Hello, and welcome to Virtual Investor Conferences. On behalf of OTC Markets, we're very pleased you joined us for our annual OTCQX Best 50 Conference. Our first live presentation is from Valeura Energy. Please note you can submit questions for the presenter in the box to the left of the slides. You can also view a company's availability for one-on-one meetings by clicking "Book a Meeting" in the top toolbar.
At this point, I'm very pleased to welcome our first presenter of the conference. He's Robin Martin, Vice President, Communications and Investor Relations of Valeura Energy, which trades on the OTCQX Best Market under the symbol VLERF and on the TSX under the symbol VLE. Welcome back, Robin.
Thanks, John. Great to be back here presenting at the OTCQX Virtual Investor Conference, and especially your conference that focuses on the OTCQX Best 50. We have been recognized by a couple of entities over the last year for the performance that the company has made. OTCQX Best 50, as well as, you can see on the top right of our title slide here, Canada's top growing companies as recognized by the Report on Business report in 2024. Good to see the performance recognized by the market.
Before I jump into it, I will just draw your attention to the disclaimers and advisory slide, which is slide two in the pack. I should mention these are also available on our website, and I'll ask that you take a look at these at your leisure, paying in particular attention to the cautionary language around forward-looking information.
Just a very high-level overview of Valeura Energy for anyone who might not be familiar with the company. We are an oil producer. Our oil comes from the offshore Gulf of Thailand, where we have four assets. This portfolio that we've built has come to us by way of two highly accretive acquisitions that we did in 2022 and 2023.
Ultimately, what that's done is it's transformed our business from one that was initially focused on Northwestern Turkey, had no production, and $30 million of cash in the bank to what we are today, which is about $570 million market cap and a very strong balance sheet, which I'll go into in a little bit more detail in a moment.
We have $238 million in cash in the bank at the end of Q1 , and over the last two years, our journey in Thailand has shown that we are able to increase production fairly significantly, and we're able to replace reserves as well as extend the economic life of our fields. The whole goal here is to add additional years of cash flow from our portfolio.
At the same time, we've reduced our abandonment liabilities significantly and therefore taken care of the balance sheet on the liability side as well. The business we've built has always been focused on building something that is cash flow strong, and we've done that as well as building a business that is resilient to low oil prices.
Part of that is some clever things we've done with the portfolio when it comes to reorganizing our subsidiary companies to take advantage of some significant tax losses across the business while also focusing on some shareholder returns. Beyond that, just by way of synopsis, what to look forward to from the business, I expect we'll keep growing organically, and we will keep growing inorganically. We see ourselves very much as a logical, natural consolidator within the Southeast Asia region.
Taking a look at our share price is a fun slide for me. What this shows you is how we performed going back to the beginning of 2022. That is basically when we started this transition. At the time, the shares were trading at about CAD 0.44, and current volatility notwithstanding, you see a bit of a zigzag there over the last few weeks. We are now trading between CAD 7 and 8.
When I reference share price, I do speak in Canadian dollars just because our main exchange is the Toronto Stock Exchange. However, everything else that I present here is in US dollars. That is about a 17-fold increase in share price over that time. What I would point out is the first blip of that increase was due to the quality of the acquisitions we have done.
All the rest of it is due to execution on our asset base, demonstrating replacement of reserves and significant cash flow generation over that period. While we're trading between $7 and 8 right now, the average of the broker's target prices for us is closer to $13. Moving forward, the overall strategy that we chase for our business is to deliver value through growth, and that's a clear distinction.
It is delivering value first and using growth as the way to do that. We're not interested in growing for growth's sake or for bragging rights. We're interested in adding value for shareholders, and that's something we've done over the last two years. The two main avenues for that are organic growth. What that means for our portfolio is not necessarily growing the top-line production from the business.
I expect that to stay in the range of 20,000 to 25,000 barrels a day long-term, but it is extending the life of our assets. You get more years of cash flow generated from that level of production. As I have said, we see ourselves as a natural consolidator in the region with the ability to transact, with the ability to negotiate, and a team that is very comfortable to do this and has done this most of their careers.
Inorganic growth is the second pillar of that. Equally important to our growth aspirations and abilities is operational excellence. We believe very strongly that to be seen as a credible operator with opportunities to grow, it is very, very important that we operate our assets to a world-class standard. How do we achieve that sort of share price growth since this acquisition, the acquisitions in Thailand?
