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

Hi, everyone. Thanks for joining for this Valeura Energy webcast, where we'll discuss our Q2 2026 results released earlier today. My name is Robin Martin, SVP of Communications and Investor Relations. And joining this call from Bangkok are Sean Guest, our CEO; Yacine Ben-Meriem, our CFO; and Greg Kulawski, our COO. We are recording the call today, the 6th of August 2026, and we'll make a replay available through our webcast and YouTube channel later today. Running order for the event. In a moment, I'm going to hand over to the team to present some slides and offer their prepared remarks. Those slides are available on our website, by the way, if you'd like to download a copy. After the prepared remarks, we'll go into a Q&A session, which I'll moderate. For that, you're able to either type your questions or ask a live question. Again, I'll explain how to do that when we get to that segment. Before I hand over, I'll just draw your attention to Slide 2 in the pack, which is our disclaimers and advisories, and I'll ask that you pay particular attention to the forward-looking information cautionary language here. So with that, Sean, I'll ask that you unmute your microphone and you can go ahead.

Hello, everyone. This is actually Greg here. Thanks very much, Robin, for kicking off the call, and thank you all for joining us. I'll start with a few updates focused on operations. I will then hand over to Yacine and thereafter to Sean. And so first of all, it's been a really good quarter in terms of operational delivery, which combined with a very strong pricing environment resulted in record cash generation for the company. So we have that $154 million of adjusted cash flow from operations. I would really draw your attention to the margin related to this, which we believe is top-quartile, $77 per barrel of CFO margin. Free cash flow of $105 million. This resulted in increased overall cash position for the company at the end of Q2 of $317 million. And overall realized price behind these numbers is $106 per barrel. Now the quarter operations proceeded without any incident. Production delivery was pretty much exactly right on plan. We have also continued to execute our drilling program per plan, and the wells have either met or exceeded expectations. And we had a couple of specific highlights in well delivery in the quarter, the longest horizontal well that was ever drilled in the Gulf of Thailand, just pretty much exactly 5,000 feet. We have also delivered our first multi-lateral well and actually the first multi-lateral well of that level of complexity in the Gulf of Thailand, which is now on production. Wassana Redevelopment is ahead of schedule and under budget and we are also on track to add 4 additional drilling slots on the Nong Yao A platform. So let me just say a few more about those assets. I think on drilling, apart from the execution of the Q2 program, I would highlight the new drilling rig contract that we have signed during the quarter. It's a high-spec jack-up drilling rig, very comparable in terms of capability to the rig, we've been using over the last few years, but we have been able to secure about a 30% reduction in day rate for this rig compared to what we're paying now. And given this favorable rate, we have decided to lock this rig in for a 3-year term, given also the strength of the drilling portfolio we see. We now expect that the operation of the rig will start in Q4. And initially, we will start drilling wells on Nong Yao, utilizing the slots that are now being installed. And thereafter, we will proceed to redevelopment of Wassana and drilling to the new platform. And I think the point about the multi-lateral well that we have now brought on stream is really that in an environment where we continue to be constrained by the number of slots on the platform, this a technology that allows us to access more subsurface volumes at a lower unit development cost through targeting 2 separate subsurface compartments through a single top hole and a single surface platform. So, we're really pleased with that result. And it's just this one-off on Nong Yao, but it's something that we are planning to do in Wassana Redevelopment and also other fields across the portfolio. Let me then say a few things about our projects. First of all, Wassana redevelopment. This project is proceeding very well. And what you see on the picture on the right-hand side is a photograph of the platform in the yard in Thailand in July. And so all of the main elements structurally, but also the main pieces of equipment are already in place. And the contractor is now finishing mainly the cabling installations, instrumentations and such like. And we now have -- we are pretty confident the mechanical completion will be accelerated to 1st of October. Now with that expectation, the team has been working really well to secure also an earlier installation slot for this platform. So we expect to start installation in October. Now this is kind of part of a sequence of installation activities of the same set of installation assets that are working in the Gulf of Thailand for other operators will then come to execute the Wassana installation. So there is a bit of a queue, but we have actually secured an earlier slot in that installation queue. Now it's a very positive development. Again, we are working to fully finalize the execution of it, but we expect it will accelerate some of the CapEx, which would otherwise have been spent in '27 into '26. But it would mean that the first oil from that redevelopment field will be on stream, say, 2 months later. And that would, sorry, 2 months earlier, obviously, and that would be equivalent to about 0.5 million barrels of extra production within calendar year '27 compared to earlier. So really, really good progress, and we'll give further update as we get closer to Q4 and the end of the year. Now the other project that we flagged earlier is the decision to add additional 4 drilling slots on the Nong Yao A platform for the cost of about $7 million of additional CapEx. That project is now in execution. Some of the equipment has already been fabricated actually on the platform itself. We're already executing some of the modifications and adding the flow lines in anticipation of these slots being ready for drilling. We expect we will finalize installation of the slots in around October time horizon, then in time to start drilling around November of these additional Nong Yao wells. And then the last project I would flag is progress in the G1 and G3 blocks where we have signed a funding agreement with PTTEP. We have now obtained the seismic, the 3D seismic that was acquired last year. The seismic has now been processed and it's now on the workstations. And so the teams are working to then interpret the seismic data and update the 2027 Exploration Program. We already know we are planning an exploration well in the oil-prone area in the so-called Nong Yao versus Northeast area that's adjacent to our G11 Nong Yao block. So that's already stated for Q1 '27. On the Gazprom part of this block in the Bussabong area, the teams have been working together and really firming up an FID, which is pretty much technically and commercially ready of a 2-platform gas development. So really, we expect to announce that FID in the coming months after Valeura has been formally signed on the PSC of the block following Thai Cabinet approval. It's an approval where we don't see any risk of not getting it, but there has been probably a bit of delay in terms of how long it takes now with the new government to process it through a pretty busy cabinet agenda. So again, really good operational progress and translated into excellent cost delivery. With this, I'll hand over to Yacine.

