Valeura Energy Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 26, 2024

There are 3 speakers on the call.

Operator

Welcome, everyone. Thanks for joining us for this Valeura Energy webcast. Today, we're discussing Valeura's 2023-twenty 6, 2024, and we'll make the replay available on our website within about 24 hours. A couple of housekeeping items before we get started. 1st, all lines will be in a listen only mode for the duration of the event today.

Operator

After the prepared remarks, we'll answer any questions you might have. To submit a question, you can either use the Q and A feature in Teams or you can email us using irvaluraenergy.com. I'd also like to draw your attention to our disclaimers and advisories. These are at the front of our slide deck, which should be on your screen now, And the slides are also available on our website. I'll note in particular, the cautionary language around forward looking information and ask that you read this at your leisure.

Operator

So with that, I will ask Sean to unmute your microphone and you can go ahead.

Speaker 1

Thank you very much, Robin, and thank you for everyone joining us here today. It's been about a year since we closed the deal with Mubadala to demonstrate this transformation across many areas of our business. To demonstrate this transformation across many areas of our business. So, firstly, technically, we have 4 fields all producing underpinning very strong cash flow. We are currently producing approximately 23,000 barrels a day.

Speaker 1

Through drilling activity in 2023, we've increased the reserves and the value of every field and also extended the field life of every field. Now, while delayed in 2023, we returned the Wassana field to production after 3 years of being in suspension and have recently increased this production approximately 15% above those pre shut in levels. And on growth, the expansion of the Nongyao field started in 2023 and is currently progressing on-site and we should deliver by mid year approximately 50% growth in production to 11,000 barrels a day. And then further with appraisal drilling in 2023 on Wassana, we identified significant future growth potential. Now in 2023 organizationally, we brought 3 companies together into 1 organization and have moved the corporate office to Asia.

Speaker 1

Valeura is now a significant player in Thailand and were recognized in the Southeast Asian region. On M and A, since closing the Mubadala acquisition at the end of Q1, we've completed 2 small M and A deals, which at the time we referred to as really equity consolidation. However, both are yielding accretive value. Now financially, in less than 1 year, we've transformed the balance sheet to one that is resilient and positions us for future growth, but I'll let you see him go into more detail about that. And importantly, looking up on the slide, for those of you who've been with us on this journey over this past couple of years, you've been rewarded through share price growth.

Speaker 1

At the beginning of 2022, Valeura's share price was just over $0.40 and now we find ourselves over $4 a tenfold increase in just over 2 years. But even with that growth, when I kind of review our current assets and comparing these with our trading metrics, we anticipate another good year of returns in 2024 and we seem to be off to a good start. Okay. Next slide, please, Robin. So, looking a little bit more at 2023.

Speaker 1

Now, at the time of the deals, we referenced that we were transforming the company into a strongly cash flowing business with significant future organic growth potential. And it's important to me that I really address these and really show people that, you know, we said what we're going to do and we've been able to meet or exceed these expectations. So first off, I'll look at strongly cash flowing business and the other point is significant future organic growth potential. Now, at the time of doing Mubadala acquisition, most people could see 1, the strong cash flowing business. But in general, the concern was that given the reserve report that these would be limited for a year or 2, followed by steep production declines.

Speaker 1

We've demonstrated in 2023 that this isn't the case. So first off, just looking at cash flow. That's pretty clear. I think Yacine will talk more about this, but simply if you compare the cash in bank at year end 2022 to the end of 2023 when we have more than US150 $1,000,000 in the bank, you can see that these assets generate cash. Looking at revenue, production up, pricing up.

Speaker 1

2023 production was within guidance. It was below target due to the Wassana field being offline for 5 months. However, our team were able to minimize this loss of production by using the drill rig on the other fields. With Wasson now back online, we are currently producing about 23,000 barrels a day, more than 10% above our 23 average. I'll note though that this is roughly on or slightly above our current plan for 2024.

Speaker 1

Oil prices were good in 2023 and prices continuing to be strong heading into 2024. Now based on historical data, we've guided the market to use Brent pricing for our pricing. However, what we did see is that we're seeming to get above Brent in that to a slight premium. And in fact, with where oil price has been sitting this week, we're getting close to $90 a barrel for the oil. Looking at cost as it relates to cash flow.

