Good day, and welcome to the VAALCO Energy Q1 2020 earnings conference call. All participants will be in listen only mode. Should you need assistance, please signal our conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, please press star and then one. 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.
Thank you, Allison. Good morning, everyone, and welcome to VAALCO Energy's Q1 2020 conference call. After I cover the forward-looking statements, Cary Bounds, our Chief Executive Officer, will review key highlights along with operational results. Liz Prochnow, our Chief Financial Officer, will then provide a more in-depth financial review. Cary 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 reenter the queue with additional questions. I'd like to point out that we posted an updated investor deck on our website this morning that has additional financial analysis, comparisons, and guidance that should be helpful. With that, let me proceed with our forward-looking statement comments. During the course of this conference call, the company will be making forward-looking statements.
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 the forward-looking statements. VAALCO 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 yesterday's press release, the presentation posted on our website, and the reports we file with the SEC, including the Form 10-Q that was filed yesterday. Please note that this call is being recorded. Let me now turn the call over to Cary.
Thank you, Al. Good morning, everyone, and welcome to our Q1 2020 earnings conference call. Before I discuss our results, I would like to reflect on the extraordinary challenges that we are facing as an industry and how VAALCO is decisively responding to these challenges. Thus far, VAALCO's operations have not been materially disrupted by the global COVID-19 pandemic. We have managed through the logistical challenges that we have faced since the outbreak and continue to put the safety of our employees, contractors, and local stakeholders first. Back in March, we implemented stay-at-home initiatives for all but critical staff and put into place social distancing measures. In addition, we actively screen and monitor employees and contractors that come onto our facilities in Gabon. In accordance with government guidelines, all our workers in Gabon must undergo a 14-day quarantine before going offshore.
We are also engaging in regular company-wide COVID-19 updates to keep employees informed of key developments. Finally, we have contingency plans in place in the event we are directly impacted. The combination of the worldwide shutdown due to COVID-19 and its impact on oil demand, coupled with the Saudi and Russian supply disagreements, have driven oil prices to historic lows. In response to the decline in Brent pricing, we are taking action to minimize capital expenditures and lower operating costs to preserve our balance sheet and maximize cash flow. We are working with our vendors and suppliers to implement cost-cutting measures, and we are partnering with other operators to reduce costs by sharing services and equipment such as support vessels and helicopters. We have reduced compensation for our directors by 25%, executive compensation by 20%, and non-executive employee compensation by an average of 8%.
We released the Vantage rig in early April following the completion of our successful 2019-2020 drilling campaign, and we have no material capital expenditures remaining in 2020. While we have deferred all discretionary capital expenditures, including drilling, until the global oil pricing environment improves, we remain confident in the long-term viability of our inventory of drilling opportunities. Despite this uncertain environment, we remain focused on operational excellence, which was demonstrated in our Q1 2020 results, which I will turn to now. In the Q1 , we produced an average of 4,944 net barrels of oil per day, which was near the high end of our guidance range of 4,700 to 5,000 net barrels of oil per day as a result of strong production from the 2019-2020 drilling program.
The Q1 benefited from having three full months of production from the Etame 9H well, nearly three months of production from the Etame 11H well, and a few weeks of production from the Southeast Etame 4H well. The Q1 production volumes from the new wells demonstrate the considerable impact that the drilling program has had on our overall production. This increase in volume has helped drive down our unit operating cost per barrel and improve our break-even margins. As we've said before, approximately 90% of our costs are fixed. We can add production with minimal increase in cost, which significantly improves our overall margins and will help generate cash flow in a low-price environment. In the Q1 , we reported adjusted EBITDAX of $6 million. The Q1 also marked the culmination of our successful 2019/2020 drilling campaign.
We released the Vantage rig on April 9th, and as part of the drilling campaign, we brought online three new horizontal development wells, drilled two successful appraisal wellbores, and completed two workovers. The drilling campaign had a 100% success rate and has increased production by 35% in the Q1 of 2020 compared to the Q4 of 2019. The entire program was completed as planned, on time, within budget, and with no safety or environmental incidents. Unfortunately, in mid-April 2020, the South Tchibala-2H well was shut in due to a down-hole mechanical failure not related to the electric submersible pump. Prior to going offline, the well was producing approximately 830 gross barrels of oil per day or 225 net barrels of oil per day.
