VAALCO Energy Inc (EGY) 2024 Q4 法說會逐字稿

Good day and welcome to the VAALCO Energy fourth-quarter 2024 earnings conference call and webcast. (Operator Instructions)

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

Thank you, operator. Welcome to VAALCO Energy's fourth quarter and full year 2024 conference call. After I cover the forward-looking statements, George Maxwell, our CEO, will review key highlights of 2024 and discuss our plans for 2025. Ron Bain, our CFO, will then provide a more in-depth financial review. George will then return for some closing comments before we take your questions.

During our question-and-answer section, we ask you to limit your questions to one and a follow-up. You can always re-enter the queue with additional questions. I would like to point out that we have posted a supplemental investor deck on our website 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 our earnings release. A presentation posted on our website and in the reports we file with the SEC, including our Form 10-K. Please note that this conference call is being recorded.

Let me turn the call over to George.

Thank you, Al. Good morning, everyone, and welcome to our fourth quarter and full year 2024 earnings call. Over the past two years, we have delivered record breaking operational and financial results while meeting or exceeding our quarterly guidance targets. Maintaining operational excellence and consistent production across our portfolio is essential to expanding adjusted EBITDAX, which has allowed us to grow inorganically and also to fund organic growth initiatives better positioning VAALCO for the future.

Before I go into more details about the exciting opportunities that we have across our asset base, let me first summarize some high level financial and operational results that led to a record-breaking year and some key items that have occurred thus far in 2025. For full year 2024, we increased our adjusted EBITDAX to $303 million, a new company record. We also had record production of almost 25,000 working interest barrels equivalent per day and record sales of almost 20,000 net interest barrels per day. Our SEC proved reserves grew 57% year-over-year to 45 million BOE and a 2P CPR reserves grew to 96.1 million BOE.

We sustained our commitment to returning cash to shareholders in 2024. And over the past two years, we have returned $83 million to our shareholders through our ongoing dividend program and share buybacks. We completed the Svenska acquisition in April 2024. And by year end 2024, we had already seen a 1.8 times payback on the initial investment. We have positive momentum as we enter 2025, both operationally and financially. We are building size, scale and profitability to sustainably grow VAALCO.

I would now like to go through and give an update on our diverse portfolio of high-quality assets, beginning with our newest assets in Cote d'Ivoire. I would like to remind you that a year ago, we had no production or interest in Cote d'Ivoire. And then in April 2024, we swiftly and efficiently completed the Svenska acquisition, securing a valuable asset. Based on the results of our third-party reserve engineers, our year-end 2024 SEC net proved reserves of 16.5 million BOE was higher than our estimate at the time of closing and the 2024 reserves were reduced by production of 1.2 million BOE.

In alignment with the projected timeline, the FPSO ceased hydrocarbon operations as scheduled on January 31, 2025, with the final lifting of crude oil from the vessel occurring in early February, our partners of the CI-40 block have commenced mobilization efforts for the FPSO. The vessel is planned to be towed to the shipyard in Dubai for refurbishment upon departure from the field in March 2025. Significant development drilling is expected to begin in 2026 after the FPSO returns to service with meaningful additions to production from the main Baobab field.

The Council of Ministers recently approved a 10-year extension of the license on CI-40, extending it to 2038. In March 2025, we announced a farm-in agreement for the CI-705 block offshore Cote d'Ivoire, where we will operate with a 70% working interest and a 100% paying interest under a commercial carry arrangement through the seismic reprocessing and interpretation stages and potentially drilling up to two exploration wells.

We are partnering with Ivory Coast Exploration Oil & Gas SAS and PETROCI. We believe the CI-705 block is favorably located in a proven hydrocarbon system near existing infrastructure with access to a strong, growing domestic market and attractive upside potential. It is located in the prolific Tano Basin and is approximately 70 kilometers to the west of our CI-40 block and 60 kilometers west of ENI's recent Calao discovery.

We invested $3 million to acquire our interest in the new block, and our initial assessment is that there are both oil and natural gas prospects of a diverse place on the block. We plan to conduct a detailed integrated geological analysis to assess and mature our understanding of the block's overall prospectivity. We have demonstrated our ability to acquire, develop and enhance value through accretive acquisitions and we are excited about the prospects in Cote d'Ivoire.

Turning to Canada. We successfully drilled four wells in the first quarter of 2024, completed those wells in March and April and brought the wells online. As a reminder, we drilled longer laterals to improve the economics of the program and all four wells were 2.75-mile laterals. We're very pleased with the production results from our drilling program and as you can see in the production mix in Canada.