I think the best way to look at that and the best way to characterize our success is really defined by what we've done with reserves. Reserves, obviously, being the most significant asset for an upstream oil and gas company. What you can see in the top chart shown here is, at the beginning of 2022, basically when we did these acquisitions, we had 29 million barrels in 2P reserves from that production of 7.5 million barrels that year, which generated significant cash flow, but we also added 16 million barrels, meaning we threw off a significant amount of cash flow in 2023 and ended the year having replaced more than double the barrels we produced, 219% reserves replacement.
I fielded a lot of questions from investors at that time saying, "That's fantastic, but you can't possibly do that again." Moving into 2024, 8.4 million barrels of production, but we added more than 20. We have actually increased reserves to 50 million barrels by the end of 2024 for a 245% reserves replacement ratio. All this translates to longevity of the portfolio, and I will show that in just a moment. More importantly, it translates to increased value for the business.
The chart on the bottom, if you draw your eye right to the middle of it, shows you the value of our 2P reserves. I should note that these are not our internal estimates. These are provided by our external third-party reserves evaluator.
Ultimately, what this shows is NPV 10 of our reserves went from $261 million in 2022, up to nearly triple that at the end of 2024 of $752 million. When we speak about organic growth and what that means, it's extending the life of our portfolio. This chart shows you a Gantt chart of when the external reserves evaluator saw the end of the economic field life for each of our fields listed there: Manora, Jasmine, Nong Yao, Wassana.
You can see that in the early days of our venture in Thailand, some of these fields were expected to reach the end of their economic life as early as 2026. Through successive reserve adds, we've pushed that further and pushed it further again, and I would hope we're able to push it further yet.
What this ultimately means is the very first of our assets to reach an economic limit as defined by the reserves evaluator is in 2030. In some instances, our fields stretch out to 2036 with good opportunities for further development to push that even further yet. How is that possible that we continue adding reserves and continue extending the field life? The geology is part of the answer. I'm not going to go into this slide in a lot of detail. I would love to, and I'm happy to do that through a separate call if you're keen to let me talk through squiggly lines. It's one of my favorite parts of my job.
Suffice to say, the geology of the Gulf of Thailand is relatively unique and provides opportunities for us to continue doing infill drilling, continue drilling into additional fault blocks, and continue leveraging new technology in order to increase the sweep efficiency within the reservoirs from which we produce. All of this translates into adding reserves year- on- year.
More importantly, I think, is to look at the performance that we did in a financial sense in 2024. I have shown some highlights here. On the right-hand slide is our full year 2024 outcomes. We have produced 23 million barrels of oil. That means liftings of 8.3 million barrels, and the price that we received for that has been $81 per barrel. Importantly, that is a couple of dollars above the Brent crude oil benchmark, which is very typical for us.
We are strongly leveraged to Brent crude oil, and we tend to get slight premiums above them. On the operating cost side, I mentioned operational efficiency, and let me just put that into a dollar sense. Our OPEX per barrel in 2024 was less than $26 a barrel, which compared to other international operators is a very respectable number and a number that we've seen come down over the last three years.
We've done this by investing capital of $134 million in 2024, that being directed mainly to infill drilling for the purpose of both appraising new opportunities and ensuring that production remains stable or increases and adds reserves. Ultimately, as I've mentioned, the goal was to build a cash-flowing business, and we produced $273 million in adjusted cash flow from operations in 2024. Balance sheet numbers are on the bottom there. As I mentioned, very strong balance sheet.
At the end of the year, we were at $259 million in cash in the bank with no debt. Let's look at 2025 and what to expect there. I think this is an important slide because it really sort of underlines some of the clever things we've done to supercharge the cash flow position of the business. The numbers at the top production, we will produce 23,000 to 25,500 barrels per day.
Within that band that I've mentioned as the long-term expectation for the business of 20,000 to 25,000 barrels a day, adjusted OPEX in that $26 per barrel range, CAPEX relatively similar to last year, $125 to 150 million, and we will do a little bit of exploration this year.
We do not have a lot of what I would classify as true exploration within the portfolio, but there are some very interesting prospects, which I will get into in just a moment. Ultimately, what this translates into is a free cash flow expectation of between $112 million and $227 million in 2025. Just to reiterate, that is free cash flow. That is cash flow after capital spending, after taxes. Before you ask, as I am sure you will, the range that I have given there ties to $65 to 85 Brent crude oil. Now, today we are trading between $66 and 67 Brent. We are basically at the bottom end of this range.