Speaker 1

So in 2023, we delivered cost reduction that enhanced this cash flow and we're targeting further reductions in 2024. Our initial guidance a year ago on OpEx was looking at about $30 a barrel And in the end, we're able to deliver about $28 This year's guidance has at about $26 a barrel, and that's even considering that we have a new leased MOPR that we're going to have to pay for the year at Nongyao. On 2023 capital spend, we came in well under the CapEx guidance in 2023 and a lot of it is driven by better drilling performance with the new rig we're using there, doing more with less. Now, what I'll make on costs is that in 'twenty three, we introduced a continuous improvement program in the office in Bangkok and we've seen the staff respond very well to this coming forward with ideas for further cost reductions. And that's what we use to really drive costs down as we move into 2024 and beyond.

Speaker 1

And while it's not directly related to cash flow, the other point you'll notice is abandonment costs. Now the decommissioning obligation on our balance sheet has been reduced 30% relative to where it was when we closed the Badala deal. And we still see more potential to bring that down in 24% with more engineering studies. But in summary, after just 9 months of operations, this decommissioning liability is actually less than our cash balance we've been able to achieve. So the cash flow is clear, but Robin just moving on to the next slide.

Speaker 1

But just as important is sustaining that cash flow through organic growth in the assets. Since we announced Mubadala acquisition in late 2022, in every presentation we've tried to Thailand and the ability to extend field life and show the history of actually reserve additions in the fields we've acquired. However, we appreciate that this is challenging for many investors as they're not used to seeing strong and continued reserve growth in producing fields. But summarizing what's happened since we announced this deal, in 2022, we had over 100% reserve replacement and yet that was still operated by Mubadala. In 2023, we were able to deliver over 200% reserve replacement with Valeura now commencing operatorship.

Speaker 1

And importantly, every field has had the reserves increase in 23 and every field has had its end of field life extended out into the future. This is not just driven by an increase on one field, it's across all fields. And again, if you've heard me before, the field I'd like to go back and highlight is Menorah, which when we did this deal in 2021, that field was supposed to be abandoned in 2022. And you'll now see that that's been pushed out to middle of 2027. So we pushed the abandonment out 5 years in just 2 years on that one field.

Speaker 1

Looking at Wasson in a little more detail. Wasson field, we kind of call that field our high light and our low light for 2023. Now, while the field is back online and the infill drilling has increased the production to about 5,000 barrels a day, These are barrels that were already in our reserves. What is more important to consider is that the appraisal drilling we did in 2023 has shown that there is significantly more oil in the ground and that this can support a redevelopment of this field and production extending well into the 2030s. And finally, another point to note there on the bottom of this slide is that while we increased cash with our production in 2023, the value of the assets has gone in 2023 from CAD 261 1,000,000 to CAD429 1,000,000.

Speaker 1

So we're seeing an increase in the reserve value as well as being able to take cash from the assets. So in summary, in 2023, we demonstrated the cash flow from the assets. We proved that the reserves are not just being replaced, but they're actually being increased so that these assets will continue to deliver this cash flow into the future. In addition, we've also reduced the future obligations related to abandonment. So, a couple of other points I just want to note before handing over to Yacine.

Speaker 1

M and A, so once we completed the deals in 2022, the question from everyone was, when's the next deal? And a comment at that time was that we did not see another large deal in 2023, but that we anticipated some equity consolidation deals, deals around the assets that we had just acquired. So, in following on from that, early in 2023, we acquired the last 11% interest in the Wassana field and this is subsequently worked out and been highly accretive given the value increase we're seeing at Wassana and the future potential there. Now, unfortunately, while we are disappointed that we were not able to come to an agreement on Roscon to progress on that development with our partner, We negotiated a deal to allow the partner to proceed and we have a gross overriding royalty on that field of 4.65% on what was our 43% working interest. The operator has brought that Roscon field online.

Speaker 1

We received an initial $5,000,000 payment as agreed and we expect royalty payments will begin soon. And one last highlight I'd like to point to also is that in the short time we've been operating in Thailand, it's the relationships that we've been able to develop in country. 1st, internally, and someone commented to me recently in Bangkok, you'd never know that this was in fact 3 separate organizations less than a year ago. The teams have gelled together very well. And I believe that's on the back of having interesting work, the extension of field life and a collective desire to also keep adding value through growth.