In Q1, our Canadian production was about 60% liquid. And in Q2 through Q4, our Canadian production was approximately 75% liquid from the new wells coming online with a lower GOR. This strong oil production has rebalanced production in Canada more in favor of liquids, which contributes to the strong production performance. As I mentioned in the last call, we drilled a well in the Southern Acreage in the fourth quarter.

In our Southern Acreage, we have a minimal horizontal subsurface information, and this exploration well was drilled to help us better understand acreage and potentially add proved undeveloped locations. We do not have 30-day initial production rates from the well yet, but the well has been completed and placed on pump. We are monitoring the well's results and will provide an update on it in the future.

In Egypt, as we disclosed last quarter, our focus for most of 2024 was on the high rate of return capital workover projects that help mitigate decline. In the fourth quarter of 2024, we had two recompletions. And for the full year 2024, we had 12 completed to help mitigate decline. Also in the fourth quarter, we contracted a rig and drilled two wells starting a drilling campaign that will carry into the first half of 2025.

We expect to drill an additional 8 to 13 wells in 2025 as part of this drilling program in Egypt. By drilling these wells in late 2024 and in the first half of 2025, we are maximizing the positive impact of our Egyptian production throughout the year. In addition to the successful work overs and drilling we have seen over the past two years, I'm very proud of a major milestone that we have accomplished in Egypt.

We did not have a lost time incident in 2024, and thus far, in 2025, we have not had a lost time incident, which means we have gone over 3.5 million man hours without an incident. This is a testament to our commitment to safety, training and dedication, which is of the utmost importance to a fall of all our people in the operation.

We continue to work with the ministry and EGPC on our outstanding receivables. Our rate of collections has improved in the second half of 2024 and has continued to outpace revenues in early 2025. We fractured one of our wells in the South Ghazalat in the Western Desert late in the fourth quarter and we are evaluating the results. We are considering our follow-up exploration well in the nearby prospect on the block.

Moving to Gabon. Given that we haven't drilled a well in Gabon for over two years, we are pleased with the positive overall production results with strong production uptime and improved decline curves on the wells. The FSO and field reconfiguration projects in 2022 have allowed us to minimize downtime, capture efficiency and reduce overall OpEx.

We secured a drilling rig in December 2024 for our 2025-2026 drilling program, which is planned to begin in Q3 2025. The rig has a firm commitment of five wells with an additional five well option. We are targeting at least two wells to be drilled and completed in 2025 with the remainder of the program to occur in 2026. In total, we now anticipate drilling three infill development wells, one oil exploration well, a high GOR well to support the field fuel needs and two workovers. We have option to drill additional wells if information gathered during the program results in the high grading and derisking of already identified well locations.

Since the last call, we have continued to review the well sequencing of the program and the testing of the Ebouri shut-in wells. We are conducting an extended flow test on the Ebouri 4H well to gather information on the H2S concentrations at this location to aid in equipment design and to evaluate our chemical crude sweetening process.

I am pleased to say that the H2S concentration is within our modeling expectations. This well has now flowed for over two months, demonstrating our ability to treat the oil and has provided us some additional production in the process. This well will be worked over during the program and should provide a nice boost to oil production.

Regarding our exploration blocks in Gabon, the Niosi Marin and the Guduma Marin, we are working with our partners and the operator BW Energy on plans for the two blocks moving forward. A seismic survey to fulfill a work commitment on Niosi is being planned for acquisition in the late 2025 or early 2026. Given the proximity of these blocks to the prolific producing fields of Etame and Dussafu as well as the recent BWE discovery at the Board and Prospect in the Dussafu concession, we're excited about the future possibilities for this block.

Turning to Equatorial Guinea. In March 2024, we announced the finalization of documents related to the Venus-Block P plan of development. In the second half of 2024, we began our front-end engineering design or FEED study. We anticipate that completion of the FEED study will lead to an economic final investment decision or FID in 2025, which will enable the development of Venus. We are very excited to proceed with our plans to develop, operate and begin producing from the discovery in Block P offshore Equatorial Guinea over the next few years. We look forward to discussing this new area of operations in more detail once the FEED study is complete.