Point being, even at the prices that we're seeing today, after all the volatility the market has experienced in the last few weeks, our expectation is still to generate free cash flow of more than $100 million in 2025. Just to touch on our asset portfolio briefly, and I won't go into this in a huge amount of detail. Again, I'm happy to walk through assets through one-on-ones or through separate calls if you like, but just to kind of typify our asset base, all of the assets are offshore. They're all in the Gulf of Thailand.
This is an environment that has relatively benign operating conditions. Water depth is shallow, jack-up drilling territory of 45 to 75 meters water depth, very calm sea conditions in general. There's a reason that Thailand's beaches and ocean life is so famous as a vacation destination. It also makes for a great place to operate oil and gas assets offshore.
The two northernmost fields there, Manora and Jasmine, I would describe as on the more mature end of the spectrum when it comes to oil fields. That said, assets like Manora continue surprising to the upside. This was an asset that when we were first negotiating to acquire it was said to be approaching the end of its economic life in the kind of 2022, 2023 timeframe.
In fact, after drilling a couple of wells, uncovering new development opportunities, we continue to pursue a development program and an appraisal program on this block, including a five-well program that we did in January of this year, which has given rise to even more drilling opportunities that I expect we'll be tackling next year and beyond.
Pushing the end of that field life much, much further than was initially expected. The Jasmine field is exactly the same story, but on a much bigger scale. This is a field that was initially developed with an expectation of producing 7 million barrels from this accumulation. As of last month, when I last checked the total, it was over 94 million barrels that had been produced from the Jasmine field. Very typical for fields in the Gulf of Thailand, tying back to those geological factors that I mentioned earlier.
The fields to the south, Nong Yao and Wassana, I would describe as much less mature, and in fact, you could describe these as being in an initial original growth phase. Nong Yao is a great example of that. In 2024, it was our largest single source of production.
We developed a third cluster to this field called Nong Yao C, which increased production there, and also being brand new production, reduced the operating cost for that field to less than $15 a barrel. The Wassana field, similar characteristic, this was the first asset that we acquired in Thailand. Through some appraisal and near-field exploration drilling, we've demonstrated that there is substantially more oil here than could be developed with the existing development scenario.
We are in the midst of a FEED study, front-end engineering and design study in order to assess the merits of a redevelopment of this asset. I expect we'll be bringing that forward to consider for final investment decision in the very near term. As I've mentioned, there are several slides in this pack that you can see online that take you into a little bit more detail on our assets.
At your convenience, I'm happy to walk through those. I'm going to jump forward to what to watch for in 2025. By way of this Gantt chart, you can see the Wassana field. The next big thing to watch for would be an investment decision on redeveloping this asset. As and when we take a positive investment decision, I expect we'll provide some more information to the market on what that will cost, what it means for changing our guidance, and what to expect for forward production from this field.
Until such time as we've taken that final investment decision, we haven't published a lot of details on that. If you're curious to talk about what's on the table as an opportunity here, I'm happy to get into that. The Manora field, as I've mentioned, we've done development and appraisal drilling in the very recent past.
We're also doing a debottlenecking project there in pursuit of that operating efficiency, operating excellence that I've mentioned as a core part of our strategy. We're drilling on the Jasmine field at the moment, development and appraisal opportunities, and there's a very exciting exploration prospect. One of the rare exploration opportunities in our portfolio is a prospect called Ratree, which is on the Jasmine block further south from the main fields.
Importantly, this qualifies as true exploration. Mean recoverable resource from a prospect like this is believed to be in the 20 million barrel range, meaning success here could yield an entirely new standalone development on the Jasmine block and would breathe new life again into this field that has already exceeded its expectations many, many times over.
We're also doing some creative things on Jasmine to improve efficiency, reduce use of diesel, improve operating costs, the operating cost portfolio, and we'll speak more about that. Ultimately, it's a project that also significantly reduces our greenhouse gas emissions from this project, which is effectively a modernization of the facility. As I say, we'll speak more about that once we've got a bit of history from the project online.
Moving on to the Nong Yao field, we will do a major drilling phase on Nong Yao, covering the A, B, and C clusters on that field. That'll take most of the Q3, and there's more exploration to be done here as well. Follow-up exploration drilling in response to a discovery that we made last year at the Nong Yao D cluster.
