Q1 2024 VAALCO Energy Inc Earnings Call

Participants

Al Petrie; Investor Relations Coordinator; VAALCO Energy Inc

George Maxwell; Chief Executive Officer, Director; VAALCO Energy Inc

Ronald Bain; Chief Financial Officer; VAALCO Energy Inc

Chris Wheaton; Analyst; Stifel

Stephane Foucaud; Analyst; Auctus Advisor

Bill Dezellem; Analyst; Tieton Capital Management LLC

Charlie Sharp; Analyst; Canaccord Genuity Ltd.

Presentation

Operator

Good day and welcome to the Valero Energy First Quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by Zebra. After today's presentation, there will be an opportunity to ask questions. To ask a question. You may press are then one on your telephone keypad. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead.

Al Petrie

Thank you, operator, and welcome to Valero Energy's first quarter 2020 for a conference call after I cover the forward-looking statements, George Maxwell, our CEO., will review key highlights of the first quarter. Ron Bain, our CFO, will then provide a more in-depth financial review. George will then return for some closing comments before we take your questions during our question-and-answer session, we ask you to limit your questions to one and a follow up. You can always re-enter the queue with additional questions. I'd like to point out that we posted a supplemental investor deck on our website that has additional financial analysis comparisons and guidance that should be helpful.
With that, let me proceed with our forward-looking statement comment. During the course of this conference call, the Company will be making forward-looking statements, and investors are cautioned that forward-looking statements are not guarantees of future performance, and those actual results or developments may differ materially from those projected in a forward-looking statement. Pelco disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on forward-looking statements. These and other risks are described in our earnings release. The presentation posted on our website and in the reports we file with the SEC, including our Form 10 K. Please note that this conference call is being recorded.
And now let me turn the call over to George.

