Good morning. My name is April and I will be your conference operator today. At this time, I would like to welcome everyone to the VAALCO Energy Second Quarter 2016 Earnings Conference Call. Today's host will be Liz Prochnow, Chief Accounting Officer; Steve Guidry, CEO; and Cary Bounds, COO. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session [Operator Instructions]. Thank you. Ms. Prochnow, you may begin your conference.

Thanks April. And on behalf of the management team, I welcome all of you to today's conference call to review VAALCO's second quarter 2016 operating and financial performance. After I cover the forward-looking statements, Steve Guidry, VAALCO's CEO, will review key highlights of the second quarter. Following Steve's comments, Cary Bounds, our COO and soon to be interim CEO, will then review operational results in more detail. I will then provide a more in-depth financial review and updated 2016 guidance. Steve will then return for some closing comments before we take your questions. During our questions session, we ask that you limit your questions to one question and a follow-up. I would like to point out, that we posted an updated Investor Deck on our web site this morning, that has additional financial analysis, comparisons and updated guidance, that should be helpful. With that let me proceed to our forward-looking statement comments. During the course of this conference call, the Company will be making forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement. Forward-looking statements are those concerning VAALCO's plans, expectations, future drilling and completion activities, expected capital expenditures, sources of future capital funding and liquidity, future strategic alternatives, prospect evaluations, negotiations with governments and third parties, reserve growth and other operations. Statements made during this conference call that address activities, events, or developments that VAALCO expects, believes or anticipates, will or may occur in the future are forward-looking statements. These statements are based on the assumptions made by VAALCO based on its experience, perception of historical trends, current conditions, expected future developments and other factors we believe that are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond VAALCO's control. 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 and in the reports we file with the Securities and Exchange Commission, including the second quarter 2016 Form 10-Q that was filed yesterday. Please note that this conference call is being recorded. Let me now turn the call over to Steve.

Thank you, Liz, and good morning everyone. Welcome to our second quarter 2016 earnings conference call. The second quarter of 2016 showed a marked improvement in our financial results, compared with the first quarter of this year. Revenues rose 72%, due to the combination of higher oil prices that were up 48% from the first quarter, and increased sales volumes that were up 14%. Our production volumes of 4,796 BOE per day exceeded the high end of our production guidance. From a cost perspective, we were within guidance on all of our costs. Cary and Liz will review costs in more detail later in the call. The improvement in revenue and continued close control of our costs, led to a higher operating income, which totaled $4.6 million compared to a loss of $6.6 million in the first quarter. We reported a small loss of $300,000 compared with a loss of $8.1 million in the prior quarter, and our EBITDAX rose $11 million from a loss of $3.1 million in the first quarter, to a gain of $7.7 million. These numbers reflect the significant positive impact even a modest improvement in pricing to $42.13 per barrel can have on our results, since we took the actions over the last 18 months to better position the company for the current downturn. Just as importantly, we reported a number of positive achievements during the quarter. First, we announced last month that we reached a fair and amicable agreement, regarding the remaining contract term on the rig we had used in our offshore Gabon drilling program. We agreed to a payment of $5.1 million net to VAALCO's interest for unused rig days under the contract. This amount, plus the company's share of demobilization charges is payable in seven equal monthly installments, with the first…

Thanks Steve. I appreciate your kind words and it has been a pleasure to work with you and have your leadership during a very challenging period for the oil and gas industry. I assure you, that we will build on the strategic direction laid out by you and the board, and continue running the business with a focus on maximizing shareholder value. Now, I would like to spend the next few minutes reviewing our second quarter operational results, expand on recent operational events, and talk about our near term path forward, which demonstrates our commitment to increasing margins by optimizing production and maintaining our positive cost savings momentum. VAALCO's total production increased 6% from 4,516 barrels of oil equivalent per day in the first quarter of 2016, to 4,796 barrels of oil equivalent per day in the second quarter of 2016. The production increase was due to minimal, unplanned downtime, continued strong performance from the wells added in the recent Etame development program, and there were no planned shutdowns as we had in the first quarter of 2016. We exceeded second quarter production expectations, primarily due to the fact, that from the end of the shutdown earlier this year in February through midyear 2016, the company has achieved greater than 97% runtime. As we previously disclosed, we temporarily lost production from one of our Avouma platform producing wells at the end of June, when the electric submersible pumps or ESPs failed in the South Tchibala 2H well. Prior to the ESP failures, the well was producing approximately 1,700 barrels of oil equivalent per day gross or 415 barrels of oil equivalent per day net. In late July, we experienced a third ESP failure, when one of the two ESPs in the Avouma 2H well failed. Prior to attempting to start…

