Good morning, and welcome to the VAALCO Energy Second Quarter Earnings Conference Call. All participants will be on listen-only mode. Should you need assistance please signal a conference specialist by pressing the star key followed by zero. After todays presentation there will be an opportunity to ask questions. To ask a question please press star then one on your touch tone phone, to withdraw you question please press star then two. Please notice event is being recorded. I would now like to turn the conference over to Al Petrie, Investor Relations Coordinator. Please go ahead.
Thank you, operator. Good morning, everyone, and welcome to VAALCO Energy's Second Quarter 2021 Conference Call. After I cover the forward-looking statements, George Maxwell, our CEO, will review key highlights along with operational results. Ronald Bain, who was named CFO in June, will then provide a more in-depth financial review. George will then return for some closing comments before we take your questions. During our question-and-answer session, we ask you to limit your questions to one and a follow-up. You can always reenter the queue with additional questions. I would like to point out that we posted a Q2 2021 supplemental 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 in the reports we file with the SEC, including the Form 10-Q that was filed yesterday. Please note that this conference call is recorded. Let me now turn the call over to George.
Thank you, Al Petrie. Good morning, everyone, and welcome to our second quarter 2021 earnings conference call. Thus far, 2021 has been an exciting year for VAALCO, where we have completed a very accretive acquisition opportunity that arose in late 2020. We closed the acquisition of Sasol's 27.8 working interest in Etame in February 2021 with cash on hand. The accretive nature of the deal are very apparent in our first half 2021 results, with significant increase to our production, adjusted EBITDAX, and cash flow. In the second quarter, we produced an average of 8,018 net barrels of oil per day, which was an increase of 55% over the first quarter, driven by the inclusion of all three months of the increased NRI production due to the Sasol acquisition. The second quarter also reflected stronger revenue due to higher realized pricing and strong sales.
This helped to boost our adjusted EBITDAX to $21.9 million in Q2 2021, and we have now generated $40 million in adjusted EBITDAX for the first half of 2021, which is more than in either of the previous two full calendar years, and over six times what we generated in the fourth quarter of 2020. We are happy with the ongoing strength of the oil price environment. With the significant increase in production, we wanted to lock in a meaningful portion of our free cash flow and adjusted EBITDAX to assure that we have the funds for our upcoming capital program later this year and into 2022.
Turning our attention to the future, our strategic vision is built on accretive growth through organic drilling opportunities and through acquisitions. As you saw in our Q2 results, we are generating significant cash flow in preparation for our 2021, 2022 drilling campaign.
Also during the second quarter, we accelerated the processing of our 3D seismic in order to maximize the impact to the upcoming drilling campaign. We continue to expect all the data will be fully processed and analyzed by the fourth quarter, and we are using the seismic to optimize our drilling locations for the drilling campaign. Additionally, we are de-risking future drilling locations and potentially identifying new drilling locations with the 3D processing. In June, we secured a contract with Borr Drilling Limited to drill two development wells and two appraisal well bores with options to drill additional wells. Depending on commitments related to the rig, we believe that we can begin drilling as early as December of this year.
If the four-well program is successful, the estimated increase in gross field production is 7,000 bbl-8,000 bbl of oil per day, or 3,500-4,100 net barrels of oil production per day to VAALCO when the drilling campaign is completed in 2022. Hand-in-hand with the production increase will be the margin expansion and per barrel cost reductions. About 90% of our production costs are fixed, as production increases, our per barrel cost will decrease dramatically. Every new barrel we bring online is more economic because of the low variable costs. As we grow production, we're also growing our margin per barrel and reducing our cost per barrel.
From a capital standpoint, the estimated cost of the program is between $115 million-$125 million gross, or $73 million-$79 million net to VAALCO. The upcoming drilling campaign has the potential to generate significant additional free cash flow, especially when you combine the sustained higher oil prices with our low-cost operating structure. Our strategy is to utilize the additional free cash flow to fund organic and potentially inorganic accretive growth opportunities in the future. In line with our strategy to be a low-cost operator, we are constantly looking at ways to minimize costs and improve margins. From an operating cost standpoint, our current FPSO costs are about 40% of our total production expense. The non-binding LOI, which VAALCO announced in April of this year, expired without any mutually agreeable contract being reached.
