Valeura Energy Inc.: Fourth Quarter and Year-end 2023 Results

March 26, 2024

Record Results in 2023 from First Year of Thailand Operations

SINGAPORE and CALGARY, Alberta, March 26, 2024 (GLOBE NEWSWIRE) — Valeura Energy Inc. (TSX:VLE, OTCQX:VLERF) (“Valeura” or the “Company”), the upstream oil and gas company with assets in the Gulf of Thailand and the Thrace Basin of Türkiye, reports its financial and operating results for the three month period and year ended December 31, 2023.

The complete reporting package for the Company, including the audited financial statements and associated management’s discussion and analysis (“MD&A”) and the 2023 annual information form (“AIF”), are being filed on SEDAR+ at www.sedarplus.ca and posted to the Company’s website at www.valeuraenergy.com.    

2023 Highlights

Closed the Mubadala Acquisition(1) for cash consideration of US$10.4 million, adding three producing offshore Gulf of Thailand fields to the Valeura portfolio; Four producing fields yielded average oil production of 20,440 bbls/d(2); Restarted production from the Wassana field and drilled appraisal wells which confirmed the presence of oil deeper than previously proven, leading to a potential re-development of the field and extension of field life beyond 2030; Drilling activity extended the economic life of all fields in the Company’s Thailand portfolio; Replaced more than double the volume of oil produced by all fields in 2023 – 219% through proved (1P) and proved plus probable (2P) reserves additions (reserves replacement ratio); Generated adjusted cash flow from operations of US$152 million(3); Fully paid off debt and had accumulated cash of US$151 million as of December 31, 2023; Further strengthened the balance sheet by reassessing and reducing decommissioning obligation on the balance sheet by 30% to US$129 million(4); Increased 2P net present value (NPV) before tax to US$616 million and US$429 million after tax(5); and Considering year end 2023 cash position, increased 2P net asset value (NAV) after tax to US$579 million, equating to C$7.56 per share(6).

(1)   As more fully defined in the AIF, closed March 22, 2023.

(2)   Working interest share production, before royalties, from closing of the Mubadala Acquisition on March 22, 2023 through December 31, 2023.

(3)   Non-IFRS financial measure (defined below) or non-IFRS ratio – see “Non-IFRS Financial Measures and Ratios” section within this news release.

(4)   Compared to decommissioning obligation of US$184 million as first reported following the Mubadala Acquisition as at March 31, 2023.

(5)   Discounted at 10% discount rate (NPV10).

(6)   2P NPV10 plus net cash at December 31, 2023, assuming C$/US$ exchange rate of 0.742, and 103.3 million shares outstanding (as of February 19, 2024).

Sean Guest, President and CEO commented:

“I am very pleased to present our first full year financial results which reflect the true scale of our now-transformed business. Through the Gulf of Thailand acquisitions we completed in 2022 and 2023 and the hard work our team has performed throughout the year, Valeura has become a strongly cash flow generating business, with assets that are exceeding expectations on all fronts.

Importantly, we have also created a clean and resilient balance sheet. The cash flow capacity of our assets has allowed us to rapidly pay off all debt and exit the year with US$151 million in cash. We have also seen our decommissioning obligations drop to US$129 million, a 30% reduction from the total we reported just after closing the Mubadala Acquisition. Valeura’s financial position is exceptional and positions us very well for further growth.

Drilling activity and studies performed in 2023 resulted in our independent third-party reserves evaluator significantly increasing reserves volumes and value. The life of all fields was extended on the back of a reserves replacement ratio of 219%. Additionally, appraisal of the Wassana field has proven more oil than previously reported which will underpin a 2024 decision on field expansion. This increase in 2P reserves value, when coupled with our cash, generates a net asset value of over C$7/share. 

The complementary nature of our assets is becoming increasingly apparent as we completed the process to merge the companies into a single organisation. We reduced unit operating costs in 2023 and the team are enthusiastically seeking further synergies in cost optimisation and tax efficiency as we look to 2024. 

We intend to continue to aggressively pursue value through our growth-oriented strategy, which continues to include aspirations to growth both organically and inorganically by way of mergers and acquisitions opportunities, which we continue to see in our core Southeast Asia region.

We continue to drive safety and sustainability as a priority throughout our operations and will publish our inaugural sustainability report in the near term to articulate key performance metrics for the business in 2023. Through the sustainability report we aspire to be transparent about our performance and to create a baseline from which to measure improvement over time, so as to best assure the ongoing sustainability of our business.”

Financial and Operating Results Summary

  Three months
ended
 Year ended  December 31,  December 31,  2023 2023Oil Production(1)(‘000 bbls)1,763 5,825Average Daily Oil Production(1)bbls/d19,165 15,960 (365 days(3))
20,440 (285 days(3))Average Realised Price$/bbl85.5 84.3Oil Volumes Sold mmbbls2.0 5.9Oil Revenue$ ‘mm169.9 493.5Adjusted Opex per bbl(2)$/bbl29.4 28.3Adjusted Capex(2)$ ‘mm30.4 108.7Adjusted Pre-Tax Cash Flow from Operations(2)$ ‘mm88,3 238.7Adjusted Cash Flow from Operations(2)$ ‘mm56.0 152.4Adjusted EBITDAX(2)$ ‘mm96.7 230.7      

  As at  December 31, December 31,  20232022Cash & Cash equivalents and Restricted cash(US$’000)151,16517,585Current and Non-Current Debt(US$’000)-11,090Adjusted Working Capital Surplus(2)(US$’000)117,24013,247Shareholder’s Equity(US$’000)287,682

 28,457

(1)   Working interest share production, before royalties.
(2)   Non-IFRS financial measure – see “Non-IFRS Financial Measures and Ratios” section within this MD&A.
(3)   Average Daily production of 15,960 bbls/d represents average over the full calendar year (365 days), whereas , the average daily production of 20,440 bbl/d represent the average production over the period from the closing of the Mubadala Acquistion on March 22nd, 2023 (i.e. 285 days).

