Mr. Sean Guest reports

VALEURA ENERGY INC. ANNOUNCES SECOND QUARTER 2023 RESULTS

Valeura Energy Inc. has released its unaudited financial and operating results for the three- and six-month periods ended June 30, 2023.

Q2 2023 highlights:

• No lost time safety incidents;
• Valeura's first full quarter of Gulf of Thailand production operations;
• Oil production of 22,097 bbl/d (barrels per day);
• Oil sales of 2.167 million bbl, generating revenue of $174.2-million (U.S.);
• Opex (operating expenditure) per barrel of $22.7 (U.S.)/bbl;
• Capex (capital expenditure) spending of $33.6-million (U.S.);
• Adjusted cash flow from operations of $70.4-million (U.S.);
• Adjusted EBITDAX (earnings before interest, taxes, depreciation, amortization and exploration) of $78.9-million (U.S.);
• Net cash balance of $87.6-million (U.S.).

Q2 2023 key achievements:

• Captured early operational synergies between assets by moving to a one-rig drilling program, rather than two;
• Drilled eight wells during Q2, including completion of an infill drilling program on the Jasmine oil field and an infill drilling program on the Nong Yao oil field;
• Under-budget operating and capital cost performance, resulting in a downward revision to spending expectations for the year, and no change to production guidance;
• First production from the Wassana oil field restart on April 28, 2023;
• Completed the purchase of the Wassana oil field's mobile offshore production unit (MOPU) and increased working interest in licence G10/48 to 100 per cent;
• Divested interest in licence G6/48 in exchange for a royalty on future production from the undeveloped Rossukon oil field.

Sean Guest, president and chief executive officer of Valeura, commented:

"I am pleased to announce that during our first full quarter of production operations in Thailand, we have safely and responsibly produced an average of 22,097 bbl/d of oil. Our Q2 2023 results mark a step change in our business, underscored by sales of 2.167 million barrels of oil, generating revenue of $174.2-million (U.S.). Operating costs were managed below our guidance estimates for the quarter, at $22.7 (U.S.)/bbl on an adjusted basis, resulting in adjusted cash flow from operations of $70.4-million (U.S.).

"Our company is in a strong financial position. Compared to our metrics as of one year earlier, we have added only a modest level of debt, which has already been reduced to $30.7-million (U.S.) as of June 30, 2023. We have increased our cash position from approximately $30-million (U.S.) one year ago to $121.7-million (U.S.), even after having paid taxes and investing $33.6-million (U.S.) of capital spending into our assets during the quarter. Valeura is now a strongly cash generative business.

"We are fulfilling our promise to deliver value and growth, and at the same time are beginning to see the benefits of operating synergies across the portfolio we have assembled. With more than half the year completed, we have revisited our guidance estimates for the year, and are now revising downward our expectations for both capital and operating spending, while keeping production expectations unchanged.

"At the same time, our longer-term outlook for growth remains positive, as evidenced by the key 90-million-barrel production milestone achieved at Jasmine during the quarter and ongoing success with infill drilling across the portfolio, which continues to support our objective of replacing produced reserves."

Financial update

During Q2 2023, Valeura had sales of 2,167,000 bbl of crude oil. The company recorded revenue of $174.2-million (U.S.), versus nil in the same quarter of 2022, which was prior to the company having active production operations. Sales included 943,000 bbl of oil held as unsold crude oil inventory at the beginning of the quarter. As of the end of Q2, the company had unsold oil inventory of 777,000 barrels. As all of Valeura's producing assets are offshore and utilize floating storage vessels, oil is recorded as inventory until such time as it is periodically sold as discrete cargoes and, accordingly, sales volumes do not precisely match reported production volumes.

Valeura's average realized price for crude oil sales was $80.40 (U.S.)/bbl in Q2 2023, reflecting an average premium to the Brent crude oil benchmark of approximately $1.90 (U.S.)/bbl. While actual realized prices vary on a field-by-field basis, reflecting each field's unique crude oil characteristics and market demand, average prices across Valeura's portfolio are expected to continue to approximate the Brent crude oil benchmark. The company currently has no hedging arrangements in place in respect of its crude oil sales.