George Maxwell

Thank you, and good morning, everyone, and welcome to our first quarter 2024 earnings conference call. We began 2024 with positive operational and financial results, including strong earnings and adjusted EBITDA generation. In addition, we closed the Svenska acquisition at the end of April, ahead of schedule, and we're excited about incorporating those operational and financial results into our numbers for the rest of 2024.
Beginning in Q2, we returned over $12 million to shareholders in Q1 2024 through dividends and buybacks.
Let's begin our overview of Alcoa's assets with the new acquisitions. We are nice, but we closed the Transco acquisition in an all cash deal for $40.2 million on April 30th, 2024. This was done very quickly and efficiently and ahead of our internal expectations. Our team traveled to Cote d'Ivoire to meet directly with the Minister of hydrocarbons to officially introduce vocal as a new partner on Block CI. 40. We are adding an asset with strong current production and reserves at a very attractive price. This acquisition is highly accretive on key shareholder metrics and provides another strong asset to support our future growth. It provides us with additional diversification and strategically expand our West African focus area because of our bareboat field in Block CO. 40 has strong production and reserves. We are excited to be partnering with Pepsi and CNR international and believe a bill, but feel the next phase of drilling and the discovered yet undeveloped principal field in Cote d'Ivoire is an outstanding asset with significant upside potential in yesterday's earnings release. We updated our full year and second quarter 2024 guidance, both of which reflects a positive impact to production and production expense per barrel, which should lead to improved margins and greater adjusted EBITDA we did this year. We expect to provide additional information on the beer Bob FPSO project planned in 2025 and future Baobab drilling times after we've had time to further our relationship with CNRL international and getting a more detailed understanding of the operator's development plans.
Turning to Egypt, as we disclosed last quarter, the first half of 2024 is focused on high rate of return capital workover projects to help mitigate decline. In the first quarter, we had six workovers, including five recompletions and frac. This was added about 800 barrels of oil per day, helping to offset natural decline.
In addition to the successful workovers, I'm very proud of a major milestone that we accomplished in the first quarter of 2024. In Egypt, we have gone over 1 million man hours without a lost-time incident. This is a testament to our commitment to safety, training and dedication of all of our people in the field. As I mentioned on our last call, we have a 10 to 15 well drilling program that we are currently evaluating for the second half of this year. This program remains contingent upon completion of the program evaluation and confirmation of a drilling rig for the period. We have not included this program and our 2024 CapEx guidance and what added until confirmed. However, if we proceed with the program, we anticipate additional 2020 for CapEx of approximately $80 million, which will also generate additional production. We have seen some positive announcements from the government in 2024, in particular, payment of aged receivables, which is very encouraging.
In Canada, we successfully drilled four wells in the first quarter of 2024 or 2.75 mile lateral wells. In late March, we released the drilling rig and we began completing all four wells. We have now successfully completed all four wells, and two of the wells have been unloading fluid and are coming on production with encouraging results. The other two wells are expected to be placed online within the next 14 days and all four wells in production by the end of the month. You can see the impact in our production and sales guidance that we put out yesterday in our press release and that Ron will review in more detail later.
In addition, we are also targeting an exploration appraisal well in the third quarter of 2024 in our southern acreage in our southern acreage, we have minimal subsurface information and this exploration well, if successful, could prove up additional long lateral wells in the future with the potential to add proved undeveloped locations. Our existing well portfolio has an increasing gas-oil ratio on the new wells will rebalances more in favor of liquids, which contributes to the strong production performance and to our overall profitability.
Turning to Gabon, we completed a previous drilling campaign in the fourth quarter of 2022 and invested on a minimal CapEx dollars in Gabon and 2023, primarily related to maintenance CapEx on long lead drilling equipment. We have seen positive overall production results since then with strong production uptime and improved decline curves on the wells. The FSO and field reconfiguration projects in 2022 have allowed us to minimize downtime, capture efficiency and reduce overall OpEx.
Looking ahead to 2025, we are actively working on the final technical and commercial aspects. Our next drilling campaign at determining activities are planned at the Tommy and bootie Southeast determined not to relive fields. We have a planned drilling campaign of between five and seven wells. That includes a mix of development and exploration wells along with a gas well or infill power requirements that will substantially reduce fuel costs in the field going forward.
As discussed previously, in 2014, at a boutique field, we encountered increasing low levels of H2S in the three oil wells after they had been on production or tested, we were able to keep the well with the lowest levels of H2S, the Bully two H. well on production using a chemical treatment solution. But the 3H and 4H wells would shut in due to the high 80s to US levels that were trending to be too high for chemical treatment to be effective. As a result, we were left with between 8 to 12 million barrels of oil of contingent resource due to age to have contamination. We are currently in remeasuring the H2S concentrations in the 2H and four at 12 to validate the field's current levels and expect to complete our H. two F. testing in the second quarter of 2024. The testing is being done to support our modeling efforts to assess and forecast future potential H2S levels and mature it well and also other proposed wells. We continue to look for the most cost effective path forward to increase production stability. We are reviewing two methodologies to address and sweeten the oil body, mechanical and chemical treatment going forward, once we determine the optimal solution going forward, we plan to conduct workovers of the 2H and 4H wells and replace the 3H well with a more optimal way located well. In addition, we will test an undrilled fault block in this field with a new well, coupled with our plans to derisk the crude sweetening process will result in an opportunity not only to commercialize are currently stranded H. two S. oil to beauty but also to potentially add resources with an exploration well, our ability to use our engineering knowledge and new technologies to drive more cost and access more oil has been paramount to extending the life of retirement field. Anytime we feel we have just completed a revised evaluation of the field's potential. Based on the results of this new evaluation, we identified a number of opportunities. We are planning two additional production wells at Tommy and to test a nearby exploration prospect. The exploration prospect sits within reach of the Italian platform. Therefore, the well will be drilled from the platform and the well is successful. It will be immediately brought online a production well, we have three slot open at the Tommy platform, so we have the option of both of the early pilot wells are attractive and the exploration well is successful to drill the second production well from the time Infoblox, resulting in a potential third well for the Tommy platform. We continue to spend a lot of time examining our assets, how to make them more efficient and profitable. We are expecting to spend between 30 and $40 million and long lead items in 2020 for preparing for and in anticipation of the drilling campaign. Progress on Block G and H is ongoing. Psc negotiations are continuing between the partnership and the governing government, and we have made some encouraging progress this quarter. On March 21st, 2024, we announced the finalization of documents in Equatorial Guinea related to the Genius Block P. plan of development. The finalization of these agreements included a carrier arrangement of the partners, Atlas and Chipotle. This arrangement is on commercial terms at software plus 7%, a total of currently 12.5%. This improves our 1P economics on those previously announced, and we have included an illustration of this in our accompanying slide deck we will now proceed with our front end engineering design or FEED study. We anticipate the completion of the FEED study will lead to an economic final investment decision or FID, which will enable the development of Venus. We're very excited to proceed with our plans to develop, operate and begin producing from the discovery in Block P offshore Equatorial Guinea in the next few years, and we look forward to discussing this new year of operations in more detail.
Once the FEED study is complete, we have started 2024. We're delivering on or exceeding our guidance operationally on the solid financial results have outpaced analyst expectations. We remain focused on growing production reserves and value for our shareholders. I would like to thank our hard-working team continue to operate and execute our plans. Over the past two years, we have greatly diversified our portfolio, which has expanded our ability to generate operational cash flow while growing our cash position and remaining bank debt free. We are well positioned to execute the projects within our enhanced portfolio and our proven track record of success in these past few years to instill confidence for the future.
With that, I'd like to turn the call over to Ron to share our financial results.