Turning to reserves. We're very pleased with the growth of our SEC proved reserve base despite a significant decline in pricing. Our acquisition in Cote d'Ivoire, coupled with our positive reserve revisions due to field performance in Gabon and drilling results in Egypt and Canada, more than offset production and slightly lower pricing. SEC proved reserves at year end increased 57% to 45 million BOE and our PV-10 increased 11% from 342 million to 379 million. Our 2P CPR estimate, which includes proven and probable reserves using VAALCO's management's assumption for future pricing and cost reported on a working interest basis prior to deductions for government royalties saw a year-over-year increase of 24% to 96.1 million BOE.

The 2P CPR and PV-10 saw a 9% increase to 687 million at year end 2024. The value of our Svenska acquisition, as well as our efforts across our asset base to improve production, manage costs and expand our asset through drilling can be seen in the positive results from our reserve report. We have a strong runway of opportunities that will continue to add value. And as you can see from our SEC proved reserves, 2P CPR reserves and corresponding PV-10 values compared to our current market cap, our stock is quite undervalued. g

In closing, we have an outstanding diversified portfolio of assets that have significant upside opportunities. We remain focused on growing production, reserves and value for our shareholders. I would like to thank our hardworking team who continue to operate and execute our plans.

Over the past two years, we have significantly diversified our portfolio, enhancing our capacity to generate operational cash flow and adjusted EBITDAX, return capital to shareholders, grow our cash reserves while increasing our credit facility capacity. We are well positioned to execute the projects in our enhanced portfolio and our proven track record of success in these past few years should instill confidence in our future.

With that, I would like to turn the call over to Ron to share our financial results.

Thank you, George, and good morning, everyone. Let me first echo George's comments about our continued success driven by our diversified and high performing asset base. Over the past two years, we have met or exceeded our quarterly and annual production guidance leading to consistent and operational and financial results, including record adjusted EBITDAX generation in each of the last two years.

In the fourth quarter, we reported $76 million in adjusted EBITDAX ahead of consensus estimate. For the year 2024, we saw positive impact from the Svenska acquisition and $303 million in adjusted EBITDAX. We generated an additional $23 million or 8% increase in adjusted EBITDAX year-over-year. Our adjusted EBITDAX growth outpaced our production and sales growth, which shows that we expanded margins in 2024 aided by Cote d'Ivoire acquisition and continued focus on costs.

Turning to production and sales, which along with realized pricing drive our revenue. Production for the fourth quarter remained solid at 25,300 working interest barrels of oil equivalent per day at the midpoint of our guidance. Our fourth quarter sales were 20,352 net barrels of oil equivalent per day, which is at the higher end of guidance. We, together with our partners, completed three liftings in Cote d'Ivoire in Q4, driving our sales growth and emptying the FPSO from the drydocking project, which began in January of 2025.

I'd like to reiterate that with a diversified portfolio of assets, we will have changes from the quarter-to-quarter in the midst of sales for which we are producing New Years. This will be seen in our 2025 guidance numbers as we have some major projects in Gabon and Cote d'Ivoire. This change in mix impacts our realized pricing and ultimately our revenue and earnings. But again, if you look at the bigger picture, over the past three years, we've more than doubled production and over the next several years, you'll see another step change in growth across our expanding portfolio of producing assets.

Pricing remains fairly stable in the fourth quarter and full year 2024 and our hedging program has always looked to help mitigate risk and protect our commitment to shareholder returns. Our current hedge positions were disclosed in the earnings release.

Turning to costs. Our production costs for the fourth quarter of 2024 were below the low end of guidance both on an absolute basis on a per barrel basis. For the full year 2024, we were at the bottom of our guidance range. Absolute expense was $37.7 million and on a per barrel basis was $20.16. For the full year 2024, while the absolute costs went up by about $10 million, our per barrel costs were slightly lower at $22.48. Our focus remains on keeping our costs low to enable us to maximize margins and increase our cash flow.

G&A costs were well below the midpoint of guidance, and they fell quarter-over-quarter. We commenced a back-office process improvement project with the implementation of a single cloud-based ERP system across the whole company that went live in Q3 2024. This is helping us to streamline processes and efficiently work across multiple offices located around the world. We will continue to develop this in 2025.

Moving to taxes. As I previously stated, in Gabon, Egypt and Cote D'Ivoire, are foreign income taxes accepted by the government through oil listings in Gabon and Cote d'Ivoire and the government taking this share in Egypt.

Turning now to the balance sheet and cash flow statement. Unrestricted cash at the end of the fourth quarter declined slightly to $82.6 million. Post year-end on the January 3, 2025, we received a payment of $11.3 million for Cote d'Ivoire lifting and $4 million from EGPC, so our year end cash balance could have been $15 million higher. The reduction from Q3 closing cash was driven by an additional $50 million in capital spend sequentially.