Valeura reported operating expenses of $70.6-million (U.S.) in Q2 2023. Operating expenses include both preproduction and production operations at the Wassana oil field in addition to a full quarter of operations spending on the assets acquired from Mubadala Energy, which was completed toward the end of Q1 2023. Valeura calculates opex per barrel, a non-standardized measure, to provide a more consistent indication of the cost of field operations, as more fully described above. Opex during the quarter was $45.6-million (U.S.) (equating to opex per barrel of $22.70 (U.S.)/bbl). Opex, as opposed to operating expenses, excludes the impact of non-recurring, non-cash items, including prior-period adjustments relating to inventory movements, operating expenses capitalized to inventory, and adds back lease costs in relation to floating storage and other facilities.

During Q2 2023, the company generated adjusted cash flow from operations of $70.4-million (U.S.). Valeura's management believes adjusted cash flow from operations provides a consistent measure of the continuing cash-generative capacity of the business, and hence its ability to continue investing, by adjusting for non-recurring items and non-cash expenses.

Valeura generated adjusted EBITDAX of $78.9-million (U.S.) in Q2 2023. Adjusted EBITDAX is a non-standardized variant of EBITDAX, adjusted to remove non-cash items as well as certain non-recurring costs, including severance payments and other one-off items in relation to the company's recent acquisitions. The company reported a comprehensive loss of $1.3-million (U.S.) in Q2, compared with comprehensive income of $1-million (U.S.) in the same quarter of 2022.

As of June 30, 2023, Valeura had cash and cash equivalents of $121.7-million (U.S.) (including restricted cash of $13.6-million (U.S.)), compared with $29.7-million (U.S.) at June 30, 2022, primarily reflecting an inflow of cash as a result of the acquisition of assets from Mubadala Energy just before the end of Q1 2023 and subsequent tax payment of $178.1-million (U.S.) in respect of the previous owner's 2022 operations, in addition to further generation of net cash through continuing production operations during Q2 2023.

The company had total debt of $31.5-million (U.S.) (book value) as of June 30, 2023. The debt liability reflects the company's continuing facility arrangements in connection with its Thailand acquisitions, which, as of the end of Q1 2023, were drawn to $52.5-million (U.S.). During Q2, the company repaid $18.5-million (U.S.) of the facility. Progressive repayments of the debt are continuing and the company aims to repay the facility in full during the remainder of 2023.

As at June 30, 2023, the company had a net cash balance $87.6-million (U.S.), which consisted of a cash balance of $121.7-million (U.S.) and outstanding debt of $34-million (U.S.) (after reversal of accounting provisions).

Operations update

During Q2 2023, the company had continuing production operations on its Jasmine/Ban Yen, Nong Yao and Manora oil fields, and restarted production on the Wassana oil field. Aggregate production averaged 22,097 bbl/d during Q2 2023. One drilling rig was under contract for the duration of the quarter.

Production from the Jasmine/Ban Yen oil field, in licence B5/27 (100 per cent Valeura) averaged 9,838 bbl/d during Q2 2023. In May, the company finished a 10-well infill drilling program on the asset, which commenced earlier in the year, and also attained a key milestone for the field, having produced its 90 millionth barrel of oil. The field has greatly exceeded oil recovery expectations set at its original development sanction in 2004 of approximately seven million barrels. Production operations have continued throughout the remainder of the quarter without incident. Positive continuing performance of the new Jasmine oil field infill wells has led to the development of a further infill drilling program for the asset, which is now in the planning phase.

Nong Yao oil field production, in licence G11/48 (90-per-cent Valeura working interest) averaged 7,486 bbl/d during Q2 2023, net to Valeura's interest. The field's production was enhanced by two horizontal infill wells drilled during the quarter, which contributed an initial gross rate of approximately 1,350 bbl/d. Also during the quarter, work continued on a new-build mobile offshore production unit to develop the Nong Yao C oil accumulation. The new facility is scheduled to mobilize to the field in late Q4 2023, with development drilling planned thereafter. In preparation for the new facility, during Q2 2023 the company began installing a three-kilometre pipeline to connect Nong Yao C to the field's existing production facilities. At the same time, the company is progressing plans for further infill drilling on the already-producing Nong Yao accumulations aimed at enhancing production and minimizing the effect of natural declines.

Production at the Manora oil field, in licence G1/48 (70-per-cent Valeura working interest) averaged 3,145 bbl/d during Q2 2023, net to Valeura's interest. Following the Nong Yao drilling campaign, the contracted drilling rig mobilized to the Manora oil field to conduct a three-well drilling program, which was under way at the end of the quarter. The campaign concluded in late July, 2023, with all wells having met or exceeded their predrill volume estimates. The new wells are now all on production and are contributing approximately 1,400 bbl/d (net working interest basis). Importantly, the increased field output includes dry oil contributions from bypassed oil downdip of existing and currently producing wells in one of the field's deeper reservoir intervals, as well as multiple other attic or bypassed accumulations in the shallower reservoirs. The results of these wells indicate the potential for further development opportunities, which are likely to form the basis of further infill drilling campaigns in 2024 and 2025. Accordingly, the company anticipates that the enhanced volumes from the Manora oil field will result in a further extension to the field's economic life. Valeura foresees at least three further infill drilling targets, with individual investment decisions subject, as always, to favourable economic conditions.