Speaker 1

Externally as well in Thailand, we recently celebrated our 1st year of operations in Thailand with more than 100 people from the industry in Bangkok attending. We're very pleased with the strong support we have received from the regulator, the DMF, the Canadian Embassy in Thailand, from the National Oil Company, PTTP, and from all of our suppliers and service providers in country. So, an exciting year. And at that point, I'll hand over to Yousseen to talk a little bit more about the finances. Yousseen?

Speaker 1

Thank you, Sean.

Speaker 2

Hello, everyone. Thank you, Robin. I guess before starting on this slide, maybe a couple of preamble when it comes to the numbers, especially for the year 2017. It's worth highlighting or emphasizing again that the from an accounting perspective, since the transaction the closing of this transaction from Mubad that occurred on the 22nd March, effectively, we can only book, again, from an accounting perspective, only the revenues on those from that days onward and again, when it comes to cost. But obviously, when it when, I think over the next few slides, we've tried to also try to provide some sort of a pro form a basis, especially when it comes to the key metric that we provided when it comes to guidance, be it only OpEx, CapEx or production itself.

Speaker 2

But I guess, this really this slide is really kind of highlight what one has been talking in terms of how 'twenty three has panned out for Valeura. Now if you compare Valeura at the beginning of the year to where it is today, you can see now, you know, looking at the production in terms of how much we lift, we do operate quite in a material position now. It's entitled and it's strong and the desire is to grow that both organically and inorganically. So and notwithstanding this as well, you know, we don't just have a material operator position, we also have quite a highly cash generative portfolio as well. And we'll walk you through the financials.

Speaker 2

But I think, again, kind of mirroring what Sean was mentioning in terms of how the balance sheet looks today compared to what it was before, which sets us in the right directions of, you know, trying to do more going forward. So, you know, starting maybe with the revenue drivers there on the top left hand side. For Q4, we registered around 19.2 1,000 barrels per day net working production to us. And in terms of from the day we closed the transaction of Aftopas or Mubadala, we have recorded an average during this period, I. E.

Speaker 2

From the 22nd March till the end of the year of around 20000.4 percent. This also actually mathematically equal to the production if we assume the pro form a from the 1st January. I think the difference there is just around 20 barrels per day less. From a lifting perspective in Q4, we did have quite a strong lifting schedule, which translates in around 2,000,000 barrels. Again, it's slightly higher than the actual production and we'll show this in the next slide.

Speaker 2

On from a full year basis, we've closed to around 6,000,000 bottles. Now from a cost perspective, as Sean said, overall, we have come below our guidance when it comes to CapEx and just at the lower end of the guidance when it comes to OpEx. But I think it's worth highlighting that, you know, during this period, we were still, you know, we were still having Fasana, which was during most of the period was shut in, yet we were still incurring costs. And that to a certain extent, we see this improving going forward through next year. From cash generation portfolio, for the full year, we've recorded in our bulk and our P and L around close to SEK 500,000,000 of revenues and for the quarter, it was just shy of SEK 170,000,000, which translates of an EBITDA for the quarter of around SEK 67,000,000 on full year basis of SEK 231,000,000.

Speaker 2

Importantly, as you can see from a cash flow from operation for the quarter is quite a good quarter. We generated around $56,000,000 which is quite high compared to the last quarter. Again, the last quarter and to certain extent, even the Q4, Wassana was still most of the time shutting. Wassana only we only restarted Wassana at the tail of December. And for the full year, we recorded around $152,000,000 Looking at the balance sheet, as Sean mentioned, we closed the year with around $151,000,000 of cash.

Speaker 2

We have repaid all the debt. The loss stress was paid in October, and that was at $12,500,000 So we stand today as of the 31st December with 0 debt, just cash. And I think what you can see there as well is what the book value of Alora at the year end at 31st December. And I will come to this point in terms of what this value means conceptually. Next slide, please, Robin.

