4Q23 Production Outperformed Guidance
Continued strong asset performance across VAALCO’s portfolio in Gabon, Egypt, and Canada contributed to 4Q23 production and sales at, or above, the high end of management’s November 7, 2023, updated outlook. 4Q23 working interest (WI) production and sales fell to 23.1-23.5 MBOE/d and 27.4-27.6 MBOE/d, compared with guidance of 22.9-24.6 MBOE/d and 25.3-27.6 MBOE/d, respectively. 4Q23 net revenue interest (NRI) production and sales volumes averaged 17.9-18.2 MBOE/d and 21.725-22.125 MBOE/d, compared with guidance of 17.6-19.4 MBOE/d and 19.8-22.0 MBOE/d, respectively. 4Q23 production pushed FY23 WI production and sales to the high end of management’s guidance. FY23 NRI sales volumes averaged 18.7-18.8 MBOE/d, above the 17.9-18.5 MBOE/d guidance range. Asset performance was driven by VAALCO’s development and efficiency initiatives on the Egyptian and Canadian assets acquired in the 4Q22 TransGlobe acquisition and the full-field reconfiguration at the Etame field in Gabon that was also completed in 4Q22. VAALCO reduced spud-to-sales times for new wells in Egypt and Canada and completed upgrades, which debottlenecked production facilities. Gabon benefited from the results of the 2022/2023 development campaign and reduced field downtime. We expect management to outline a FY24 capital and operating plan building on solid FY23 performance in tandem with its 4Q23 earnings release in March. The plan is expected to include bringing a rig back to Etame during 2H24 for a new development program that could stretch into 2025. VAALCO’s cash balance increased to more than $120 million at year-end 2023 from $37.2 million at year-end 2022. Management funded the capital program along with ~$50 million of dividends and share repurchases from cash flow while generating excess cash to add to the balance sheet. We have updated our 4Q23 estimates reflecting the actual estimated 4Q23 WI sales and production volumes and actual Brent oil prices. Brent spot prices averaged $83.72/bbl in 4Q23, compared with $86.66/bbl in 3Q23 and $88.58/bbl in 4Q22. VAALCO is currently trading at 1.3x our FY24 adjusted EBITDA estimates and a 5.8% dividend yield. Our current estimates imply the company can comfortably fund a FY24 capital program and the dividend.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.
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