VAALCO Energy (NYSE: EGY): Good operational performance in 4Q23
• 4Q23 NRI sales were 21,725-22,125 boe/d, at the top end of expectations of 19,800-22,000 boe/d.• 4Q23 WI production of 23.1-23.5 mboe/d was comfortably within the management guidance of 22.9-24.6 mboe/d.
• VAALCO held >US$120 mm in cash and cash equivalents at the end of December, up from US$103 mm at the end of September. This is after having paid >US$25 mm in dividends and bought back >US$22 mm in shares. The YE23 cash position was impacted by the fact the Egyptian sales during 4Q23 were for the domestic market rather than exported (domestic sales carry a lower value than exported cargoes). The change in working capital during the quarter difficult to read given the end of the drilling programme.
• Given the strong performance of Egypt and Canada, we are now assuming an increasing level of continuous investments at these two assets resulting in higher production in future periods. In Canada, we are now anticipating a production growth of 3-5% per year.
• We re-iterate our target price of US$9.00 per share.
Financials and valuation
We have reduced our Brent price forecast from ~US$92.5/bbl to US$85.5/bbl. We have also reviewed our opex assumptions for the various field as well as the amount of remaining cost oil. We now forecast that VAALCO will hold ~US$190 mm in net cash at YE24. This is after shareholder distributions and does not include the potential for the repayment of the US$50 mm historic “adjustment” receivables by EGPC.
VAALCO Energy is an independent energy company engaged in the acquisition, exploration, development and production of crude oil. The company is primarily engaged in its Etame Production Sharing Contract related to the Etame Marin block located offshore the Republic of Gabon in West Africa. The company also owns interests in an undeveloped block offshore Equatorial Guinea, West Africa.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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