Given the nature of the mechanical failure, it is unlikely that we will be able to repair the well until the next drilling campaign when a rig is on location. Taking into account all of the production from the drilling campaign and the South Tchibala-2H well, we believe that our Q2 production will be approximately 5,000-5,400 bbls of oil per day net. For the full year 2020, we are reaffirming the guidance we gave you earlier this year, which was 4,400-5,000 bbls of oil per day net. At this point in time, we have not curtailed any production, and we will keep the market informed of any material changes in that regard. I would now like to give you a quick update on our activity in Equatorial Guinea.
On November 12, 2019, the Equatorial Guinea Ministry of Mines and Hydrocarbons approved VAALCO's appointment as operator of Block P. We are currently awaiting an amendment to our production sharing contract to finalize our appointment as operator and begin activities in Block P. In the Q1 , VAALCO acquired additional working interest from Atlas Petroleum, which increased our working interest from 31%- 43%. The cost for acquiring the additional Block P working interest is a potential future payment of $3.1 million that will only be made if there is commercial production from Block P. The Equatorial Guinea Ministry of Mines and Hydrocarbons has already approved this assignment of interest to VAALCO. We are having ongoing discussions with Levene Hydrocarbon Limited on a potential farm-out.
Under the farm-out terms, Levene will potentially cover all or substantially all of VAALCO's costs to drill an exploratory well in exchange for an assignment of a portion of VAALCO's working interest in Block P to Levene. VAALCO would also serve as a non-owner operator under a service agreement with Levene on Blocks 3, 4, and 19 in Equatorial Guinea. We have executed a non-binding memorandum of understanding with Levene regarding the commercial discussions. We do not have binding agreements in place, and government approval of the agreements between VAALCO and Levene must be obtained prior to completing the transaction. Given the current pricing environment, we have asked the Equatorial Guinea government for an extension to the contractual requirement to either drill a well by December 31, 2021, or relinquish the license.
We are optimistic that we will finalize the agreements with Levene and prepare for a drilling campaign in the next couple of years with minimal financial exposure to VAALCO. In summary, we are committed to maintaining business continuity in these challenging times. We have a strong debt-free balance sheet, $61 million in cash, and a stable production base, all of which provide stability in the near term and flexibility for the future. Before I turn the call over to Liz to share our financial results, I would like to mention that we have published our inaugural sustainability report, and it is available on our website. We believe the sustainability report reflects our commitment to our employees, to the people who live in the communities where we operate, and to the environment. With that, I will turn the call over to Liz.
Thank you, Cary, and good morning, everyone. Q1 2020 results were significantly impacted by several non-cash charges, as well as non-cash gains totaling a net $59.7 million of charges that were due to the sharp decrease in oil prices. As a result, we had a net loss of $52.8 million, or $0.91 per diluted share for the quarter. The non-cash charges for the quarter included a $30.6 million charge from impairment of our proved oil and gas properties and deferred income tax expense of $35.6 million. These charges were partially offset by unrealized mark-to-market gains of $6.6 million related to the company's crude oil swaps. Excluding these items, we had adjusted net income for the quarter of $6.9 million.
Adjusted EBITDAX was $6.0 million in the Q1 of 2020, which was lower than the same period a year ago, as well as the Q4 of 2019, primarily due to lower oil prices. Production for the Q1 of 450,000 net barrels was significantly higher than both the Q1 of 2019 and the Q4 of 2019 due to the impact of the new wells coming online in late 2019 and early 2020. Q1 2020 oil sales of 294,000 net barrels, however, were lower than both the Q1 of 2019 and the Q4 of 2019, as a lifting of 85,000 bbls that was scheduled for March 2020 was delayed until April 1st. This was not a result of any impact on operations associated with COVID-19, but rather it was due to poor weather conditions at the time of the lifting.
We had only two liftings during the quarter, whereas we would typically have three liftings during the quarter, i.e., one per month. The delay in the scheduled March lifting also resulted in the average oil price received in the Q1 being higher than expected, as it reflected prices for just January and February, before the most significant declines in Brent crude oil prices experienced in March. For the Q2 of 2020, we expect sales to increase over the Q1 of 2020 and the comparable Q2 of 2019 as a result of the extra lifting on April 1st. We also will benefit from a full quarter of production from all the wells from the 2019-2020 drilling program and recent workovers. Barring any unforeseen increase in Brent prices between now and June 30th, average realized crude oil prices for the Q2 will be significantly lower, however.
