Valeura Energy Q2 2024 Earnings Report

Valeura Energy EPS Results

• Actual EPS: C$0.14
• Consensus EPS: C$0.21
• Beat/Miss: Missed by -C$0.07
• One Year Ago EPS: N/A

Valeura Energy Revenue Results

• Actual Revenue: $202.86 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Valeura Energy Announcement Details

• Quarter: Q2 2024
• Date: 8/8/2024
• Time: N/A
• Conference Call Date: Friday, August 9, 2024
• Conference Call Time: 10:30AM ET

Valeura Energy (TSE:VLE) is an upstream oil & gas company, with a clear strategy to add value for shareholders through growth. The Company is expanding operations organically and through acquisitions in Southeast Asia, focussing on assets with immediate or substantial near-term cash flow, with imbedded reinvestment opportunities.

Valeura Energy Q2 2024 Earnings Call Transcript

Key Takeaways

• Q2 production averaged around 21,000 bbl/d with adjusted cash flow from operations of $66 million (37% higher than Q1), ending the quarter with $147 million in cash and zero debt.
• The Wassana field is back online at about 5,000 bbl/d and the Nong Yao FPSO is slated for first oil in August, contributing an additional ~4,500–5,000 bbl/d and boosting total output to ~25,000 bbl/d by September.
• Reserve replacement exceeded 200% in 2023, with further upside from Wassana redevelopment, the new Nong Yao wells, ongoing performance at Jasmine and Menorah, plus three successful exploration wells, extending field life into the 2030s.
• Engineering work is underway for a major Wassana field redevelopment, targeting a final investment decision in early 2025 to install a larger facility and extend production capacity through 2035.
• 2024 guidance remains unchanged with mid-case production of ~23,000 bbl/d, Brent‐linked pricing, OpEx around $28/bbl, ~$120 million of drilling CapEx, and Board review of potential share buybacks and M&A opportunities.

Presentation

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Hi, everyone. Welcome to the Valeura Energy Q2 2024 Results webcast. I'm Robin Martin, Vice President, Investor Relations and Communications. Joining me on the call today are Sean Guest, President and CEO, and Yacine Ben-Meriem, CFO. We're recording the event today, August ninth, twenty twenty-four, and we'll post a replay to our website when available in the next day or so. So running order for today, in a moment, I'm gonna hand over to Sean and Yacine, who will go through some prepared remarks in conjunction with the slides that should be shown on your screen. Thereafter, we'll go onto a Q&A session. For that, all of the lines are going to remain in a listen-only mode for the call. You can submit questions at any time, though, using the Q&A button at the top of your Teams screen.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

With that, I will ask Sean to go ahead and unmute your line, and it's, the floor is yours.

[Sean Guest, President and CEO at Valeura Energy]

Thank you very much, Robin, and thank you for everyone joining us here today. Robin, if you could just go forward to the first slide, please. Yeah, and again, I'm not even going to go into the slide in detail. It's really more of a summary reminder for people. I expect that most of the people who are on the call here today are familiar with the story and have been in the story for a while. The key thing to emphasize is we have had very good returns to shareholders, in the past couple of years, and in fact, even for this year, we still remain in the top quartile performance for our peer group. But the real focus of the company is creating a highly cash-generative portfolio of opportunities.

[Sean Guest, President and CEO at Valeura Energy]

I think with what we'll show here today, we are seeing that, but we're also seeing that that's not only for today, but we still have much more life in these assets as we move forward. So if we can move on, Robin. So the three key points we'd like people to take away from today is, one, the strong financials. Now, I'll hand over to Yacine in a minute, who will go through that in detail, but, you know, the main point for me is that given that we're looking at about 21,000 barrels a day for the quarter, we're looking at cash flow from operations of $66 million, which is up 37% from Q1. We still have a cash stockpile of about $147 million, and a final reminder that we have no debt.