We are in advanced talks to finalize a binding agreement with other parties that will reduce our costs and meet our schedule in line with what we previously announced. We expect to update the market at the earliest opportunity, and we still expect that the project will be fully operational before our FPSO contract ends. This will dramatically improve our margin per barrel, and we will be able to deliver more free cash flow to fund our future growth opportunities. Looking at the second half of 2021, we have several operational events coming up. We are now planning on completing two workovers during the third quarter, when we initially had planned to do just one in the second half of 2021. We believe there is significant cost savings associated with performing the two workovers sequentially.
One of the workovers is expected to provide potential production uplift, while the second is to install an updated ESP design on a well where the existing ESP is showing signs of potential failure. Given the cost savings benefit of doing two workovers sequentially, our expected costs are not going to double when compared to the cost of completing just one. We are also planning our annual seven-day field maintenance turnaround, which is expected to take place in September and be completed by the end of the quarter. As always, our annual production guidance included that planned turnaround. Unfortunately, the FPSO will not be able to perform its full annual maintenance turnaround at the same time due to safety protocols.
We have to schedule an additional six-day turnaround in the fourth quarter to accommodate the additional FPSO maintenance. Taking into account the planned and unplanned turnarounds, potential uplift from the workovers, and natural decline, we expect production in the second half of 2021 to average between 7,000 and 7,800 net barrels of oil per day. This is just a bit lower than we had estimated earlier this year for the second half of the year before we knew of the additional quarter four FPSO maintenance event. Our annual guidance hasn't changed, and we still expect to be within the range of 6,800 bbl-7,400 bbl of oil per day. Without the unplanned second maintenance event, we believe we would have been well above the midpoint of our 2021 full year guidance.
As a reminder, since our 2021/2022 drilling campaign doesn't begin until late this year, we are not currently forecasting any material production uplift from that drilling campaign in 2021, but we should see significant uplift in 2022. For sales volumes, we haven't changed our annual guidance of 7,100 bbl of oil per day-8,000 bbl of oil per day. We expect third quarter sales to be in the range of 7,800 bbl of oil per day-8,500 bbl of oil per day. As we have discussed before, sales volumes do not always equal production volumes due to the timing and size of liftings.
Going forward, we plan to continue to provide sales volumes guidance on an annual and quarterly basis. If we expect a material change in our actual sales volume compared to guidance, we will inform the market. As a result, going forward, we will no longer post monthly liftings on our website.
We arrange the timing and size of liftings to optimize revenue, which means that we will not always have three liftings per quarter, and the size can change somewhat from lifting to lifting. Posting liftings is not a common occurrence in the industry, and we believe our investors will be better served with us giving quarterly sales guidance with material updates provided by us as needed. I would now like to give you a quick update on some exciting new developments in Equatorial Guinea. We have a substantial working interest in Block P, and we are evaluating several development step out and exploration opportunities in our acreage. We are excited about the opportunities on the block and believe it makes sense to move this project forward with a more definable timeline and potential development.
We have recently completed our drilling feasibility study for the standalone development of the Venus discovery in Block P, and we are moving forward now with a field development concept. As we work through the development, we will provide more details about potential timing, capital costs, and reserves and production estimates. We are committed to profitably exploiting the resource potential of our assets, and Equatorial Guinea could become a significant operational asset moving forward. In summary, our outstanding employees continue to operate and execute on VAALCO's strategy of accretive growth and free cash flow generation through cost effectively maintaining core production. We have a strong balance sheet, and with our increased production base and new hedges, we have locked in sufficient cash flow to fund our upcoming capital obligations whilst maintaining upside.
