VAALCO Energy Inc (EGY) 2020 Q1 法說會逐字稿

Good day, and welcome to the VAALCO Energy First Quarter 2020 Earnings Conference Call. (Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead.

Thank you, Allison. Good morning, everyone, and welcome to VAALCO Energy's First Quarter 2020 Conference Call. After I cover the forward-looking statements, Cary Bounds, our Chief Executive Officer, will review key highlights along with operational results. Liz Prochnow, our Chief Financial Officer, will then provide a more in-depth financial review. Cary will then return for some closing comments before we take your questions. (Operator Instructions)

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

With that, let me proceed with our forward-looking statement comments. During the course of this conference call, the company will be making forward-looking statements. Investors are cautioned that forward-looking statements are not guarantees of future performance, and those actual results or developments may differ materially from those projected in the forward-looking statements. VAALCO disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on forward-looking statements.

These and other risks are described in yesterday's press release, the presentation posted on our website and the reports we file with the SEC, including the Form 10-Q that was filed yesterday. Please note that this call is being recorded.

Let me now turn the call over to Cary.

Thank you, Al. Good morning, everyone, and welcome to our first quarter 2020 earnings conference call. Before I discuss our results, I would like to reflect on the extraordinary challenges that we are facing as an industry and how VAALCO is decisively responding to these challenges. Thus far, VAALCO's operations have not been materially disrupted by the global COVID-19 pandemic. We have managed through the logistical challenges that we have faced since the outbreak and continue to put the safety of our employees, contractors and local stakeholders first.

Back in March, we implemented stay-at-home initiatives for all but critical staff and put into place social distancing measures. In addition, we actively screen and monitor employees and contractors that come on to our facilities in Gabon. In accordance with government guidelines, all our workers in Gabon must undergo a 14-day quarantine before going offshore. We are also engaging in regular company-wide COVID-19 updates to keep employees informed of key developments. Finally, we have contingency plans in place in the event we are directly impacted.

The combination of the worldwide shutdown due to COVID-19 and its impact on oil demand, coupled with the Saudi and Russian supply disagreements, have driven oil prices to historic lows. In response to the decline in Brent pricing, we are taking action to minimize capital expenditures and lower operating costs to preserve our balance sheet and maximize cash flow. We are working with our vendors and suppliers to implement cost-cutting measures, and we are partnering with other operators to reduce costs by sharing services and equipment, such as support vessels and helicopters. We have reduced compensation for our directors by 25%, executive compensation by 20% and nonexecutive employee compensation by an average of 8%.

We released the Vantage rig in early April following the completion of our successful 2019-2020 drilling campaign, and we have no material capital expenditures remaining in 2020. While we have deferred all discretionary capital expenditures, including drilling until the global oil pricing environment improves, we remain confident in the long-term viability of our inventory of drilling opportunities.

Despite this uncertain environment, we remain focused on operational excellence, which was demonstrated in our first quarter 2020 results, which I will turn to now. In the first quarter, we produced an average of 4,944 net barrels of oil per day, which was near the high end of our guidance range of 4,700 to 5,000 net barrels of oil per day as a result of strong production from the 2019-2020 drilling program. The first quarter benefited from having all -- from having 3 full months of production from the Etame 9H well nearly 3 months of production from the Etame 11H well and a few weeks of production from the South East Etame 4H well.

The first quarter production volumes from the new wells demonstrate the considerable impact that the drilling program has had on our overall production. This increase in volume has helped drive down our unit operating cost per barrel and improve our breakeven margins. As we've said before, approximately 90% of our costs are fixed, and we can add production with minimal increase in cost, which significantly improves our overall margins and will help generate cash flow in a low price environment.

In the first quarter, we reported adjusted EBITDAX of $6 million. The first quarter also marked the culmination of our successful 2019-2020 drilling campaign. We released the Vantage rig on April 9. And as part of the drilling campaign, we brought online 3 new horizontal development wells, drilled 2 successful appraisal wellbores and completed 2 workovers. The drilling campaign had a 100% success rate and has increased production by 35% in the first quarter of 2020 compared to the fourth quarter of 2019. The entire program was completed as planned, on time, within budget and with no safety or environmental incidents.