Financial Update

The table above shows a comparison of key financial and operating metrics for both Q4 and the full year, to the same periods in 2022. However, as Valeura established active production operations following the close of the Mubadala Acquisition on March 22, 2023, the comparison to 2022 provides no insight regarding production, revenue, price realisations, and taxes. Accordingly, no discussion is offered for these metrics. 

The Company’s Q4 2023 financial performance reflects ongoing oil production which averaged 19,165 bbls/d leading to sales of 1.987 million bbls and generating oil revenue of US$169.9 million. Production during the quarter was primarily from the Company’s Jasmine, Nong Yao, and Manora oil fields, with the Wassana field contributing only minor volumes due to being offline for much of Q4. The Company implemented operating changes at the third-party operated storage vessel to enhance safety, and production at the Wassana field was restarted on December 8, 2023.  Production rates, as shown, are the Company’s working interest share, before royalties.

For the full year of 2023 (which effectively covers the period of March 22, 2023 through December 31, 2023 during which Valeura operated the assets acquired via the Mubadala Acquisition), total oil sales were 5.854 million bbls, generating oil revenue of US$493.5 million. This equates into an average oil production rate of 20,440 bbls/d for the 285-day period from March 22, 2023, the date on which Valeura closed the Mubadala Acquisition.    

Valeura’s average realised price for crude oil sales was US$85.5/bbl in Q4 2023, reflecting an average premium to the Brent crude oil benchmark of approximately US$1.2/bbl. For the year ended December 31, 2023, Valeura’s average realised price was US$84.3/bbl, which was a premium of US$2.2/bbl above the Brent crude oil benchmark. Realised prices during both Q4 and the full year 2023 were broadly in line with the Company’s guidance expectation for realised prices throughout the year being approximately on par with the Brent crude oil benchmark.

In Q4 2023, operating expenses were US$49.6 million, and Adjusted Opex (a non-IFRS measure which is more fully described in the “Non-IFRS Financial Measures and Ratios” section of this news release) were US$51.8 million, or US$29.4/bbl on a unit basis. Q4 operating costs reflect a relatively higher volume of maintenance activity and well workovers than previous quarters and was consistent with the Company’s plans and included in its 2023 guidance estimates. For the year ended December 31, 2023, Adjusted Opex averaged US$28.4/bbl on a unit basis.    

During Q4 2023 and full year 2023, the Company generated Adjusted Cash Flow from Operations (a non-IFRS measure which is more fully described in the “Non-IFRS Financial Measures and Ratios” section of this news release) of US$58.2 million, and US$137.3 million, respectively. During Q4 2023, Valeura generated comprehensive income of US$57.4 million, compared to a comprehensive loss of US$7.9 million in Q4 of 2022. For the full year ended December 31, 2023, comprehensive income was US$246.0 million, compared to a comprehensive loss of US$15.2 million for the full year ended December 31, 2022.     

Valeura incurred total tax expenses of US$71.2 million during the year ended December 31, 2023.

Valeura’s current and non-current debt at December 31, 2023 was nil, compared to US$11.1 million at December 31, 2022. During the year 2023, the Company increased its debt through draws from a facility arrangement (more fully described in the AIF), then fully repaid the debt during Q4 2023.

As at December 31, 2023, Valeura had cash and cash equivalents of US$151.2 million (including restricted cash of US$17.3 million), compared to US$17.6 million as at December 31, 2022. The change in cash position reflects the combined effect of net cash inflows as a result of closing the Mubadala Acquisition just before the end of Q1 2023, and positive after-tax net cash flows from its ongoing oil production business throughout the remainder of 2023.

As the Company’s current and non-current debt at December 31, 2023 was nil, the Company’s December 31, 2023 net cash balance was comprised of only its cash and cash equivalents, of US$151.2 million. 

Operations Update and Outlook

During Q4 2023, the Company had ongoing production operations on its Jasmine/Ban Yen, Nong Yao, and Manora oil fields.  Production operations at the Wassana field remained suspended at the beginning of the quarter but resumed on December 8, 2023. Aggregate working interest oil production during Q4 2023 was 19,165 bbls/d. The Company had ongoing operations at its Wassana field throughout the year, comprised of a period of start-up preparation, active production operations, a temporary production suspension, and again active production operations toward the end of the year. The Company’s Jasmine/Ban Yen, Nong Yao, and Manora fields were in active production throughout the year, from the completion of the Mubadala Acquisition onwards. The average oil production from all assets since closing of the Mubadala Acquisition on March 22, 2023 was 20,440 bbl/d (Valeura working interest share, before royalties). The average production for the first half of March was approximately 23,000 bbl/d.

One drilling rig was actively drilling across all of the assets for the full year.