Thanks, Greg. Greetings, everyone. I guess for the purpose of the financial, it might be worthwhile just circling back in terms of like where the pricing is today because this kind of explains a lot of what our quarter -- our results for the financial quarter for these results. As I'm sure you're all aware, our crude tend to be benchmarked against Dubai, which historically has traded at a slightly discount to Brent. What we benefit in our Thai crude is that like most of our crudes in aggregate tend to be at the premium to the Dubai, which kind of lands us at around the Brent pricing. Now I'm sure if you've been following the relationship between Brent and Dubai since the conflict in the Middle East has started, you must have noticed quite a big volatility in terms of pricing between these 2 benchmarks. At the start of the conflict, the Dubai price have shot up compared to the Brent at a significant premium. And a month or 2 after that, it reversed to quite a significant discount. However, in terms of our realized price, what we have noticed is that also our premium compared to Dubai in this quarter has also strengthened, which led to effectively matching the Brent prices. So I think in terms of consistency, we continue to guide the market towards Brent as an equivalent to our realized price rather than just relying purely on the -- what we see in the news and where the Dubai benchmark is trading at. Effectively, the premiums we received have offset to a certain extent, the discount that has been widening between the Dubai and the Brent. So again, the key message here is that as far as Valeura is concerned, our conviction right now at this point in time continue to be that we should be -- as far as modeling or any perception as to what our revenue will be, the Brent benchmark is a good reflection of where we stand today despite where Dubai is today. So as Greg mentioned, this is quite a standout quarter for Valeura, and it's across all the key numbers that we, as a management team, we tend to keep an eye on. So let me kind of walk you through the -- for this quarter. So in this quarter, we have recorded around -- close to $260 million of revenue. As a reminder, this is over 100% increase compared to the last quarter, and that's on the back of a realized price of around $106, which is broadly in line with Brent and also on the back of 2.45 million of barrels that got sold. Now this is -- as sometimes it happens in our quarter, this is above the production we had during the quarter, but it's really a reflection of some of the inventory drawdown that we've done compared to the previous quarter. Now once we include the royalties and the adjusted OpEx, and also SG&A, we end up with a pretax cash flow from operation of around $163 million. And in this quarter, we have realized a tax of around $8 million with just a small amount related to the SRB. Now as you are all aware, Valeura had benefited from tax losses that we still have. But as a reminder, those tax losses really are pertaining to a few of our assets. This [indiscernible] that has been recorded in this quarter related really to Jasmine, which is out of the scope of the tax losses. So this is why we have recorded [indiscernible] on this occasion. When we sum all these up, we end up with effectively the highest -- one of the highest cash flow from operations we've ever recorded as a company of around $154 million, which, as Greg mentioned, it equates to around $77.1 per barrel, and an extremely outstanding results really for this quarter. So how does this translate in terms of our balance sheet? We started the quarter with $262 million. Once we add the adjusted cash flow from operations, also the CapEx was spent in this quarter for around $54 million, of which $17 million was related to the Wassana Redevelopment and around $1 million related to the explorations and other income of around $5 million. And this $5 million is really related to interest income and also from the royalty that we've seen from Rossukon. We continue to receive those royalties. And obviously, we benefit equally from a high oil price that is pertaining in current market. Once we adjust for the working capital and also take into consideration the tax payment that we've done this quarter related to prior year taxes, SRB taxes of around $90 million. And equally as well, during