In Q4, we spent $41.5 million in cash CapEx and returned $6.5 million through dividends to our shareholders. Additionally, in February 2025, we offset the next annual monetization payment of $10 million due to EGPC for 2025 that relates to the PSC consolidation a few years ago by way of pay down of each receivables. We have one more annual payment due under that agreement. This offset has allowed us to reduce the legacy receivable balance with EGPC, while they've kept their ongoing operational payments current.

Looking at our working capital changes year-over-year, there were two main drivers to the increase in current assets and liabilities. The first is related to the acquisition of Cote d'Ivoire in Q2, which increased both our assets and our liabilities. The second is related to Egypt, where we saw an increase in our trade receivables in Egypt during the first six months of 2024, when all of our crude was switched to being refined locally, we continued to press for an export cargo. This resulted in collections in the first half of 2024 running behind sales, which was tracking behind some of our peers after we had come off a strong collection year in 2023, where we also had two export cargoes and had a nine-month drilling campaign.

In the second half of 2024, we focused and working with the state to allow many suppliers to receive Egyptian payments allowing us to accept a greater quantity of collections as well as utilize offsets in some US dollar collections to better keep pace with revenues. We've maintained this focus in 2025 with to-date collections including offsets local currency and US dollar receipts now exceeding revenues.

As George outlined, we have an active drilling campaign that will kick off in mid-2025 at Gabon, an FPSO upgrade project that began in Q1 in Cote d'Ivoire as well as an additional drilling in Egypt and Canada. To support these development capital programs, this month, we entered into a new revolving credit facility with an initial commitment of $190 million and the ability to grow to $300 million. This new facility will place an existing ongoing revolving credit facility and will provide short-term funding that may be needed from time-to-time to supplement our entirely generated cash flow and cash balance.

In Q4 2024, VAALCO paid a quarterly cash dividend of $0.0625 per common share or $6.5 million. In 2024, we returned $33 million to shareholders through dividends and buybacks. We also announced the first dividend payment of 2025, which will be paid later this month. Let me now turn to guidance where I'll give you some key highlights and updates.

I want to remind you that guidance for 2025 has the field that CI-40 is shut-in on January 31, 2025, and our drilling campaign in Gabon not kicking off until early Q3. So the production and sales for 2025 are expected to be lower than 2024, but we'll jump up materially in 2026 when the FPSO is back online in Cote d'Ivoire and the full impact of the Gabon drilling campaign is realized. Our full guidance breakout is in the earnings release and in our supplemental slide deck on our website for an adoption breakout of both working interest and net revenue interest by asset area.

For the total company, we are forecasting Q1 2025 production to be between 21,550 and 22,750 working interest BOE per day and between 16,550 and 17,650 net revenue interest BOE per day. This takes into account the FPSO shutdown and natural decline. For the full year 2025, we are forecasting the production range from the total company to be between 19,250 and 22,310 working interest BOE per day and between 14,500 and 16,710 net revenue interest BOE per day.

For the first quarter, we are forecasting our sales to be higher than our production. But for the full year, we believe that sales will be more or less in line with our production. In Q1, we are forecasting two liftings from Gabon. The first three lifting to settle our current taxes. For the substantial capital and operational program in 2025 for Gabon, we forecast this state lift could be the only state lifting in the calendar year. We expect our absolute operating costs to be lower compared to 2024, but because of the lower sales in 2025, we are projecting our BOE expense to increase to a range between $24 and $28 per BOE. We are also expecting flat to slightly lower absolute G&A.

Finally, looking at CapEx, our 2025 capital spend is projected to be between $270 million and $330 million as we begin the drilling campaign in Gabon, execute the 2025 FPSO change out in Cote d'Ivoire and continue drilling in Egypt and Canada. George outlined the multiple programs across our assets as we believe that our efforts in 2025 will allow us to experience another step change in production in 2026 and beyond. In the first quarter, we are expecting a range of between $70 million and $90 million for our CapEx.

In closing, we are well positioned to continue executing our strategy of growing production of reserves while adding meaningful value. We have a long track record of successfully delivering results that meet and exceed expectations. We achieved many things in 2024 from record sales and record adjusted EBITDAX to completing the Svenska acquisition and already paid back operationally 1.8 times the initial deal investment.