Jasmine

Production from the Jasmine/Ban Yen oil field, in Licence B5/27 (100% Valeura working interest) averaged 8,864 bbls/d during Q4 2023, and 9,269 bbls/d from March 22, 2023 to year end. In May of 2023, the field achieved an historic milestone, having produced its 90 millionth barrel of oil. In March 2024 (period of March 1 to March 23, 2024), production from the Jasmine/Ban Yen fields averaged 7,914 bbls/d. 

During 2023, the Company conducted two separate drilling campaigns on the Jasmine field, one on the Jasmine B platform which was in progress at the time of closing the Mubadala Acquisition and completed in May 2023, and one on the Jasmine D wellhead platform from September through October 2023. In aggregate, the Company drilled 11 (gross and net) wells on the Jasmine field, with six being production-oriented development infill wells and five appraisal wells. In addition, the Company conducted one well workover in 2023 on the Jasmine field.

During 2023, Valeura also completed a study into power generation and emissions efficiency opportunities at the Jasmine field, culminating in a project to install a gas turbine generator tailor-made to utilise the field’s unique waste gas stream as feedstock for power generation. The project is intended to both reduce the field’s greenhouse gas emissions and diesel consumption, and thus reduce operating costs.

2P Gross Reserves (working interest share, before royalties) at the Jasmine/Ban Yen fields increased from 10.0 million bbls at end 2022 to 10.4 million bbls at end 2023, after having produced 3.4 million bbls during the year. This constitutes reserves replacement of 112% and has resulted in a further extension to the estimated economic life of the fields to December 2028. 

The Company believes that with continued infill drilling and ongoing well workovers on the Jasmine/Ban Yen fields, it can reduce the effect of natural declines and continue the fields’ long history of year-on-year reserves additions. Valeura’s work programme in 2024 calls for drilling approximately seven wells in the second half of the year, in addition to one exploration well to test the Ratree prospect.

Nong Yao

Oil production from the Nong Yao oil field, in Licence G11/48 (90% Valeura working interest) averaged 6,436 bbls/d during Q4 2023 and 7,134 bbls/d from March 22, 2023 to year end.  In March 2024 (period of March 1 to March 23, 2024), production from the Nong Yao field averaged 7,214 bbls/d.

During the year the Company conducted two drilling campaigns on the Nong Yao field, one in Q2 on the Nong Yao B wellhead platform, and one in Q4 on Nong Yao A. In aggregate, the Company drilled a total of six gross wells (5.4 net). Five of the gross wells (4.5 net) were development-oriented production wells, in addition to one gross (0.9 net) appraisal well. In addition, the Company conducted one well workover in 2023 on the Nong Yao field. 

The overall effect of Valeura’s Nong Yao drilling and well work in 2023 has been an increase in production and reserves as well as an expansion in the perceived opportunity set for further infill drilling within the field. 2P Gross Reserves (working interest share, before royalties) at the Nong Yao field have increased from 11.2 million bbls at year end 2022 to 12.4 million bbls at year end 2023, after having produced 2.7 million bbls during the year. This constitutes 147% reserves replacement and has resulted in a further extension to the estimated economic life of the field. 

Also during the year, the Company conducted groundwork for the expansion of the Nong Yao oil field through development of the new field known as Nong Yao C. In 2023, the mobile offshore production unit (“MOPU”) T7 Shirley was refurbished and a three-kilometre pipeline was installed to connect the existing production infrastructure to the MOPU. As of the time of this release, the MOPU has been installed on site and preparation is underway for hook-up, commissioning and the commencement of drilling activity. Development drilling is expected to commence in the coming weeks with a programme comprised of up to nine gross wells (8.1 net), being six producers and up to three water injectors. First production from the Nong Yao C extension is expected in late Q2 2024, and when fully on stream in the months thereafter, the Company is targeting peak oil production rates from the greater Nong Yao field totalling approximately 11,000 bbl/d (90% Valeura working interest). 

In addition to the development drilling, the Company intends to drill one exploration well (0.9 net) on the nearby Nong Yao D prospect. 

Manora

Oil production at the Manora oil field, in Licence G1/48 (70% Valeura working interest) averaged 3,420 bbls/d during Q4 2023, and 3,336 bbls/d from March 22, 2023 to year end. In the first part of March 2024 (period March 1 to March 16, 2024), production from the Manora field averaged 2,946 bbls/d, after which production was suspended for a planned maintenance shutdown. At the time of this release, the planned maintenance is complete and the facility has returned to full production.   

In Q2 2023, the Company conducted a successful infill drilling programme of three development wells (2.1 net) to commercialise bypassed oil downdip of existing wells in one of the field’s deeper intervals, as well as multiple attic or bypassed accumulations in shallower reservoirs. The Company also conducted one well workover during the year.

The effect of infill drilling has been an increase in production output from the Manora field, and an increase of reserves. 2P Gross Reserves (working interest share, before royalties) increased from 1.8 million bbls at year end 2022 to 2.2 million bbls at year end 2023, after having produced 1.2 million bbls during the year. This constitutes 132% reserves replacement and has resulted in a further extension to the estimated economic life of the field to July 2027.  Importantly, the results of the Manora 2023 work programme indicate the potential for further development opportunities on the field. Additionally infill drilling is notionally planned for late 2024.

Wassana

Production of oil at the Wassana field, in Licence G10/48 (100% Valeura working interest) started in April 2023 and was voluntarily suspended in July as part of the Company’s drive to enhance safety on the field’s third-party operated FSO. Production then recommenced on December 8, 2023.  Given the short period of 24 days’ production in Q4, the Company recorded an average of 445 bbls/d during the quarter, and 548 bbls/d during the full year 2023 from 93 days of total production. Daily production rates did achieve levels of over 3,000 bbls/d after both restart periods in 2023 illustrating the early potential of the asset as part of Valeura’s portfolio.   