Again, this furthers the whole idea that this is an asset that's in an initial growth phase that offers much more for us to do. Beyond that, inorganic growth is something to continually watch for our business. We are actively negotiating on probably the order of four or five separate opportunities, all which could materialize at any given time.
Strong cash flow is the name of the game for this business, and why we like that is it creates optionality for the business. The question that I face regularly is, what are you going to do with all that cash? What are you going to do with all that cash flow? Our priorities are identified in the three blue bands you see in the middle of this slide: capital spending and organic investment.
This is money spent in order to ensure that we maintain production in that 20,000 to 25,000 barrel a day range, and at the same time, to continue replacing reserves so that we can demonstrate longevity of the portfolio and hopefully a further extension of the economic life of our assets. Value accretive M&A, and again, I'll repeat those words, value accretive is the key for us. It's not M&A growth for growth's sake. It's growth for the purpose of adding value.
We see ourselves as one of the very few credible operators in the Southeast Asia region who have a very strong balance sheet that can capitalize on this. As such, we intend to keep the balance sheet very strong to maximize opportunities, especially as we see other operators in more distressed situations. Returns is also something that we continue to focus on.
We put in place a, pardon me, normal course issuer bid back in November of 2024 that allows us to repurchase 7.5 million shares. We've started chipping away at that. We will continue doing so on an opportunistic basis, and we balance that drive with the drive to keep cash in the bank in order to maintain that very, very strong balance sheet so that we're best able to capitalize on other opportunities we see.
We do like the idea of ultimately paying a dividend, a regular dividend to shareholders. We feel the sort of assets that we can get our hands on in Southeast Asia lend themselves really well to generating that distributable cash flow stream. However, we also feel we'd like to be a bigger company before we implement a larger dividend, or before we implement a dividend, I should say.
It's something we'll continue to consider, and particularly if we don't see opportunities to reinvest our cash flow into the business or into M&A, it's something that would tip the scales in that direction. Continue watching this space would be my advice on shareholder returns. My last slide. I'm going to close on this one to rehash what we're doing in terms of share price. The bottom chart that you're seeing here in the light blue bars shows you what we calculate as a net asset value of the business.
Now, what this is, is ultimately the NPV as cascaded from our, or as stated by our external reserves evaluator, plus the cash that we have in the bank. If you translate that into a dollar per share basis, again, I'm speaking Canadian dollars here, at the end of 2022, that equated to CAD 4.17 per share.
That was a healthy increase over where we were trading at the time, which was about $2. If you scan your eye across the chart, you can see the dark blue line being our share price. We actually hit that. We achieved that net asset value about 10 months later, later in 2023. We reevaluated this with our reserves redetermination at the end of 2023 and adding our new cash position at that time.
The net asset value of the business was $7.56 per share. Scanning your eye to the right again, you can see that we achieved that toward the end of 2024. At the end of 2024, our NPV plus our cash in the bank now equates to $13.61 per share.
My point being, I hope what this is indicating to you and to me, is that the market is in a continual state of catch-up with rewarding Valeura with the net asset value in terms of our share price. Does that mean that we might be able to attain $13.61 per share by the end of the year? I do not see why not. The analyst target is ultimately at $13, and some analysts, in fact, have a target of $15 per share.
While we are never in a position to promise share price, this history, I think, speaks for itself in the company's ability to add value. With that, I will hand back over to John, and we can move into a Q&A session. Sorry, I am not going to hand over to John. I'm going to read the questions on the screen, getting up to speed with the system here.
Interesting question here. Do you expect to put something together this year to advance the appraisal of the Thrace Basin Turkey assets? I did not speak much about Turkey in this presentation. I'm happy to do so. We have retained our interest in the deep tight gas play in Turkey. It has been effectively, in what I would describe as a dormant state for the last two years. We have seen some renewed interest in this.
We are trying to farm out an interest in this play before we go about drilling the next phase of exploration and appraisal wells. It is true exploration and appraisal, but we have drilled some wells. We have demonstrated that there is a tremendous amount of gas here. We have not yet attained the commercial flow rate.
It is something that I do not think is reflected in the value of the business at the moment, but we have seen some renewed interest. What is driving that is, number one, we have seen some other activity in the basin with new companies coming in, farming in, and trying to pursue opportunities in the Thrace Basin. Number two, we have had the term of our licenses and leases extended into mid-2026. That has given some renewed interest. I think the best I can offer you is watch this space.
We are seeing renewed interest in this, and I hope we can turn that into a transaction of some kind that results in more work here. Next question is, are your taxes owing for 2025 and 2026 zero? That is a very good question. The answer is yes and no.
