Kolibri Global Energy - Earnings Call - Q4 2024

Transcript

Operator (participant)

Good day, and welcome to the Kolibri Global Energy's 2024 Annual Financials Conference Call. All participants will be in a listen-only mode. Media may monitor this call in a listen-only mode. They are free to quote any member of management but are asked to not quote remarks from any other participant without that participant's permission. If anyone has any trouble and needs assistance, please signal a 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, you may press star, then one on your touch-tone phone. To withdraw your question, please press star, then two. Please note that this event is being recorded. I advise participants that this conference is being recorded today, March 26th, 2025. This call will be available on the company's website at www.kolibrienergy.com.

This call may include forward-looking information regarding Kolibri's strategic plans, anticipated production, capital expenditures, exit rates and cash flows, reserves, and other estimates and forecasts. Forward-looking information is subject to risks and uncertainties, and actual results will vary from the forward-looking statements. This call may include forward-oriented financial information and financial outlook information which Kolibri discloses in order to provide readers with a more complete perspective on Kolibri's potential future operations, and such information may not be appropriate for other purposes. For a description of the assumptions on which such forward-looking information is based and the applicable risks and uncertainties in Kolibri's policy for updating such statements, we direct you to Kolibri's most recent annual information form and management's discussion and analysis for the period under discussion, as well as Kolibri's most recent corporate presentation, all of which are available on Kolibri's website.

Listeners should not place undue reliance on forward-looking information. Kolibri undertakes no obligation to update any forward-looking, future-oriented financial or financial outlook information other than as required by applicable law. I would now like to turn the call over to Wolf Regener, the President and CEO of Kolibri Global Energy. Please go ahead, sir.

Wolf Regener (President and CEO)

Thank you, Nick, and thank you, everyone, for joining us today. With me today on the call is Gary Johnson, our Chief Financial Officer. We released our 2024 annual report yesterday, and we'll assume you've had a chance to look over the report. We are very pleased with the accomplishments we've achieved. I think that we've had an outstanding year with great results in multiple areas. Production increases of 24% over 2023, accomplished with a capital spend that was below the low end of our guidance. We had successful and under-budget drilling of the first three longer lateral wells, the 1.5 mi lateral Alicia Renee wells, which are performing very well. We have drilled them very quickly, only taking two days longer than our one-mile laterals. We added 50% to the amount of reservoir that we accessed for an extra only 15% in drilling time.

That all makes a big impact on efficiencies. Our operating expenses remain low. Our 2024 average was $7.44 per BOE, which actually included $0.63 of prior-year gas and NGL processing from our gatherer XTO, without which our 2024 numbers would have been about $6.81 for the year. Our efficient operations led to great unhedged netback. We have in 2024, which were $38.54. That is how much we make per barrel of oil that we pull out of the ground, with an average oil price of $74.06 and gas as low as $1.93 an MCF. On top of that, our 2024 year-end proved reserves increased by 24% over the 2023 year-end numbers, which is really a big increase. In 2024, we also increased our line of credit up to $50 million. Things are going very well for the company.

With that, I'll turn the call over to Gary to discuss our financial results.

Gary Johnson (CFO)

Thanks, Wolf, and thanks, everyone, for joining the call. I am going to go over a few highlights of our annual and fourth-quarter results, as well as our 2025 forecast, and then we will take questions at the end. All amounts are in US dollars unless otherwise stated. As you mentioned in our earnings release yesterday, we reported our highest annual revenue and adjusted EBITDA ever for the company. Net revenue for 2024 was $58.5 million, which was an increase of 60% compared to the prior year and within our forecasted guidance. The increase was due to an increase in production, partially offset by lower prices of 7%. Adjusted EBITDA increased 28% to $44 million, which was within our guidance, and that compared to $39.1 million in 2023 due to the higher revenue, partially offset by higher operating and G&A expenses.

Average production for 2024 was also within our guidance, as it increased 24% to $3,478 BOE per day compared to $2,796 in the prior year. The increase was due to the wells we added in 2024, including our three Alicia Renee 1.5-mile lateral wells, which came on production in the fourth quarter. Net income was $18.1 million, and basic EPS was $0.51 per share in 2024, compared to $19.3 million and basic EPS of $0.54 per share in 2023, a 6% decrease. Operating expenses were $7.44 per BOE for the year compared to $6.61 in 2023. Like Wolf mentioned, that did include $0.62 of prior-year cost true-ups in 2024.

CapEx for 2024 was $31.3 million compared to $53.2 million in 2023, which was a decrease of 41% and about $2 million less than the low end of our forecasted guidance as we continued to achieve cost efficiencies in our field operations. Our netback from operations decreased to $38.54 per BOE compared to $42.97 in the prior year. This was due to lower average prices of 7% and higher operating expenses. Our net debt at the end of 2024 was $28.9 million, which was slightly better than the lowest end of our forecasted guidance. Now I'm going to move on to the fourth-quarter results. Our average production for the quarter was 4,440 BOE per day compared to 2,842 in the prior-year quarter, which was an increase of 56% due to production from the 2024 wells.