Speaker 2

So from working interest reduction as you can see, 4th quarter came at around 4% less than the last quarter. This is really a reflection of some work that was done predominantly on Nang Yao, which led to that decline to a certain extent, notwithstanding the natural decline that comes in the field. But happy to report that Nanyao today is around 3 point 7,000, 3.3, so 7,300 barrels per day. Wassala have restarted as we said in December. So that's why you can see the production there at around 400 close to 4 50 barrels per day.

Speaker 2

Wasana today, we expect it to be around the 4,000 barrels a day, so around 5,000 barrels. I think what's important here is to see that like if we look at the Q4, that 12,200 barrels per day, today the production in the last from the 1st March 16th March was around 23,000 barrels per day, as Sean mentioned. And during this period, since we acquired Mubad effectively, which we've booked in our P and L, we've produced around 5,800,000 barrels in this period, which equates to that 20,440. Next slide please, Robin. From a lift perspective, as I mentioned, we did have quite a good busy schedule in terms of lifting for this quarter where we lifted around 2,000,000 barrels.

Speaker 2

As you can see, it's higher than the production during the quarter. I think what's as you can see as well there, a reduction in terms of inventory. I think we've mentioned last in one of the few calls before communicated to the market that the level of inventory is something that we're going to be keeping an eye on going in 2024. I'm certainly happy to see that that number have come down compared to Q3. In terms of realized price, as Sean mentioned, we have been guiding the market towards parity to Brent.

Speaker 2

But as you can see, the our crude has been consistently at this point, consistently above the Brent. And I think for Q4, there as you can see on the left hand side, bullet point there, we recorded around $1,100,000 above Brent. And for the full year as well, we ended the year at around $84.3 per barrel for our crude. Next slide please. And from an OpEx and CapEx perspective, again, I think what you can see here is just from Q4 perspective where we recorded around $52,000,000 which equates to around $29.4 per barrel.

Speaker 2

That came down as came at around 14% lower than Q3. I think initially, the expectation was that Q4 will be higher than Q3. But I think with optimizations and kind of like careful planning, we managed to reduce that cost, which led ultimately to the pro form a basis, which you can see on the right hand side there coming at around 203. So the pro form a, just for the benefit of everyone, this is effectively from the 1st Jan 20 23 till December 23, whereas when we book in our balance sheet sorry, in our P and L is the $165,000,000 you see in front of you. And from a CapEx perspective, again, similar story.

Speaker 2

Q4 came lower than Q3. And again, the pro form a kept quite substantially lower than what the guidance and I think Sean has highlighted the reason for that. And from a P and L perspective for this year, for the financial year 2020, we recorded CHF 144,000,000. And if we add the RUB 5,000,000 that we paid for the acquisition of the MOPO, which is the contingent the deferred payment there, we end up with total CapEx, adjusted CapEx of around RUB 108 for this for the year. Next slide please, Robin.

Speaker 2

Which lead us to, you know, the financial metrics. For Q4, as you can see, we have recorded a pretax cash flow from operation just shy of SEK 90,000,000 and that leads to around the cash flow from operation of around SEK 56,000,000. That's quite substantially higher to what we recorded in Q3. Looking on a full year basis, we've recorded a revenue of just shy of $500,000,000 leading to a pretax cash flow from operations. So this is the cash flow before the payment for the PECAN SRB of just shy of CAD 240,000,000.

Speaker 2

Dollars And we're taking away the tax in the SRB, we end up with the cash flow from operation of around $152,000,000 Again, substantiate what Sean and what the team have been saying all along, these are very highly cash generative assets. Next slide, please, Robin. And looking at the cash bridge from the last date of the balance sheet high in Q3, you can see we have adding FX to the cash flow from the operation and some interest income we received from our balance, from our cash in our balance sheet. Are taking away the debt repayment that we've to pay for the loss tranche of the $12,500,000 debt and the delta working capital, we end up with a cash balance of $150,000,000 $51,000,000 Again, emphasizing the strength of the balance sheet when it comes to the cash positions. We are today cash debt free cash company.

