Valeura Energy Inc. (VLE) Earnings Call Transcript & Summary

Hi, everyone. My name is Annie Bliklen. I'm here in Bangkok Dr. Sean Guest, President and CEO of Valeura Energy. Hi, Sean.

Hi, Annie. It's good to be back here with you.

Yes. Sean a lot has happened for Valeura since we last spole in April, Valeura has announced 2 set of quarterly results since then, including quarter 2 results announced earlier today, maybe we can start with that. What are the highlights from the public result?

Yes, Andy, we set out to build a cash flowing company and really a strong cash flow that would underpin -- be a foundation for future growth in the company. And I think what we can see when we look at these quarterly results is the success that we're having. So in Q1, we had $47 million in cash flow. In Q2, we were up almost 40% to $66 million on the back of higher oil sales, coupled with higher oil prices. And that cash flow is also creating a strong balance sheet. So we left Q2 with $147 million in U.S. in cash at that time. And even though we knew this was a quarter that was going to have strong outflows of cash. In Thailand, you make the majority of your 2023 tax payments in May. We paid those. We also acquired the Nong Yao FSO, and we made the final contingent payments under the KrisEnergy 2022 acquisition. So in total, $108 million in outflows and yet still a strong cash flow for the quarter. And as we can see, no debt still within the company.

You mentioned a couple of important things there. One, being growth and the other being the Nong Yao field which I know has been mentioned in the few recent announcement. Can you comment on that?

Yes. So Nong Yao C is the third phase of expansion in the Greater Nong Yao field and will be our largest growth project for the year. So in Q1, we installed a new facility on the location. And then we've been drilling on that facility since then to drill the development wells. Now we've just completed that drilling. And while the original plan was for 6 horizontal development wells, we've actually taken the opportunity to drill an appraisal well, which was successful and that will now be actual development well for the field. And further, we extended two of the development wells initially to appraise other objectives. Both of those were successful and will form future development opportunities for us on the field. So a very good result that really we found what we wanted geologically, and we've even had some additions.

Okay. So what needs to happen before we start producing from the Nong Yao C?

Yes. So we've completed the drilling. And an actual fact now, we've completed all of the engineering and fabrication work out on the facility. So really, the phase we're in now is the final reviews, inspections and then the certification to allow hydrocarbons to flow through the facility. Now we've guided the market that we expected that this quarter. But I think I can say that we actually expect we're going to see first oil from this facility in August, so this month. Yes. And with that, currently, if we're doing just over 7,000 barrels a day from Nong Yao, we expect that to go to 11,000 barrels a day from September really through the end of the year. So an exciting result.

Yes, I live in [indiscernible] So the other field that's being discussed is Wassana. Can you summarize for our review or what happened there?

Yes. So in June, we were out doing a regularly inspections of [indiscernible] facility and a crack was identified down near the seabed. So we had to get out there with more sophisticated equipment. We went out there in July. We reviewed that crack and have found that it is actually superficial and confined to a well. So we're able to give the team the green light to actually go back and restart production from the facility. That's been ongoing since last weekend, and we expect to be fully ramped up to our pre-suspension production, about 5,000 barrels a day by the end of this week.

So what will happen next for Wassana field?

Yes, we've always known that this facility was limited. And then now we had the appraisal wells we drilled last year, and then we followed it up with successful exploration earlier this year. So this MOPU that's out there doesn't have the size nor the life to really recover the oil we now know is in Wassana. So we've been going through a redevelopment plan for the field. We're currently in feed, front-end engineering of that work. And we expect to take a final investment decision probably just in 2025, Q1 2025, so after the new year on that expansion of the field and a redevelopment. And with that, we see that really pushing the field life out to the mid-2030s. So this is really exciting. It really points to what we see in our fields in the Gulf of Thailand. There is way more oil in the ground here than you're currently seeing represented in the reserve reports, and we're showing that with our year-end reserves. But specifically on Wassana when we took this over in mid-2022, there is 4 million barrels of reserves there. And that was just under 3-year reserve life for the field. We now see at end of '23, 13 million barrels of reserves and production out until the mid-2030s. And we expect that to extend further.

So now that you have a clear way forward for Wassana Nong Yao C is about to start up what are your expectations for key numbers over the rest of the year?

Yes. So it is quite exciting. If we get Wassana back up now. We're going to bring Nong Yao C on in August. We can see that our production from September through to the end of the year should be about 25,000 barrels a day, so significantly up on last year. But looking at full year guidance, we're still guiding towards the midpoint similar to what we had at the beginning of the year but narrowed to a range of 22,000 to 24,000 barrels a day for the full year. Now we've seen Wassana being offline. We've seen a few delays on Nong Yao, but this has been largely recovered by increased performance from the Wassana field as well as we took the opportunity to drill a couple of infill wells on Nong Yao A to make up that difference. OpEx is remaining largely unchanged. We've had some increases due to the Wassana inspection, which does come in as OpEx. But on the other hand, the acquisition of the Nong Yao FSO is going to reduce our OpEx going forward. So we're sticking with that guidance. Now CapEx. CapEx is trending towards the lower end of the range. So we've kind of tightened the guidance down to those numbers on the lower end. But what's important to note too is that Drilling makes up about 87% of our CapEx budget, and it's largely fixed because we have the rig on contract for the full year. But with better drilling performance, we see the opportunity to actually drill more wells in '24 than was originally planned. So Menora infill drilling program that was scheduled for early '25 is now starting to come into Q4 2024. So spending less, but also achieving more with that money.

Well, thanks, Sean. That's all very helpful. Before we side off, I think it's worth mentioning that Valeura has won some awards recently First, we were awarded upstream company of the year. At this year, APAC Energy Assembly. And also, you will name the Executive of the Year and more recently, Valeura received the EIA monitoring award from Thailand Office of Natural Resources and environmental policy planning for Banyan, Nong Yao and Manora fields.

Yes, we're obviously very honored to receive all of these awards. And really, when we look at the company, a lot of it is on the back of the hard work and the quality of the team that we have here in the country. So we're very pleased with the results, and we really look forward at, again, a strong foundation to build on going forward.

Right. Sean, thanks for chatting with me today.

[Foreign Language].

And thank you for everyone who turn in to once again with us. [Foreign Language].