Ronald Bain

Thank you, George, and good morning, everyone. I will provide some insight into the drivers for our financial results with a focus on the key points.
Let me begin by echoing George's comments about our continued success in 2024, driven by strong operational performance, quickly closing on our highly accretive acquisition and solid financial results. In the first quarter, we generated $7.7 million in net income or $0.07 per share and 61.7 million in adjusted EBITDA ex both were ahead of consensus estimates.
Let's turn to production and sales, which along with realized pricing, drives our revenue production for the first quarter remained solid and sales were almost 16,400 barrels of oil equivalent per day at the high end of our guidance with our sales for the quarter. Also at the higher end of the guidance, we completed a lifting in Gabon in March. As you can see by the strong sales results, I'd like to reiterate that with a diversified portfolio of assets. We will have changes from quarter to quarter in the mix of sales from each of our producing areas. This change in mix impacts our realized pricing and ultimately our revenue and earnings. But if you look at the bigger picture and over a full year, you'll see impressive growth across our expanding portfolio of producing assets. We closed the Svenska acquisition on April 30th. And this means that all production sales and financial results for the assets will be incorporated into our results from May first forward.
So the second quarter will have two months of Svenska impact on the full year numbers. Eight months of impact pricing remains strong and our hedging program has always looked to help mitigate risk and protect our commitment to shareholder return with costless collars in place for 2024, our current hedge positions were disclosed in the earnings release. Realized hedge costs in the quarter were $24,000.
Turning to costs, our production costs for the first quarter of 2024 were below the low end of guidance on an absolute basis and at the bottom end of guidance on a per barrel basis. While we remain focused on capturing synergies and keeping our costs low to enable us to maximize margins and increase our cash flow some of the lower costs were driven by timing of projects across our assets. G&a costs were also in line with guidance when compared to the combined G&A costs seen in 2022 by both vocal and TransGlobe. We've seen meaningful reductions in costs, well ahead of our target synergies. The final integration and reorganization of that business is behind us, and we have commenced a back-office process improvement project with the implementation of a single cloud-based ERP across the whole company. Non-cash DD&A costs increased quarter over quarter, primarily due to year end depletion adjustments, mostly in Egypt that were made in the fourth quarter once we completed our reserves evaluation and 2023 CPR compared to the prior year in 2023, we've seen an increase in absolute DD&A costs because of the additional investment in new wells brought online for both Egypt and in Canada in 2023 year on year, DD&A costs on a per barrel basis are down 13% in November 2023. We agreed on a protocol with a governing state for a long-standing debt on TVA, together with an outstanding debt from the government owns the Gara refinery. This was by way of transfer of state profit oil barrels to the Tommy contractors in settlement of its debt. This reduce the quantity of barrels we are holding as foreign taxes payable on. This will be settled with a steep lifting of the remaining barrels in May 2024, with new companies state listing in 2023, primarily due to the protocol agreement for how to state listing in 2022 by approximately 600,000 barrels tax costs in the first quarter of about $22.2 million resulted in effective tax rate of about 74% in the quarter. This was higher than prior quarters and driven by both revaluation of tax, all bottles, helpful, Gabon, as well as some discrete permanent differences at corporate for deal costs for Svenska and an increase in our overall credit loss reserve. As I stated before in Gabon, our foreign income taxes are settled by the government through in-kind oil payments. By the end of each quarter, we have to mark-to-market the in-kind oil. So in general when prices rise, it has a negative impact to our accrued taxes. And if prices fall, we see a benefit thus reducing our tax liability. We cannot control the movement of the underlying commodity price to which this in-kind oil is marked to. We continue to guide that 60% to 65% effective tax rate is the correct effective tax rate over the long term, excluding discrete items.