Speaker 2

Maybe stay next slide please, Robin. And maybe, look, you don't often see balance sheets being portrayed in this type of presentations. But I think, you know, pictorially, it's we thought this might be helpful in terms of telling the story, looking at it from a financial and balance sheet perspective. What we what we what you have in front of you is effectively comparison of what our balance sheet looks like, Valeura looks like at the year end last year compared to this year compared to 'twenty three. And you can see from an in terms of asset, the business has been be it from an asset perspective or shareholder equity, there is almost like a 10 fold jump in terms of these two metrics, which again highlight how transformational those transactions were.

Speaker 2

And most important, equally to a certain extent, what has been done during this period to get to these numbers. And maybe if I could, you know, just draw your attention to the bottom graph there, which highlight just Q3 versus Q4. And again, this is we think this kind of gives a good story in terms of what has happened in the year and how this how the all the work that the team have done from a technical perspective kind of impact the balance sheet. And specifically, when it comes to, for example, reserve replacement and how upgrading reserves for a company like an E and P company can have a substantial impact on its balance sheet and its financial position as a whole. So we can see from the right hand side 2 bars there where we have effectively what the equity value has how the shareholders' equity value has increased from $225,000,000 to $284,000,000 But maybe highlighting as well what extend the field life, pushing back those pushing back those decommissioning and at the same time, trying to trying to also from a real term or nominal term, try to reduce it by trying to be clear by doing the work cleverly, then it's a substantial deleveraging of the balance sheets.

Speaker 2

And you see, as Sean mentioned, there's been a 30% around 30% reduction compared to the balance sheet at the time of the acquisitions. But if you look at how that comparison between the last balance sheet to today's balance sheet, you can see that the numbers are quite even bigger. So we move so our IRR have moved away from close to $200,000,000 now to around $129,000,000 And again, worth highlighting that as of Q4, we have in our asset, we do have around $151,000,000 of cash sitting there. I think the message from this slide is that, you know, not only has, you know, operationally we've delivered in terms of like, you know, trying to optimize the business and trying to extract more from the business by paying less. But most importantly, it's also trying to set the balance sheet.

Speaker 2

We're trying to set the business into the right footing to give us that flexibility and that resilience going in the future, especially when we look at organic growth, inorganic growth and further beyond that. And I think with that, I'll hand back to Sean.

Speaker 1

Thanks, Yassine. Yeah, next slide please, Robin. So look at, as Yacine said, operationally, financially, organizationally, 2023 was a great year. But we'll just take a couple of slides now just to point to 2024 and we see that going. From a guidance point

Speaker 2

of view,

Speaker 1

as we noted, mid range of the production guidance there, 23,000 barrels a day, a range of 21.5 to 24.5. And we already have a lot of that production in. We still have further projects to go, but of course, those are you'll be offset slightly by declines in some of the other fields. OpEx wise, we're decreasing the unit OpEx down to about 26 barrels a day is the target. But when you look at CapEx, the CapEx that we've also brought that down from where we've seen it previously.

Speaker 1

And I'll just make a note that this actually includes a power generation project we're putting on the Jasmine platform, total about $7,000,000 for this year, which will reduce the emissions, but also lower the OpEx for that. So next slide. So looking at Wassana, now we've talked about this a couple of times. The operations we had through most of Q1, the drill rig was on Wassana, did 5 horizontal well and 2 workovers. That work is now all complete and the rig is left site and we've had production in the first half of March was about 5,000 barrels a day.

Speaker 1

But importantly, as we look ahead, it's that idea that we want to look at the redevelopment concept we're going to put in here and we've planned for a concept select on that sometime in the next month. And then that would lead through the tendering process, all the detailed design for targeting FID late in the year. That has potential to add actually further reserves above what we able to book last year and extend the field life well into the 2030s. But again, we've got to go through that final concept select. Next slide.

Speaker 1

Nong Yaoshi, again, this work was started last year. The pipeline was laid last year. And what's at least nice on this slide now is that instead of having a cartoon of what facility we're installing, we actually have an image of the new facility installed on the Nongyao Sea location. And since this time, actually, they're installing the conductors to get ready to commence the drilling on the Nongyaosy facility. And that will be taking probably late within the next month and continuing throughout Q2.

Speaker 1

The other point we'll make is that looking at the next phase of expansion of Nongyao, which is currently looking at Nongyao D. Now, the drill rig has currently moved on to that location and we'll be drilling an exploration well there. The idea is really to prove up sufficient oil in that location, so we can already start to do the work on where the next development for the Nongyao field is going to be at that location. So that's kind of exciting work this year. Next slide.