In late April, 2023, Valeura restarted production from the Wassana oil field, on licence G10/48, and also announced an agreement to acquire the remaining working interest from its partner, thereby increasing its interest to 100 per cent. Production rates increased on a gradual basis to approximately 2,400 bbl/d, resulting in average production for the full Q2 2023 of 1,628 bbl/d. Following the Manora oil field drilling campaign, Valeura mobilized its drilling rig to the Wassana oil field where it is currently conducting maintenance work, including replacing electric submersible pumps which have reached the end of their useful life. Recently, the company has conducted a thorough review of the subsurface potential at Wassana and has identified the potential for additional oil accumulations in a downdip portion of a fault block to the north of the main field. For clarity, these targets are in addition to the infill drilling program planned by the company since its acquisition of the asset. The company intends to drill two pilot wells now to assess the potential for additional volumes in the northward extension, but will defer production-oriented infill drilling so as to time activity to coincide with a phase of active production operations. Valeura intends to utilize the contracted drilling rig as fully as possible, including adjusting its drilling program to accelerate the next phase of infill drilling on both the Jasmine and Nong Yao fields, and now anticipates drilling various wells on these fields in 2023, which were previously planned for 2024.

Valeura recorded a full quarter of safe operations during Q2 2023, with no lost time incidents or deviations from its safe work practices. The company actively records key metrics on its environmental, social and governance performance, and intends to present these metrics as a component of an inaugural sustainability report in due course, along with an articulation of its forward strategy to ensure the sustainability of its business. Subsequent to the end of the quarter, the company implemented a safety-related intervention in production operations at the Wassana oil field in response to a collision between the third party-operated floating storage and offloading vessel, and the field's catenary anchor leg mooring buoy. The field remains suspended as the company formulates a plan for its restart and continuing safe operation, in keeping with its high standards. In the meantime, Valeura is using production downtime at the Wassana oil field to conduct maintenance work.

The company had no active operations in Turkey during Q2 2023, as it continued its search for a farm-in partner to pursue the next phase of work on its tight gas appraisal play in the Thrace basin, where it holds interests ranging from 63 per cent to 100 per cent.

Guidance update

Valeura has revisited its guidance estimates and now anticipates total capital spending in 2023 of $155-million (U.S.) to $175-million (U.S.). The downward revision is driven by good drilling operations performance, the move to one (versus two) drilling rigs for the year, as well as adjustments to its forward drilling program. Operating costs are anticipated to total $200-million (U.S.) to $220-million (U.S.), reduced from original estimates as the company begins to realize logistics synergies and economies of scale in relation to the continuing integration of its Thailand businesses. While changes in the drilling program will alter the composition of production volumes for the second half of the year, the company continues to anticipate that it will achieve full-year rates of 20,000 bbl/d to 22,300 bbl/d and, accordingly, has not changed its production guidance for the year. Given sales prices to date in 2023, the company also reaffirms its expectation of price realizations approximately equivalent to the Brent crude oil benchmark.

The company intends to finance its operating costs and capital spending through cash generated from continuing operations. For clarity, all production, operating costs and capital spending estimates provided above relate to the full calendar year 2023 and, accordingly, include amounts relating to the period prior to completion of the company's acquisition of assets from Mubadala Energy, which closed in March, 2023.

Webcast

Valeura's management team will host an investor and analyst webcast at 8:30 a.m. Calgary (3:30 p.m. London, 9:30 p.m. Bangkok, 10:30 p.m. Singapore) tomorrow, Aug. 10, 2023, to discuss today's announcement. The live audio and video feed can be accessed on-line. Written questions may be submitted through the webcast system or by e-mail to IR@valeuraenergy.com.

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

Conference ID:  582 141 370 followed by the pound key

Dial-in numbers

Canada:  833-845-9589

Singapore:  65-6450-6302

Thailand:  66-2-026-9035

Turkey:  00-8001-4203-4779

United Kingdom:  0800-640-3933

United States:  833-846-5630

About Valeura Energy Inc.

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

We seek Safe Harbor.