In December 2023 Valeura began an infill drilling campaign on the Wassana field, initially planned to include three production-oriented horizontal wells, and subsequently expanded to a programme of five new wells and two well workovers. The last two new wells and the workovers were brought on production in the past two weeks. In March 2024 (period of March 1 to March 23, 2024), production from the Wassana field averaged 4,930 bbls/d.

In addition to the year-end development drilling campaign, which continued into 2024, Valeura drilled two appraisal wells (gross and net) on the Wassana field in Q3 2023 and conducted three well workovers, targeting deeper portions of the reservoir. The wells were successful in proving the presence of oil deeper than previously demonstrated and as a result, the Company has commenced a review of development options to expand the field’s production infrastructure, which could increase production and extend the field life beyond 2030. Valeura has commissioned a project team to select a suitable development concept for re-development of the field and anticipates making a final investment decision in 2024. 

As a result of the 2023 appraisal drilling and studies, 2P Gross Reserves (before royalties) at the Wassana field have increased from 6.1 million bbls at year end 2022 to 12.9 million bbls at year end 2023 and the economic field life has been extended to June 2032. The Company sees potential for further reserves upside, with volumes largely dependent on the final development concept selected in 2024 for the potential redevelopment of the field. 

Reserves and Resources Summary

The results of Valeura’s third-party independent reserves and resources assessment for its Thailand assets as of December 31, 2023 were announced on February 20, 2024. Highlights were as follows:

Reserves increased across all fields – 29.9 MMbbl 1P, 37.9 MMbbl 2P and 46.5 MMbbl proved plus probable plus possible (3P); 1P and 2P Reserves Replacement more than double the volume of oil produced in 2023 – 219%; 2P net present value before tax of US$616 million and US$429 million after tax(1); Considering year end 2023 cash position of US$151 million, 2P net asset value after tax of US$579 million, equating to C$7.56 per share(2); and More than three-fold increase in best estimate (2C) contingent resources, on a risked basis.

(1)   Discounted at 10% discount rate (NPV10).

(2)   2P NPV10 plus net cash at December 31, 2023, assuming C$/US$ exchange rate of 0.742, and 103.3 million shares outstanding.

Summary of Reserves Replacement, Value and Field Life

 2P Reserves (Gross WI)End of Field
Life
2P NPV10  After Tax
(US$ million)
          FieldsDecember
31, 2022
(MMbbls)2023
Production
(MMbbls)Additions
(MMbbls)December
31, 2023
(MMbbls)Reserves
Replacement
Ratio (%)NSAI
2022
ReportNSAI
2023
ReportDecember
31, 2022December
31, 2023          Jasmine10.0(3.4)3.810.4112%26-Jun28-Dec37.181.8            Manora1.8(1.2)1.62.2132%26-Jan27-Jul12.121.2            Nong Yao11.2(2.7)3.912.4147%27-Jul28-Dec145.5185.6            Wassana(1)6.1(0.2)712.93,500%27-Sep32-Jun66.3139.9            Total29.1(7.5)16.337.9219%  261.0428.6

(1)       Valeura’s working interest in the Wassana field was 89% at December 31, 2022 and 100% at December 31, 2023.

Summary of NPV and NAV

 1P Before
Tax
2P Before
Tax
1P After
Tax
2P After
Tax
NPV10 (US$ million)301616194429Net debt at December 31, 2023 (US$ million)(1)151151151151Net Asset Value (US$ million)453768345580Net Asset Value (C$ million)(2)6101,034465781Common shares (million)(3)103.3103.3103.3103.3Estimated NAV per basic share (C$ per share)5.9010.014.507.56

(1)       Cash at December 31, 2023 of US$151 million, debt nil.

(2)       C$/US$ exchange rate of 0.742.

(3)       Issued and outstanding as of February 20, 2024.

Webcast

Valeura’s management team will host an investor and analyst webcast at 09:00 Calgary /15:00 London / 22:00 Bangkok / 23:00 Singapore today, Tuesday, March 26, 2024 to discuss this announcement. The live audio and video feed can be accessed via the link below. Written questions may be submitted through the webcast system or by email to IR@valeuraenergy.com.

Webcast link: https://teams.microsoft.com/l/meetup-join/19%3ameeting_NDdlMWE2MzMtZjMzNC00ZGJhLTljOGYtNzE5ZDc5ZDQ2OGQ1%40thread.v2/0?context=%7B%22Tid%22%3A%22a196a1a0-4579-4a0c-b3a3-855f4db8f64b%22%2C%22Oid%22%3A%22241f769c-12ae-4efc-8c14-d2e523040a83%22%2C%22IsBroadcastMeeting%22%3Atrue%2C%22role%22%3A%22a%22%7D&btype=a&role=a

An audio only feed of the event is available by phone using the Conference ID and dial-in numbers below.

