total, Murphy and ENI currently active in Cote d'Ivoire
- FPSO maintenance and upgrades starting in 2025 enables future drilling and development; expected to restart in 2026 following the drilling campaign
- Significant development drilling expected to begin in 2026 with meaningful additions to production from the main Baobab field in CI-40, as well as potential future development of the Kossipo field also on the license
Water Depth | 900 - 1,300M |
Discovery year | 2001 |
License term | April 20381 |
First production | August 2005 |
Gross production to date | ~150 MMBOE |
Best estimate STOIIP | ~1,000 MMBOE |
Slide 9 Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024
1) Assumes exercise of 10-year extension option under terms of the production sharing contract.
GABON UPDATE
Production Optimization
Asset Highlights
- Strong operational production uptime and optimization efforts, offsetting decline
- Achieved ~97% production uptime in 2023
- Focus on back pressures post FPSO change out optimizing field process and production capabilities
- Capital program in 2024 focused on maintenance capex and long lead items for next drilling campaign expected in 2025
- Targeting a five to seven well drilling program that includes a mix of development and exploration wells
- Remeasuring, testing and modeling H2S methodology to address and sweeten the oil at Ebouri unlocking reserves and production
www.vaalco.com | |||
1Q 2024 Asset Stats | |||
9,001 BOEPD | 100% / 0% / 0% | ||
WI Production | Oil | NGL Gas | |
Operational Production Uptime | ||||||
98% | ||||||
96% | ||||||
~97% | ||||||
94% | ||||||
92% | ||||||
Uptime | ||||||
90% | ||||||
Percentage | ||||||
88% | ||||||
86% | ||||||
84% | ~85% | |||||
82% | ||||||
80% | ||||||
78% | ||||||
2022 average | 2023 average | |||||
Maintaining Strong Production and Planning for Next Drilling Campaign
Slide 10 Q1 2024 Supplemental Information: Profitably and Sustainably Growing Value May 2024
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VAALCO Energy Inc. published this content on 08 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2024 11:11:40 UTC.