Speaker 1

So, trying to look at the catalysts we've got. Well, we're getting great prices and we're seeing that actually currently we're getting premium to Brent. As we noted, we're actually looking at increased production in 2024. We're currently doing about 23,000 barrels a day on the back largely on the back of Wassana coming online, doing about 5,000 barrels a day. And then as we've said, bringing Nongyaosy on mid year, which can go from 7000 to 11,000 barrels a day.

Speaker 1

We do plan further work on Manor and Jasmine later in the year with the rig to put some new wells in there. Key point, as we've said, redevelopment decision on Wosana, but then we are drilling a few exploration wells this year. On the FIRM plan is Nonyaoudi, which we're currently on-site. Rattri near Jasmine will be drilled later this year when we go up to do work on Jasmine. And there's potential for also putting in a Wasson and Northwell, depending on the rig sequencing.

Speaker 1

And then the other point is Yossine was talking about on the balance sheet. Well, we obviously see further strengthening there with cash generation, but also as we look to optimize and reduce the decommissioning obligations further. I'll also note there that we are still working on the corporate restructuring and we still have expectations that that will occur before mid year this year. And then finally, we still have M and A potential that we are looking at. So, next slide.

Speaker 1

So, I kind of started with this slide and I'll kind of bring it back to this slide at the end. We're honestly we still see that there's more potential in the share price, given where we're sitting today, looking at our cash, looking at our reserves value, looking at the targeted free cash flow for the year, we are well below our peers and we still see future there. However, the other point I kind of note is that the share price is continuing to rise and your executive is just going to keep focusing on maintaining the business, delivering on the business, delivering on what we've told you we're going to do. And I expect that we're going to still see that share price keep rising. Another point I'll just note on this slide is that the another transformation in the company is in our shareholder base.

Speaker 1

We are seeing new entries coming in and taking significant position and in fact, historic strong supporters of the company increasing their position recently. Now given our very high liquidity, all of these acquisitions were done on the open market. So in conclusion, Yacine and I have talked a lot today about 2023 and the transformation of the company over the past 2 years. However, we don't need to talk about this anymore. This is about looking forward at the production and the cash flow we intend to deliver in 2024 in the coming years.

Speaker 1

This is about the significant catalysts that the company has in our immediate future. This is about the focus on profitability enhancement that we're going to continue to drive from the Valeura team in Bangkok. And it is about the next step forward in growth and building on this foundation that we've created now. 2023 was great, but we see another exciting year ahead and thank you for joining us on this journey. Thank you.

Operator

Thanks, Sean. Thanks, Yacine. As I mentioned at the beginning, we're able to take any questions that you might have, which you can either submit by email using irvaloreenergy.com. In fact, you can use that email address anytime to reach us. And in the call, you can use the Q and A button in MS Teams.

Operator

Just give me a second here to sort of organize our questions. All right. So a few questions, production related. Number 1, we've got several people watching production figures that are published by the DMF where they're posted on a monthly basis. And very specific question on Jasmine, why was Jasmine production so low in February 2024?

Speaker 1

Yeah, it's actually a good question. And you'll also note that menorah will be low we expect to be low in March. So these were just planned shutdowns that we've had on the facility. So the team knows you have to do this every so often where you go and you shut down and you do a full suite of maintenance at that time, but it requires that shutdown. So with Desmond, they had to shut down the facility and that obviously

Speaker 2

then drops your production during that period.

Speaker 1

The good news is for during that period. The good news is for Jasmine that was done actually faster than expected. So, they didn't need the full time that they expected to need to be off. And on sorry, on Menorah, we were also shut down there in March, but the field is back up and producing already.

Operator

Okay, Great. Another couple of questions on production here. And I'm going to lump a couple of them together because there's similar ones here. But first of all, where do you see 2024 exit rate production? And second part of that, what's the sort of overall vision for production over the next few years?

Operator

Is it above 25,000? Is it sort of between now and between where we are now and 25,000? Or what's the sort of general overview?