Conference ID: 770 213 036#

Dial-in numbers:

Canada:833-845-9589
Singapore:+6564506302
Thailand:+6620269035
Türkiye:00800142034779
UK:08006403933
USA: 833-846-5630

For further information, please contact:

Valeura Energy Inc. (General Corporate Enquiries)   +65 6373 6940Sean Guest, President and CEO Yacine Ben-Meriem, CFO Contact@valeuraenergy.com   Valeura Energy Inc. (Investor Enquiries)  +1 403 975 6752 / +44 7392 940495Robin James Martin, Vice President, Communications and Investor Relations IR@valeuraenergy.com   CAMARCO (Public Relations, Media Adviser to Valeura)+44 (0) 20 3757 4980Owen Roberts, Billy Clegg Valeura@camarco.co.uk 

Contact details for the Company’s advisors, covering research analysts, and joint brokers, including Auctus Advisors LLP, Cormark Securities Inc., Research Capital Corporation, Schachter Energy Report, and Stifel Nicolaus Europe Limited, are listed on the Company’s website at www.valeuraenergy.com/investor-information/analysts/.

About the Company

Valeura Energy Inc. is a Canadian public company engaged in the exploration, development and production of petroleum and natural gas in Thailand and in Türkiye.  The Company is pursuing a growth-oriented strategy and intends to re-invest into its producing asset portfolio and to deploy resources toward further organic and inorganic growth in Southeast Asia.  Valeura aspires toward value accretive growth for stakeholders while adhering to high standards of environmental, social and governance responsibility.

Additional information relating to Valeura is also available on SEDAR+ at www.sedarplus.ca.

Non-IFRS Financial Measures and Ratios

This news release includes references to financial measures commonly used in the oil and gas industry such as adjusted EBITDAX, net debt / net cash, outstanding debt, net working capital, adjusted net working capital, adjusted cashflow from operations, adjusted opex, and adjusted capex which are not generally accepted accounting measures under International Financial Reporting Standards (“IFRS Accounting Standards”) and do not have any standardised meaning prescribed by IFRS and, therefore, may not be comparable with similar definitions that may be used by other public companies. Management believes that adjusted EBITDAX, net debt / net cash, outstanding debt, net working capital, adjusted net working capital, adjusted cashflow from operations, adjusted opex, and adjusted capex are useful supplemental measures that may assist shareholders and investors in assessing the financial performance and position of the Company. Non-IFRS financial measures should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.

Reconciliations of these non-IFRS financial measures to the most directly comparable financial measures in Valeura’s annual financial statements, are incorporated by reference from the “Non-IFRS Financial Measures and Ratios” section in Valeura’s MD&A dated March 26, 2024, available on www.sedarplus.ca.

Adjusted EBITDAX: is a non-IFRS financial measure which does not have a standardised meaning prescribed by IFRS. This non-IFRS financial measure is included because management uses the information to analyse the financial performance of the Company. Adjusted EBITDAX is calculated by adjusting Profit (loss) for the year before other items as reported under IFRS to exclude the effects of Other income, exploration, SRB, finance income and expenses, transaction costs, and DD&A, restructuring and other costs, and certain non-cash items (such as impairments, foreign exchange, unrealised risk management contracts, reassessment of contingent consideration, and share-based compensation) and gains or losses arising from the disposal of capital assets. In addition, other unusual or non-recurring items are excluded from Adjusted EBITDAX, as they are not indicative of the underlying financial performance of the Company.

Adjusted opex and adjusted opex per bbl: are a Non-IFRS financial measure, and a non-IFRS financial ratio, respectively, which do not have standardised meanings prescribed by IFRS. These are included because management uses the information to analyse cash generation and financial performance of the Company. Operating Cost represents the operating cash expenses incurred by the Company during the period including the leases that are associated with operations, such as bareboat contracts for key operating equipment, such as FSOs, FPSOs, and warehouses. Adjusted opex is calculated by effectively adjusting non-cash items from the Operating Cost and adding lease costs. Adjusted opex is divided by production in the period to arrive at Adjusted opex per bbl. Adjusted cashflow from operations: Is a non-IFRS financial measure which does not have a standardised meaning prescribed by IFRS. This non-IFRS financial measure is included because management uses the information to analyse cash generation and financial performance of the Company. Adjusted cashflow from operations is calculated by subtracting from oil revenues, royalties, Opex, general and administrative costs which are adjusted for non-recurring charges, and accrued petroleum income tax act tax and special remuneratory benefit expenses.

Adjusted cashflow from operations: is a non-IFRS financial measure which does not have a standardised meaning prescribed by IFRS. This non-IFRS finance measure is included because management uses the information to analyse cash generation and financial performance of the Company. Adjusted Cashflow from operations is calculated by subtracting from Oil revenues, Royalties, Adjusted opex, General and administrative costs which are adjusted for non-recurring charges, and accrued PITA tax and SRB expenses. Debt & Net Debt / Net cash: Are non-IFRS financial measures which do not have standardised meanings prescribed by IFRS. These non-IRFS financial measures are provided because management uses the information to a) analyse financial strength and b) manage the capital structure of the Company. These measures are used to ensure capital is managed effectively in order to support the Company’s ongoing operations and needs.

Outstanding debt and net debt / Net cash: are non-IFRS financial measures which do not have a standardised meaning prescribed by IFRS. These non-IRFS financial measures are provided because management uses the information to a) analyse financial strength and b) manage the capital structure of the Company. These non-IFRS measures are used to ensure capital is managed effectively in order to support the Company’s ongoing operations and needs.

Net working capital and adjusted net working capital: are non-IFRS financial measures which do not have a standardised meaning prescribed by IFRS. These non-IFRS financial measures are included because management uses the information to analyse liquidity and financial strength of the Company. Adjusted net working capital is calculated by adding back current leases liability to net working capital.