this quarter, we have spent around $7 million as what we call here anti-dilution, which related to prior historical option in PSUs and RSUs. The aim here is really to try to retain our cash -- our share count the same. We end up with a cash position with a very healthy cash position of around $360 million, $370 million. Now as the title says here on the slide, the balance sheet continued to be strengthened. And on top of that, which maybe in the next slide, Robin, please. Lead us to kind of like how does it fit within our guidance now. Now as Greg mentioned, at this point in time, let me first maybe start with the production range. I think considering we are 6 months down the line in terms of -- for the full year, we have narrowed a little bit our production. It's really a reflection of our confidence in where the assets are performing, as Greg mentioned earlier on. So we just narrowed the range a little bit here. Now if we look at the CapEx and expect in terms of capital spending overall, we have maintained the same CapEx for now. But as Greg mentioned, there might be scope later in the year once we have secured like the slots for the installation of Wassana acceleration for this CapEx to actually move a little bit. And as a reminder for everyone, and I think Greg also flagged it, the bulk of this spending is really just shifting some of that phasing, shall we say, shifting forward some of the spending from '27 to '26. As far as the OpEx are concerned, we are again maintaining the same -- the same range for now. It's worth highlighting that like -- and I think we've mentioned it to the market overall previously, a good chunk -- there's a good percentage of our OpEx that's related to oil price via the diesel, which we use for our logistics and everything around that. So as the prices strengthened, we might end up at the top end of that range, and there might be a possibility to go below that or even above that if the price goes beyond above this. However, from a financial perspective, so to speak, if the oil price is higher, obviously, our margins will expand. And therefore, it's something that we're more than happy to absorb in that scenario. Overall, I think the whole message is that like we still maintain that 2025 long-term view, and this is where we stand in terms of production. Now with the guidance as it is today and with the balance sheet, as I've just described earlier on, maybe Robin, we can move to the next slide. It's worthwhile kind of like revisiting an item that we disclosed to the market the last few months really is relating to our liquidity overall. It's obvious that like as a company of our size, we do have the financial resources quite a substantial amount of resources we have cash that sits on our balance sheet, which, as I mentioned right now, is about $317 million, $360 million. However, I think we've been quite clear to the market that like our strategy and our growth aspiration is really related to how we can inorganically grow the business. And it's therefore, this is why we've decided to kind of trigger or at least go on and secure financial facilities that will enable us to kind of tap the market when it's required, when we want it rather than when we need it. And this is why we have announced the financial -- sorry, the RCF and also the accordion. As a reminder for everyone is we've secured a $75 million RCF -- it doesn't require us to hedge it. It's also like a 3-year facility. I would like to point to the -- to everyone really is the accordion associated with that. We have right now size of the $250 million, but it's important for everyone to realize that, that number can easily be expanded for the right assets. And it's all about like setting us up to be able to do deals that are transformational to the company. I think as we mentioned during the announcement of this facility is that like we would rather have it in place when we are prior to be ready rather when we actually need it. And it's kind of like -- to a certain extent, it also reflects how we see the current market and how we can -- how we feel confident about being able to actually participate in all the opportunities that we are seeing around us. And it sits again with the whole strategy, which I'll let Sean really kind of gives you a bit of an overview again, a reminder for everyone. Sean?