Our assets in the Gulf of Thailand fall into two different batches of fiscal terms. The Jasmine field falls under something called Thai 1 fiscal terms. That one will still continue paying its taxes. The other assets, being Manora, Nong Yao, and Wasana, all fall under the same batch of fiscal terms called Thai 3. What that means is those three assets can be considered together for income tax purposes.
All of the tax losses we have tied to Thai 3 fiscal regime, tied to the Thai 3 fiscal regime, there are tax losses of nearly $400 million, which means by putting these companies together, these subsidiaries together, we are able to use those net operating losses over the next two to three years. I expect we will consume those. Therefore, zero taxes on Nong Yao, Wassana, and Manora for that period, but we will still continue paying some taxes on the Jasmine field.
What are you doing from a communication standpoint to communicate with investors and increase shareholder value? How are you bringing in new shareholders by increasing liquidity? That is a very good question, something that I think about every single day. That is why we are here. That is why we are speaking to investors through conferences like this. I was on the road at a conference two weeks ago as well. I expect we will do an aggressive phase of marketing following our annual general meeting in the middle of May. That will have us visiting cities like Boston, New York, potentially into Texas, Montreal, Toronto.
Meeting face- to- face, we find a very effective way to garner shareholder interest as well as trying to be as active as we can on news flow. Sorry, just reading questions and trying to save my voice here. Given the significant discount to the share price to the company's intrinsic value, do you plan to increase the pace of buybacks? It is a good question, and it's something that we debate regularly.
We have the ability to buy back a total of 7.5 million shares between November 2024 and November 2025. It's something we keep watching, and we balance the desire to buy back shares to prop share price with the desire to maintain a very, very strong balance sheet and maintain as much of that cash as possible in order to capitalize on opportunities.
As we see the price of oil drop to the $65 sort of range, as I've illustrated, we still see that we're generating significant free cash flow. That's not the case for everyone. That's not the case for everyone in our region even. If that sort of oil price depresses other players that they have a difficult time with things, that may create some very lucrative M&A opportunities, and we want to make sure that we're as positioned as possible in order to capitalize on that.
It is a continual debate between us and the company to say, do we want to be opportunistic on share buybacks, or do we feel like it makes more sense in order to preserve maximum dry powder? Again, watch this space. I expect we're going to keep chipping away at some pace, but the sort of opportunity set we see on the M&A side really kind of governs our thinking as to how aggressive we should be on that.
Next question, when can we expect an FID for the Wassana redevelopment project? As I've mentioned, redeveloping Wassana is an exciting opportunity for us. Where we're at right now is we're in the front-end engineering and design phase, the very tail end of it, I would say.
What the tail end of the FEED study does is actually go out to the market and essentially do the contracting and procurement so that we've got real numbers, real commitments to tie to our economic model so that when the board considers an FID, they know that we're looking at real numbers and not high-level estimates that may be wrong one way or another. What I can tell you is those estimates have come in largely as expected, if not even a little bit better than expected.
The economics are, as we saw them months ago. I expect this will be in the relatively near term, certainly within Q2, that we consider that final investment decision. Numbers that we published a while ago with reference to the goal mentioned in the conference call of reaching 100,000 barrels per day by the end of 2026. Is that target considered achievable and likely?
Yeah. We've looked at the opportunity set within Southeast Asia, and we see some small things that qualify as tuck-ins. We see some exploration-led opportunities. We see some development-led opportunities, and we see some immediate cash flowing opportunities as well. Some of those are at the market now. Some of them are likely to come to the market.
If we tally up what we think we can do, we've come to a number that we've previously stated, which is 100,000 barrels of oil equivalent per day within the next couple of years. I continue to see that the M&A landscape in Southeast Asia provides an opportunity for us to get to that level of production at that time. Obviously, we can never promise what we're going to do on the M&A side of things, but there are opportunities that can certainly get us up to that sort of level. Question here, is the current oil price environment impacting potential M&A opportunities? Yeah, I think it's fair to say that there are more things coming to the table that make this exciting for us. I think that's it for questions that we've had. If there is anything else, I'm happy to take one-on-ones with anyone. I know OTCQX has a system for you to register for one-on-ones. You can also feel free to reach out to me with the contact information that's at the tail end of this pack and also available on the website. With that, I'll thank everyone for their attention and hand it back over to John to wrap up. Thanks very much.