In the Q1 , we had gains on our crude oil swaps of $7.3 million. This included non-cash, mark-to-market unrealized gains of $6.6 million that reflected the significant change in oil prices between December 31st, 2019 and March 31st, 2020, as well as realized cash gains of $0.7 million on swaps which settled during the quarter. These swap agreements are at a dated Brent weighted average price of $66.70 per barrel. As of March 31st, 2020, there were monthly swap contracts outstanding for 172,000 bbls for April through June 2020, which had a fair value of $7.3 million. We will continue to evaluate ways to mitigate price risk and protect cash flow against low commodity prices through our hedging program. Turning to expenses, total production expense, excluding workovers for the Q1 of 2020, was $6.9 million, or $23.39 per net barrel of oil sales.
The amount was lower for the quarter due to the lower sales volume. On a unit basis, we were near the midpoint of our guidance for the quarter of $23 per net barrel. Our unit cost was less than prior quarters due to the increase in production volumes and the fact that about 90% of our production costs are fixed and don't rise with higher volumes. For the Q2 of 2020 and the full year of 2020, we expect our unit cost should be between $20 and $24 per net barrel sales. While low crude oil prices have certainly had an effect on our financial results, from an operational standpoint, we have not been materially impacted by the worldwide COVID-19 pandemic. Our guidance, however, excludes any potential future impacts not currently being experienced.
During the quarter, we completed one workover and had an additional workover that was nearing completion at the end of the Q1 of 2020, whereas we performed no workovers throughout 2019. As a result, workover expense during the Q1 of 2020 was $2.8 million. We have some costs for the 2020 workovers that will carry over to the Q2, and we expect it to be no more than $1 million. We had initially provided guidance of $6 million-$8 million net to VAALCO for workovers in 2020, but canceled the third workover originally planned for 2020. As a result, the workover expenses we incur in the Q1 and Q2 are all the workover expense we currently expect for 2020. DD&A for the Q1 of 2020 was $3.1 million, or $10.55 per net barrel of oil sales, which was slightly above our original guidance.
Q1 2020 DD&A expense per barrel increased over both the Q1 of 2019 and the Q4 of 2019, reflecting the additional costs associated with the new Etame 11H well, Southeast Etame 4P appraisal well bore, and Southeast Etame 4H well. During the Q1 of 2020, impairment testing was performed using our estimated reserves and forward price curves as of March 31st, 2020. Due to the lower forecasted oil prices, we recorded a non-cash impairment charge of $30.6 million to write down our investment in Etame to the fair value of $15.6 million. Due to this impairment, we now expect our DD&A per net barrel to decrease during the remainder of the year and have lowered our guidance to $4-$6 per net barrel for the full year.
There were no impairment charges to capitalized costs for oil and gas properties taken in either the Q1 or Q4 of 2019. General and administrative expense for the Q1 of 2020, excluding non-cash stock compensation expense, was $3.4 million. The G&A increase from both the first and Q4 of 2019 was primarily related to higher professional fees. For the full year of 2020, we continue to forecast our G&A to be between $10 million and $12 million. Non-cash stock-based compensation expense was a credit of $2.6 million during the three months ended March 31st, 2020, due to the change in the SAR liability as a result of the decrease in the company's stock price between December 31st and March 31st. For both the Q1 and Q4 of 2019, our stock price increased, resulting in additional expense during those periods. Turning now to taxes.
Current income tax expense is primarily attributable to Gabon taxes, which are settled by the government taking their oil in kind. Current income tax expense for the Q1 of 2020 included a $3.4 million favorable oil price adjustment as a result of the change in value of the government's allocation between the time it was produced and the time it was taken in kind. After excluding this impact, overall current income taxes were $1.3 million for the period. Overall deferred income tax for the Q1 2020 was $35.6 million. This included $46.9 million related to increases in valuation allowances from both the U.S. and Gabon deferred tax assets, and a deferred tax benefit of $11.8 million resulting from the tax effect of the loss for the period. Valuation allowances are recognized when it's no longer likely that the deferred tax asset will be realized in the future.
