VAALCO Energy, Inc. (NYSE: EGY) today reported results for the
first quarter of 2015.
First Quarter 2015 highlights:
- Successfully drilled and completed two
development wells on the new Etame platform, offshore Gabon. First
production from the Etame 10-H and Etame 12-H wells occurred in
February and April 2015, respectively.
- Increased offshore Gabon production
capacity 30% since the fourth quarter of 2014 with the two new
wells which are currently producing a combined total of 4,600 gross
barrels of crude oil per day (BOPD) (1,100 BOPD net to the
Company).
- Grew total production to 1,555,600
barrels of crude oil (Bbls) gross (380,000 Bbls net), up 6%
compared to 1,370,000 Bbls gross (360,000 Bbls net) in the first
quarter of 2014.
- Confirmed 25 million gross Bbls in
place in the Etame 1-V fault block based on successful drilling at
the new Etame platform.
- Mobilized the Transocean “Constellation
II” jack up rig to begin development drilling at the new Southeast
Etame/North Tchibala (SEENT) platform following completion of
initial drilling at the Etame platform.
For the 2015 first quarter, VAALCO reported a net loss of $39.0
million, or $0.67 loss per diluted share, which includes dry hole
and non-cash leasehold expense totaling $27.2 million, or $0.47 per
diluted share, related to the unsuccessful post-salt Kindele
exploration well offshore Angola. The loss for the quarter includes
a non-cash impairment charge of $5.4 million, or $0.09 per diluted
share, to write-down VAALCO’s investment in the Etame Marin Block
as a result of further declines in forecasted oil prices. The
benefit of increased production in the first quarter from the
Company’s Etame field following the successful drilling of two
development wells from its new Etame platform was more than offset
by lower crude oil prices. In the first quarter of 2014, VAALCO
reported a net loss of $7.0 million, or $0.12 per diluted
share.
Steve Guidry, Chairman and CEO, commented: “With the two new
successful wells at our recently installed Etame Platform, we are
well on our way to resuming growth in production offshore Gabon.
The two new wells are performing beyond expectations and are
achieving the level of production from the platform that we had
anticipated from three producing wells. Just as importantly, the
new wells helped confirm the existence of significant reserves in
place in the un-drained lower Gamba sand in the 1-V fault block. We
now look forward to results from additional development wells that
will be drilled from the new SEENT platform. We expect to have
results in the second half of June on the first development well at
the Southeast Etame field being drilled to the Gamba formation. We
will then drill to the Dentale formation in the North Tchibala
area, a new formation not currently producing, but which has been
tested by previous successful exploratory and delineation wells. We
look forward to continued production growth through 2015 as these
new wells are placed online.”
Guidry continued, “While we were disappointed that our initial
well offshore Angola was not successful, we did encounter
hydrocarbons higher in the Pinda section and confirmed the
existence of thick, well-developed, albeit water-bearing, sands in
the target formation. Our processing of new seismic data over Block
5 is very encouraging and has yielded a number of new pre- and
post-salt leads that will provide us with an expanded inventory of
exciting new exploratory opportunities for the future. No
additional drilling is planned in Angola until late next year at
the earliest, providing ample time to study the seismic data as
well as benefit from the reduction in rig rates that the industry
downturn has provided. We are also moving forward with our
development projects onshore Gabon and offshore Equatorial Guinea
at a more measured pace to give us the opportunity to consider
lower cost development alternatives that will yield higher returns
on those projects.”
Gabon
In the first quarter of 2015, the Company drilled two new
development wells offshore Gabon from the recently installed Etame
platform. The Etame 10-H well was brought on production in the
first quarter of 2015 at an initial rate of approximately 3,000
BOPD on a gross basis. The Etame 10-H well confirmed the presence
of an un-drained lower lobe of the Gamba reservoir in this fault
block, which is estimated to have approximately 25 million gross
Bbls in place. The Company began drilling the Etame 12-H in March
2015 which was subsequently completed early in the second quarter
of 2015 and was brought on production in April 2015 at an initial
rate of approximately 2,000 BOPD on a gross basis.
After the completion of the Etame 12-H well, the drilling rig
currently under contract was moved to begin drilling additional
development wells from the recently installed SEENT platform. The
Company began drilling a development well in the Southeast Etame
Field in April 2015, and after completion, expects to drill to the
North Tchibala field. The Company drilled a successful exploration
well in the Southeast Etame area in 2010 to the Gamba formation
which will be developed from the second platform. An oil discovery
was made in the North Tchibala field in the Dentale formation prior
to the Company acquiring the lease on the Etame Marin block in
1995.