[Sean Guest, President and CEO at Valeura Energy]

But when we look at production, production for the first half of the year was between 21,000-22,000 barrels a day, depending on the quarter. And that was even with some outages we had planned on the facilities, as you have to do regular maintenance. But as we look at this and moving forward, what we want people to really focus on is that while Wassana was out for July, Wassana is now fully back on and delivering about 5,000 barrels a day of production. But importantly, the Nong Yao facility is now really ready to go and should come on and ramp up during August. And with those two facilities now back producing, that should yield about 9,000 barrels a day more, once we get to September, relative to what you just saw last month in July.

[Sean Guest, President and CEO at Valeura Energy]

And that'll really look at, looking at September through to year-end, you can be looking at production of about 25,000 barrels a day. So just even with the production, the cash flow we've seen from that 21,000 barrels a day, we're quite optimistic about getting that production up and being around 25,000 barrels a day for the remainder of the year. The other point for people to take away, and that's reserves, and this has been a challenge for us since we did the takeover of the Mubadala assets in the Gulf of Thailand. People have generally pointed to the short Reserve Life Index, but we keep extending this more and more. So we saw last year we had more than 200% Reserve Replacement Ratio, and now it's quite exciting that with the work that we're seeing going on to date.

[Sean Guest, President and CEO at Valeura Energy]

Wassana, I'll talk about in more detail, but a whole redevelopment there that should take the reserves from that up above the 13 million barrels that we saw at the end of last year. Nong Yao C was in our reserves. However, while drilling the wells, we did additional appraisal. We added an extra development well in there, and we see that those—that's now a producing asset, and that'll come into reserves at the end of the year, including drilling a couple of extra wells at Nong Yao, which, while those were designed for production, actually, they did find some new oil that we expect to be a target for future drilling.

[Sean Guest, President and CEO at Valeura Energy]

Then they add on to that that Jasmine is still performing extremely well, and Manora, which was, again, a field that was due to be abandoned a few years ago, we're now going into a new drilling campaign there, which we expect to start later this year. So all of these elements are building into reserves that we expect at year-end. And additionally, we went out and drilled three exploration wells this year, all successful, and we expect those to come in largely as probably contingent resource at year-end. But we're still seeing that we're able to increase the reserves on these fields and kind of get away from that myth of the short Reserve Life Index.

[Sean Guest, President and CEO at Valeura Energy]

And just as noted at the bottom there, is again, the focus still remains on safety, operational excellence, and that was one of the reasons why we had to look at that short shutdown on the Wassana field to assure that that facility was still in good order. So that's really the key points that we're trying to get you to take away from today's presentation. And with that, I'll hand over to Yacine, just to give a bit of an update on the Q2 financials. Yacine?

[Yacine Ben-Meriem, CFO at Valeura Energy]

Thanks, Sean. Greetings, everyone, and good evening from Singapore. I'd like to start by highlighting some key achievements for what we describe as being a solid quarter in Q2. As you can see, our revenue in Q2 came in at $164 million, which was 10% higher than Q1. This was on the back of higher lifting during the period and also improved realized prices. Both in terms of underlying benchmark, but most importantly, from our perspective, it's also the premium that we receive for our crude. Production, on the other hand, came slightly lower than the last quarter, though still slightly above our initial expectation for this quarter, thanks to better performance from Wassana and also the drilling of the infill well in Nong Yao A, to counter some delay in Nong Yao C.

[Yacine Ben-Meriem, CFO at Valeura Energy]

It's good to remind everyone, or the audience in general, that it's quite common for us, or indeed even all other offshore producers, to have a slight mismatch between production and sales, since all of our crude is stored, is produced, and then thereafter stored on a vessel, be it an FSO or an FPSO, before it is sold, i.e., lifting. It's just part of how offshore operators work, the industry works. With cost and capital expenditure staying steady, we saw our EBITDAX for the quarter rise at $200 million, which was 12% above the last quarter. I think the standout takeaway from these figures is really our pre-tax cash flow from operation and our tax flow from operations, which reached $87 million and $66 million, as you can see in front of you, respectively, from Q2, reflecting an impressive 20% and 37% increase versus Q1.