Thanks, Yacine. Yes. Thanks. Greg took us through a lot of what's going on in our operations because we have had an extremely good quarter, both operationally and financially. One of the things we like to point to is we've said one of our key pillars of our strategy is operational excellence. And we're seeing that, whether it's delivering on the production, the HSE, our projects where we're taking on the biggest project we've ever done and delivering that early and under budget. All of these really build to the credibility of the company, which is what shareholders are looking for. All of that is going extremely well. Yacine pointed to the amount of cash that we've actually brought in and importantly, also at this point in time, to that extra debt facility that we now have accessible to us that really creates that liquidity that allows us to look at further growth. And this slide from our corporate presentation, we always talk about, okay, that strong cash flow and where is it going. We've said to the market, we've said to all of you that we're a growth stock, and that's what we're looking at. But when we look at it, I mean, we're really producing about the same amount of hydrocarbons as we were 3, 4 years ago when we took over the asset from Mubadala, but we've delivered top end growth, top-quartile in the shareholder growth. And that's because we've been able to deliver to the market and demonstrate that these assets have much more future to them, really reaping the extra amount out of the assets and showing that future, which has really underpinned that growth that we've had. So when we look at that cash flow, yes, it's deploying it back into these assets to remain that -- to really support that strong cash flowing engine. What we've also seen in Turkey now is we're starting to see growth there in the deal with G1 and G3, and we're making investments there. That's really a solid foundation that we have. The other element then to it, which we've talked about for a while is the M&A aspect. And really, we believe the 2 pieces of that are coming together right now. Our cash position, the access to liquidity is coming at the same time that we're actually seeing some significant deals that we're involved in right now in the market. So again, we've been focused on this for a while. We've been telling you that. We've continued to deliver the strong shareholder growth and value growth there, but we see this is an opportune time now. There is a lot going on in the market, and we see ourselves as very well positioned to deploy that into further M&A for that next step of growth for the company. So Robin, maybe just go to the last slide. So look, we talked about this, all the aspects that are going right. But one of the things we really want to emphasize to you is that we've set up this business. We've designed this business to deliver solid, good returns at $65 oil price. And we've seen that over the past couple of years, and we've been delivering on that on the oil price. We also made a decision last year when oil prices dropped to make the biggest investment decision that this company had made by doing a Wassana Redevelopment. And that's proved to be perfect timing is that was at a point in time when oil prices had dropped, right? And we made the right decision because we're looking at the long-term view. The other aspect, if you look right now is that now oil prices have jumped up. Okay, Greg was talking about the new project that we're looking at on Nong Yao, the acceleration in the project on Wassana. We're not doing these because the oil prices jumped up at this point in time. We're doing them because these are projects that deliver positive cash flow, positive returns within 12 months. That's why we're doing these projects and accelerating these things is because of the value of the company at $65. And then setting it up that way, when we get these bonuses in the oil price, we just reap the benefits of that into our cash flow to create the solid foundation of the company. So it's been an excellent quarter. Things have gone extremely well operationally and financially. And we just look forward right now that we're extremely well positioned to take this company to the next level. So thank you very much for joining us here today. And at this point in time, we take questions.