Despite all of this, we continue to trade at a very low multiple of EBITDAX despite having a top quartile dividend yield amongst NYSE income stocks. We have a new up to $300 million revolving credit facility and over $80 million in cash in the balance sheet ready to fund a robust organic capital program of high return growth opportunities which should help us set new record sales and adjusted EBITDAX in 2026 and beyond. We've delivered and we are very well positioned to continue to execute at a high level across our diversified assets over the next several years.

With that, I'll now turn the call back over to George.

Thank you, Ron. As you have heard this morning, we have successfully delivered strong operational and financial results for the past several years by successfully executing our strategic vision. Our strategy remains unchanged; operate efficiently, invest prudently, maximize our asset base and look for accretive opportunities. We have delivered record growth and profitability over the past three years, and we are poised to deliver more in the future.

Looking across our asset base, we have a multitude of projects to execute. In Gabon, we have an extensive drilling campaign at Etame that should add reserves and production. The FPSO refurbishment project in Cote d'Ivoire has already begun, and we are working with the operator on the development drilling program that should begin in 2026.

Also in Cote d'Ivoire, we'll be acquiring additional regional well data, licensing seismic data and conducting further geological evaluations of our newest block, CI-705, where we are the operator with a 70% working interest. We have additional drilling campaigns planned in Egypt and Canada to help offset decline.

In Equatorial Guinea, we are progressing the FEED study and looking to take the project to FID in the first half of 2025. Our entire organization is actively working to deliver sustainable growth and strong results to continue funding our capital programs while also returning value to shareholders through our top quartile dividend.

I believe we have gained credibility over the past three years having delivered on our commitments to the market and to our shareholders and we will continue to deliver with the exciting slate of projects that we have over the next few years. We're in an enviable financial position with a much stronger and diverse portfolio of producing assets with significant future upside potential.

Over the past two years, we have returned over $83 million to our shareholders through dividends and share buybacks and we are on pace to deliver another $0.25 per share annual dividend for 2025, which at our current share price is a dividend yield of about 6.5%. We are truly excited about the future and VAALCO now has multiple producing areas and future prospects that have diversified our risk profile and our sources of income. Our disciplined approach to maximizing value for our shareholders by delivering growth in production, reserves and cash flow has not been reflected in our stock price, but we believe that we will see the market begin to properly value VAALCO as we execute on our organic opportunities over the next few years.

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

Thank you. We will now begin the question-and-answer session. (Operator Instructions)

Jeff Robertson, Water Tower Research.

Thank you. Good morning. George, on the exploration projects in both Gabon and CDI, can you talk about the cycle times? I mean, I know there's tremendous amount of variables in there, but the cycle times between when you drill and when you might be able to produce it and if you make a discovery?

Yes. Well, the cycle times, first and foremost, on the two new blocks in Gabon, they've basically just been approved, and the decree is just being issued. So where we are with that, with conjunction with our partners, BW Energy and Panoro, as I think in the coming weeks, we're going to have the first TCM with the partners and that will start to outline the work program and budget for 2025 and 2026. So the first activity there is going to be seismic acquisition and that's likely to take place sometime in Q1 2026.

And then from seismic acquisition in Q1, we then go to the processing and interpretation, which is likely to take a lot most of 2026. There's also a commitment. Well, so I don't see us actually spinning the drill bit on the first block until late '26 at the earliest, probably early '27.

And on the Cote d'Ivoire block, it's slightly different. We farmed into that. There is a third-party seismic acquisition has already taken place by I think it's TGS. So we would be looking at acquiring that source data and taking that into interpretation. So that would probably again, so the acquisition of that information would be into Q2 or Q3 this year and then probably six months of interpretation to identify and firm up the targets.

And then you may see in the supplemental deck that was published this morning, we have a little bit of an overview of 705 and we've kind of given you a little bit of information as to where we already see some targets identified within the block that made it interesting for us to make the acquisition. And 705 is, again, likely to be once we've got the interpretation, we're not -- we don't have a commitment to drill, but we have an option to drill. So the commitment is really just seismic acquisition and interpretation and then move to the next phase, which would be committing a drilling program over those identified targets.

Secondly, the capital campaign in 2026 in both Gabon and CDI. Can you talk about what impact that will have on your cost recovery pools as you move into 2026?

Yes, that's a great question. Because when we look at the CapEx spend and you look at the absolute number between $217 million and $300 million, you immediately think, well, that's a very large number, but you have to take into account particularly in the producing asset of Gabon that we start to recover that capital as soon as we have the successful wells on production. So the actual cash sink on that capital isn't at the headline number.