[Yacine Ben-Meriem, CFO at Valeura Energy]

And I will elaborate further on this in a moment. As for the balance sheet, we have recorded an increase in book value, and so did our working capital surpluses. Importantly, as Sean mentioned, we ended up the quarter with $147 million, which again, I will elaborate further in a moment. Robin, next slide, please. Now, let's break down our cash flow from operation in Q2. Our revenue of $164 million during the quarter, we also recorded a royalty of $18 million. Royalties on a percentage basis were 11% versus our guidance for the full years of 13. This is due to lower production from Jasmine, which, again, to remind everyone, has a higher royalty tariff on it.

[Yacine Ben-Meriem, CFO at Valeura Energy]

OPEX came in at $54 million, consistent with what we projected internally, and just slightly higher than the $52 million we recorded in Q1. On a per barrel basis, that comes out at $28.3 per producing barrels, a bit higher than the previous tracking in Q1, but not surprising, given the dip in production and level of activities during the quarter. Our SG&A are in line with our run rate of just of $5 million, which ends up with our pre-tax cash flow from operation of $87 million. For petroleum income tax, or PITA, we accrued $21 million this quarter. Just to clarify, this is an accrual amount, and cash payment is a separate topic.

[Yacine Ben-Meriem, CFO at Valeura Energy]

There was no special remuneration benefits, or SRB, during the quarter, because of the drilling we've done, which ultimately resulted in a strong $66 million in adjusted cash flow from operation, which again, as Sean mentioned, it's a multiple 37% increase compared to Q1. Now, Sean—sorry, Robin, can you move to next slide, please? Thank you. Now, moving on to our cash balance. I think you all know that we are focused on maintaining a strong and robust balance sheet, to facilitate both growth and also value creative opportunities that comes our way, and also to enhance shareholders. First, let's look at our cash balance on a pro forma basis compared to Q1, and then we can talk a little bit more about some one-off cash payment done during this quarter.

[Yacine Ben-Meriem, CFO at Valeura Energy]

During the quarter, we had our cash flow from operation, adjusted cash flow from operation of $66 million. We spent CapEx of $31 million. We also spent $5 million during this quarter on exploration, fiscal operations. We also, during this quarter, had $72 million cash payment in May, which obviously impacted our cash position. But just as a reminder to the audience, in Thailand, taxes are paid, PITA and SRB are paid in May and August. So we will see more tax payment in Q3, but it's not gonna be as big as this, as what you see in front of you now. With the adjustment of working capital, our cash balance would have been $177 million this quarter. However, as I mentioned, we had some non-recurring outflows during this quarter.

[Yacine Ben-Meriem, CFO at Valeura Energy]

We've made an $11.3 million tax payment related to reassessment for taxes, for PITA taxes for the, for the year 2018 and 2019, which was actually during the previous ownership of the asset. We are now actively working with the counterparty to see if we can recover this amount. And we obviously will keep the market updated on this in the next quarter. During the quarter, we also closed the transaction for the acquisition of the Nong Yao FSO, of, for $19 million, and made the final contingent payment of $7 million related to the KrisEnergy acquisitions. As a reminder for the audience as well, out of that $7 million, we also received $5 million from us selling the Rossukon field as well. So that's just an offset payment.

[Yacine Ben-Meriem, CFO at Valeura Energy]

So at the end of the quarter, we're looking at a solid cash position of $147 million, and most importantly, with no debt. Our priority is, as Sean mentioned, our priority is to keep the balance sheet strong, which position us well for the future. And I think this with that, I'll hand it back to Sean.

[Sean Guest, President and CEO at Valeura Energy]

Thanks, Yacine. Okay, I'm looking at Wassana. Obviously, we had the issue there where we had to shut down the field temporarily at the end of last quarter. It's back up and running now. But one of the key things we're seeing, and that's on the chart on the left, is the blue line is really showing our planned production that we had from the facility. And you can see the green line, with the drilling that we did in Q1, we're getting better performance from the field, which is averaging around 5,000 barrels a day. So we're getting that good, solid production, and obviously very happy to have that back on, considering we're 100% interest in this field.