Unfortunately, in mid-April 2020, the South Tchibala 2H well was shut-in due to a downhole mechanical failure not related to the electric submersible pump. Prior to going off-line, the well was producing approximately 830 gross barrels of oil per day or 225 net barrels of oil per day. Given the nature of the mechanical failure, it is unlikely that we will be able to repair the well until the next drilling campaign when a rig is on location.

Taking into account all of the production from the drilling campaign in the South Tchibala 2H well, we believe that our second quarter production will be approximately 5,000 to 5,400 barrels of oil per day net. For the full year 2020, we are reaffirming the guidance we gave you earlier this year, which was 4,400 to 5,000 barrels of oil per day net. At this point in time, we have not curtailed any production, and we will keep the market informed of any material changes in that regard.

I would now like to give you a quick update on our activity in Equatorial Guinea. On November 12, 2019, the Equatorial Guinea Ministry of Mines and Hydrocarbons approved VAALCO's appointment as operator of Block P. We are currently awaiting an amendment to our production sharing contract to finalize our appointment as operator and begin activities in Block P.

In the first quarter, VAALCO acquired additional working interest from Atlas Petroleum, which increased our working interest from 31% to 43%. The cost for acquiring the additional Block P working interest is a potential future payment of $3.1 million that will only be made if there is commercial production from Block P.

The Equatorial Guinea Ministry of Mines and Hydrocarbons has already approved this assignment of interest to VAALCO. We are having ongoing discussions with Levene HydroCarbon Limited on a potential farm-out. Under the farm-out terms, Levene will potentially cover all or substantially all of VAALCO's cost to drill an exploratory well in exchange for an assignment of a portion of VAALCO's working interest in Block P to Levene. VAALCO would also serve as a nonoperator -- I'm sorry, as a nonowner-operator under a service agreement with Levene on Blocks 3, 4 and 19 in Equatorial Guinea.

We have executed a nonbinding Memorandum of Understanding with Levene regarding the commercial discussions. However, we did not have binding agreements in place and government approval of the agreements between VAALCO and Levene must be obtained prior to completing the transaction.

Given the current pricing environment, we have asked the Equatorial Guinea government for an extension to the contractual requirement to drill -- to either drill a well by December 31, 2021, or relinquish the license. We are optimistic that we will finalize the agreements with Levene and prepare for a drilling campaign in the next couple of years with minimal financial exposure to VAALCO.

In summary, we are committed to maintaining business continuity in these challenging times. We have a strong debt-free balance sheet, $61 million in cash and a stable production base, all of which provides stability in the near term and flexibility for the future.

Before I turn the call over to Liz to share our financial results, I would like to mention that we have published our inaugural sustainability report, and it is available on our website. We believe the sustainability report reflects our commitment to our employees, to the people who live in the communities where we operate and to the environment.

With that, I will turn the call over to Liz.

Thank you, Cary, and good morning, everyone. First quarter 2020 results were significantly impacted by several noncash charges as well as noncash gains totaling a net $59.7 million of charges that were due to the sharp decrease in oil prices. As a result, we had a net loss of $52.8 million or $0.91 per diluted share for the quarter. The noncash charges for the quarter included $30.6 million charge for impairment of our proved oil and gas properties and deferred income tax expense of $35.6 million. These charges were partially offset by unrealized mark-to-market gains of $6.6 million related to the company's crude oil swaps. Excluding these items, we had adjusted net income for the quarter of $6.9 million.

Adjusted EBITDAX was $6.0 million in the first quarter of 2020, which was lower than the same period a year ago as well as the fourth quarter of 2019, primarily due to lower oil prices. Production for the first quarter of 450,000 net barrels was significantly higher than both the first quarter of 2019 and the fourth quarter of 2019 due to the impact of the new wells coming online in late 2019 and early 2020. First quarter 2020 oil sales of 294,000 net barrels, however, were lower than both the first quarter of 2019 and the fourth quarter of 2019 has a lifting of 85,000 barrels that was scheduled for March 2020 was delayed until April 1.

This was not a result of any impact on operations associated with COVID-19, but rather it was due to poor weather conditions at the time of the lifting. We had only 2 liftings during the quarter, whereas we would typically have 3 liftings during the quarter, i.e., 1 per month. The delay in the scheduled March lifting also resulted in the average oil price received in the first quarter being higher than expected, as it reflected prices for just January and February before the most significant declines in Brent crude oil prices experienced in March.