As a result of the lower crude oil prices at the end of the period, future estimated taxable earnings declined significantly, and we now have full valuation allowances against our deferred tax assets as of March 31st, 2020. As detailed on slide 25 in the presentation deck posted this morning on our website, we currently estimate that VAALCO's operational breakeven in 2020 is approximately $27 per net barrel of oil sales. Our free cash flow breakeven price in 2020 is approximately $35 per net barrel of oil sales. Keep in mind that our realized prices are benchmarked to crude oil prices. Those amounts include workover expense but do not include any impacts from hedges. These estimates are lower than the $31 and $38.50 per net barrel of oil sales previously estimated, as shown in our March 2020 investor presentation.
The lower breakeven cost reflects cost-cutting measures that we have implemented over the past month. In general terms, we estimate that each $5 increase in realized oil price increases our annual adjusted EBITDA by approximately $8.5 million. This clearly shows our strong leverage to higher oil prices. As mentioned earlier, our guidance excludes any potential future impacts not currently being experienced as a result of the COVID-19 pandemic. At March 31st, we had unrestricted cash balance of $61 million, which includes $11.3 million of cash attributable to non-operating joint venture owner advances. This does not include an additional $13.1 million in short-term and long-term restricted cash related primarily to deposits in Gabon for future abandonment costs. Adjusted working capital from continuing operations in March 31st, 2020, totaled $25.8 million, an increase of $7.5 million from December 31st, 2019.
Despite the sharp decline in oil prices, VAALCO's cash and adjusted working capital positions remain very strong. We fully funded our 2019-2020 drilling program at Etame from cash on hand and cash flow from operations. In the Q1 of 2020, net capital expenditures totaled $12 million on a cash basis and $9.4 million on an accrual basis, primarily related to the 2019-2020 drilling program at Etame. As Cary discussed, we do not expect any remaining material capital expenditures for the balance of 2020. As has been the case since the Q2 of 2018, we are carrying no debt. Turning to our share repurchase plan, since its inception in June 2019 through March 31st, 2020, we purchased 2,549,639 shares at an average price of $1.75, $4.5 million. In the very beginning of the Q2 , we purchased 191,000 additional shares at an average price of $0.99 per share.
All of our share purchases have been funded using cash on hand. No purchases were made after April 2nd, and on April 13th, 2020, to preserve the company's cash resources and liquidity, our board terminated the program, which was scheduled to expire in June. The company will revisit instituting a share repurchase program in the future when commodity markets stabilize at higher levels. With this, I will now turn the call back over to Cary.
Thanks, Liz. Over the past several years, we have worked diligently to build a solid foundation for the future and to strengthen our financial position. Even in the challenging environment we face today, we remain focused on operational excellence. VAALCO has a stable producing asset with significant upside in Gabon. We have taken actions to drive down our operational costs and improve our margins, which will allow us to generate cash flow to fund future drilling campaigns. While we have deferred capital expenditures, including drilling, until the global oil pricing environment improves, we remain confident in the long-term viability of our inventory of drilling opportunities. We continue to plan for the future, where we hope to repeat the successful 2019/2020 drilling campaign with similar drilling campaigns and continue adding reserves and production through the life of our PSC at Etame.
With a debt-free balance sheet, approximately $61 million in cash on hand at March 31st, and strong production from our recently completed drilling program, we have positioned VAALCO to weather the near-term uncertainties. We expect that 2020 will be a challenging year for our industry, we will continue to carefully manage our business with a focus on protecting our balance sheet and optimizing cash flow. Thank you. With that, operator, we are ready to take questions.
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star and then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then two. Once again, it is star and then one to ask a question. Our first question today will come from Charlie Sharp of Canaccord. Please go ahead.
Yes. Good morning, everybody. Thank you very much for the detailed update. Much appreciated. I guess sort of two questions in one really, if I may. Obviously, you had a very successful drilling campaign in 2019 and 2020, which you talked about in the presentation. Perhaps you could just outline a little bit more in detail what it is that you've learned from that and how much more confident you may be in the potential of the Etame license. The follow-on is, what has to happen with the COVID virus and oil prices for you to turn what you would like to do next in terms of operations into concrete plans for new drilling? Thank you.