[Sean Guest, President and CEO at Valeura Energy]

Now, the one thing to kind of discuss is that, you know, we had the inspection, part of a regular inspection, that identified a crack in one of the welds in the legs right down to the seabed, which caused us to do a temporary shut-in while we analyzed that crack in detail and determined that it really was confined within the weld. It was not; it had no effect on structural integrity at all, and we've been able to start that back up. But it does point out one of the things that, you know, we wanna note to people is that, the majority of our facilities are from platforms, which are obviously much longer life, much more serious, solid structures. We have two MOPUs within our portfolio.

[Sean Guest, President and CEO at Valeura Energy]

The one of them is the Ingenium at Wassana, where we have had the problem, and the other one is actually the new one that's just been installed, just come out of the yard and been certified, which is brand new, which is the one on Nong Yao C. Now, we recognize that the one on Wassana has been around, you know, it's coming up near the end of really its planned life. And with what we've seen with our appraisal drilling on Wassana, that's really one of the reasons that we're now focused on a redevelopment of this field. It's a recognition that this facility that we have does not have the size, the processing capacity, nor the life to be able to fully reap the rewards from the Wassana field.

[Sean Guest, President and CEO at Valeura Energy]

And that's the reason we're going into the redevelopment now, is to replace this with a much more solid facility that can take production not from mid-2025, from the mid-2020s, 2025 or 2027, but we wanna see this field producing out to 2035. So that appraisal work was done last year, again, demonstrating that we have this upside potential. We're in the engineering work right now on that, and that'll lead to procurement probably in Q4 of this year, and a final investment decision for that is expected. We're saying now early 2025, just after the new year. I'm saying that it'll be around the end of the year. Well, it's highly unlikely any decisions we're getting made in the latter half of December. So we see that as really extending now into early 2025 to make that decision.

[Sean Guest, President and CEO at Valeura Energy]

But again, bringing it back to focus on reserves. The first reserve report that we put out on Wassana when we took it over in 2022, was for 4 million barrels of recoverable oil, and that would yield about a 3-year reserve life for that amount of oil. At the end of 2023, we'd increase that to pretty well 13 million barrels, and we're talking of reserve life now producing out into, I think, at the time for that reserves was 2032. And with this final investment decision, we see that we should be able to extend that life further out and add some more reserves when we get that done in early 2025. And that's even before we start talking about the exploration we did, which shows more oil to the north, or we already know there's more oil to the south.

[Sean Guest, President and CEO at Valeura Energy]

So what's really pointing to this is that we're not just extending these fields by a year or two, but we're looking at extending the life of these things by around a decade. Next slide. So Nong Yao C. Nong Yao C was really our growth project for the year. The greater Nong Yao field already had two platforms on it, A and B, and C was the third development area of the field. Now, remember in Q1, we installed the facility out there, and then since that time, the drilling has really been focused on drilling all of the development wells, water injection wells that were required here. Now, while the plan was originally for six horizontal development production wells, in the end, we are able to use rig time. We drilled one more appraisal well into a zone which was successful.

[Sean Guest, President and CEO at Valeura Energy]

The team have actually now converted that over to a development well, which will be brought on as we go forward here and ramp up the production from the field. So all of those wells are now currently drilled and really ready to go into the facility. The other point to note, I mentioned the one well that was dedicated appraisal and now converted to development, but two of the horizontal wells were also deepened at the end to test deeper targets. Both of those were successful, and we expect those to form further infill drilling for this area as we go forward in the future. So again, while a lot of the reserves were captured in this, we're now gonna bring the production on, and we've had several appraisal objectives that are successful, that we expect to build on the recoverable oil volumes in this area. Next slide.

[Sean Guest, President and CEO at Valeura Energy]

So as I noted, the facility was installed. The wells have now been all drilled. All of the work on the facility is done to tie in the wells, to get it all completed, all the fabrication work that was required. And the only thing that we're actually waiting for now is the final inspections and the certification to allow you to flow hydrocarbons through the facility. And in that way, we've been guiding the market that we would have first oil here in Q3. I now see that we're going to have first oil from this facility in August. And what's quite exciting is the volume of oil we're talking about here is, you know, 4,000 barrels a day plus net to us from this. And it's quite interesting to hear the team talking about the greater Nong Yao facility really being related to the...