Speaker 1

Yeah, I think what we can say is like, look at everyone would look and say, well, jeez, you were at just over 20,000 last year. Already in Q1, you're at 23,000, you should be in to get over 25. And we do expect that we can get over 25 about midyear when we bring on Dong Yao C, right, and that thing jumps up to that level. But you still do have the natural declines that will come in. It'll matter the amount of work we get done with the drill rig later in Jasmine and at Manor to try and work on the decline of those fields and natural declines.

Speaker 1

So, the guidance of saying that for the year, we'd average about 23,000 as a target. We still feel that that's quite valid and the exit number could be near that sort of number for there. Now, when we look ahead for the next few years, what we've tried to say even back a year ago was our target is to keep these fields producing between 20,000 to 25,000 barrels a day out for the next 3, 4 years or more. Right? So, no, we don't see that we're going to want to drive this thing right up to a high number from this asset base, But it's more about maintaining them because you are dealing with the declines taking place on Jasmine and Menorah and off setting those with growth in Wassana and Nongyao.

Speaker 1

Okay.

Operator

Maybe just switching gears a little bit on reserves. Question is, can reserves be extended further in 2024 2025?

Speaker 1

Look, it's a great question. And we've always showed the slides, right, back that every year, the Company, even before we've taken on these, has generally replaced their reserves. Now that we're starting to focus a little more on growth, you can see that we're adding reserves. We're going out there to drill this year 2 to 3 true exploration wells, which could actually then form new developments or new expansions of Nong Yao. These things have the potential to then obviously be future growth.

Speaker 1

And that's obviously the target that we're looking to have here is that, no, these reserves are not coming off in the next couple of years. We're looking to maintain them.

Operator

Okay, good. And possibly a related question on that. Can you tell us a little bit more about the exploration targets that you're drilling this year? How big and what sort of risk are we looking at?

Speaker 1

Yes. So, Nongyao D, we would say from an exploration world is relatively low risk. You are drilling in an untested area, but all the indications and the way that the team after decade, 15 years of working these 3 d data understand the seismic and the response of the reservoirs, the response of oil. We see it as a relatively low risk, but it's a type of field that likely can get enough oil in that location on success that it could justify a new facility in that area. Whereas, Ratri is different.

Speaker 1

Ratri is one that has more risk to it because it really isn't an undue part of the block. But if it's successful, it will be a whole new development. We expect it to be over 20,000,000 barrels if successful.

Operator

Okay. Bunch of questions on the tax consolidation. And I think you've mentioned this already in your prepared remarks, Sean, but I'll ask it anyway just because so many people have asked the question. Can you give an update on the progress toward tax consolidation? And one person has noted here, we do mention in our disclosures that we've completed the process to merge the businesses together.

Operator

Does that imply that we're now able to use the tax losses? Or is that something else?

Speaker 2

No, sorry, this is Yacine. These are 2 different aspects, to be honest. And I think we've So, mechanically, effectively, the organization is really housed under one roof, so to speak. And I think this is what Sean was referring to when he said like the organization are put together. From a tax consolidation perspective, what I can say here, as Sean said, we still think the expectation that by midyear this will occur.

Speaker 2

What I can add maybe to that is that, you know, we are effectively at the last gate. So subject to that, you know, so far all the signals appear to be positive. We seem to have support from different from the key stakeholders when it comes to this matter. But again, there is still one last gate that we have to go through. But so far, nothing is stopping us from believing that it does this will not occur.

Operator

Okay, very good. And while we've got you on the line, Yassine, a couple of questions on the change in the decommissioning obligations. What are the drivers behind this? Is it reduction in cost estimates or is it predominantly the NPV effect?

Speaker 2

It's I think it's a combination of the 2. We've seen an actual reduction in cost compared to what we had before. And it's also but I think at this point in time, and Sean did say that like in 2024, our aim is really to try to focus on those decommissioning to try to see how much absolute reduction can we get, I. E, e, on the real from a real perspective or a nominal perspective, how can we reduce them. But the bulk of the changes that you see today is really just it's predominantly driven by that ability to delay the decommissioning back.

Speaker 2

So discounting the back today, you get that impact.

