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| Statement |
|---|
| Brent increased 10% quarter-over-quarter with natural gas pricing improving by 32% and NGL pricing up 5% |
| Overall, we had a very economic drilling program with strong production performance and we are very pleased with our drilling performance in 2023 |
| I am very pleased with our ability to deliver exceptional operational and financial results in 2023, exceeding our guidance and expectations following the TransGlobe combination that occurred a year ago |
| I think it’s always good as it was in Q2 to come to the end of Q3 with a strong set of results, a strong set of performance, both in the production, operational side, driven in part by higher and increasing commodity prices |
| As we have discussed, our successful capital programs in Egypt and Canada, coupled with our operational focus on uptime to mitigate decline in Gabon is leading to meaningful increases in production |
| With our solid production in the third quarter, we are now further raising our full year production range to be between 18,200 barrels of oil equivalent per day and 18,900 barrels of oil equivalent per day |
| Canada also set production record in 2023, another reason we are performing so well as a company and exceeding our production targets |
| Looking at our sales volumes, we are expecting to see a solid increase in our fourth quarter sales with a guidance range of 19,800 NRI barrels of oil equivalent per day to 22,000 NRI barrels of oil equivalent per day |
| As a result of higher sales and lower CapEx spend, we believe that VAALCO is very well positioned to grow cash flow in the fourth quarter of 2023 |
| This was driven by record production levels in Egypt from our successful drilling program, as well as high operational uptime in Gabon |
| As a reminder, we have not drilled any new wells in Gabon since 2022, but our commitment to operational excellence and the new FSO have helped to minimize decline and maintain production uptime at high levels in 2023 |
| If prices continue to fall as they have since the end of the third quarter, when we mark-to-market the oil in-kind we will see a benefit, thus reducing our tax liability and all things equal, increasing our earnings and earnings per share |
| We are encouraged by the new wells drilled in 2023 and the high operating efficiencies, and our expectation is this will be more than sufficient to cover any decline in SEC pricing over 2022 levels |
| Despite no 2023 drilling program, we have seen strong overall production results in 2023 by focusing on operational excellence |
| The diversity of our asset base has allowed us to grow and generate significant growth in production, cash flow and adjusted EBITDAX |
| Our solid sales coupled with good commodity price environment, as well as our ongoing commitment on controlling costs led to our adjusted EBITDAX growth |
| We are starting to see some of the benefits of the diversification of our asset base, the ability to overcome slight bumps in the roads in one jurisdiction supported by the others |
| We have a positive momentum as we enter 2024, both operationally and financially, and we are building size and scale to substantially grow VAALCO |
| Our drilling campaign in Egypt has seen some very positive results |
| I mean, the turnaround in the Canadian operation has been exceedingly impressive |
| So, yes, our projected position for Q4 would be another strong cash performance |
| With our growing cash position of over $100 million and a clean balance sheet, we are much better positioned today with a growing and diversified asset base than ever before in VAALCO’s history |
| When compared to the combined G&A costs seen in 2022 by both VAALCO and TransGlobe, we have seen meaningful reductions in costs well ahead of our targeted synergies |
| By drilling the wells faster, we are cutting costs meaningfully and improving the economics of our wells in Egypt |
| As I have detailed before, these efforts have resulted in increased production, lower costs and better safety and environmental performance in Egypt |
| We continue to set production records in 2023 since we acquired the properties, which is one of the key areas driving our ability to exceed guidance with our total company production |
| I would also like to point out that in the first week of October, we successfully restored the feed gas pipeline to the FSO and will benefit from lower diesel consumption from Q4 |
| Well, obviously, we have said and in relation to the strategy, I know we got a shareholder question, what does VAALCO’s future look like? In the last three years, we have each year doubled the size of the company, doubled production and we are starting to reap the benefits of having that derisking of a single asset company, and that I think, was clearly demonstrated to our benefit in Q3, having multiple areas of production when certain areas are going through some areas of difficulty |
| This demonstrates that we are delivering on capturing synergies and cost savings initiatives like the FSO project last year |
| We believe right now is an excellent opportunity to buy our common shares that are trading at a discount to their intrinsic value, which is also a reason why we decided to accelerate our share buyback program over the past few months |
| Statement |
|---|
| Turning to costs, our production costs were below the low end of guidance on an absolute basis and at the bottom end of guidance on a per barrel basis |
| For the fourth quarter of 2023, we are expecting our production to decline slightly in all areas compared to the third quarter, as we have completed all of our capital drilling for the year |
| So when prices rise as they did from Q2 to Q3, it has a negative impact on our accrued taxes |
| We did have some issues with the drilling of the well, as well as the completion of the well with the pump placement and a tangent section in a well |
| As Ron mentioned, we have significantly allowed and included the synergies of the amalgamation that took place in Q4 of last year and the combined operation now is one of much greater efficiency than the two independent organizations were previously, but that also presents some challenges |
| Thor’s just reminding me, the -- how we drill and complete the cycle times have also been reduced considerably, I think, 68 days, something ridiculous |
| We saw a decrease of about $8 million from Q2 to Q3 |
| Finally, looking at CapEx, our 2023 capital spend was first half weighted and we have seen a decline every quarter in 2023 |
| I mean it -- I think, I am remembering numbers now, I think, we started around 200 barrels a day, the last call it was down to about 120 and right now it’s around 80 barrels a day |
| As you are aware, in the previous calls we didn’t get the results in that well that we anticipated |
| This impacts earnings and earnings per share |
| So, the well -- as George mentioned, the well is still on production and it seems to be flattening out the curve |
| If I am not wrong, there is a bit of mismatch |
| The wells were tied in and equipped in April and early May with overall cycle times that were significantly less than historical cycle times |
| So we are actually having to deviate and look at opportunities for value rather than just geography, but the market is exceedingly tight |
| I mean, obviously, we have got, as I mentioned in the response to the last question, we are seeing a very tight market as the service side of the business catches up with the higher commodity prices and that’s looking at significant increase in the cost for executing the drilling programs on each of the wells |
| This was unusually high and driven by the revaluation of tax oil barrels held for Gabon |
| We are collecting our receivables and have seen our Egyptian accounts receivable decrease by $17.7 million to just $18.8 million |
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