[Sean Guest, President and CEO at Valeura Energy]

Now the amount of oil that you can flow from the main production facility over to the storage vessel, which is limited to 13,000 barrels a day, gross. So this is really where we see a lot of the production coming from and really looking at Valeura having about 25,000 barrels a day from September through to December. When we look at the drilling performance, it's also important to note that actually the cost for Nong Yao C came in about 25% under budget on the drilling. Now, some of this was related to the change in scope, where we took out a couple of water injection wells and actually drilled these appraisal wells and that extra well. But we also saw drilling efficiencies here that were about 13% less than our plan.

[Sean Guest, President and CEO at Valeura Energy]

What this means is that even though our drilling budget for the year is remaining largely fixed at just over $120 million total for all of our 2024 drilling, we're now starting to get more wells drilled than were planned. And for that reason, we're seeing that Manora campaign, which was planned for 25, is now we see that we expect that to actually get drilling in late Q4 and to get some extra drilling coming from that well over there. So as we look forward to the rest of the year, the Nong Yao C drilling is completed. We expect the rig to be demobilizing from the site shortly.

[Sean Guest, President and CEO at Valeura Energy]

It will go up to Jasmine and do some infill drilling at Jasmine to look to bring the production up there, and then once that's done, it'll head over to Manora to start that five-well campaign that we're looking at over there. So a good full program coming up. Again, getting back to more Jasmine and Manora, where we're looking just, really manage the slow decline of production on these fields. Next slide. So that just leaves us really as a reminder of where we're at on our guidance and, you know, a mid-year update relative to what we put out at the beginning of the year. So in the production, with a mid-case of around 23,000 barrels a day for the full year, we still see that we can maintain that.

[Sean Guest, President and CEO at Valeura Energy]

While the production in Q1 and Q2 as planned was in that 21-22 range, if you start to look at 25,000 barrels a day out to year-end, we're able to support that mid-range case, and we're kind of then narrowing the range. Prices, we're sticking to a price realization of approximately Brent. Now, again, in the first half of the year, we were achieving a premium, but a lot of this is due to a change where we're starting to see the Dubai oil price that we actually are benchmarked to. While it's always been at a slight discount to Brent, is now pretty well coming in online with Brent, and all of our fields are getting a premium to that.

[Sean Guest, President and CEO at Valeura Energy]

So while that continues, if that continues, we will get a big bump, a bit of a bump in the latter half of the year, but again, the guidance-wise is really sticking towards Brent. OpEx-wise, we're maintaining the same guidance. Now, we have had some cost increases. Recognize that these Wassana subsurface, subsea, review work actually all comes into your OpEx budget. And the other thing we're seeing is because of the high, high oil prices, we use a significant amount of diesel, and those costs were increased. But these have been offset by really the acquisition of the Nong Yao FSO, so we're maintaining that guidance for now. And then finally, the CapEx. We talked about the majority of that CapEx is drilling related, and you've pretty well got an equal run rate from the first half to the second half of the year.

[Sean Guest, President and CEO at Valeura Energy]

But we are starting to look at some of these brownfield projects that take place out in the facilities, some of those occurring later in the year, but we still are guiding towards the lower end of that number, so we've brought the top end down. And exploration is really largely on budget as to what we had planned. Next slide. So really, you know, as we started the presentation here, bringing it back to this point of we see getting Nong Yao C back on, getting Nong Yao C on, Wassana is on good production numbers for the remainder of the year.

[Sean Guest, President and CEO at Valeura Energy]

Wassana, that redevelopment field still remains a target for us, and we're looking at that final investment decision just into Q1, and that's looking to then have a facility out there that we can have higher production than we currently have on Wassana, and again, maintaining that higher production well out into the 2030s. Exploration. We've done the three exploration wells, all of which were successful. Ratree prospect, which is one we've talked about, we expect that now to slip into 2025, and that's just both for a reason that we're focusing on production wells right now as we go towards the end of the year. But also, there are some commercial reasons that that well around Jasmine may be better to do in 2025. The balance sheet, Yacine's talked about that, good, strong cash flow for the remainder of the year.