Thank you, Cary. Our realized oil price for the second quarter of 2016 averaged $42.13 per barrel. This is up 48% from the first quarter of this year. Our oil sales volume totaled 436,000 barrels, which is up 14% from 381,000 in the first quarter. Our first quarter sales volumes were lower by the planned six day shutdown of production at offshore Gabon during our maintenance turnaround. Our second quarter 2016 operating income showed a marked improvement to $4.6 million. This compares to a loss of $6.6 million in the first quarter. We reported a net loss of $300,000, basically breakeven, which includes non-cash charges of $900,000 for the write-off of deferred financing costs, and $600,000 related to mark-to-market adjustments on our derivatives. Our adjusted EBITDAX grew to $7.7 million from a loss of $3.1 million in the 2016 first quarter. Turning to expenses; total production expense for the 2016 second quarter was $7.3 million, which includes the benefit of a $700,000 revision to the estimated accrual for prior period workover expenses. Ongoing production expenses, excluding workovers, totaled $8 million or $18.16 per BOE of sales compared to $8.9 million or $19.08 per BOE of sales in the second quarter of 2015, and $7 million or $18.16 per BOE in the first quarter of this year. Our second quarter 2016 production costs were below the midpoint in our guidance range. DD&A for the second quarter of 2016 was $1.9 million or $4.40 per BOE. This compares to $9.3 million or $20 per BOE in 2015 second quarter, and $2.2 million or $5.81 per BOE in the 2016 first quarter. We are reducing guidance for DD&A for the third quarter and full year of 2016 to between $4 and $6 per BOE. The lower rates in 2016 reflect the lower depletable…

Thanks Liz. To wrap up today's call, I'd like to discuss the results of our recent review of the strategic alternatives. In late January, we announced that our Board had formed a strategic committee to explore a range of strategic alternatives to further enhance shareholder value. Senior management was actively involved in that process. Over the last six months, we evaluated a wide range of options and opportunities. We had numerous meetings with a variety of firms, including larger and smaller E&P companies, oil services companies, investment and commercial banks and investment firms. We considered joint ventures, asset sales, form outs, acquisitions, and the possible sale or merger of the company. We also looked at securing additional investment in VAALCO to bolster liquidity and to fund attracted development opportunities and acquisitions. As discussed earlier, over the last few weeks, we announced several significant accomplishments as a direct result of that review process. That included, the resolution of the matter regarding the rig release earlier this year, the conversion of our ISC facility to a term loan and securing potential additional availability under that loan, and most importantly, the pending acquisition of an additional 3.23% participating interest in the Etame Marin concession. After a full review of all alternatives, the board believes, the best path forward is to seek additional targeted acquisitions like we did with Sojitz, where our existing expertise and current staffing can create value for shareholders, particularly in this extended low price environment. While our board will always consider proposals or opportunities presented to us for a review that can enhance value, we believe, continuing to seek attractively valued acquisition opportunities in our focus area and other similarly situated basins, is our best strategy. In summary, we believe that we have taken some key steps to positively impact our future, and we will continue to pursue value adding propositions. VAALCO is committed to safely achieving strong production results, lowering our overall cost structure and generating cash with a focus on enhancing shareholder value. Thank you, and with that April, we will be ready to take questions.

[Operator Instructions]. And our first question comes from the line of Glenn William [ph].

Good morning. Thank you for taking my call. Just a couple of quick questions. First, looking at some of the comments in the recent filing, it looks like you guys have the ability to generate positive operating cash flow at the second quarter pricing levels. Given that, are you going to be inclined to add additional hedges, if we see, should pricing stay where it is or move like north of $46 per barrel or so?

Good morning Glenn, thanks for that. The hedging strategy is something that we visit on a regular basis with the board, and it would be premature for me to comment on exactly what we might do going forward. It’s a discussion that we have at the board level. But right now, we are satisfied with the hedge that we have in place, which as you know, as one third of our production is hedged at $40 per barrel put. So we like the protection that that gives us against the downside, but at the same time, we are able to retain all of the upside potential on the full volume. But as it stands right now, as I said, we make that decision on a regular basis, and no decision has been made at this point, as to whether we would take on additional hedges.