As you can see, we are firmly focused on maximizing shareholder return opportunities and operating with the highest regards towards ESG while we progress our strategic objectives focused on accretive growth. I would now like to introduce Ronald Bain, our new Chief Financial Officer. I have known and worked with Ron for many years, and his guidance has been an integral part of our success in the past. His leadership of large, geographically diverse financial teams listed in both the U.S. and U.K., and strong ties to the London investment and banking communities make him an important addition to VAALCO. With that, I would like to turn the call over to Ron to share our financial results.
Thank you, George, and good morning, everyone. Let me begin by saying I'm very pleased to have recently joined the VAALCO Management team. Like George, I knew VAALCO well from my days working with him at Eland and see the significant potential we have at VAALCO in both Gabon and Equatorial Guinea. I look forward to getting to know our shareholders and analysts over the coming months. Turning to our financials. Adjusted EBITDAX totaled $21.9 million in the second quarter of 2021, compared with $18 million in the prior quarter, and more than double the $10.1 million in the same period of 2020. Adjusted EBITDAX for the second quarter of 2021 was higher than both prior periods, primarily due to the increased sales volumes and higher realized prices.
Our adjusted net income for the second quarter of 2021 totaled $8.4 million, or $0.14 per diluted share, as compared to an adjusted net income of $8.7 million, or $0.15 per diluted share for the first quarter of 2021. Higher sales and realized pricing were offset by higher DD&A due to the bargain purchase price accounting associated with the Sasol acquisition and one-time severance costs. In the second quarter of 2020, VAALCO reported $5.3 million in adjusted net income, or $0.09 per diluted share. Additionally, we reported strong net income of $5.9 million, or $0.10 per diluted share in the second quarter of 2021, which included a $10 million loss in derivative instruments, of which $5.7 million was an unrealized loss. As George mentioned, the second quarter reflected significant increases in sales and continued strong realized pricing. Turning to production.
Production for the second quarter of 8,018 net barrels of oil per day increased 55% from 5,180 net barrels of oil per day in the first quarter of 2021, driven by the Sasol acquisition volumes being included in the company's results for all three months of Q2 compared to only about one month in Q1. Second quarter 2021 production was up 48% from the second quarter of 2020. Sales volumes in Q2 2021 were up 4% from the first quarter and up 2% compared to the same period in 2020. The increase in volumes is primarily due to the additional Sasol interest.
Our crude oil price realization increased 14% to $69.61 per barrel in the second quarter of 2021 versus $61.31 per barrel in the first quarter of 2021, and was up 146% compared to the $28.31 per barrel in the second quarter of 2020.
Our hedging strategy for 2021 has been to lock in a majority of our 2021 production volumes to protect cash flows and assure funding of our capital program in 2021 and 2022, but still allow for some additional upside. In January 2021, we entered into a crude oil commodity swap arrangement for a total of 709,262 barrels at a dated Brent weighted average price of $53.10 per barrel for the period from and including February 2021 through January 2022. These swaps settle on a monthly basis. In May, we added more crude oil swaps of 672,533 barrels at a dated Brent weighted average price of $66.51 per barrel for the period from and including May 2021 through October 2021.
Last week, we entered into an additional commodity swap at a dated Brent weighted average of $67.70 per barrel for the period from and including November 2021 through February 2022 for a quantity of 314,420 bbl. After entering into this latest hedge, VAALCO now has 70% of its production hedged through October 2021 and 50% of its production hedged from November 2021 through February 2022. We took similar actions in 2019 before we began our 2019/2020 program and will continue to assess our needs to mitigate price risk and protect cash flow in the future as we consider any additional future derivative contracts. Turning to our expenses.
Production expense excluding workovers for the second quarter of 2021 was $16.1 million, which was flat with the first quarter of 2021 despite the higher sales and $3.9 million higher than in the second quarter of 2020 due to higher sales and the increase in working interest associated with the Sasol acquisition. The per-unit production expense, excluding workovers, of $25.02 per barrel in the second quarter of 2021 decreased as compared to $26.02 per barrel in the first quarter of 2021 and $19.31 in Q2 2020. The per-unit production expense, excluding workovers, decreased 4% as compared to the first quarter of 2021 due to the increased sales but flat actual cost.