For the second quarter of 2020, we expect sales to increase over the first quarter of 2020 and the comparable second quarter of 2019 as a result of the extra lifting on April 1. We also will benefit from a full quarter of production from all the wells for the 2019-2020 drilling program and recent workovers.

Barring any unforeseen increase in Brent prices between now and June 30, average realized crude oil prices for the second quarter will be significantly lower, however. In the first quarter, we had gains on our crude oil swaps of $7.3 million. This included noncash mark-to-market unrealized gains of $6.6 million that reflected a significant change in oil prices between December 31, 2019 and March 31, 2020 as well as realized cash gains of $0.7 million on swaps which settled during the quarter.

These swap agreements are the Dated Brent weighted average price of $66.70 per barrel. As of March 31, 2020, there were monthly swap contracts outstanding for 172,000 barrels for April through June 2020, which had a fair value of $7.3 million. We will continue to evaluate ways to mitigate price risk and protect cash flow against low commodity prices through our hedging program.

Turning to expenses. Total production expense, excluding workovers, for the first quarter of 2020 was $6.9 million or $23.39 per net barrel of oil sales. The amount was lower for the quarter due to the lower sales volume.

On a unit basis, we were near the midpoint of our guidance for the quarter of $23 per net barrel. Our unit cost was less than prior quarters due to the increase in production volumes and the fact that about 90% of our production costs are fixed and don't rise with higher volume.

For the second quarter of 2020 and the full year of 2020, we expect our unit cost should be between $20 and $24 per net barrel sales. While low crude oil prices has certainly had an effect on our financial results, from an operational standpoint, we have not been materially impacted by the worldwide COVID-19 pandemic. Our guidance, however, excludes any potential future impacts not currently being experienced.

During the quarter, we completed one workover and had an additional workover that was nearing completion at the end of the first quarter of 2020, whereas we performed no workovers throughout 2019. As a result, workover expense during the first quarter of 2020 was $2.8 million. We had some costs for the 2020 workovers that will carry over to the second quarter, and we expect it to be no more than $1 million. We had initially provided guidance of $6 million to $8 million net to VAALCO for workovers in 2020, but canceled the third workover originally planned for 2020. As a result, the workover expenses we incur in the first and second quarters are all the workover expense we currently expect for 2020.

DD&A for the first quarter of 2020 was $3.1 million or $10.55 per net barrel of oil sales, which is significantly above our -- which was slightly above our original guidance. Quarter 1 2020 DD&A expense per barrel increased over both the first quarter of 2019 and the fourth quarter of 2019, reflecting the additional costs associated with the new Etame 11H well, South East Etame 4P appraisal wellbore and South East Etame 4H well.

During the first quarter of 2020, impairment testing was performed using our estimated reserves and forward price curves as of March 31, 2020. Due to the lower forecasted oil prices, we recorded a noncash impairment charge of $30.6 million to write-down our investment in Etame to the fair value of $15.6 million.

Due to this impairment, we now expect our DD&A per net barrel to decrease during the remainder of the year and have lowered our guidance to $4 to $6 per net barrel for the full year. There were no impairment charges to capitalized costs for oil and gas properties taken in either the first or fourth quarters of 2019.

General and administrative expense for the first quarter of 2020, excluding noncash stock compensation expense, was $3.4 million. The G&A increase from both the first and fourth quarters of 2019 was primarily related to higher professional fees. For the full year of 2020, we continue to forecast our G&A to be between $10 million and $12 million.

Noncash stock-based compensation expense was a credit of $2.6 million during the 3 months ended March 31, 2020, due to the change in the SARs liability as a result of the decrease in the company's stock price between December 31 and March 31. For both the first and fourth quarters of 2019, our stock price increased resulting in additional expense during those periods.

Turning now to taxes. Current income tax expense is primarily attributable to Gabon taxes, which are settled by the government taking their oil in-kind. Current income tax expense for the first quarter of 2020 included a $3.4 million favorable oil price adjustment as a result of the change in value of the government's allocation between the time it was produced and the time it was taken in-kind.

After excluding this impact, overall, current income taxes were $1.3 million (sic) [$1.9 million] for the period. Overall, deferred income tax for the first quarter of 2020 was $35.6 million. This included $46.9 million related to increases in valuation allowances from both the U.S. and Gabon deferred tax assets and a deferred tax benefit of $11.8 million resulting from the tax effect of the loss for the period.