Adjusted EBITDA was $13.5 million, which was a 28% increase from the prior-year fourth quarter, due to the higher production partially offset by a 17% price decrease. Net revenue was $17.4 million in the fourth quarter compared to $13.4 million in the prior-year quarter, an increase of 29%. Net income for the quarter was $5.6 million, and basic EPS was $0.16 per share compared to $4.8 million and basic EPS of $0.14 per share in the prior-year fourth quarter. Operating expenses were $6.59 per BOE in the fourth quarter compared to $7.02 in the prior-year quarter, which was a decrease of 6% due to increased production, which reduced the per barrel fixed cost. Netback from operations was $35.94 per BOE compared to $44.40 in the prior-year quarter, which was a decrease of 19% due to the lower prices in 2024.

Next, I wanted to touch on our 2025 forecast, which we released at the beginning of the year. Our forecast continues to show double-digit growth on top of the significant growth we've already achieved over the last three years. Our average production forecast is 4,500-5,100 BOE per day, which is a 29%-47% increase from our 2024 actual production. The revenue forecast of $75 million-$89 million is a 28%-52% increase from our revenue in 2024. Our adjusted EBITDA forecast is $58 million-$71 million, which is a 32%-61% increase from our 2024 adjusted EBITDA. We forecasted to spend between $48 million-$53 million on our CapEx, as we expect to bring nine wells into production, with seven of them being longer laterals. All this growth is expected to be funded by our cash flow from operations.

We will tap into our credit facility to manage our working capital during the year, but we expect to have net debt of $25 million-$30 million at the end of 2025. Our leverage ratio is expected to be well below one. The last item I wanted to mention is our share buyback program. During 2024, we purchased 280,656 shares for about $1.1 million. Our plan is to continue to buy back shares in 2025 while managing our cash flow needs for the new wells. With that, I'll hand it back to Wolf.

Wolf Regener (President and CEO)

Thanks, Gary. As I stated, we had a great 2024, and as Gary pointed out with all the detailed numbers. When you look over the last few years, the company has had quite the growth. Revenue and cash flow have grown a lot, while keeping our leverage low. As you heard from Gary, our production is forecast to continue growing. Our team has been executing really well. Our striving for constant improvement has been paying off well. The drilling times and cost improvements have been huge. We've also had numerous completion improvements that have led to more economic wells. Our operating expenses and netback are, from what I can see, the best among our peers. As to the stock price, we had a 58% gain in 2024, and it's been up even more in 2025.

I'm glad the company is starting to get some recognition, and we'll continue to attempt to get the word out and make more people aware of our story. In addition, as Gary mentioned, we're intending to continue our returning capital to shareholders in the form of our share buybacks. Overall, our plan is to continue to execute and to build and grow company value for all shareholders. This includes the formal part of our presentation, and we would be pleased to answer any questions you may now have.

Operator (participant)

We'll now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two. At this time, we will pause momentarily to assemble our roster. Your first question today will come from John White with Roth Capital. Please go ahead.

John White (Senior Research Analyst)

Good morning and congratulations on the strong results, especially your LOE per BOE. Very impressive operating cost number.

Wolf Regener (President and CEO)

Thank you, John. I appreciate it. Appreciate you coming on the call as well.

John White (Senior Research Analyst)

You're drilling the Lovina wells right now. 100% working interest. Remind me again, what is your net revenue interest in the Lovina wells?

Wolf Regener (President and CEO)

In the Lovina wells, we are around 80%.

John White (Senior Research Analyst)

100%?

Wolf Regener (President and CEO)

Oh, working interest. Yeah, sorry. I thought you said net revenue. Did you say net revenue, John?

John White (Senior Research Analyst)

Net revenue interest.

Wolf Regener (President and CEO)

Yeah, net revenue is, I think it's around 79%, roughly. I'll have to look exactly, but our average is right in that range.

John White (Senior Research Analyst)

Okay. Those are going to finish up. Those are going to be fracked in May. Would we expect production press release in June?

Wolf Regener (President and CEO)

Yes. Yeah. Depending on weather and timing for the frackers when they finish up their previous job. Right now, we're scheduled about mid-May, and then we'll be bringing those—we intend to bring those wells on production sometime in early June.

John White (Senior Research Analyst)

Okay. When do you think the Ferguson well would be fracked?

Wolf Regener (President and CEO)

The plan right now is to frack that sometime in July, but we'll see if that doesn't move into June. Or it's into June, I should say, not as well, but bringing it on in July sometime.

John White (Senior Research Analyst)

Okay. Again, congratulations and good luck with all your operations. I'll turn the call back to the operator.

Wolf Regener (President and CEO)

Sounds good. Thank you, John. Appreciate it.

Operator (participant)

Your next question today will come from Steve Ferazani with Sidoti. Please go ahead.