[Sean Guest, President and CEO at Valeura Energy]

But I know a lot of the questions that people have is really related to the corporate, the corporate consolidation that we are looking at, which give tax benefits. What we can say at this time is that all of the work is done at that, all of the reviews are done at that, and we're really just waiting for a signature on that. But again, we'll have to just wait and see when that signature comes, as to whether it's next week, next month, or next quarter. And finally, on M&A, and really where we're at on there is similar to where I can say we were in 2022. We are active on deals. We are in discussions with people.

[Sean Guest, President and CEO at Valeura Energy]

We're working on a number of opportunities, but again, we don't make any announcement there until it, we actually have something that we have signed and that we can actually release the details on. So all in all, we see production up. That should yield better cash flows as we go in later in the year and some exciting opportunities like Wassana that are coming up there and potentially looking at further M&A in the latter half of the year. So at that point, I'll hand it back to Robin, and, we'll take questions. Thank you.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

... Thanks, Sean. Thanks, Yacine. Sean, I'll let you rest your voice for a moment and ask some other questions about tax so that Yacine can speak here. Now, Sean, you've already mentioned the state of affairs we're at with the tax consolidation. So I won't voice the many questions we've had along those lines. On the $11 million tax payment that we had, simple question: Can you explain what this is all about?

[Yacine Ben-Meriem, CFO at Valeura Energy]

It's, I think as I mentioned earlier on, it's related to a reassessment of taxes during that year. The tax office in Thailand has the right to audit, and as part of an initial discussion with the audit, with the tax office in Thailand, it transpired that the previous owners might have, you know, needed to do a small adjustment to that tax filing. Now, just to kind of like, you know, deal with it from on our side, obviously in collaboration with the previous owner, we have chosen to resubmit or resubmit our filing, and that has led to a tax 11% $11 million increase in taxes, so we've submitted that.

[Yacine Ben-Meriem, CFO at Valeura Energy]

But as I mentioned, look, we are in discussion with the previous owners to, as per our SPA with them, to try to recover this amount from them.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Okay, thanks for that. And just by point of clarification, there's another question along these lines as well, saying: What options are available to recover the $11 million taxes in that KrisEnergy was acquired out of receivership? And just to clarify, we're talking about the producing assets that came from the other acquisition that we did. It had nothing to do with KrisEnergy, unless there's something else that you wanna contribute there.

[Yacine Ben-Meriem, CFO at Valeura Energy]

No, no, no, that's absolutely correct, Robbie.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Okay, moving on then. A couple of questions on shareholder returns, and in particular, has there been any advancement around putting in place a, an NCIB? And if so, could that possibly be a 2024 event?

[Sean Guest, President and CEO at Valeura Energy]

Look, you know, we do get this question a lot, and what I will say is that our messaging for the past nine-plus months has been very similar on this, is that this is an item that we take and discuss with the board at every quarterly meeting. We said the appropriate time for us to have a significant look on this was, you know, the mid-2024 meeting, which is about now. Obviously, it's related to what we see coming in the deal space, because our priority does remain on growth and having the cash to underpin that growth, given the problems in raising capital for oil and gas right now. This is something that we are reviewing, and that could potentially be a 2024 event.

[Sean Guest, President and CEO at Valeura Energy]

But we need to go through a final decision and review with the board on that.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Okay, I think that's clear. Switching to an operations question, specifically on Nong Yao C. The question is: How many barrels per day do you expect, individual wells that were drilled for the Nong Yao C development are going to be capable of doing?

[Sean Guest, President and CEO at Valeura Energy]

Yeah, the total initial production we expect from that is, you know, when we talk gross numbers, is let's talk about approximately 4,500-5,000 barrels a day, gross from that, and you're getting that from... The plan was to get that from six wells. Obviously, we'll have to see what we get more now that we have a seventh well on there, but the other thing is we just have to make sure, too, that this, we're at some point, we're gonna hit facilities constraint on the number of barrels we can push through the system. So that's kind of the numbers we're looking at for there, is, you know, that, 4,500-5,000 gross.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Okay. Okay, maybe back to Yacine just for a moment before we leave taxes. A question sort of in response to the responses before. Is it possible that there'll be any other tax reassessments, or is there a statute of limitation that prevents the tax authorities from going back further than they already have with this reassessment?

