• Revenue: $164 million in Q2, a 10% increase from Q1.

• Cash Flow from Operations: $66 million in Q2, up 37% from Q1.

• Production: 21,000 barrels per day for the quarter, with expectations to increase to 25,000 barrels per day from September through December.

• Cash Stockpile: $147 million with no debt.

• EBITDAX: $200 million, a 12% increase from the previous quarter.

• Operating Expenses (OpEx): $54 million, slightly higher than Q1.

• Capital Expenditure (CapEx): $31 million in Q2.

• Petroleum Income Tax (PITA): $21 million accrued in Q2.

• Reserve Replacement Ratio: More than 200% last year.

• Warning! GuruFocus has detected 7 Warning Signs with NYC.

Release Date: August 09, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Valeura Energy Inc (VLERF) reported strong financials with cash flow from operations reaching $66 million, a 37% increase from Q1.

• The company has a solid cash position of $147 million and remains debt-free, providing a strong balance sheet for future growth.

• Production is expected to increase to approximately 25,000 barrels per day from September through December, up from 21,000 barrels per day in the first half of the year.

• Successful exploration and drilling activities have led to a 200% reserve replacement ratio, with additional reserves expected from recent appraisal wells.

• The Nong Yao C facility is set to begin production in August, contributing an additional 4,000 barrels per day net to Valeura Energy Inc (VLERF).

Negative Points

• Production in Q2 was slightly lower than the previous quarter due to planned maintenance and temporary shutdowns.

• An $11 million tax payment was made due to a reassessment of taxes from previous years, impacting cash flow.

• The Wassana field experienced a temporary shutdown due to a crack in one of the wells, highlighting potential risks with aging infrastructure.

• There is uncertainty regarding the timeline for corporate restructuring approval, which could impact future tax benefits.

• The company faces challenges in raising capital for new deals, relying heavily on cash and debt rather than equity placements.

Q & A Highlights

Q: Can you explain the $11 million tax payment? A: Yacine Ben-Meriem, CFO: The payment is related to a reassessment of taxes from previous years. The Thai tax office audited and found a need for a small adjustment in the tax filing by the previous owners. We are working with them to recover this amount as per our SPA agreement.

Q: Has there been any advancement on implementing a Normal Course Issuer Bid (NCIB)? Could it happen in 2024? A: William Guest, CEO: We discuss this with the board at every quarterly meeting. Our focus remains on growth and having cash to support it. However, an NCIB could potentially be a 2024 event, pending board review and decision.

Q: How many barrels per day do you expect from the wells drilled for the Nong Yao C development? A: William Guest, CEO: We expect approximately 4,500 to 5,000 barrels per day gross from the six wells, with potential for more from a seventh well. However, we may face facilities constraints on the number of barrels we can process.

Q: Are there possibilities for other tax reassessments? A: Yacine Ben-Meriem, CFO: The Thai tax office can audit up to five years back. Therefore, they have the right to audit any period within the last five years.

Q: Can you comment on your timeline to reach the target of 100,000 barrels a day, and what debt or share price dilution would you accept to achieve this? A: William Guest, CEO: We aim to reach this target by the end of 2026. We focus on funding deals through cash or debt rather than new equity placements, given current market conditions. Our base case does not include issuing new shares.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.