The leases are associated with operations, such as bareboat contracts for key operating equipment, such as FSOs, FPSOs, and warehouses which are included in the Company’s disclosed Adjusted opex (and Adjusted opex guidance). Management believes the adjusted net working capital provides a useful data point to the reader to ascertain the business’ NTM surplus or deficit capital requirement. It is also a data point that management uses for cash management.

Adjusted capex: is a non-IFRS measure which does not have a standardised meaning prescribed by IFRS. Capex is defined as the addition in capital expenditure for drilling, brownfield, and other PP&E.

Oil and Gas Advisories

Reserves and contingent resources disclosed in this news release are based on an independent evaluation conducted by the incumbent independent petroleum engineering firm, Netherland, Sewell & Associates, Inc. (“NSAI”) with an effective date of December 31, 2023. The NSAI estimates of reserves and resources were prepared using guidelines outlined in the Canadian Oil and Gas Evaluation Handbook and in accordance with National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities. The reserves and contingent resources estimates disclosed in this news release are estimates only and there is no guarantee that the estimated reserves and contingent resources will be recovered.

This news release contains a number of oil and gas metrics, including “NAV”, “reserves replacement ratio”, and “end of field life” which do not have standardised meanings or standard methods of calculation and therefore such measures may not be comparable to similar measures used by other companies. Such metrics are commonly used in the oil and gas industry and have been included herein to provide readers with additional measures to evaluate the Company’s performance; however, such measures are not reliable indicators of the future performance of the Company and future performance may not compare to the performance in previous periods.

“NAV” is calculated by adding the estimated future net revenues based on a 10% discount rate to net cash, (which is comprised of cash less debt as of December 31, 2023, as disclosed by the Company in is January 16, 2024 press release). NAV is expressed on a per share basis by dividing the total by basic shares outstanding (currently 103.3 million shares).  NAV per share is not predictive and may not be reflective of current or future market prices for Valeura.

“Reserves replacement ratio” is calculated by dividing the difference in reserves between NSAI’s report on the reserves and resources for all of Valeura’s Thailand assets as of December 31, 2023 and NSAI’s previous report, plus actual 2023 production, by the assets’ total production before royalties for the calendar year 2023.

“End of life” is calculated by NSAI as the date at which the monthly net revenue generated by the field is equal to or less than the asset’s operating cost.

Reserves

Reserves are estimated remaining quantities of commercially recoverable oil, natural gas, and related substances anticipated to be recoverable from known accumulations, as of a given date, based on the analysis of drilling, geological, geophysical, and engineering data, the use of established technology, and specified economic conditions, which are generally accepted as being reasonable. Reserves are further categorised according to the level of certainty associated with the estimates and may be sub-classified based on development and production status.

Proved reserves are those reserves that can be estimated with a high degree of certainty to be recoverable. It is likely that the actual remaining quantities recovered will exceed the estimated proved reserves.

Developed reserves are those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (e.g. when compared to the cost of drilling a well) to put the reserves on production.

Developed producing reserves are those reserves that are expected to be recovered from completion intervals open at the time of the estimate. These reserves may be currently producing or, if shut in, they must have previously been on production, and the date of resumption of production must be known with reasonable certainty.

Developed non-producing reserves are those reserves that either have not been on production, or have previously been on production, but are shut in, and the date of resumption of production is unknown.

Undeveloped reserves are those reserves expected to be recovered from known accumulations where a significant expenditure (e.g., when compared to the cost of drilling a well) is required to render them capable of production. They must fully meet the requirements of the reserves classification (proved, probable, possible) to which they are assigned.

Probable reserves are those additional reserves that are less certain to be recovered than proved reserves. It is equally likely that the actual remaining quantities recovered will be greater or less than the sum of the estimated proved plus probable reserves.

Possible reserves are those additional reserves that are less certain to be recovered than probable reserves. It is unlikely that the actual remaining quantities recovered will exceed the sum of the estimated proved plus probable plus possible reserves. There is a 10% probability that the quantities actually recovered will equal or exceed the sum of the estimated proved plus probable plus possible reserves.

The estimated future net revenues disclosed in this news release do not necessarily represent the fair market value of the reserves associated therewith.

The estimates of reserves and future net revenue for individual properties may not reflect the same confidence level as estimates of reserves and future net revenue for all properties, due to the effects of aggregation.

Contingent Resources

Contingent resources are those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations using established technology or technology under development, but which are not currently considered to be commercially recoverable due to one or more contingencies. Contingencies are conditions that must be satisfied for a portion of contingent resources to be classified as reserves that are: (a) specific to the project being evaluated; and (b) expected to be resolved within a reasonable timeframe.

Contingent resources are further categorised according to the level of certainty associated with the estimates and may be sub‐classified based on a project maturity and/or characterised by their economic status. There are three classifications of contingent resources: low estimate, best estimate and high estimate. Best estimate is a classification of estimated resources described in the Canadian Oil and Gas Evaluation Handbook as the best estimate of the quantity that will be actually recovered; it is equally likely that the actual remaining quantities recovered will be greater or less than the best estimate. If probabilistic methods are used, there should be at least a 50 percent probability that the quantities actually recovered will equal or exceed the best estimate.

The project maturity subclasses include development pending, development on hold, development unclarified and development not viable. The contingent resources disclosed in this news release are classified as either development unclarified or development not viable. 