Steve Ferazani (Senior Equity Analyst)

Morning, Wolf. I appreciate the detail on the call. Or afternoon, I should say. Could you talk a little bit about any changes in your hedging strategy? I could see that the release day showed your hedging into 2026. Any reason to shift it given some concerns over oil prices?

Wolf Regener (President and CEO)

No, not really. I mean, we try to protect the lower end of it. We want to keep the upper end open as much as we can. We have been going with the costless collars. Really, we are hedging right now what the bank wants us to hedge. Gary, you want to give a little color on that?

Gary Johnson (CFO)

Yeah. So we're required to hedge 50% of our next 12 months and 35% of three quarters after that. Is that correct?

Wolf Regener (President and CEO)

That's a BOE portion. Yeah.

Gary Johnson (CFO)

That's the outside. That's only the oil.

Wolf Regener (President and CEO)

That's the forecasted oil based on our existing wells that are on production, not on future wells.

Gary Johnson (CFO)

Yeah.

Steve Ferazani (Senior Equity Analyst)

Okay.

Gary Johnson (CFO)

We have watched our costless collars are a pretty wide bandwidth. The current, yeah, it's $60.94. So we have some flexibility there in the price unless it goes really low.

Steve Ferazani (Senior Equity Analyst)

Got it. That's great. Thank you. Can you talk a little bit about the success of drilling the proved reserves last year and what you think the drilling program—where the drilling program is focused this year? I know last year a lot of the drilling was on your reserves that were not improved. How does that compare to what your plans are in 2025?

Wolf Regener (President and CEO)

This year, we are drilling mainly in our proved acreage. We are hoping that drilling in this proved acreage will show how well these longer laterals are performing because, in our opinion, we were still haircut by Netherland, Sewell & Associates on the longer laterals. As we get more production from these longer laterals, I think that will—assuming they perform like we expect them to, and it looks like the Alicia Renee wells are doing—we should not have those haircut in comparison to the one-mile laterals that we had in the past. That is really the focus of that. Obviously, the east side acreage, that Ferguson well, that is another 3,000 ac for us. That is not in the reserve report at all.

That is our, we call it, step out to see if we can add some more reserves into the bank without taking a lot of risk because that looks good out there. It looks similar to what is in the heart of the field. It is just a little shallower. It is a matter of what do the economics look like? Where does it work? Does it work at $40 oil? Does it work at $60 oil? Does it work at $80 oil? I am expecting there to be a well there. It is just a matter of how economic it is.

Steve Ferazani (Senior Equity Analyst)

Got it. That's helpful. I know I don't want to look too far into the future, but for modeling purposes, you have the two more wells to drill and the two you're going to frack in the second half. Any sense of timing at this point just to help us with the modeling?

Wolf Regener (President and CEO)

I think we're planning on spudding those in around August to early September.

Steve Ferazani (Senior Equity Analyst)

Okay. With the fracking of the other two at the same time?

Wolf Regener (President and CEO)

With the same following. Yeah. With the following for all four at the same time. Yes. Correct.

Steve Ferazani (Senior Equity Analyst)

Got it. Great. Thanks, Wolf. Thanks, Gary.

Wolf Regener (President and CEO)

All right. Thank you.

Operator (participant)

Again, if you have a question, please press star and then one. Your next question today will come from Leigh Curry with Curry Partners. Please go ahead.

Leigh Curry (President)

Thank you very much. I noticed that the Ferguson well has a 46% working interest instead of the 100%. Am I correct that that's the one Exxon is participating with you in?

Wolf Regener (President and CEO)

Yeah. I don't really say who the company is. They don't—

Leigh Curry (President)

Oh, okay.

Wolf Regener (President and CEO)

I refer to it as a large integrated oil company that has bought out everyone around us.

Leigh Curry (President)

All right. Whatever.

Wolf Regener (President and CEO)

They don't like their name in print.

Leigh Curry (President)

Whichever large integrated company that's doing that, it's pretty exciting, I think, when you have an unknown large integrated player farming into a step out, if not a new field wildcat. Congratulations.

Wolf Regener (President and CEO)

Yep. Thank you. Appreciate it. Yeah. We're good. We've done a good job.

Leigh Curry (President)

Explaining who it is, could you sort of say, how did that come about?

Wolf Regener (President and CEO)

It's more along the lines of what acreage that they had out there as well. We have some joint acreage together with them. We are kind of subject to the section, and they elected to participate. In the past, they have not always participated, I will say.

Leigh Curry (President)

That's it. I think that's a validation. Keep doing what y'all are doing, guys. Thank you.

Wolf Regener (President and CEO)

Thank you very much. Thanks for the question.

Operator (participant)

Concludes our question and answer session. I would like to turn the conference back over to Wolf Regener for any closing remarks.

Wolf Regener (President and CEO)

I just want to say thank you all for participating and joining. We are looking forward to another great year. Everything looks like it's on track in order to achieve that. Let's hope it continues that way. I look forward to having future calls to share good news as well. Thank you everyone.

Operator (participant)

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.