Turning now to the balance sheet and cash flow statement. Unrestricted cash was down slightly to $113 million as of March 31st, 2024. Also in April, we used about $$40 million of this cash to fund the Svensk acquisition. In the last call, we discussed likely working capital movements, some of which occurred in the fourth quarter 2023 related to the reduction in accounts payable associated with the 2023 capital program in the first quarter of 2024. We experienced a small decrease in rejection accounts receivable. We sold all production as domestic sales in the first quarter, but we also have multiple assets, including our annual modernization payment. The $10 million annual modernization payment was negotiated as an offset against EGPC accounts receivable. We also had cash collections and other available EGPC. system company offsets more than recovering a full quarter of domestic sales. Additionally, in Q1, we had certain annual cash payments that tend to be paid early in the new year included in our domestic market obligation in Gabon under our annual energy package insurance renewal and annual staff costs.
Finally, as part of being a responsible operator and a community partner in Gabon, we are executing on community engagement projects sanction by the PSC there were previously accrued. These items also reduced cash in the first quarter of 2024. With that said, we're pleased that the Egyptian government has made a concerted effort to reduce its backdated billed payables and the first quarter reduced its Part D to build payables with Volcker by about 25% of its agreed outstanding receivables as of the 31st of December 2023. As has been the case since the third quarter 2018, we are carrying no bank debt and our credit facilities available to utilize for additional accretive acquisition opportunities continue to build value in Q1 2020 for holdco paid a quarterly cash dividend of six and a quarter cents per common share were $6.5 million and our share buyback was about $5.5 million over 12 million in shareholder returns in the quarter. We are also announced the second dividend payment of the year, which will be paid in June.
Let me now turn to guidance, but I will give you some key highlights and update. I want to remind you that guidance now includes the recently closed Svenska acquisition for the second quarter and for the full year 2024. Also, our full guidance breakout is in the earnings release and the supplemental slide deck on our website with production breakout of both working interest and net revenue interest for the total company, we are forecasting Q2 2024 production to be between 23,827 thousand, working interest barrels of oil equivalent per day between 19,021 thousand 800 net revenue, interest barrels of oil equivalent per day. This is up significantly from the first quarter due to the Svensk acquisition, expected new wells in Canada and slightly offset by natural decline for the full year 2024, we're now forecasting our total Company production to be between 23,600 and 26,500 working interest barrels of oil equivalent per day and between 18,900 and 21,400 net revenue interest barrels of oil equivalent per day.
Looking at production by asset, we'd expect a natural decline in Gabon and Egypt, although we do have a capital workover program in Egypt in the first half of 2024, that should help mitigate decline in Canada.
As I mentioned, we expect year-over-year growth from our drilling campaign and Cote d'Ivoire would have reflecting operations from May through to December and a full year numbers for the second quarter and for full year 2024, we are assuming our sales will be more or less in line with our production in Gabon. We are expecting two liftings in the quarter with one of them being a government lifting the government lifting flows through our sales and is offset by cycling the accrued tax liability that we're holding on.
The balance sheet is net cash neutral for vehicle in the quarter. Our absolute operating costs are expected to go up with Svenska addition, but we are projecting our per barrel of oil equivalent range to decrease due to the Transco volume. We're also expecting small increases in absolute G&A as we noted previously.
Finally, looking at our CapEx, our 2024 capital spend has increased to be between $115 million and $140 million as we prepare for the 2025 Svenska FPSOs changes. The anticipated next drilling campaigns in both Gabon, Ivory Coast and the Canadian 2024 drilling program. For the second quarter, we're expecting a range of between 30,000,050 million for our CapEx In closing, despite a recent strong stock price performance we believe that we continue to trade at a low multiple of EBITDA despite having a dividend yield and being bank debt-free. With this Svenska acquisition, we are forecasting a meaningful increase in production and sales, which should also increase our ability to generate adjusted EBITDA and operational cash flow in 2024. We are very well positioned to execute and fund our CapEx program across multiple producing assets over the next several years.
With that, I will now turn the call back over to George.