Development unclarified is defined as a contingent resource that requires further appraisal to clarify the potential for development and has been assigned a lower chance of development until commercial considerations can be clearly defined. Chance of development is the likelihood that an accumulation will be commercially developed.

Conversion of the development unclarified resources referred to in this announcement is dependent upon (1) the expected timetable for development; (2) the economics of the project; (3) the marketability of the oil and gas production; (4) the availability of infrastructure and technology; (5) the political, regulatory, and environmental conditions; (6) the project maturity and definition; (7) the availability of capital; and, ultimately, (8) the decision of joint venture partners to undertake development.

The major positive factor relevant to the estimate of the contingent development unclarified resources referred to in this news release is the successful discovery of resources encountered in appraisal and development wells within the existing fields. The major negative factors relevant to the estimate of the development unclarified contingent resources referred to in this news release are: (1) the outstanding requirement for a definitive development plan (2) current economic conditions do not support the resource development, (3) limited field economic life to develop the resources and (4) the outstanding requirement for a final investment decision and commitment of all joint venture partners.

Development not viable is defined as a contingent resource where no further data acquisition or evaluation is currently planned and hence there is a low chance of development, there is usually less than a reasonable chance of economics of development being positive in the foreseeable future.  The major negative factors relevant to the estimate of development not viable referred to in this news release are: (1) current economic conditions do not support the resource development, and (2) availability of technical knowledge and technology within the industry to economically support resource development.

If these contingencies are successfully addressed, some portion of these contingent resources may be reclassified as reserves.

Resources Project
Maturity Subclass
Light and Medium Crude Oil
(Development Unclarified)Chance of Development
(%)UnriskedRiskedGross (1)
(Mbbl)Net
(Mbbl)Gross
(Mbbl)Net
(Mbbl)Contingent Low
Estimate (1C)
Development
Unclarified5,3464,8143,2962,93662%Contingent Best
Estimate (2C)
Development
Unclarified7,6786,8994,8454,30663%Contingent High
Estimate (3C)
Development
Unclarified10,8689,7886,5965,86261%

Resources Project
Maturity Subclass
Heavy Crude Oil
(Development Unclarified)Chance of Development
(%)UnriskedRiskedGross (1)
(Mbbl)Net
(Mbbl)Gross
(Mbbl)Net
(Mbbl)Contingent Low
Estimate (1C)
Development
Unclarified4,2534,0081,870176344%Contingent Best
Estimate (2C)
Development
Unclarified6,0785,7292,4762,33441%Contingent High
Estimate (3C)
Development
Unclarified9,3318,7943,2843,09535%

Resources Project
Maturity Subclass
Light and Medium Crude Oil
(Development Not Viable)Chance of Development
(%)UnriskedRiskedGross (1)
(Mbbl)Net
(Mbbl)Gross
(Mbbl)Net
(Mbbl)Contingent Low
Estimate (1C)
Development Not
Viable2,8642,60939435814%Contingent Best
Estimate (2C)
Development Not
Viable2,6922,44439936215%Contingent High
Estimate (3C)
Development Not
Viable3,5773,24353748615%

Resources Project
Maturity Subclass
Heavy Crude Oil
(Development Not Viable)Chance of Development
(%)UnriskedRiskedGross (1)
(Mbbl)Net
(Mbbl)Gross
(Mbbl)Net
(Mbbl)Contingent Low
Estimate (1C)
Development Not
Viable2,7322,57597291636%Contingent Best
Estimate (2C)
Development Not
Viable3,4263,2291,1511,08534%Contingent High
Estimate (3C)
Development Not
Viable4,1003,8651,1541,08828%

The NSAI estimates have been risked, using the chance of development, to account for the possibility that the contingencies are not successfully addressed. Due to the early stage of development for the development unclarified resources, NSAI did not perform an economic analysis of these resources; as such, the economic status of these resources is undetermined and there is uncertainty that any portion of the contingent resources disclosed in this news release will be commercially viable to produce.

Glossary

bbl       barrel
bbls/d   barrels per day
Mbbl     thousand barrels of oil
MMbbl   million barrels of oil

Advisory and Caution Regarding Forward-Looking Information

Certain information included in this news release constitutes forward-looking information under applicable securities legislation. Such forward-looking information is for the purpose of explaining management’s current expectations and plans relating to the future. Readers are cautioned that reliance on such information may not be appropriate for other purposes, such as making investment decisions. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “expect”, “plan”, “intend”, “estimate”, “propose”, “project”, “target” or similar words suggesting future outcomes or statements regarding an outlook. Forward-looking information in this news release includes, but is not limited to:  potential re-development of the Wassana oil field and the extension of its economic life beyond 2030; Valeura’s financial position positioning the Company very well for further growth; the Company’s focus on seeking further synergies for cost optimisation and tax efficiency; the Company’s intention to continue to aggressively pursue value through a growth-oriented strategy, which includes aspirations to grow both organically and inorganically by way of mergers and acquisitions; Valeura’s focus on safety and sustainability and its plan to publish a sustainability report and the timing thereof; the sustainability report being transparent about the Company’s performance and allowing the Company to measure its sustainability improvements over time; the installation of a gas turbine generator at the Jasmine oil field reducing the Jasmine fields’ greenhouse gas emissions and diesel consumption, leading to a reduction in operating costs; the continued infill drilling and ongoing well workovers on the Jasmine/Ban Yen fields reducing the effect of natural declines and continuing the fields’ long history of year-on-year reserves additions; the company’s plan to drill seven wells in the second half of 2024, in addition to one exploration well to test the Ratree prospect; preparation for the hook-up, commissioning, and commencement of drilling activity occurring on the Nong Yao C accumulation and the timing thereof; the drilling programme on Nong Yao C consisting of up to nine gross wells, six producers and up to three water injectors; timing of first production from the Nong Yao C extension; the Company’s expectations for peak production rates from the Nong Yao field; the Company’s intention to drill one exploration well on the Nong Yao D prospect; the Company’s intention to begin infill drilling in late 2024; the Wassana field being a potential asset as part of the Company’s portfolio; Valeura’s project team selecting a suitable development concept for re-development of the Wassana field, Valeura making a final investment decision on such development and the timing thereof; and the potential for further reserves in the Wassana field. 