The per-unit rate in the second quarter of 2021 increased 30% from the rate in the year-ago quarter, primarily due to the increase in working interest costs associated with the Sasol acquisition. Sales were nearly flat year-over-year. The second quarter of 2020 included four liftings that increased sales. Included in total production expense are COVID-19 related costs incurred to protect the health and safety of the company's employees, which totaled approximately $800,000 in the second quarter of 2021. Production expense for the third quarter of 2021, excluding workovers, is projected to be between $20 million and $22 million, or $27 to $30 per barrel of oil sales. Keep in mind that Q3 2021 has an increase in absolute and per barrel cost compared to the second quarter of 2021 due to the seven-day planned maintenance turnaround.
As George mentioned, we are now planning on completing two workovers during the third quarter, where we initially had planned to do just one in the second half of 2021. We've adjusted our guidance for workover cost to $8 million-$10 million net to VAALCO from $5 million-$6 million previously. We do get the benefit of doing the two workovers in succession, so our expected costs are not double the cost of just completing one. DD&A for the second quarter of 2021 was $5.8 million, or $9.05 per net barrel of oil sales, compared to $4.1 million or $6.70 per barrel in the first quarter of 2021, and $2.8 million or $4.44 per barrel in the second quarter of 2020. DD&A was higher comparable to the prior periods due to the higher depletable costs associated with the Sasol acquisition.
Our asset base for the Sasol acquisition was valued at fair market value in a stronger pricing environment than which we negotiated the deal price. General and administrative expense for the second quarter of 2021, excluding stock-based compensation expense, was $4.2 million, compared with $3 million in the first quarter of 2021 and $2.3 million in the second quarter of 2020. The increase in Q2 2021 compared to Q1 2021 was a result of additional severance costs associated with changes in key personnel. The per unit G&A rate, excluding stock-based compensation, in the second quarter of 2021, was $6.57 per barrel of oil sales, was higher than both the first quarter 2021 and the second quarter of 2020 due to higher severance costs with relatively small changes in sales.
For the third quarter, we are forecasting G&A, excluding stock-based compensation, to be between $2 million and $3 million, which is more consistent with our expected run rate without these one-time costs. Non-cash stock-based compensation expense was impacted by the change in the SARs liability as a result of changes in the company's stock price during the quarter. For the second quarter of 2021, the stock-based compensation expense related to SARs was an expense of $400,000 compared to an expense of $1.2 million for the first quarter of 2021. For the second quarter of 2020, there was expense of $700,000 related to SARs. Turning now to taxes. Income tax expense for the three months ended June 30th, 2021 was $2.8 million. This is comprised of a $3.3 million of a deferred tax benefit and a current tax expense of $6.1 million.
The income, $2.2 million income tax benefit for the three months ended June 30, 2020, included a $3.4 million deferred tax benefit and a current tax expense of $1.2 million. For both Q2 2021 and 2020, VAALCO's overall effective tax rate was impacted by non-deductible items associated with operations and deducting foreign taxes rather than crediting them for United States tax purposes. At June 30, 2021, we had an unrestricted cash balance of $22.9 million, which included $2 million in net joint venture owner advances. Working capital at June 30, 2021, was negative $9 million, compared with a negative $15.8 million at March 31, 2021. While adjusted working capital at June 30, 2021, turned positive to $4.3 million compared to negative $2.7 million at March 31, 2021.
For the second quarter of 2021, net capital expenditures excluding acquisitions total $3.1 million on a cash basis and $1.8 million on an accrual basis. These expenditures were primarily related to the purchase of our mobile workover unit, equipment and enhancements, as well as early costs associated with the 2021, 2022 drilling program. As has been the case since the second quarter of 2018, we are carrying no debt. With that, I'll now turn the call back over to George.