And when we look at the starting position of the drilling program for Gabon, that's due to start in the beginning of Q3. And as I mentioned in the earlier script, we're hoping to get at least two wells drilled and completed and on stream before the end of the year. So that cash that's going out is already coming back in before the end of this year.

More importantly, when we look at CDI, which is also in a different scenario because it is all cash out because the asset is currently off production. But to incentivize the investment, the production sharing contract does offer a 25% uplift for every dollar that you invest. So as we look at the position in CDI, which is about 40% to 45% of our capital program this year, you already have a 25 uplift in that investment as soon as production recommences in early 2026. So it's an extremely attractive PSC that incentivizes this level of investment.

Chris Wheaton, Stifel.

Thank you very much indeed. A couple of questions, if I may.

Firstly, just coming back to the point on CapEx. In Gabon, last time, we had a big drilling campaign in 2022. We were able to get production up not quite doubled sequentially year-on-year. I'm interested in do you think you could achieve something similar given the additional drilling you've got planned for late this year into '26? Because that's obviously then going to have quite a significant impact on volumes, certainly exit volumes from, say, 2026 onwards.

And then also coming back to Cote d'Ivoire, I'd love to understand more how much of that CapEx is FPSO, how much of that is long lead time for the drilling plan for '26 because it feels like as soon as the FPSO is back, you want to be drilling as well because you want to be putting as much flow through your new FPSO as possible and also to maximize the cost recoveries you just mentioned in your last answer, George.

I think I'd also got a question on working capital that maybe I'll finish off with Ron after those two, but those two for starters. Thank you.

Okay, so let me start with the Gabon program. And as all the listeners will be aware, we were trying to initiate this program back in 2024 as a four well program. And we went back to reevaluate the whole performance of Etame based on the enhanced performance we were seeing from the production after the field reconfiguration. So that forced us to go back and look again rather than just have a run in the middle standard drilling campaign.

Other things we're now seeing with a post reconfiguration that can enhance the opportunity of the drilling campaign. And as you've seen, when we were talking about this over a year ago, we were talking about a four well campaign. We're now talking about a five well campaign with five options. So we've really seen a lot of opportunity to get the drill bit spinning again in Etame that's been very prolific for us in the past.

So, yes, we obviously have some forecasts in there for IP rates for the first two wells going in. We are -- to answer the question on the cost recovery we -- and I think Ron mentioned it in his script, we do see a GOC lifting coming in Q1. But with the level of investment going into Gabon this year, we don't really see another government lifting for the rest of the year. So the cost pool will increase with that investing in the drilling activity.

The target has always been longevity into the next phase of the Etame license which is 2028 to 2033. And I think the success base of this particular program highlights that both the prolific nature of Etame and gives us much more confidence and comfort that we're going right through into the mid-2030s with production on this asset.

When we look at the Cote d'Ivoire position, yes, there's a lot of the long lead items in relation to the drilling campaign have already been purchased. So the vast majority of the capital you're seeing coming through for Cote D'Ivoire relates to the MV10 refurbishment in 2025 and that will continue into 2026. We're awaiting discussions with the operator about rig selection and rig confirmation and we expect to be able to say something about that in Q2. Sorry, Thor is just going to augment that a little bit for you.

Yes, just a step back to the Gabon program. One of the things that we were able to do with the delay in the program from 2024 was the Ebouri sour wells and the Ebouri enhancements on the sour processing facilities to coincide with that drilling program.

Great. Thank you. And Ron, one question for me on working capital. There's been quite a significant outflow in the year, I wondered if you were expecting any of that to reverse in 2025, because that was obviously quite a significant hit to your free cash flow generation this year or, sorry, in 2024.

Indeed, Chris. I think I'd really say two parts to that.

First part is, yes. We see obviously with the CDI, when the field shut in Q1, the outstanding receivables and the oil on crude oil inventory is all collected in Q1. Additionally, in 2024, and I kind of laid it out in my speech earlier, in Egypt, we obviously had in the first half of the year, I would say, we were a little bit slow to pivot to the fact that our crude was basically being refined in country, and that meant we lagged collections in that first half of the year. Our new country manager came in the summer, took a little bit of speed obviously with the ministry and EGPC changes at the same time. That needed to settle down.

But really, from about August, September time, we really got after it. And what you'll see is our collections significantly improved in the second half of the year, has improved even further into Q1 2025. And partly, that's because we've looked at different ways of being able to work with the state and with our suppliers with approximately now between 90% and 95% of all supplies in country is being paid in Egyptian pounds. So we can't accept more Egyptian pounds from the state.