In addition, statements related to “reserves” and “resources” are deemed to be forward-looking information as they involve the implied assessment, based on certain estimates and assumptions, that the resources can be discovered and profitably produced in the future.

Forward-looking information is based on management’s current expectations and assumptions regarding, among other things: political stability of the areas in which the Company is operating; continued safety of operations and ability to proceed in a timely manner; continued operations of and approvals forthcoming from governments and regulators in a manner consistent with past conduct; future drilling activity on the required/expected timelines; the prospectivity of the Company’s lands; the continued favourable pricing and operating netbacks across its business; future production rates and associated operating netbacks and cash flow; decline rates; future sources of funding; future economic conditions; the impact of inflation of future costs; future currency exchange rates; interest rates; the ability to meet drilling deadlines and fulfil commitments under licences and leases; future commodity prices; the impact of the Russian invasion of Ukraine; royalty rates and taxes; future capital and other expenditures; the success obtained in drilling new wells and working over existing wellbores; the performance of wells and facilities; the availability of the required capital to funds its exploration, development and other operations, and the ability of the Company to meet its commitments and financial obligations; the ability of the Company to secure adequate processing, transportation, fractionation and storage capacity on acceptable terms; the capacity and reliability of facilities; the application of regulatory requirements respecting abandonment and reclamation; the recoverability of the Company’s reserves and contingent resources; ability to attract a partner to participate in its tight gas exploration/appraisal play in Türkiye; future growth; the sufficiency of budgeted capital expenditures in carrying out planned activities; the impact of increasing competition; the ability to efficiently integrate assets and employees acquired through acquisitions; global energy policies going forward; future debt levels; and the Company’s continued ability to obtain and retain qualified staff and equipment in a timely and cost efficient manner. In addition, the Company’s work programmes and budgets are in part based upon expected agreement among joint venture partners and associated exploration, development and marketing plans and anticipated costs and sales prices, which are subject to change based on, among other things, the actual results of drilling and related activity, availability of drilling, offshore storage and offloading facilities and other specialised oilfield equipment and service providers, changes in partners’ plans and unexpected delays and changes in market conditions. Although the Company believes the expectations and assumptions reflected in such forward-looking information are reasonable, they may prove to be incorrect.

Forward-looking information involves significant known and unknown risks and uncertainties. Exploration, appraisal, and development of oil and natural gas reserves and resources are speculative activities and involve a degree of risk. A number of factors could cause actual results to differ materially from those anticipated by the Company including, but not limited to: the ability of management to execute its business plan or realise anticipated benefits from acquisitions; the risk of disruptions from public health emergencies and/or pandemics; competition for specialised equipment and human resources; the Company’s ability to manage growth; the Company’s ability to manage the costs related to inflation; disruption in supply chains; the risk of currency fluctuations; changes in interest rates, oil and gas prices and netbacks; potential changes in joint venture partner strategies and participation in work programmes; uncertainty regarding the contemplated timelines and costs for work programme execution; the risks of disruption to operations and access to worksites; potential changes in laws and regulations, the uncertainty regarding government and other approvals; counterparty risk; the risk that financing may not be available; risks associated with weather delays and natural disasters; and the risk associated with international activity. See the most recent annual information form and management’s discussion and analysis of the Company for a detailed discussion of the risk factors.

Certain forward-looking information in this news release may also constitute “financial outlook” within the meaning of applicable securities legislation. Financial outlook involves statements about Valeura’s prospective financial performance or position and is based on and subject to the assumptions and risk factors described above in respect of forward-looking information generally as well as any other specific assumptions and risk factors in relation to such financial outlook noted in this news release. Such assumptions are based on management’s assessment of the relevant information currently available, and any financial outlook included in this news release is made as of the date hereof and provided for the purpose of helping readers understand Valeura’s current expectations and plans for the future. Readers are cautioned that reliance on any financial outlook may not be appropriate for other purposes or in other circumstances and that the risk factors described above or other factors may cause actual results to differ materially from any financial outlook. The forward-looking information contained in this new release is made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking information, whether as a result of new information, future events or otherwise, unless required by applicable securities laws. The forward-looking information contained in this new release is expressly qualified by this cautionary statement.

This news release does not constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction, including where such offer would be unlawful. This news release is not for distribution or release, directly or indirectly, in or into the United States, Ireland, the Republic of South Africa or Japan or any other jurisdiction in which its publication or distribution would be unlawful.

Neither the Toronto Stock Exchange nor its Regulation Services Provider (as that term is defined in the policies of the Toronto Stock Exchange) accepts responsibility for the adequacy or accuracy of this news release.

This information is provided by Reach, the non-regulatory press release distribution service of RNS, part of the London Stock Exchange. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

 

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