Well, thank you, Charlie. I'm happy to talk about what we've learned or what we learned from the drilling campaign we just executed. I guess first and foremost, it was the successful appraisal wellbores which identified oil in place and resources in areas where we were not completely confident there was oil in place before we drilled the appraisal wellbores. That was, of course, the Dentale reservoir underneath the Gamba field at Etame, I should say, underneath the Gamba reservoir at the Etame field. In the future, we have confidence in pursuing some Dentale development wells. Over at Southeast Etame, of course, we had a successful appraisal wellbore and actually completed a development well in that new reservoir. As we watch the new well produce, we may learn that there's space for a development well there.
I think those were the two key things we learned that will impact future drilling campaigns. Also on the operational side, I think that we learned a whole lot. We hadn't had a drilling rig at Etame in five years. We restarted the drilling campaign in September of last year, as everyone knows. As you recall, there was a little bit of a cost overrun in the beginning, but we learned very quickly on how to manage those problems, and we ended up saving some money towards the latter part of the campaign. I think operationally, what we learned is get the right people in-country early, and we wouldn't have sort of suffered through those learnings at the beginning. Again, we overcame those in our entire drilling campaign, or the entirety of the drilling campaign came in on budget.
Operationally, I think we proved that we can drill wells in Gabon without major cost overruns or major operational difficulties, and that's as important as the success of the appraisal wellbores. The second part of your question on what will it take in terms of the COVID-19 pandemic and oil prices, what changes are required for us to lock down a drilling campaign? I think what you can see is, or what should be what I've talked about before in terms of the COVID-19 pandemic, it's really the logistical challenges. Right now, the Gabon borders are closed to expatriates coming into the country.
I think that's sort of the obvious change that needs to happen, is there needs to be some loosening and some opening of the Gabon borders and moving people in and out, and we need to learn how to do that safely, which we can do. That's the one challenge we have that we're looking for that really needs to be overcome before we would consider starting another drilling campaign. Like we've said so far, we've been able to manage our operations with no direct impact other than the logistical challenges. We're waiting and watching for the Gabon government to, like I said, reopen their borders and reopen their economy just like we're doing here in the United States. In terms of oil prices, what we're looking for is confidence in the long term.
As we see oil prices move into the 40s, and we're confident that they will remain in the 40s, I think that's the impetus we need to go ahead and solidify a drilling campaign. Charlie, did I answer your questions?
Yes. That's very helpful. Thank you.
Our next question today will come from Bill Dezellem of Tieton Capital. Please go ahead.
Great. Thank you. A couple of questions. I'd like to start with your $35 free cash flow number. I think of the difference between free cash flow breakeven and operational breakeven as being CapEx. I guess the first question, is there something more besides CapEx? If that is the difference, what CapEx are you using with your assumption of that difference between $27 and $35 breakeven?
The main difference between the two is the G&A, and then also the asset retirement obligation. In the operational breakeven, that's limited to OpEx, tax, and workovers. When you get to the free cash flow, it's the OpEx, tax, G&A, workovers, and asset retirement obligations. We haven't included CapEx for the wells because that fluctuates significantly based on whether you have a drilling program in place or not. It distorts the overall numbers. We felt like it was more informative to have something excluding well costs.
Great. Thank you, Liz. Secondarily, the Q1 production expense, when you exclude workover and add back the 85,000 bbls that were delayed from the weather. Those really should have been in Q1. I end up with production expense of $18.34. Taking the initial production expense of $9.7 million, subtracting off the $2.8 million of workover, brings to $6.9 million of production expense. Taking the 294,000 bbls of sales, adding in the 85,000 bbls that were delayed a day because of the weather, that's where I get the $18.34. Your guidance is $20-$24 a barrel. What's the difference, and why is your guidance for production expense so much higher than what you would have experienced in Q1 had you not had that daily weather delay?
Yes.
Right.
You're missing an element.
Yeah. I'll let Liz cover some details here, but you're right, Bill. In general, we're finding ways to reduce costs, and so that unit operating expense is coming down. Unfortunately, the calculation to adjust for the 85,000 bbls, you're right, that should have been in the Q1 calculation if we didn't have the weather problems. The adjustment to unit operating cost is a little more complicated than just adding the barrels back in. It's because there's an inventory line on the operating expense, built into operating expense that would change as well. The inventory line accommodates for barrels that have been produced but have not been sold. Based on the calculation, actually, the number that we're reporting for Q1 does account for the 85,000 bbls, even though it was not sold in the Q1 . Liz, do you have anything to add?