As you know US dollars has always been an issue for the state, especially in 2024, both with the [inaudible] conflict obviously impacting the Suez Canal and the tourism income being down. So that's been work with EGPC, our partner to be able to do that and with our suppliers, and it's working very well for us now into Q1. And we're seeing, as I stated, revenues in collections keeping pace with one another. And indeed, in Q1, so far, we're outpacing that.

And when you say outpacing that, Ron, that's excluding Cote d'Ivoire?

Yes. That's excluding Cote d'Ivoire. I'm specifically just looking at Egypt on its own there, Chris, when I say it's outpacing revenue.

Right. I just wanted to make sure I understood what perimeter you were referring to that comment. Brilliant. That's really helpful, Ron. Thanks very much indeed. And I'll hand it back to the operator. Thank you.

Charlie Sharp, Canaccord.

Good morning or good afternoon, gentlemen. I appreciate the presentation earlier. Question really on Cote d'Ivoire and the refurbishment of the FPSO, what are the critical path items in this process that you will be looking for in that work in Dubai that you might be announcing to the market as well? And what do you see as the timing for that field coming back the Baobab field coming back on stream? Thank you.

I'll start with part of it and then I'll hand it over to Thor, who knows a lot more about this. But I think the first thing is critical to understand is although we are not the operator, we are integral inside the project with our own personnel with working very closely with CNR. So because of the size and nature of this project and the importance to our success, we have a team working directly with the operator in the execution of this project.

And the second thing we would say, Charlie, is that when we look at the timeline of the project, where we are today, we're already 10% through the timeline of the project and slightly, I'm going to say slightly ahead. Thor -- but I'll let Thor give you more detail.

Yes. So thanks, Charlie. I think we mentioned earlier, the production was shut in January 31, which was on schedule. The toll to Dubai should commence here on the March 24. The disconnection was completed. So essentially, the tow tugs are either in place or being put in place for that to start. The critical path, I guess, aside from sort of the normal ship work that has to be done in the drydock is probably the turret bearing.

That turret bearing was ordered, I think, almost a year ago and is in route now to Dubai from West Germany. So that's really probably one of the key milestones that we are looking for. We expect that the quayside arrival in late May and we expect it to leave the quayside in January of '26 with commissioning starting in early May of '26. And depending on the commissioning works, it will be anytime between sort of mid to late May for first oil.

That's helpful. Thank you. And then the follow-on from that is, I'm just looking at your slide 16, key milestones and catalysts. With that now coming on stream sometime maybe Q2, late Q2 next year and the bulk I suppose of the Gabon drilling campaign next year, how should we think about CapEx next year? Should we think it will be for Gabon and Cote d'Ivoire pretty similar to this year, but a bit more weighted towards Gabon?

The Gabon drilling program should be entering its final phases late '26 and the CapEx profile on CDI on the FPSO should be pretty well done by May with the drilling program commencing probably in July is what we're seeing of '26 there.

And the other thing to bear in mind, Charlie, is that we've got the potential for five options on the Gabon drilling campaign. So depending on how successful we are in the firm program, we may look at extending that program. And as we mentioned in the script earlier, we do expect to immediately roll into CDI drilling campaign in Phase 5 on Baobab to hook up as soon the vessels we commissioned.

Yes. In fact, I believe some of the risers for the drilling program are being installed during the commissioning phase.

The additional drilling impact is why it sounds like we should be thinking in terms of a similar CapEx level next year to this year?

I would say, obviously, we don't give guidance for '26 at this time, but you can see the work program flowing through. So it's a reasonable assumption. The only difference I would say again is that the with both assets fully on production, the recovery of that CapEx will be really accelerated particularly through CDI.

Bill Dezellem, Tieton Capital.

Yes, thank you. Relative to the wells that have H2S now that you have found a way to process that, does that open up a significant amount of acreage that previously was essentially closed off or off limits to you because of your lack of processing capability?

We're both looking at something and going, okay, how do we answer that one?

It does unlock additional locations and some of those locations are -- we're looking at inside the 20 not the 20, the 2025-'26 program. So we do have an additional well planned for Ebouri in that firm program. So depending on that, it may allow us to look further afield from Ebouri. And the reason why we're saying that is that there's a fault line that we're dealing with there and we're not clear on what's on the other side of that fault line, which is what this well potentially would address. So that's one question there. There are also some wells that are sort of isolated, I guess, between Ebouri and Etame that may possibly down the road allow us to look at a bit closer that were originally drilled and showed some levels of H2S that are not tied in right now.