Speaker 1

You know, maybe just an additional make on that. You know, you know, Pete heard us talk on this before, you might have heard some of these details, but there is a significant amount of abandonment going on in the Gulf of Thailand now. A couple of years ago, Chevron abandoned 1500 wells in 1 year. All of that data can be accessed through working with the contractors and the service companies to really benchmark what have been our engineering estimates that were done up prior to that work to then see, okay, we see savings there. We also know from talking to contractors that I think Chevron will be abandoning approximately 40 platforms between last year and this year.

Speaker 1

So, you're monitoring that work and understanding what is really the cost of that work that's ongoing. So, what we're seeing is not just having to do up engineering estimates in the blind, but you now have a full data suite to work from.

Operator

Okay, very good. Just a couple more questions and I'll let you save your voices. Shareholder returns, any change in thinking on the company's strategy to do direct shareholder returns by way of a buyback or dividend or does the strategy remain the same?

Speaker 1

Look, the strategy remains the same. We obviously, as we've always said, we're focused on growth and there's some there are some interesting things and exciting things that are ongoing this year. We'll just see where we get to on those. However, we will continue to monitor the cash build. We are sensitive to comments from shareholders on this matter and continue to have discussions with the Board on this matter at each one of our quarterly meetings.

Operator

Okay. And maybe one last question, Nong Yao D. Drilling, how long do you expect this to take? And should the market expect to hear results when we're finished that well? Or is that something that we keep tight until a development is defined?

Speaker 1

No, I would expect that we would actually give results of that well, as an exploration well. We have tried to with as we said, with drilling campaigns, we tend to release drilling campaigns. And in that view, I would kind of view an exploration well as a drilling campaign. The well on timing, look at these wells go fairly quickly. We would expect it to be done within a couple of weeks.

Speaker 1

However, if successful, then we would expect the rig to kind of stay there and probably drill a number of sidetracks. Because really what you want to do is when you have success there is have the rig stay there long enough to prove up sufficient oil that there's a development at that point, rather than having to take the rig away, come back in, do geotechnical surveys, drill a new location. Once the rig is set up, it's very cheap to do that, those sidetracks and that appraisal work.

Operator

Very good. Maybe just one last question that's come in. Any interest in new Thai licenses or new licenses elsewhere in the region?

Speaker 1

Yes. Look, obviously, we've had a strategy which is very much focused on producing assets. We would look at development assets as well. And in Thailand though, we would also look at exploration where we see good synergies to our facilities and where we're currently operating. We do know that we expect the Thai government to really come out with some licenses in the near future and we're monitoring those closely and in discussions with them and I expect our team will do some work on those.

Speaker 1

Straight exploration in other areas of Asia, don't see us doing that. No, but we will continue we are continuing to look for assets that come with cash flow.

Operator

Very good. Okay. That's it for questions for the moment. I'll remind everyone listening,

Speaker 1

if you

Operator

do have any questions that come up in the interim, you can reach us at any time. Our contact details are on the website. Best way to be in touch is using that email address irvaloraenergy.com. But as for today, that's all we've got. So I'll hand it over to you just to finish up the call, Sean.

Speaker 1

Yeah. No, I just wanted to say, again, thank you very much, Fermin, for joining. We look forward to this year. We have a lot of catalysts coming and expect a lot of excitement. Thank you very much.

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Key Takeaways

  • Valeura is currently producing 23,000 barrels per day and delivered over 200% reserve replacement in 2023, extending field lives across all four operating assets.
  • The Wassana field was returned to production at 5,000 bopd—15% above pre‐shutdown rates—with appraisal drilling revealing substantial upside and a potential redevelopment into the 2030s.
  • The Nong Yao expansion is on schedule to boost output by ~50% to 11,000 bopd by mid‐2024, with additional exploration drilling at Nong Yao D and Ratri targeting new growth.
  • Financially, Valeura closed 2023 with over US$150 million cash, zero debt, ~US$231 million EBITDA, unit OpEx down to US$26/bbl and a 30% reduction in abandonment liabilities.
  • Organizationally, the integration of three companies and Asian HQ relocation have consolidated operations, complemented by accretive M&A (full Wassana interest, Roscon royalty) and tax‐pool consolidation expected mid‐year.
AI Generated. May Contain Errors.
Earnings Conference Call
Valeura Energy Q4 2023
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