Thanks, Sean. [Operator Instructions] Let's start off with a batch of questions that we've had on the PTTEP farm-in. And perhaps not surprisingly, the main question here is on timing in 3 separate ways: Number one, best estimate for timing of the government approval; number two, timing for providing more color on the size of the opportunity set that we're looking at; and number three, anticipated timing for the Bussabong FID.

Yes. Okay. Maybe I'll take that one. Thanks, Robin. It's a key one because it was 12 months ago that we actually announced this deal. And I know I can say that, honestly, we've been a little disappointed that it hasn't been through formal approval yet to get us in. There is nothing that has us concerned on this. We're watching it progress. We're seeing what's happening in the political situation in Thailand, elections, new cabinet, energy crisis that's currently ongoing. They are dealing with the matter. So we're following this. Everything looks like it will come to fruition very closely, but we do appreciate in the market that there's a little nervousness when you see it kind of waiting around on this. But during this whole 12 months that we've been waiting for that approval, our team have been working very closely with the PTTEP team, right? We have drilled wells. We've shot seismic, process seismic. Now that data has arrived on the workstation. And importantly, the teams have been working together to come up with an FID, a Final Investment Decision for the Bussabong Gas Project. And we really expect that to come fairly shortly after we actually get the formal approval and get in on that. So it has taken longer than we would have liked. The teams have been working positively together. And what I can say is once we do get that formal announcement, we will plan to really try and get more information out to the market there to allow whether it's the analysts, the investors in that to quantify the value of this opportunity because it's something of both oil and gas that we're very excited with, but we do really want to actually start converting this opportunity into actually cash flow.

Okay. Let's move on to a question on exploration. So probably for Greg. Can you say more about the open water well that you're planning on the G1 block? And anything you can share on size of the prospect risk and comment as to whether the volumes are in our prospective resources?

Yes. So I think I was referring to an open water well on the G3 block, not on the G1 block, right? So it's this area of Nong Yao Northeast. It's -- we see already a set of prospects that are adjacent to our Nong Yao facility. It's sort of northeast of Nong Yao A. There's actually a number of well identified prospects for which we already had prior 3D seismic, but the new 3D seismic covers all of that area. right? So we've already between our technical team and PTTEP have agreed that we will drill exploration area wells in that area in Q1. And now with the new seismic, the teams are just finalizing the best locations and the best well targets for that, right? But again, we see strong prospectivity. And so we expect that in the case of successful discovery, this is a block that can go into relatively quick development with a tie-in into the Nong Yao system lets say, well at the platform. And there is potential for multiple of those, not just a single one.

Thanks for that. While we're on the subject of drilling, in our announcement, we speak about Turkey and specifically mentioned that a well was drilled on the Banarli block that's been flagged as a discovery. The question is, what does that actually mean for us? And I think what the question is getting at here is, is this, in fact, a Valeura well? Or does it just have some other bearing on us?

Yes. So simply on that, we actually it was a 2 block -- big blocks that we have in that area, each of them had actually a well commitment that had to be drilled prior to June '26. And one of them was drilled in the West Thrace Block earlier this quarter or and a while ago. And in actual fact now we have drilled one which we had drilled for us in the Banarli Block. That was a gas discovery. And kind of an agreement we had there was that we paid for the drilling of that well. It's a success. The revenue will flow back to us to cover all the costs that we had in there. But what it gives us is a discovery in that block, it gives us the right to then go forward for a 2-year extension period. So we have the extension period on the West Thrace Block. Now that we have this commitment fulfilled the discovery in this block, we will actually go forward with the seeking an appraisal -- a 2-year appraisal period on the Banarli Block. So it's really about protecting the acreage much more than it is about having a discovery and having cash flow.

Okay. Let's move on to some finance-oriented questions. First of all, on operating costs, we mentioned diesel a couple of times. And the question is, how much are our diesel costs? And what proportion of the operating cost does that comprise?

All in, Robin, the estimate -- all in across all our fields and across all the operations, 25% -- around 25% of our cost is diesel -- is related to diesel. So as you might imagine, an increase in oil price, which we've seen over the last few months since the conflict in the Middle East have started have led to an increase in our OpEx.

Okay. Well, I've got you, you've seen a question on the debt facility as well. And the question is, is the size of this debt facility tied to our existing assets somehow? And would an increase in the borrowing base by way of an acquisition change the debt capacity?

Yes. Look, let me make this crystal clear. We've selected this debt facility, the firm side of it, which is the $75 million, is really just as a mean to build the relationship with the banks. It's not a reflection of our current borrowing base. It's really just a number that we felt, a, created that relationship with the banks. And secondly, as a working capital kind of allows us to really just again, just having that flexibility around that. It does not reflect by any measure really what's the borrowing case -- borrowing base of our current assets. And I think as we flagged it before, this borrowing base doesn't require us to hedge. We continue to be completely unhedged company. We have a full exposure to the oil and gas, but it's really about like, again, building that relationship with the financial institution that have backed so far and to enable us to build -- enable us to kind of tap into the market for the right acquisition targets we're currently pursuing.