Valuation allowances are recognized when it is no longer likely that the deferred tax asset will be realized in the future. As a result of the lower crude oil prices at the end of the period, future estimated taxable earnings declined significantly, and we now have full valuation allowances against our deferred tax assets as of March 31, 2020.

As detailed on Slide 25 in the presentation deck posted this morning on our website, we currently estimate that VAALCO's operational breakeven in 2020 is approximately $27 per net barrel of oil sales, and our free cash flow breakeven prices in 2020 is approximately $35 per net barrel of oil sales.

Keep in mind that our realized prices are benchmarked to crude oil prices. Both amounts include workover expense but do not include any impacts from hedges. These estimates are lower than the $31 and $38.50 per net barrel of oil sales previously estimated as shown in our March 2020 investor presentation. The lower breakeven costs reflects cost-cutting measures that we have implemented over the past month.

In general terms, we estimate that each $5 increase in realized oil price increases our annual adjusted EBITDAX by approximately $8.5 million. This clearly shows our strong leverage to higher oil prices. As mentioned earlier, our guidance excludes any potential future impacts not currently being experienced as a result of the COVID-19 pandemic.

At March 31, we had unrestricted cash balance of $61 million, which includes $11.3 million of cash attributable to nonoperating joint venture owner advances. This does not include an additional $13.1 million in short-term and long-term restricted cash related primarily to deposits in Gabon for future abandonment costs.

Adjusted working capital from continuing operations in March 31, 2020, totaled $25.8 million, an increase of $7.5 million from December 31, 2019. Despite the sharp decline in oil prices, VAALCO's cash and adjusted working capital positions remain very strong. We fully funded our 2019-2020 drilling program at Etame from cash on hand and cash flow from operations.

In the first quarter of 2020, net capital expenditures totaled $12 million on a cash basis and $9.4 million on an accrual basis, primarily related to the 2019-2020 drilling program at Etame. As Cary discussed, we do not expect any remaining material capital expenditures for the balance of 2020. And it has been the case since the second quarter of 2018, we are carrying no debt.

During our share repurchase -- turning to our share repurchase plan. Since its inception in June 2019 through March 31, 2020, we purchased 2,549,639 shares at an average price of $1.75, $4.5 million. In the very beginning of the second quarter, we purchased 191,000 additional shares at an average price of $0.99 per share.

All of our share purchases have been funded using cash on hand. No purchases were made after April 2 and on April 13, 2020, to preserve the company's cash resources and liquidity, our Board determined the program, which was scheduled to expire -- terminating the program, which is scheduled to expire in June. The company will revisit instituting a share repurchase program in the future when commodity markets stabilize at higher levels.

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

Thanks, Liz. Over the past several years, we have worked diligently to build a solid foundation for the future and to strengthen our financial position. Even in the challenging environment we face today, we remain focused on operational excellence. VAALCO has a stable producing asset with significant upside in Gabon. We have taken actions to drive down our operational costs and improve our margins, which will allow us to generate cash flow to fund future drilling campaigns. While we have deferred capital expenditures, including drilling until the global oil pricing environment improves, we remain confident in the long-term viability of our inventory of drilling opportunities.

We continue to plan for the future, where we hope to repeat the successful 2019-2020 drilling campaign with similar drilling campaigns and continue adding reserves and production through the life of our PSC at Etame. With a debt-free balance sheet, approximately $61 million in cash on hand at March 31 and strong production from our recently completed drilling program, we have positioned VAALCO to weather the near-term uncertainties.

We expect that 2020 will be a challenging year for our industry, but we will continue to carefully manage our business with a focus on protecting our balance sheet and optimizing cash flow.

Thank you. And with that, operator, we are ready to take questions.

(Operator Instructions) Our first question today will come from Charlie Sharp of Canaccord.

I guess sort of 2 questions in 1, really, if I may. Obviously, you had a very successful drilling campaign in 2019 and 2020, which you've talked about in the presentation. Perhaps you could just outline a little bit more in detail, what is it that you've learned from that? And how much more confident you may be in the potential of the Etame license?

And then the follow-on is, what has to happen with the COVID virus and oil prices for you to turn what you would like to do next in terms of operations into concrete plans for new drilling?