Yeah, that's exactly right. Bill, what will happen is we have some costs that are capitalized on our balance sheet related to the 85,000 bbls, plus additional barrels that were expected to be in inventory at the end of the quarter. Those costs will be reflected in the Q2 results. What you're going to see is you should see the average cost per barrel align between the two quarters.
That's helpful. Thank you. I can either step back in queue or hit you with a couple other quick questions. Your choice.
Why don't you go ahead and ask your questions, Bill. We'll try to answer them quickly.
Okay. That's just fine. Thank you. The bad debt expense of $810,000, how did that come about?
Yeah, I'm happy to take that one. That has to do with our receivable for that in Gabon. Our payments that we're getting to recover that, which is fully recoverable, are somewhat intermittent. What we found is that because of the additional stress on the Gabonese economy and also the lack of receiving any kind of payments in the Q1 , we believe that it was prudent to increase the valuation allowance against that receivable.
That's essentially a refund from the Gabonese government?
Correct.
Great. Thank you. The South Tchibala 2H mechanical issue, would you talk through what you think is going on there, please?
Well, first, the electric submersible pump in the well did not fail. I want to make that very clear. It was installed in 2018, and it was still running just fine. What we saw was rate drop significantly for no apparent reason. Until we pull the tubing and the ESP or the electric submersible pump and go down in the well with some tools, we don't know confidently why production slowed down. What we think is, like I said, there's a down-hole mechanical failure that could be something related to the casing having a problem, something's broken loose and is obstructing flow. We don't know. Like I said, we need the drilling rig to come back so we can pull the tubing, pull the ESP, and go in with some tools and diagnose what the problem is and repair the problem.
It's something down-hole that has broken loose or collapsed. We just don't know.
Great. Thank you, and congratulations on a solid quarter.
Okay. Thank you, Bill. Good to hear from you.
Our next question today will come from Jamie Wilen with Wilen Investment Management. Please go ahead.
Good morning, fellas. Congrats on running things well in a very difficult environment. With Levene in Equatorial Guinea, is the memorandum of understanding non-binding because it's negotiations with the government that have to be concluded to extend the timeline? Is that the majority of the holdup at this point?
A couple of things, Jamie. In terms of finalizing the agreements, yes, we will need some time with the government to work with the government to approve the agreements. We're not at that stage yet. We're still negotiating agreements with Levene. Unfortunately, the COVID-19 restrictions have slowed us down. We're working as fast as we can, but typically, we would have met in person for maybe a day or two and finalized the negotiations. That option's not available, we're trying to work through teleconferences and video conferences. It's just taking a while for VAALCO and Levene to come to final terms. It's not the government that's delaying things right now. I just want to be clear about that.
Okay. The 12-month timeframe has not started. The clock hasn't started ticking on that yet, I assume.
What we have in place from the government right now is the government has confirmed that we have until December 31st, 2021 to either drill the well or relinquish the license. There's no penalty if we relinquish the license, but we do remove the $10 million of value we have on our books for Equatorial Guinea, but there's no cash impact. What we've done is we've gone back to the Equatorial Guinea government, and we've asked for an extension let's say out to December 31, 2023 to drill the well. We're fairly confident we will get that extension. Otherwise, the deadline is December 31st, 2021.
Okay. On your balance sheet, why do your partners in Gabon give you a $10 million advance to sit with?
That really just has to do with the timing of cash calls. What ends up happening is we cash call our joint owners for the coming month's expenditures. We're doing an estimate. The cash calls are not due until the first day of that month, but in a number of cases, we get the cash a day before, or maybe two days before. You end up with cash on your balance sheet that is really going to be used for the next month's expenditures. That is more of a timing issue than everything else. We like to point out how much that is because we want to make sure people understand that a portion of that cash is going to be used to settle the joint owner obligations rather than our own.
Lastly, as far as you've reduced the cost. Obviously, your operational break-even is much lower. Is that an estimate for the full year? Have all those costs already been achieved? Is there more to come? What would your ultimate operational break-even be if there are other costs to be taken out?