George Maxwell

Thanks, Ron. We will continue to execute our strategy focused on operating efficiently, investing prudently in maximizing our asset base and looking for accretive opportunities.
As you've heard this morning, we are off to a very strong start in 2020 for both operationally and financially with the closing of the Sprint acquisition. At the end of April, we will see a positive impact to production sales, OpEx per BOE, operational cash flow and adjusted EBITDA. Additionally, we have a Canadian development wells coming online in the second quarter. We are planning a drilling campaign at Tommy, and we are progressing the FEED study in Equatorial Guinea and optimizing production while executing workovers in Egypt, our entire organization is actively working to deliver sustainable growth and strong results. I believe we are gaining credibility over the past two years have been delivered on our commitments to the market and to our shareholders. And we will continue to deliver with the exciting suite of projects we have over the next few years, we are in an enviable financial position with no bad debt and an even stronger portfolio of producing assets with future potential upside.
In addition to funding our capital program we have remained focused on returning value to shareholders. In Q1 2024, we returned $12 million to shareholders through dividends and buybacks. We are on pace to deliver on our $0.25 per share annual dividend for 2020 for matching what we paid out in 2023, which our current share price has a dividend yield of about 4.5%. As Ron discussed, our 2024 guidance now has Svenska acquisition Incorporated, but I want to reiterate that the second quarter only have two months of winter Inc. and the full year only eight months due to the April 30th closing date. Regardless, this highly accretive acquisition will materially increase our operational and financial results.
Before I open up the call to questions. I would like to point out that as part of our commitment to environmental stewardship, social awareness and good corporate governance, we have made a concerted effort in addressing and improving our ESG transparency and reporting, which can be seen in the sustainability report that we published in April 2024.
During 2023, we greatly enhanced our leadership team, appointing new group level have of functions to centralize accountability and set global standards, processes and plans for the business by aligned with industry best practices. Furthermore, the appointment of a director of sustainability and regulatory reporting has enabled a holistic approach to ESG management performance and disclosure. This Sustainability Report represents our most detailed report in accordance with the Task Force on Climate-related Financial Disclosures TCFD to date, including assessment of the business resilience and impact of physical climate risks. As we continue to drive our decarbonization program, we are pleased to report a 19% reduction in Scope one emissions from the previous year. The 2023 sustainability report is available on our website under the sustainability tab. We are truly excited about the future. And Volcano has multiple producing areas of future prospects to have completely diversified our risk profile and our sources of income, even though we have been highly successful over the past two years. Developing and growing our assets will remain disciplined in our approach to maximizing value for our shareholders by delivering growth in production reserves and cash flow.
Thank you and with that, operator, we're ready to take questions.

Question and Answer Session

Operator

We will now begin the question and answer session. If you ask a question, you may press star then one on your telephone keypad. If you were using a speakerphone, please pick up your handset before pressing that. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. On the first question is from Chris Wheaton with Stifel. Please go ahead.

Chris Wheaton

Thank you very much and good afternoon. Good morning, guys. Thank you very much indeed for the call today. No outside any one question of the one question in two parts. Maybe firstly, could you perhaps outline a bit more the EUR40 million or so delta the CapEx in the year, how much that breaks down between additional spending on and Canada, additional spending on Cote d'Ivoire and also maybe if you could identify what's in that additional Cote d'Ivoire CapEx, that would be really helpful because that quite a bit of CapEx to be spending ahead of the FPSO shutdown next year.
And there's also a question I had on Egyptian oil price realizations, which seemed a bit low in the quarter. I wonder if that was related to the receivables payment that Ron, you referred to in your and have your discussion earlier, it's about $10 lower quarter on quarter. And I just wondered why that was that would be my questions. Thank you.

George Maxwell

As Chris has George, on the on the CapEx side, obviously we've given a little bit of detail as to what has caused the increase in the CapEx guidance position initially. Obviously, we're now doing a fifth well in Canada and the southern part of the Harmattan area, too, to provide the opportunity to increase reserves and resources there. So that's part of it. We've also added in the FEED study for Equatorial Guinea to get to the FID position for first quarter 2025. And also with regard to the investment inside Bill, Bob, we're looking at a number of forecasts coming out right now relating to airlines that are purely for allies on the FPSO refurbishment, but also relate to the potential drilling campaign in Phase five at Bell, Bob. So primarily it's a mixture of the FPSO requirements and and also for the potential drilling program, they are increasing the main part of the of the EUR40 million on airlines?