Thanks, Ron. As we look at 2021 and beyond, this is a very exciting time for VAALCO. I believe it is paramount that businesses are sustainable in order to provide benefits to all stakeholders with a focus on growth and investor returns. With that in mind, I am pleased to announce that we have completed our second ESG report that was primarily developed in close alignment with the recommendations of SASB, as we significantly enhanced our disclosures and related discussions. The core values outlined in our report are a part of our culture and provides a solid foundation that assures our success as a trusted operator, a generous partner to the communities where we operate, and as good stewards to the environment.
We have a strong asset base in Etame that is generating meaningful free cash flow and adjusted EBITDAX in the current pricing environment, which is evident in our first half 2021 results. The $40 million that we have generated in adjusted EBITDAX in the first half of 2021 is more than VAALCO generated in either of the full years 2019 or 2020. Sustained operational excellence and robust financial performance at Etame serves as the foundation for growing VAALCO through organic drilling and future accretive acquisition opportunities in line with our strategy. In April, we also purchased a hydraulic workover unit that we have used in the past for less than $2 million in total consideration. This unit is in Gabon and is being deployed in the third quarter to perform two workovers that should increase production.
Having a workover unit in country will allow us to respond to any well downtime issue quickly and will save us significant time, production, and cash flow when addressing workover requirement if an ESP unit goes down. We are not simply looking to maintain production in Gabon. There are meaningful development opportunities across our assets. We have completed the feasibility study for the standalone development of the Venus discovery in Block P in Equatorial Guinea, and we are moving forward now with our field development concept. Etame and potentially now Block P can enhance our business and provide a strong platform for organic growth and increased future cash flow. As we continue to generate significant cash flows to fund our capital expenditures, we continue to evaluate ways to return some of that free cash flow to our shareholders.
VAALCO has adopted share repurchase programs in the past, and we will consider similar programs in the future to complement our growth strategy. In the fourth quarter, we'll begin another drilling campaign at Etame, and with our recent additional hedges, we have locked in sufficient cash flow generation from operations to fund this program and desensitize the risk of oil price movement. As you can see, we are firmly focused on maximizing shareholder return opportunities and operating with the highest regards towards ESG while we progress our refreshed strategic objectives focused on accretive growth. Thank you with that, operator, and we are now ready to take questions.
I’ll begin the question and answer session. To ask a question you may press star and one on your touch tone phone. If you are using a speaker phone please pick up your handset before pressing the keys. To withdraw you question please press star then two. At this time we will pause momentarily to assemble our roster. First question will be from John White of ROTH Capital Partners.
Good morning, George.
Morning, John.
Mr. Bain, congratulations again on your recent appointment.
Thank you.
Well, congratulations on the quarter. Looks like everything went a little better than planned. Very nice to see that, and thanks for the detailed operations update. I'm excited about Equatorial Guinea, the announcement there in Block P. That was a Devon discovery, I believe. Is that correct?
That's correct. There's currently a position within our net unrisked CPR report on a 2C basis of around 16 million barrels on the discovery.
Thanks for that. Would you want to say who are your partners in Block P?
In Block P, we've got GEPetrol and Atlas are the partners.
All right. The anticipated depth of the target zone?
Well, that's a good question. This is the target zone subsurface, so where we're planning to drill from on the surface.
True vertical depth.
True vertical depth, I believe, is around about 3,000 m.
Thank you. Sandstone, limestone, could you talk a little bit about the lithology?
We don't have that detail at hand at the moment. I think it is a sandstone play, I can come back to you on that one, John White.
Okay. No, thank you. Is it too early to talk about timing of the potential well getting started?
Yeah. Well, I think the key work that we performed in Q2 was, as we mentioned, the drilling feasibility. We had to try and determine, was it possible to reach the targeted zones from the shelf as opposed to trying to drill in a deeper water location. That was really paramount in order to assess whether we could get an economic development around that level of oil accumulations at 16 million barrels. Having established that that was possible and well trajectories and the angles were sufficient with coming in from a jackup, we're now looking at how we can have an efficient field development concept, again, from the shelf, so not fetching into the deeper water locations where costs, as you know, ramp up very quickly.