Well, thank you, Charlie. I'm happy to talk about what we've learned or what we learned from the drilling campaign we just executed. I guess, first and foremost, it was the successful appraisal wellbores, which identified oil in place and resources in areas where we were not completely confident there was oil in place before we drilled the appraisal wellbores. And so that was, of course, the Dentale reservoir underneath the Gamba field at Etame, I should say, underneath the Gamba reservoir at the Etame field. So in the future, we have confidence in pursuing some Dentale development wells. And then over at south East Etame, of course, we had a successful appraisal wellbore and actually completed the development well in that new reservoir. And as we watch the new well produced, we may learn that there's space for development well there. So I think those were the 2 key things we learned that will impact future drilling campaigns.

And then also on the operational side, I think that we've learned a whole lot. We haven't had a drilling rig at Etame in 5 years. We restarted the drilling campaign in September of last year, as everyone knows. There were some -- as you recall, there were -- there was a little bit of a cost overrun in the beginning, but we learned very quickly on how to manage those problems, and we ended up saving some money towards the latter part of the campaign.

And so I think operationally, what we learned is get the right people in-country early, and we wouldn't have sort of suffered through those learnings at the beginning. But again, we overcame those in our entire drilling campaign or the entirety of the drilling campaign came in on budget. So operationally, I think we proved that we can drill wells in Gabon without major cost overruns or major operational difficulties. And that's as important as the success of the appraisal wellbores.

And so the second part of your question on what will it take in terms of the COVID-19 pandemic and oil prices. What changes are required for us to lock down a drilling campaign? I think what you can see is with -- or what should be -- what I've talked about before in terms of the COVID-19 pandemic, it's really the logistical challenges. And right now, the Gabon borders are close to expatriates coming into country. And so I think that's sort of the obvious change that needs to happen is there needs to be some loosening and some opening of the Gabon borders and moving people in and out, and we need to learn how to do that safely, which we can do. So that's the one challenge we have that we're looking for that really needs to be overcome before we would consider starting another drilling campaign.

As far as -- like we've said so far, we've been able to manage our operations with no direct impact other than the logistical challenges. And so we're waiting and watching for the Gabon government, like I said, reopen their borders and reopen their economy just like we're doing here in the United States.

And in terms of oil prices, what we're looking for is confidence in the long term. And so as we see oil prices move into the 40s, and we're confident that they will remain in the 40s, I think that's the impetus we need to go ahead and solidify our drilling campaign.

So -- but Charlie, did I answer your questions?

Yes. That's very helpful.

Our next question today will come from Bill Dezellem of Tieton Capital.

A couple of questions. I'd like to start with your $35 free cash flow number. And I think of the difference between free cash flow breakeven and operational breakeven as being CapEx. So I guess the first question, is there something more besides CapEx? And if that is the difference, what CapEx are you using with your assumption of that difference between $27 and $35 breakeven?

Yes. The main difference between the 2 is G&A and then also the asset retirement obligation. So in the operational breakeven, that's limited to OpEx, tax and workovers. And then when you get to the free cash flow, it's the OpEx, tax, G&A, workovers and asset retirement obligation. We haven't included CapEx for the well because that fluctuates significantly based on whether you have a drilling program in place or not. And so it kind of distorts the overall numbers. So we felt like it was more informative to have something excluding well costs.

Great. And then secondarily, the Q1 production expense when you exclude workover, and add back the 85,000 barrels that were delayed from the weather, so those really should have been in Q1. I end up with production expense of $18.34. So taking the initial production expense of $9.7 million, subtracting off the $2.8 million of workover that brings to $6.9 million of production expense. And then taking the 294,000 barrels of sales, adding in the 85,000 that were delayed a day because of the weather, that's where I get the $18.34. And your guidance is $20 to $24 a barrel. And so what's the difference? And why is your guidance for production expense so much higher than what you would have experienced in Q1 had you not had that daily weather delay?

Right. I'm going to let...

I think you're missing an element. So...

Yes. I'll let Liz cover some details here. But you're right, Bill. I mean in general, we're finding ways to reduce costs. And so that unit operating expense is coming down. Unfortunately, the calculation to adjust for the 85,000 barrels, you're right, that should have been in the first quarter calculation that we had -- didn't have the weather problems. The adjustment for -- to unit operating cost is a little more complicated than just adding the barrels back in. And it's because there's an inventory line on the operating expense built into operating expense that would change as well. The inventory line accommodates for barrels that have been produced but have not been sold.