Ronald Bain

Chris, it's Ron. I'll take the question on additional price realization between Q1 and Q4. On the first part, I would say it's got nothing to do with the related payments related payments were commends. You may have heard from a number of companies, but to EGPC started to pay down some of its outstanding receivables as at the 31st of December 2023. And we were we were also fortunate to that we got about 25% of our aged receivables as at the 31st of December on their books paid. So so that was that was the first thing.
The second thing is in relation to the average realized price did come down about 11 bucks in Q4, effectively we sold domestically, but domestically and in Egypt, there was there was cargo, the EGPC hard. And so that was obviously within the price that everyone was was provided in Q1. We basically are in a situation where the utilizing the blend now for the refineries locally. So they've been trailing that height and that was the market price domestically to those refineries. So that's really the difference.
And pricing, it's down about 11 bucks quarter-on-quarter.

Chris Wheaton

Just kind of one follow up, if possible. Does that mean if if a new blend is being trialed with domestic refineries. Does that mean this $10 delta is more likely to be Web realization is going to be in total for coming quarters or is it still going to be dependent on that mix of domestic versus international sales?

Ronald Bain

I think it will be very much depending on Chris. You know, at the end of the day. It was a highlight that they went through in Q1. And so we kind of see that that that's locked in and we're continuing to talk locally with EGPC.'s key marketing department in relation to obtain and our own cargoes to. So no, I wouldn't say that has been a locked-in price.

Chris Wheaton

Great. Thanks very much indeed.

Operator

Next question is from Stefaan will cause second with Octel advisors. Please go ahead.

Stephane Foucaud

Good morning, guys. Thanks for taking my question. And a question is on Cote d'Ivoire, and I appreciate that it's early stage. But I was trying to I understand the order of magnitude prediction when things come back in 2026, are we talking 50%?
Yes, software was up. So in order of magnitude of the CapEx in which we, again, it's two to $0.2. So as my first question, my second question is for. Yes. So I was wondering whether you could provide up some.
Yes, we are 29%, but it was so it's known in Cote d'Ivoire and obviously there is any cost pool that you could benefit. Thank you.

George Maxwell

Yes. Thanks, Stefan. So with regard to the FPSO, a schedule going offline, obviously, we're looking at that right now, but the information received from the operator, we're reviewing that and it's absolutely impossible for us to say what the the position would be coming on post the refurbishment of the FPSO. One would expect that the existing production would have some flush production coming back into it and but doing that, but service quite a lot of work to do on the subsurface side to understand exactly how that would take place and the timing of that and but that would be our expectation. But at this point in time, we've yet to sit down with the operator and get an understanding of both the timelines and the projections around that. And obviously, there's also the potential of that drilling program happening concurrently, which would also increase the volumes. But we obviously have a model that works with that and that's still subject to discussions and validations with the operator?

Ronald Bain

Stefan is Ron. I'll take the second part of your question, and if I heard you correctly on the physical terms in Cote d'Ivoire in our supplemental deck. You'll see in slide 9, we've given elements of the PSCIPSC.s physical terms there and happy to go through that was he isolated the coal and to make sure that your models up to date.
Okay.
Thank you.

Operator

Again, if you have a question, please press star then one next question is from Bill Dezellem with Eaton capital. Please go ahead.

Bill Dezellem

Thank you. That's Tieton Capital. May I start with as events also given that that is non operated, I guess the question is when are you ready for the next to the next transaction, the next acquisition? And with that in mind, what does the pipeline look like?

George Maxwell

Thanks, Bill, and that's a difficult one to answer. I mean, obviously, the the opportunity set for growth is something we've been focused on. And I think our track record in the last three years demonstrates the market that we're serious about the growth opportunities for this company and where we're taking it. And of course, there are many, many transactions around that can fit into our portfolios. And yes, we have to carefully consider them and post the Cote d'Ivoire acquisition, how the cash flow profiles fit into the growth opportunities because it's absolutely paramount that we maximize the opportunity from our existing portfolio before we start looking over the fence something else. And but in this business in this industry, there's always a very steady pipeline of opportunities that are always under evaluation.