I'm hoping to be in a position towards year-end to have a much firmer outline on a timetable and a much firmer technical presentation on how we would plan to evacuate that oil.
Okay. Very good. It's exciting and I'm looking forward to learning more. I'll turn it back to the operator now.
Thank you, John.
Thanks, John.
The next question will be from Bill Dezellem of Tieton Capital Management. Please go ahead.
Thank you. Would you please, first of all, continuing on EG, update us with the production sharing contract update and what is going on with the ministry. Is that now complete, or are there still more steps that you are waiting for?
It's more or less complete. What was happening there, Bill, was we had one partner basically coming out through defaulting. Those amendments were taking place. I think we'd gotten complete towards the beginning of Q2. That was kind of good to go. We have one more amendment with another partner exiting with a small percentage. Those amendments are going through now. We don't have any issues around those amendments. It's purely just an administrative process. Discussions we've had with the EG authorities, we're seeing it in a positive aspect.
We're now, as soon as those contracts are inked, you'll then have 25 years. Is that correct? Is that when the clock begins?
Well, we're currently in an exploration position. As you know, we had an obligation for an exploration well. What we're looking to do is get into the discussions around the Venus development and that Venus development fulfilling that obligation. Once we get that position agreed, at that point, the tenure of the PSC will be extended.
All right, thank you. Relative to your comment in the release that you're accelerating the seismic processing, would you discuss what it is that you are doing more quickly and what that will actually do for you, given that it doesn't sound like the rig will be coming on any sooner than originally discussed?
Yeah. What we do there is basically, we're pulling forward the, what we call the hot package or the package of seismic interpretation that we have around our drilling location, so we can get better clarity around where our subsurface well targets are. What we want to do is basically make sure we have the same imaging, sorry, better imaging from what we had previously to just confirm bottom hole locations for the targeted drilling. The reason we pull that forward is basically to add a de-risking to the drilling program, remove some uncertainty so we're not chasing our tails close up to execution.
Great. Thank you.
Once again, if you have a question, you can press star then one. The next question comes from Charlie Sharp of Canaccord.
Yes. Thank you very much for taking my question. Good morning, gentlemen. Just a couple of questions. Firstly, around the workover, then the forthcoming drilling. Then a bit of a follow-up on the FPSO, if I may. Firstly, in terms of the workover, the extra workover that you have in the Q3, should I assume that that's the Ebouri-2H workover that I think had originally been planned as part of the drilling program? Secondly, on the drilling, given the extra work that you're putting into the new 3D seismic, what's your position at the moment in terms of possibly adding an additional fifth well to the program?
On the FPSO, I understand that maybe it's too soon to disclose details, but would you expect to see the same sort of annual reduction in operating costs that you cited before using the Omni proposed FSO with whatever it is that you plan to use instead? Thank you.
Thank you, Charlie. I'm working from memory. Don't have my notes here on this one. The second workover, I believe, is 12H. The reason we've had to come into that second workover is due to the failure of the lower ESP. The well's still performing at the moment, but it's performing on the upper ESP, and we don't want to take the risk of being there with the workover unit doing 2H and then all of a sudden leaving the workover unit and 12H upper ESP fails. It's really just to make sure we have return to the redundancy that we have on these wells with two ESPs. Like I said, we're seeing slight fluctuations in 12H, but we're not seeing a complete failure on the well yet. As a result of the lower ESP failing, we've got that scheduled in in Q3.
With regard to the drilling program, as you know, we continually will be looking at the options. We've got additional five options on the drilling program, and that will be subject to exciting target locations that we have, availability of long lead items, and obviously making sure we can get it into our existing cash forecast. Yes, we are continuing to evaluate a fifth well opportunity. As we decide, we also will be in a position to firm up on these evaluations towards beginning or middle of Q4. With regard to the change out of the FPSO to the FSO, yes, when we've been looking at this opportunity, and we've expanded the reach of potential suppliers on an FSO concept. We've kept two things in mind when we've been looking at it. The first is schedule.