Well, we are looking to take out other costs every day. I can't guarantee, but I trust that our team will find more cost reductions. In terms of well, it is a forecast. When we gave guidance for the full year, it is a forecast. Something could go wrong or circumstances could change. Operating expense could go up, could increase above our forecast. That's why we give a range. We're very confident in the range we've given today. There's obviously a high end and a low end. The high end takes into account maybe some unforeseen circumstances. I do want to be clear, though, that right now, we haven't seen any impacts on our operations from the pandemic. There may be impacts that we can't predict that would drive our operating costs up.
We can't really build that kind of forecast into our outlook. That's an unknown that's out there. Anyway, Jamie, did that answer your question?
Yes, it did. Once again, congrats on the successful drilling program, and the wonderful balance sheet you have with basically the stock price all in cash and no debt. It's a wonderful place to be situated during this tough time.
All right. Thank you. Thank you, Jamie.
Again, if you would like to ask a question, please press star and then one. Our next question is from Ricky Fairchild with RBC. Please go ahead.
Hi, thanks. Could y'all give a little more color of an insight into the rationale between suspending or with regards to suspending the share repurchase program? It just seems like net of the cash advances that are on the balance sheet, taking those out, that the stock price is right around the cash on the balance sheet. It seems like even if you're not active in the share repurchase program, that you would at least keep it open during times like this.
Right. Well, the share repurchase program was set to expire mid-year, and so the board terminated the program a bit early. Going back to your question, we do have significant cash on our balance sheet that can be used for a variety of things, and the board made the decision to preserve our cash on our balance sheet for other opportunities, I would say, and to make sure that we can weather the storm. At any time, the board can reinstate a share repurchase program. Does that answer your question, Ricky?
It does. As far as reauthorizing the share repurchase program, can that only be done at a formal board meeting or an impromptu meeting? What are the mechanics of that?
Well, it can be done. We can call an impromptu board meeting at any time. We like to give all of the board 48 hours notice, and it could be a teleconference. Otherwise, we could even agree over email, as long as it's unanimous to reinstating the program. There's a lot of flexibility. We can move very quickly.
Okay. Great. That's helpful. Congrats on a good quarter.
All right. Thank you, Ricky.
We have a final question today, a follow-up from Bill Dezellem with Tieton Capital. Please go ahead with your follow-up.
Thank you. I'd actually like to play off your answer to the last question. You referenced keeping the cash for other opportunities. Presumably acquisitions may be part of that. I guess I'll make the question two-part. Would you discuss what those other opportunities are that you were referring to in the answer to that question? Secondarily, what is the update relative to acquisitions and how do you think about them in this oil price environment?
Right. Well, Bill, good questions. Let me talk to M&A and our activity. We are keeping our eyes open for acquisitions that are strategic fit. We have nothing to announce today. Our focus right now is really on increasing our margins, making sure we deliver production at the lowest possible cost. I think that's our first priority. We're watching and we're aware of acquisition opportunities. Like I've said, nothing to announce. In terms of keeping the cash on our balance sheet, it's to preserve our liquidity not only for M&A, but if things turn around quickly and we want to restart a drilling program, we can do that. Maybe we want to shoot seismic in Etame to help future drilling programs. We'd have the cash to do that ahead of a drilling program.
We're really looking 18, 24 months out what the opportunities are and making sure that we have enough cash on hand to deliver our strategy.
Great. Thank you, Cary. One additional question. Gabon, I believe, is part of OPEC. Is there any indication that you may in the future need to reduce your production as a result?
So far we have not been notified and we have not been asked to reduce our production as a result of the OPEC cuts. You are correct. Gabon is a member of OPEC. We have not received notification that we will be required to curtail our production.
Great. Thank you again.
Mm-hmm. Yep. Thank you, Bill.
Ladies and gentlemen, this will conclude our question and answer session. At this time, I'd like to turn the conference back over to Cary Bounds for any closing remarks.
Sure. Thank you, Operator. Well, I appreciate everybody joining our call today, and we look forward to our next call after the close of the Q2 . Goodbye.
The conference has now concluded. We thank you for attending today's presentation, and you may now disconnect your lines.