Bill Dezellem

Great. Thank you. And then the BW consortium was not reference to in the press release or your opening remarks. Would you please update us relative to what was happening there yes, of course, Illumina.

George Maxwell

And the reason the reason we didn't update it has basically been no movement. There's been a lot of discussions with the partners and the DGH. and those since our ongoing, I think we have a few points still to resolve some. But but as I said in the last call, I mean, given that we've been on this this mostly for about 18 months. The gene is the activity levels in the last six to eight weeks have certainly intensified. There's been multiple meetings between the partners and with and with the DGH. and and we had had follow-up meetings in the last week or so. So I'm still confident that we'll come to a resolution in the very near future, we'll build outstanding issues which are surrounding some of the legal and contractual terms and be hopeful to be able to give an announcement on that soon.
The reason we didn't give an update is there hasn't been any significant movement other than additional meetings in the 10 K gave the impression that the government seems far more interested in interest and they have in the past?
I would say that's probably true.
We have been since the has been, obviously, as everyone's aware, attention to administration and our interaction with the new administration at the most senior level I've been I am more than I had been in the past. So to the point where we as a company have met directly with the head of state that has happened and we have had the dialogue at that level. And so yes, there is there is a lot more activity with the governmental institutions in the last six months than perhaps we've seen previously.

Bill Dezellem

Great, thank you. And then one additional question. You referenced the Equatorial Guinea and having made some good progress there. I don't think that I appreciate now the amount of time it takes to go from where you're at today. Is that through the next stages, would you walk us through a time line, if you would please?

George Maxwell

Yes, I can do that. So obviously, we've been as a company, we've been ready to start this journey for some 18 months since we've been trying to get resolution in the partner group, and that has been partly facilitated by the MMH. in Equatorial Guinea. That resolution has now been completed, as I outlined, with a change in commercial terms which included seeding additional equity to a developer in that process. And so in that time line, we'd always planned from the plan of development to then go into a detailed engineering study and there's two purposes for that study. One is to a plan of development or conceptually based on both our subsurface analysis and the cost price analysis done on a desktop level for the engineering side. The FEED study will then go out and test those concepts in the marketplace, both from a time line and a cost perspective and look to optimize both the CapEx spend and or reduce the CapEx spend with other mediums of how we can source the equipment at a lower cost or at least cost. So we do see CapEx shrinking, and that's certainly part of the plan follow for the FEED study. We estimate to get there would take us about eight to 10 months to complete the FEED and that gets us to a final FID position. And at that point, we're locking in not just the or the detailed steps forward for development, but also locking in the contracts and all the economics for the development and it's as equipment and those are in the industrial environment, changes around us. A FEED studies are always essential before you make commitments to major projects such as such as venous. The objective we're trying to get to is to reduce the CapEx spend, replace that CapEx potentially with OpEx on a lease basis and therefore make the project even more attractive from a from a return standpoint. So that's the main objective of the FEED study in addition to ensuring that there the equipment we'll acquire to execute the project is available.

Bill Dezellem

A thank you and appreciate you letting me ask more than a couple of questions.

George Maxwell

That's great, though.

Operator

Next we have a follow-up question from Stefan second with Optus advisors go right ahead.

Stephane Foucaud

Thank you. It's bit of a follow on on your question from being a viable acquisition, cash and minimal. So the well would be CapEx intensive, Equinor coming years, but I guess at Nigeria. So how are you thinking about that and cash deployment or cash resources in the context of top two very large projects, we didn't work at the same time as Stephen.

Ronald Bain

Yes, I forgot your question. Traditionally, your line's a little bit vague, basically, obviously operating cash flow for us this year on before the FPSO goes those all station operating cash flows should be strong between now and the end of the year?
Yes, we got CapEx in there, but we're more than covering those CapEx spend. And at the same point in time, we are talking to a number of different financial institutions in relation to your facilities. And you know, we bought a facility in place, but we're looking with three years of their track and that we're looking at new facilities. And I basically see a mixture of both the operational cash flow first and foremost being utilized as well as a financing cash flow for these development projects. And because there will be time periods through 25 or 26 where we're going to have some spiky CapEx spend so that's what we're looking at stuff. I can't really go into the detail of that at the moment. We're still working with those institutions.