It's absolutely critical that any contract we enter into, we have high confidence levels of being able to hit the delivery schedule well ahead of the contract end date of September 2022 for the existing FPSO. Secondly, we're looking at the cost opportunity and saying, can we, in this additional expanded view of suppliers, maintain the indicative cost savings that we mentioned in June of this year? The answer to both of those is yes. Schedule is the priority. We cannot miss it, and we will not miss it. We are also on track for those indicative cost savings.
Next question will be from Richard Dearnley of Longport Partners.
Oh, good morning. The question about the feasibility of reaching the zone from the shelf. I take it that means you expect that you'll be able to reach it from the shelf? What are the odds of the feasibility study being positive?
The feasibility study has been completed. The drilling team looked at various options as to what it would take to reach the targeted zones. The key aspects there are how high risk the well is and the angle of attack that the well design is taking to get to the targeted subsurface location. We went through a number of aspects, including the well design, whether we had to do a rotating casing program, which, of course, is a higher risk position. The results of those, based on starting the drilling at various water depth. We looked at three water depths. We looked between 120 m and 140 m. The deeper we go, the shallower the angle of attack for the well, and the shallower we go, the higher the angle of attack.
We've come to the conclusion that for the planned producing wells, we're well within the spectrum and the angle of attack to get these wells completed. There's not really a significant, at least a significant drilling risk. I think, from memory again, we're looking at the well angles down in the 40s, 50-degree positions.
I see. Thank you. The acceleration of the 3D program, did that have a meaningful cost impact in the second quarter?
Yeah. It was certainly more than we had put in our guidance, but it's about $600,000 in total that was expensed during the quarter. I would suggest that Q3 will be similar to Q2.
I see. Thank you.
Okay, George, I was emailed two questions from Stephane Foucaud with Auctus. I think he was having trouble with his phone line. The first one, what is the latest of the FPSO contract with Omni?
Okay. Well, as I mentioned earlier in one of the questions I answered, we expanded the supplier base that we contacted to really have a much better review of our options, specifically with the discussions around Omni. I know we failed to reach a commercially acceptable settlement in which we can go forward and contract. We're still in discussions with a number of providers, and I would anticipate within the next two weeks, we'll be able to come to market and advise them exactly of that contracting position.
Okay, great, George. Ron, this one's more for you. What would be good guidance for the future or future years for workover yearly expense? You said you noticed that there's $8 million-$10 million that we set for the third quarter.
Yeah. I believe we generally look at one to two workovers a year. Now that we own the [HWU], that guidance would generally be in the region of about $5 million to $10 million. We certainly look at that as the year progresses, bearing in mind that the one planned workover we had for 2022 has been accelerated into 2021. I would think 2022 will be lower, in the $5 million range. That's something that we'll take a look at in our budgeting process, which we're reviewing through now in August.
Okay. Thank you, Ron. Operator, any other questions?
There are no other questions at this time. I will turn it back to George Maxwell for any closing remarks.
I'd like to, again, thank the audience for listening to our Q2 and first half results. I think the positions that we're presenting for the company going forward in 2021 are very exciting. We have the opportunity of potentially opening a significant second leg of production opportunities in Equatorial Guinea. We have an expansive drilling program to try and fill the void of processing positions we have in Gabon, and all of that being self-funded inside the company. I think it's the outlook for second half 2021, albeit, I know we do have a second unplanned shutdown for safety reasons in Q4. I still think it looks like a very exciting second half.
That leads us into the position for 2022, where the continuation of the drilling program and further enhancement of production leave us very positive aspects towards the cash flow generation and profitability of the company in going forward. I would like to thank you very much for everyone who has listened in.
The conference is now concluded. Thank you all for attending today's presentation. You may now disconnect your lines. Have a great day.