Okay. That's fair. And also just as a follow-up, it looks like you guys had some pretty decent success at the Etame complex since the shutdown in February? And I was just curious if there was something specific that you guys have done to improve the runtimes, and also, how does the increase in runtimes compare to where they were pre-shutdown?

Okay. That's one of the things that we are most proud of. But let me ask Cary talk a little bit about what we have done to get to that 97% uptime.

Sure. Glenn, the shutdown that we took on in February was primarily to give us an opportunity to do planned maintenance. And planned maintenance preserves asset integrity, which means longer runtimes for our equipment. So that was definitely an outcome of the shutdown, was longer runtimes, because we got our planned maintenance in place, and we executed our asset integrity program. And then also, it's our operations team. They are heavily focused on maintaining production. We have gone from last year, when we were in the midst of a development drilling campaign and our focus was on the development drilling campaign, as well as production operations to 2016, where the team is entirely focused on maintaining production and production operations. And so I think that's a big part of it as well. Now prior to the shutdown, our runtimes were fairly good across the field, except for the Avouma platform, where we had some power issues. But we think we have gotten those resolved. And again, the runtime since the planned shutdown are the result of asset integrity and the focus of our team.

Okay. Thank you very much. I am sorry, just one last one, it was kind of mentioned at the end of the comments that kind of piqued my interest; as it relates to the targeted acquisitions that you guys may have, is it safe to say that you would be looking at, I guess, assets that currently have existing production already in place?

Glenn, we did, I'd say, modify our strategy as it relates to acquisition a bit. For a long time, we were focused clearly on discovered but undeveloped opportunities. But we have certainly turned our attention more towards looking at producing assets, and something that can generate immediate cash flow, is a much higher priority for us now. That's not to say that, we wouldn't give serious consideration to a very attractive discovered undeveloped resource, but production is more attractive today. Having said all of that, I could tell you that exploration is not. And so, we definitely have to put that on the backburner for now.

Okay. Thank you so much for your time.

Thank you.

And our next question comes from the line of Bill Dezellem.

Thank you. I'd like to expose my ignorance here to start with, can you explain how you bought the 3.23% interest and increased your production by 11%? That mismatch, I just don't understand?

Yeah. Bill, good morning. This is Steve. The interest that we purchased is roughly about 11% of our current position, and it takes from the 28.1% interest to upwards of 31% plus interest, and the production associated with that 3% is roughly 11%. So it increases our production. It also will proportionately increase our reserves. But on the reserve side, you have to take into consideration, the impact of timing and production that's occurred to look to arrive at a similar number. But maybe, to give you -- participating interest that we have in the field; you may recall, with the Tullow carry; while we have a 28.1% working interest, our participating interest, includes a portion of the interest that is held by Tullow, because it’s a carried interest. So we pay over 30% of the costs. So when we add 3% plus, that total percentage goes to the 33% level. So there is working interest that goes from 28% to 31%, but there is participating interest that goes from 30% to 33% plus. Does that help?

It does. But ultimately, it's nothing really more complicated than roughly 3% increase in interest on a base of 28%, which is about 11%?

That's right.

Okay, all right. Thank you. And then, would you please discuss your liftings that you had in the second quarter, remind us what they were in the first quarter, and then what you are estimating in terms of liftings in Q3?

Yeah. We don't typically publish our anticipated bookings going forward. But we do have our first quarter and second quarter liftings are included in our Q. if you look -- and they are also on our web site as well. So I don't have them summarized by quarter, but they are on our web site by date, and the number of the liftings. So we can do that math real quick. Why don't we -- let us run the math and tell you what the Q1 and Q2 were, and we will add them up real quickly and we will give you that number.

No problem at all. I can actually go back to the Qs. And then, relative to Q3, I know you don't want to give forward guidance on that, but let me ask, when was your last lifting in Q2 and how full was the tank at the end of Q2?

July 28th was our last lifting in the second quarter. And I talked earlier about how we don't give guidance on liftings on a forward basis, but we do give guidance on production. And our third quarter production guidance is between 3,700 and 4,000 barrels a day net, and of course, that includes the impact of the down wells at Avouma. So we would fully anticipate returning to the higher levels in the fourth quarter, once those wells are back on.

All right. That's helpful. Thank you.

Thank you, Bill.

And our next question comes from the line of Kenneth Palin [ph].

Hi. Good morning. [Indiscernible] for years and years, you guys have had problems with pumps. You said you are looking at a different contractor. What's actually going on with the submersible pumps, and is it something that's a third quarter problem or what exactly?