Operator

Thank you. Operator, I have on the question that I received by e-mail as opposed to George and Thor.
And that is of when do we expect to get results on the new wells that we drilled in Canada that we have coming online?

George Maxwell

Yes, I can answer that. So the drilling program completed the completions program has completed the first two wells. Actually, the first three wells are online two wells are cleaned up and are flowing. The third well is on cleanup flow and the fourth well, we expect on in about a week both to wells that are stabilized or above type curves, take groups certain well is still in clean and the fourth well, we'll know a bit more in about a week.
Okay. Thank you, sir.

Operator

Operator, this concludes our question and answer session. I would like to turn the conference back over to George Maxwell, CYO. for any closing remarks.

George Maxwell

Thank you, operator. I think it's I am very pleased to be party to another successful set of results for Q1 were the companies perform well. Our assets are performing well. We continue to streamline and become more efficient in each of our areas of operation. And and as asked by a couple of questions, the question questioners, we continue to look at opportunities in the marketplace where we can see where the skill sets that we have inside the company of operational excellence can add value to our shareholder base. And with that, with that in mind, when we look through the guidance for 2024, we see that guidance levels being maintained. We see the production in each of our areas of operation in Gabon and in Egypt and the store just mentioned in Canada improving, and we'll be able to talk more about a court of law in the coming quarters and how that's performing and what the longer-term plans are. Once we've had discussions with with the operator. And to that end, we're starting to build a much more diversified portfolio company that is able to be much more sustainable on its delivery. And for that group.
Thank you very much. Operator, Nana?

Operator

Yes, we do have one more question from Charlie Sharp with Canaccord. Please go ahead.

Charlie Sharp

Gentlemen, I do apologize. I had some phone problems. So I had to redial.
And just one very quick follow up question, a sort of slightly longer element VERSIFY and I am in Egypt you the results of the workovers in Q. one one or two of them have been quite good, others less good. I guess the first question really is what is it that you look for that might make you commit to the second half workover program.
And then the bigger question is really, you know, given the range of projects that you now have, particularly in West Africa and in Canada and in terms of capital allocation, is Egypt looking particularly with the issues there and uncertainties as Egypt looking less compelling to you than perhaps at the 12 months ago?

George Maxwell

The let me take it in a number of parts there, Charlie, the first thing with regard to the drilling campaign in just so we have the potential of a 12 to 15 well drilling campaign with an additional CapEx spend of around $18 million as we execute that campaign. The key contingency around that campaign right now is access to the drilling rig and the availability of equipment as opposed to the availability of target opportunities to drill. And so where we are for this year, primarily in 2024, if we can secure and overcome those contingent element, we will drill in Egypt because it will add additional production. And and that will, even with the capital allocation issues, will improve the PSC positions and SciTegic Now obviously, if we become more restrictive in capital allocation, then in know, the economic returns would be more far more compelling. And that will start to be some of the drivers in capital allocation, and I'll pass that over to Ron.

Ronald Bain

Charlie, what I would add to that, I mean, George is exactly right. We've got a number of things going on as you know you get some liquidity problems and liquidity problems. This liquidity issue is certainly improving. You saw the World Bank. So the land sales that they had, the UE. On the devalued the currency, obviously trying to control inflation on on the interest rates as well. So a number of things there that certainly looks more positive and where we were looking maybe in Q3 and Q4 of 2023. But it's going to be it's going to be the reverse flow right there. It's not going to be as quick as is everyone wanted to be. And obviously, we're working with the state and EGPC closely as all of our peer groups.
The other thing I would add in relation to the production decline in Egypt is that we are imminently taken in a second workover units. We sourced a second workover unit that will be taken in Q2. So we'll have two workover units and working through effectively through the next three, three months. So regardless of the discussion on the drilling campaign and two workover units will certainly help arrest the production decline.

George Maxwell

If I can just add to that when we're drilling in Egypt to drilling rig, actually only does the drilling and the workover rig does the workovers. So in order to minimize downtime on roles that need workovers. We're bringing in a second rig because the workover rig for that exact purpose to support the drilling rig when the drilling program starts up.

Charlie Sharp

Very helpful. Thank you.

George Maxwell

Looking up.
Right.
I think that was your last question, correct.

Operator

That is the last question. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.