Jamie Wilen, Wilen Management.

Yes. On the H2S wells, how many are we going to be looking at initially? Are those the first part of the drilling program and we have the tools in hand to be ready to extract them? And could you tell us the approximate volumes that those wells were doing when they were shut-in?

Okay. So the Ebouri platform currently has two wells that are tied in. The third one is tied in but not producing. The Ebouri 2H has been online for some time and it produces sort of anywhere between 1,300 and 1,500 barrels a day. It's a fairly low H2S concentration well.

The Ebouri 4H was shut-in, I'm going to say about ten years ago due to high H2S levels. That well was brought on in December on a test basis to see if we could handle a higher H2S with the chemical programs that we're using now. And there was some question on when we brought that well on because it's been sitting so long where the ESPs were going to actually operate. In fact, ESPs came online, and the well is producing as of yesterday around 1,600 barrels a day of flow at a higher level H2S, which we're still able to handle with the chemical injection programs that's still within our model.

So both those wells, we'll get a workover in the program coming up. In addition to that, we're drilling a third Ebouri well into a sour area and expect it to be somewhere in that same range.

Okay. Are these the first wells you're going to be drilling?

Sorry. Are those the first in the sequence?

Yes. That's the question.

No, those are the tail end of the sequence actually. The first wells are Etame wells and then a SEENT well and then exploration well and Ebouri wells.

So within the sequencing, is that a 2026 number?

The last Ebouri well in the current sequence that we're looking at would be a 2026 six well.

A lot of that, Jamie, is to do with the long lead items. When we put these wells on test and we understand what we've got for H2S concentration, we then need to order the equipment that can handle severe service. And the lead time on the severe service now we can specify is much longer than the standard completions that we do at Etame. So if they can be accelerated, of course, we'll look at resequencing the program to ensure that we put production wells ahead of, for instance, the exploration well. But it's all down to delivery of the equipment.

Okay. And lastly, on Cote d'Ivoire, what is the actual cost for the FPSO as opposed to how much we're putting into items for the next drilling campaign there?

I mean, at the moment, the gross cost position of the FPSO for the total project is around about $650 million. Some of that's already been spent and we are, as you know, about one-third of that roughly, about 30%, but we've already spent some of it. So when we look at the long lead items for the drilling program such as the trees, the subsea trees and the control pods, they've already all been purchased. Some of those were purchased before we acquired the company, and the commitment had been made and some of the equipment was being bought through 2024 and into '25. I think, Thor, can you give us an update?

Are we tying the drilling program or are we tying the FPSO?

We're talking the FPSO.

And will the FPSO create any efficiencies that will be helpful when it returns?

The work on the FPSO itself is pretty well putting it back into the original condition. There will be probably some enhancements on instrumentation, monitoring equipment, valving and those types of things, increased levels of trim. Obviously, the swivel is a big issue there. But overall, the FPSO is able to handle the production quite well. There's no real topside significant changes that have to be done. A lot of modernization is really what it amounts to. And sorry, metal replacement.

This concludes our question-and-answer session. I would like to turn the conference back over to George Maxwell for any closing remarks.

Thank you, operator. I think as we have grown the company over the last few years, we've created a portfolio now organically that can make a significant step change as we come into 2026. We've had a couple of light CapEx years in '23 and '24, but we've put a lot of technical work and technical effort into our key point forward production targets, particularly in Gabon.

We've looked at how we've managed to recover the positions in Egypt and rest decline through workovers and new drills. We've successfully [refracked] the South Ghazalat position, another of our concessions in Egypt, where we'll be looking at that later in 2025 to see can we build an even bigger program in the Western Desert for Egypt. And we've rebased the program in Canada to go for longer laterals and more economically viable wells.

We have an exciting project, hopefully, to get through to FID with Equatorial Guinea, which would give us, again, a massive boost to production in 2027. So we now have a lot more opportunities with a diverse portfolio to de-risk our positions even though we have considerable investing activities in '25 and '26. As I said earlier, those investing activities with the quality of the production sharing contracts we have with our host government make this a very exciting investment.

We'll be monitoring very closely our execution of these projects because the key for us as we've done in previous years is to deliver these projects on time, on budget, whether we operate them or whether we don't operate them. And we will be very focused on delivering that and communicating that throughout the year. So with that, I'd like to thank everyone for the time today and thank everyone for their attendance and the quality of the questions. Thank you very much.

Conference has now concluded. Thank you for attending today's presentation. You may now disconnect.