And so based on the calculation, actually, it's -- the number that we're reporting for first quarter does account for the 85,000 barrels, even though it was not sold in the first quarter.

But Liz, do you have anything?

Yes. That's exactly right. Bill, what will happen is we have some costs that are capitalized on our balance sheet related to the 85,000 barrels plus additional barrels that were expected to be in inventory at the end of the quarter. And those costs will be reflected in the second quarter results. So what you're going to see is you should see the average cost per barrel aligned between the 2 quarters.

That's helpful. And I can either step back in queue or hit you with a couple of other quick questions. Your choice.

Why don't you go ahead and ask your questions, Bill? We'll try to answer them quickly.

Okay. That's just fine. The bad debt expense of $810,000. What -- how did that come about?

Yes. I'm happy to take that one. So that has to do with our receivable for that in Gabon. And so we -- our payments that we're getting to recover that, which is fully recoverable, are somewhat intermittent. And what we found is that because of the additional stress on the Gabonese economy, and also the lack of receiving any kind of payments in the first quarter, we believe that it was prudent to increase the valuation allowance against that receivable.

And that's essentially a refund from the Gabonese government?

Correct.

Great. And the South Tchibala 2H mechanical issue. Would you talk through what you think is going on there, please?

Well, the -- well, first, the electric submersible pump in the well did not fail. And so I want to make that very clear. It was installed in 2018, and it was still running just fine. What we saw was rate dropped significantly for no apparent reason. And so until we pull the tubing and the ESP or the electric submersible pump and go down in the well with some tools, we don't know confidently why production slowed down. But what we think is -- like I said, there's a downhole mechanical failure that could be something related to the casing having a problem, something that's broke and loose and is obstructing flow. We just -- we don't know. And so like I said, we need the drilling rig to come back, so we can pull the tubing, pull the ESP and go in with some tools and diagnose what the problem is and repair the problem. But it's something downhole that has broken loose or collapsed, we just don't know.

Congratulations on a solid quarter.

Okay. Thank you, Bill. Good to hear from you.

Our next question today will come from Jamie Wilen with Wilen Management.

Congrats on running things well in a very difficult environment. With Levene in Equatorial Guinea, is the Memorandum of Understanding nonbinding because it's negotiations with the government that have to be concluded to extend the time line? Is that the majority of the hold up at this point?

Well, a couple of things, Jamie. The -- in terms of finalizing the agreements, yes, we will need some time with the government, to work with the government to approve the agreements. We're not quite -- we're not at that stage yet. We're still negotiating agreements with Levene. And unfortunately, the COVID-19 restrictions have slowed us down. And so we're working as fast as we can.

But typically, we would have either -- we would have met in person for maybe a day or 2 and finalize the negotiations. That option is not available. And so we're trying to work through teleconferences and video conferences. It's just taking a while for VAALCO and Levene to come to final terms. It's not the government that's delaying things right now. So I just want to be clear about that.

Okay. We -- the 12-month time frame has not started, the clock hasn't started ticking on that yet, I assume?

Well, what we have in place from the government right now is the government has confirmed that we have until December 31, 2021, to either drill a well or relinquish the license. And so there's no penalty if we relinquish the license, but we do remove the $10 -- I'm sorry, $10 million of value we have on our books for Equatorial Guinea, but there's no cash impact. So what we've done is we've gone back to the Equatorial Guinea government, and we've asked for an extension, let's say, out to December 31, 2023, to drill the well. And we're fairly confident we will get that extension. But otherwise, the deadline is December 31, 2021.

On your balance sheet, why do your partners in Gabon give you a $10 million advance to sit with?

Yes. That really just has to do with the timing of cash calls. So what ends up happening is we cash call for joint owners for the coming months' expenditures, so we're doing an estimate. The cash calls are not due until the first day of that month, but in a number of cases, we get the cash a day before or maybe 2 days before. And so you end up with cash on your balance sheet that is really going to be used for the next months' expenditures. So that -- it's more of a timing issue than everything else. We like to point out how much that is because we don't want -- we want to make sure people understand that a portion of that cash is going to be used to settle the joint owner obligations rather than our own.