[Yacine Ben-Meriem, CFO at Valeura Energy]

Correct. So for the period to. The tax office has a period of five years, up to five years to revisit, to audit. So effectively, anything from five years back, the tax office will have the right to, to audit.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Okay. Okay, and just a reminder to the audience, if you do have a question to ask, please do so using the Q&A feature in Teams, or, if you're feeling shy to have it voiced on air, feel free to email us after the fact. You can use ir@valeuraenergy.com. In the meantime, just one more question in the queue here, and that is on M&A. Can you comment on your timeline to reach the target number of 100,000 barrels a day that you previously mentioned? And, what sort of debt and share price dilution would you be willing to accept to get there?

[Sean Guest, President and CEO at Valeura Energy]

Well, the first one is we look at deals coming in the near term, let's say in the next 18 months. You know, we've mentioned that we are looking at some relatively significant deals there. All of the work that we tend to do really looks at funding these from cash or from debt. We just think it's extremely hard to look at funding these, that sort of deal from new equity placements, given where the markets are at, even if we have a good story. So that doesn't work into our base case assumption. We're always looking at how much debt we can access, still relevant to the size of the deal that we're trying to do and the cash amount that we'd be able to put into the deal.

[Sean Guest, President and CEO at Valeura Energy]

So, you know, that definitely is not a priority for us to go out and issue new shares to be able to go through and raise the money for a new deal. But we're still looking. The message we've said is our target is to try and get to that number by the end of 2026.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Okay, let me just see. I think we've had one more question come in just in the last moment here. Any early steer on 2025 CapEx?

[Sean Guest, President and CEO at Valeura Energy]

Yeah. We're just really into the business planning cycle on that now, and we are looking at a number of scenarios. And as I mentioned, if you're looking at 85%-87% of your CapEx coming from drilling, obviously, that's where the majority of the spend is. So the scenarios we're running now are really, what level of drilling do we need in 2025 to maintain that production level? Again, as we've said to people, we target to keep it between 20,000 and 25,000 barrels a day. So it's really looking at, you know, the amount of drilling that we actually need to keep this at a reasonable level. And that's given the... Now, all the opportunities the team have, drilling opportunities, we're reviewing that and doing the portfolio modeling on that right now.

[Sean Guest, President and CEO at Valeura Energy]

So there is a potential for it to drop, but again, we are looking at a Wassana project coming up, and this is a redevelopment up there, and that expenditure would start in 2025. So that would be in addition to what we're kind of talking about as our base numbers.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Okay, thanks for that. We have no further questions at this time, so over to you to wrap up, Sean.

[Sean Guest, President and CEO at Valeura Energy]

Yeah, maybe just the one thing I'll say, you know, the first question we had, Robin, and the question that you get, I know a lot on the IR website, is: Have you had approval of the corporate restructuring? Right now, just I will mention to people that that's a significant event. When we get approval of that, it will be announced. So just kind of expect that if you haven't heard from it, it hasn't. We haven't received that approval. It's a material event that we would announce immediately. And with that, so I'll just say, you know, to me, it's really exciting as we look at through going into September here and getting that production up, getting the new facility ramped up and operating smoothly at Nong Yao C.

[Sean Guest, President and CEO at Valeura Energy]

It's a real exciting focus for the remainder of the year to see the production numbers up that high, you know, of 25,000 barrels a day or even higher than that for the remainder of the year. That's what's got very much focused on that, and then heading into a Wassana decision at year-end. With that, I'll thank everyone for their support and for attending today.

[Robin Martin, VP, Investor Relation, and Communication at Valeura Energy]

Thanks, everyone. That ends the call. We'll make the replay available within the next day.

Participants

Executives

• Robin Martin, VP, Investor Relation, and Communication
• Sean Guest, President and CEO
• Yacine Ben-Meriem, CFO