Cobas AM: Nueva Gestora de Francisco García Paramés

Bill Dezellem

Absolutely. And then lastly, would you please talk through your view of your acquisition pipeline and how those opportunities are looking today relative to how they may have – how you may have viewed them in the past?

Cary Bounds

Well, a couple of things, the – I would say the pipeline is more active than we've seen in the past, which is obviously very positive for us. So we are looking at opportunities that fit us strategically. We do screen the opportunities. We look for opportunities that fit us strategically. And so I think there's a couple of things happening. Number one, it's our reputation as an operator. We've demonstrated, we can execute a drilling program for example on-time on-budget we've positioned ourselves well to whether through the current downturn in prices. And so we're actually an attractive buyer, I think, and I think that has helped generate some or increase the pipeline, I should say of opportunities that we're seeing.

And then second, we are seeing companies that are rationalizing their portfolios in West Africa and choosing to divest of non-core assets. And that would fit us very well, assets that might not make sense for a large company, the assets are producing, they might have some development opportunities, but it just doesn't fit a large company, but that fits us very well. And so we are seeing some of those opportunities come our way. So I say the – in terms of the acquisition pipeline, it's as good – it's much better than it was before for those reasons.

Bill Dezellem

In which you said that some of these opportunities would come to fruition and/or closure, earning you would either write a check or pass on those assets by the end of the year, or just for COVID and other reasons would discussions be slower than that?

Cary Bounds

It could happen by the end of the year. I'm not, I have nothing to announce right now, but I think that the industry has learned to work through and work together in spite of the challenges that we faced with the pandemic. So something could happen this year, I'm not – I'm not saying, Bill, that there's anything to announce, but yes, there's still time for something to happen this year.

Jamie Wilen

One of your partners in Gabon is divesting some of their assets in the territory. Can you tell us what that means for us and other opportunities for us to purchase theirs? And have you had discussions with them?

Cary Bounds

Well, I cannot talk about any negotiations until we have something to announce. And so you are right, Sasol has announced that they are selling their upstream operations in West Africa. And presumably that will include Sasol’s interest in Etame. And so what I will say is of course, we are very pleased with the Etame assets. And if we – if possible, we would talk to Sasol about buying their interest, but of course at the right price. So, we're very happy with the Etame asset. We would consider buying more again at the right price. But I can't speak to any ongoing negotiations.

Unidentified Analyst

Yes, hi, thanks. My question is obviously we're in a good position from the perspective that we don't have any debt right now. But to the extent that a couple of the things you are working on, either as it relates to an acquisition or a discretionary drilling campaign of whatever magnitude it may be. To the extent that that capital is going to be required, can you speak a little bit to some of the funding mechanisms to get that done at this time? Thanks.

Cary Bounds

Sure, sure. So let me take that in pieces. For the organic growth that we're targeting from Etame and drilling wells at Etame, we believe we can fund the drilling from cash on hand or cash from operations. So the only extra funding or external funding we might require is if we do – is if we execute on an acquisition. And so not only the purchase price, but potentially these acquisitions will require capital or drilling after we close the transaction.

And so we, of course, look at what cash we have available to put towards an acquisition. And then we are in touch with the debt markets and looking at what the debt would cost. And then the other tool we have is of course equity. But I think I would – we want to raise funds in a way that makes sense. But anyway, we're considering for an acquisition using some of our cash on hand debt at a reasonable cost and then if we need to, possibly raising equity.

Unidentified Analyst

Okay. I mean, so obviously all avenues are open, but at this time you are sort of – I mean, I guess it depends on the acquisition. But you are not leaning one way or another towards a particular funding mechanism that you think is attractive from a general perspective, versus what else is available out there.

Cary Bounds

Right, no we're not necessarily leaning one way or the other. We're looking, I think, I would rank things in the order that I gave you for an acquisition. First we'll use cash on hand, but preserving of cash to fund our investments at Etame. And then second is debt. And then third is raising equity. But we're not leading, any one way. I think that's a fair statement.