Oilman Jim's Letter - 9 May 2024

PetroTal (TAL.TO PTALF PTAL.L) announced Q1 2024 financial and operating results, plus the strategic acquisition of Block 131 in Peru. Average Q1 2024 sales and production of 18,347 and 18,518 barrels of oil per day respectively were recorded, making for PetroTal's second best quarter to date. The company generated Q1 2024 EBITDA and free funds flow of $71.6 million ($42.85/bbl) and $52.6 million ($31.48/bbl), respectively, materially surpassing Q4 2024 levels due to higher sales volumes realized in the quarter. PetroTal exited Q1 2024 in a strong cash position with $85.2 million in total cash ($62.5 million unrestricted), with over $93 million in short term receivables due subsequent to March 31. Lifting and variable transportation costs were under $7.00 per barrel in the quarter helping generate a near 80% net operating income margin. Capital expenditures totaled $30.4 million in Q1 2024 and were focused on drilling well 17H, and continued infrastructure projects including water handling upgrades. The company successfully drilled one and completed two new oil wells in the quarter, both of which met expectations and continue to perform at strong rates. Well 17H has averaged approximately 4,050 barrels of oil per day for the month of April 2024. Q1 2024 net income was $47.6 million ($0.05/share). The company paid total dividends of $0.02/share and repurchased 5.2 million common shares in Q1 2024, representing approximately $21.5 million of total capital returned to shareholders (approximately 4% of March 31, 2024, market capitalization). The acquisition of a 100% working interest in Peru's Block 131, including the producing Los Angeles field, adds 900 barrels of oil per day of production effective January 1, 2024. Recoverable reserve estimates are up to 4.9 million barrels and there is significant upside potential from deeper reservoirs. The purchase price is approximately $5.0 million in cash

VAALCO Energy (EGY EGY.L) reported operational and financial results for Q1 2024. The company achieved working interest production of 21,807 barrels of oil equivalent per day and net revenue interest production of 16,848 barrels of oil equivalent per day: net revenue interest sales were 1,490,000 barrels of oil equivalent (16,373 barrels of oil equivalent per day), near the high end of guidance. The company reported Q1 2024 net income of $7.7 million ($0.07 per diluted share) and adjusted net income of $6.5 million ($0.06 per diluted share). Adjusted EBITDAX was $61.7 million and funded $16.7 million in cash capital expenditures from cash on hand and cash from operations. Unrestricted cash was $113.3 million after paying out $6.5 million in dividends in the quarter and completing $5.5 million in share buybacks (since inception of the share buyback program, VAALCO has purchased approximately $30 million in shares. A quarterly cash dividend of $0.0625 per share was announced to be paid on June 21, 2024. During the quarter, the company closed the accretive all cash acquisition of Svenska Petroleum Exploration for a net purchase price of $40.2 million and following the planned shutdown for maintenance in April, the Baobab field is back on production with a current rate in excess of 5,000 VAALCO working interest barrels of oil equivalent per day (99% oil). This strategically expands the West African focus area with a sizeable producing asset that has significant upside potential and future development opportunities in Cote d’Ivoire, a well-established and investment-friendly country.

Valeura Energy (VLE.TO VLERF) announced Q1 2024 financial and operating results. Oil production was 21.9 million barrels per day, up 14% from the previous quarter; oil sales for the period were 1.8 million barrels, at an average realised price of $84.6 per barrel, generating revenue of $149.4 million. Adjusted EBITDAX was $89.0 million and adjusted cashflow from operations was $47.8 million. Cash and net cash balance as of March 31, 2024 was $193.7 million, with no debt; and the adjusted net working capital surplus was $141.9 million. Year to date achievements comprise: five horizontal development wells successfully drilled on the Wassana field (block G10/48, 100% interest) resulting in Q1 2024 average oil production of 3,979 barrels per day, and 4,900 barrels per day for the first six days of May 2024; three oil discoveries announced from one exploration well in the Nong Yao concession (block G11/48, 90% working interest) and two exploration wells north of Wassana field; scheduled shutdowns for maintenance on the Manora and Jasmine field production facilities were conducted safely and under planned time and budget; and the company installed the Nong Yao C mobile offshore production unit T7 Shirley on the Nong Yao field in preparation for development drilling.

Genel Energy (GENL.L GEGYF) issued a Q1 trading and operations update. Per Paul Weir, Chief Executive: “The business is in a robust financial position, with multiple potential catalysts for the delivery of significant shareholder value ahead.” Cash was $372 million at 31 March 2023 ($363 million at 31 December 2023) and following the first of the $11 million bi-annual bond interest payments in April, cash at the end of April was $361 million. The company expects its costs to be covered by income for the remainder of the year. Gross production was 76,310 barrels of oil per day in Q1 2024 (65,770 barrels of oil per day in Q4 2023), all from the Tawke licence, where local sales demand remains robust. Net production was 19,080 barrels of oil per day in Q1 2024 (16,440 barrels of oil per day in Q4 2023). Following negotiation with local buyers, the sales price from the Tawke licence has been raised to the upper-USD 30s per barrel level. The arbitration process, which includes Genel’s claim for substantial compensation from the KRG following the termination of the Miran and Bina Bawi PSCs, is ongoing. Written closing submissions will now be made next week, subsequent to which written reply submissions will be made in the first half of June. The result is expected by the end of 2024.

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