All right. Sure Kenneth. This is Cary Bounds. We have run ESPs for many years and over the years we have changed our design, and we have changed our design, mainly to improve runtimes. And so, during this last drilling campaign, we looked at our design and we modified it, in an effort to improve runtimes. And I will say that, we do have some issues at Avouma, that's clear. But there are other wells in the field that were part of the recent development program, that we are not seeing any issues with the ESP installation. So to really understand the root cause of the failures from the Avouma platform, we are going to have to pull the ESP systems, teardown the equipment and do a detailed inspection. And so, part of that -- the first step in that process is to pull the ESPs which we are mobilizing the hydraulic workover unit to pull the ESPs. After that, we have a very detailed plan for inspecting the pumps and understanding the root cause analysis. And I will say, part of the plan is to put as many experts as possible on this issue, which includes all of the internal VAALCO technical team, a technical team from Schlumberger, and then third party experts as well. So we are putting resources to understanding the root cause. But I can't tell you exactly what the root cause is today. We have got to, like I said, do and tear down the equipment and inspect. And that work is planned, and will be underway very soon.

Okay. Maybe I missed the very beginning, was there any update on -- you had some well before there was [indiscernible], there were some sulfur issues, is that correct?

Yes. We have H2S presence at our Ebouri Field. We had to -- couple of years ago, we had to shut-in two wells, because of high H2S content, but we do have one remaining producing well at the Ebouri Field that has relatively low H2S content. And then over at our Etame main fault block, we did see the presence of H2S in our Etame number 5 well, and also the Etame 8 well, when we drilled it in 2015. So we have seen the presence of H2S in those two fields, but we think, even within the Etame field for example, that its limited to areas close to the oil/water contact, and we don't see as much exposure in other fields, such as Avouma, North Tchibala, South Tchibala and Southeast Etame.

Okay. I think at the time you said too, you were working on mitigating that problem. Is there any update on those wells?

Well, we are mitigating the problem in a couple of ways already. We do feel like the source of the H2S is water, and so we do -- we watch the wells very closely, and we operate them to minimize water production. And then we did launch a taskforce to look at H2S removal solutions. So we have all of that technical work that we have done, and we have looked at, I don't know, let's say 30 to 50 different alternatives for H2S removal, and at current pricing and current market conditions, it really just doesn't make sense with the sour resources that we know we have.

Okay, great. I guess then finally, was that Sojitz an entire holding or is there possibility of buying more from them, and did you say what the price was?

Yeah Kenneth, its Steve. What we have purchased is Sojitz's entire interest in the Etame block. So there is nothing more that can be purchased from Sojitz. We continue to evaluate other opportunities for acquisitions and producing assets, both at Etame and in other places as well. And as far as the price is concerned, we are honoring the request of the counterparty, and not publishing the acquisition costs. Not the exact number.

Okay. Is there a number that would need you to borrow more money, or is it something that you can handle with your balance sheet, or?

You know, I think we said before that, while the additional $5 million of availability from the ISC is not earmarked for any acquisition, we were requested that additional financial capacity, in order that should be -- should the Sojitz acquisition close, and we have no reason to believe it won't. We could then go to the ISC and request monies to replenish, whatever monies we might have spent for the Sojitz acquisition.

Okay. All right. Finally, you have other large partners that -- in your field, are those other partners interested in selling or alternatively increasing their position, you are one of about four or five partners?

We are, we are. And it’s a good question, but it's one that probably is better asked of them than of us. We have competition from lots of companies, both in Etame and outside of Etame. But all of those conversations of those sorts are all protected under confidentiality. So that's a question I would suggest you, you talk to them about. But good question.

All right. Well thank you.

Just to circle back with Bill, your question on the liftings; sorry, we had to pull these numbers together on a net basis. But essentially, in Q1, on a gross basis, we lifted 1.55 million barrels, that's 381,000 net to VAALCO, and in Q2, we lifted 1.78 million barrels gross, which is the 436,000 barrels net to VAALCO. So hopefully, that answered your question Bill.

And there are no further questions at this time. Okay. Well, thank you very much for your time and your attention, and VAALCO will be here next quarter with a third quarter story. Thanks.

Thank you for participating in today's conference call. This call will be available for replay beginning today at 2:00 PM Eastern, through August the 14th, at 11:59 PM Eastern. The conference ID for the replay is, 58424453. Again, the conference ID for the replay is, 58424453. The number to dial for the replay is 1800-585-8367 or 1404-537-3406.