And lastly, as far as you've reduced the cost, obviously, your operational breakeven is much lower. Is that an estimate for the full year? Have all those costs already been achieved? Is there more to come? And what would the -- your ultimate operational breakeven be if there are other costs to be taken out?

Well, we are looking forward to take out other costs every day. And I trust -- I can't guarantee, but I trust that our team will find more cost reductions. And -- but in terms of is it -- well, it is a forecast. So the -- when we gave guidance for the full year, it is a forecast. Something could go wrong or could -- circumstances could change and operating expense could go up or could increase above our forecast, but that's why we give a range. And so we're very confident in the range we've given today. And there's obviously a high end and a low end, and the high end takes into account some -- maybe some unforeseen circumstances.

But I do want to be clear, though, that right now, we haven't seen any impacts on our operations from the pandemic. But there may be impacts that we can't predict that would drive our operating costs up. And so we can't really build that kind of forecast into our outlook. And so that's an unknown that's out there.

But anyway, Jamie, did that answer your question?

Yes, it did. Once again, congrats on the successful drilling program and the wonderful balance sheet you have with basically the stock price all-in cash and no debt. It's a wonderful place to be situated during this tough time.

All right. Thank you. Thank you, Jamie.

(Operator Instructions) Our next question is from Ricky Fairchild with RBC.

Could you all give a little more color and insight into the rationale between suspending -- or with regards to suspending the share repurchase program? It just seems like net of the cash advances that are on the balance sheet, taking those out, that the stock price is right around the cash on the balance sheet. So it seems like even if you're not active in the share repurchase program that you would at least keep it open during times like this.

Right. Well, the share repurchase program was set to expire midyear. And so the Board terminated the program a bit early. But going back to your question, we do have significant cash on our balance sheet that can be used for a variety of things. And the Board made the decision to preserve our cash on our balance sheet to -- for other opportunities, I would say, and to make sure that we can weather the storm. But at any time, the Board can reinstate a share repurchase program. But does that answer your question, Ricky?

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It does. And so as far as reauthorizing the share repurchase program, can that only be done at a formal Board meeting or an impromptu meeting? Or what are the mechanics for that?

Well, it can be done. We can call an impromptu Board meeting at any time. We'd like to give all of the Board 48 hours' notice. And it could be a teleconference. And otherwise, we could even agree over e-mail as long as it's unanimous to reinstating the program. So there's a lot of flexibility. We can move very quickly.

Congrats on a good quarter.

All right. Thank you, Ricky.

And we have a final question today, a follow-up from Bill Dezellem with Tieton Capital.

I'd actually like to kind of play off your answer to the last question. You referenced keeping the cash for other opportunities. So presumably, acquisitions may be part of that. Would you -- I guess I'll make the question 2 part. Would you discuss kind of what those other opportunities are that you were referring to in the answer to that question? And secondarily, what is the update relative to acquisitions? And how do you think about them in this oil price environment?

Right. Well, these -- Bill, good questions, and let me talk to M&A and our activity. We are keeping our eyes open for acquisitions that are strategic fit, but we have nothing to announce today. Our focus right now is really on delivering -- increasing our margins. And so making sure we deliver production at the lowest possible costs. I think that's our first priority. And then we're watching and we're aware of acquisition opportunities, like I said, nothing to announce.

But the -- in terms of keeping the cash on our balance sheet, it's to preserve our liquidity, not only for M&A, but if there's -- if things turn around quickly and we want to restart a drilling program, we can do that. Maybe we want to shoot seismic in Etame to help future drilling programs. We'd have the cash to do that ahead of the drilling program.

So we're really looking 18, 24 months out, what the opportunities are and making sure that we have enough cash on hand to deliver our strategy.

Great. And then one additional question. Gabon, I believe, is part of OPEC. Is there any indication that you may, in the future, need to reduce your production as a result?

So far, we have not been notified that we will -- we have not been notified and we have not been asked to reduce our production as a result of the OPEC cuts. You're correct, Gabon is a member of OPEC, and we have not received notification that we will be required to curtail our production.

Ladies and gentlemen, this will conclude our question-and-answer session. At this time, I'd like to turn the conference back over to Cary Bounds for any closing remarks.

Sure. Thank you, operator. Well, I appreciate everybody joining our call today, and we look forward to our next call after the close of the second quarter. Goodbye.

The conference has now concluded. We thank you for attending today's presentation, and you may now disconnect your lines.