The Company and its partners are evaluating options for handling
oil containing hydrogen sulfide (H2S) that has impacted certain
wells in the Ebouri and Etame fields. The extended test of the
Etame 8-H well that was drilled from the Etame Platform late last
year was performed in the first quarter of 2015 and confirmed the
presence of H2S; as a result, the well remains shut-in and is being
evaluated for future utility.
To re-establish and maximize production from the impacted areas,
additional capital investment will be required, including a
processing facility (or facilities) capable of removing H2S,
recompletion of the temporarily abandoned wells, and potentially,
additional new wells. Considering the substantial fall in oil
prices, the Company and its partners are focusing on more cost
efficient options for processing (e.g. chemical removal options,
construction of smaller facilities on existing structures, or the
use of surplus equipment and used structures). It is expected that
the project concept will be decided and the timing of the project
startup will be known as early as the fourth quarter of 2015 with a
goal of re-establishing production from the area impacted by H2S as
soon as practical.
Onshore Gabon, VAALCO continues to work with its concession
partner and the government of Gabon to obtain approval of a revised
production sharing contract for the Mutamba Iroru block. Once the
contract is approved, a plan of development will be submitted.
Costs and design are being re-evaluated to improve returns on the
investment contemplated.
Angola
A drilling rig contract was signed in July 2014 for a
semi-submersible rig to drill the exploration well on the Kindele
prospect, a post-salt objective. The well was drilled in the first
quarter of 2015 and while thick, well-developed sands were
encountered in the primary objective, the sands were determined to
be water-bearing, and the well was plugged and abandoned. However,
non-commercial quantities of oil were encountered higher in the
Pinda section, thus proving the existence of a working hydrocarbon
system. Accordingly, the Company has expensed $24.5 million related
to the Kindele prospect to exploration expense during the three
months ended March 31, 2015. Additionally, in the first quarter of
2015, the Company recognized exploration expense of $2.7 million
related to a portion of the capitalized leasehold costs for its
interests in Angola Block 5 as a result of the unsuccessful
well.
The unfavorable results from the Kindele well do not diminish
the attractiveness of other post-salt or pre-salt prospects on
Block 5. VAALCO continues to interpret the 3D seismic data that it
previously acquired over the block and is pleased with the new
post-salt and pre-salt leads that have been identified to date. No
additional exploratory drilling in Angola is expected before late
2016.
Equatorial Guinea
The Company continues to work with GEPetrol, the block operator,
on a joint operatorship model and with the Ministry of Mines,
Industry and Energy regarding timing and budgeting for development
and exploration activities. Field development options are being
re-evaluated to take advantage of lower capital costs for equipment
and services resulting from the current industry downturn to
improve the economics of the Block P development.
2015 First Quarter Financial Results
Total oil and gas sales for the first quarter of 2015 were $18.2
million, compared to $28.1 million for the same period in 2014. The
decrease in revenue is related to the significant decrease in the
realized crude oil sales price per barrel.
Oil Revenues
Gabon
Crude oil revenues for the three months ended March 31, 2015
were $18.1 million, as compared to revenues of $27.7 million for
the same period in 2014. During the first quarter of 2015, VAALCO
sold approximately 372,000 net Bbls at an average price of $48.66
per Bbl in Gabon compared to 257,000 Bbls at an average price of
$107.97 per Bbl in the first quarter of 2014.
Natural Gas Revenues
United States
Natural gas revenues (including revenues from natural gas
liquids) for the three months ended March 31, 2015 were $0.1
million compared to $0.3 million for the comparable period in 2014.
Natural gas sales were approximately 46 million cubic feet (MMcf)
at an average price of $2.82 per thousand cubic feet (Mcf)
including natural gas liquids for the three months ended March 31,
2015. For the same period of 2014, natural gas sales were
approximately 69 MMcf at an average price of $3.92 per Mcf
including natural gas liquids.
Operating Costs and Expenses
Total production expenses (excluding workovers) for the first
quarter of 2015 were $9.9 million, or $26.09 per barrel of oil
equivalent (BOE), compared to $9.7 million, or $23.98 per BOE, in
the first quarter of 2014. In the three months ended March 31,
2015, the Company expensed $1.4 million, or $3.60 per BOE related
to capitalized costs for the design of a centralized processing
facility to remove H2S from production from impacted wells in the
Ebouri and Etame fields as the Company now anticipates implementing
a more optimal solution given the dramatic decrease in oil
prices.
Exploration expenses were $27.5 million in the first quarter of
2015 compared to $11.3 million in the comparable period in 2014. As
discussed previously, the expense in the first quarter of 2015
related to the unsuccessful Kindele well offshore Angola that was
plugged and abandoned.
Depreciation, depletion and amortization (DD&A) expenses
were $5.9 million, or $15.62 per BOE in the three months ended
March 31, 2015 compared to $4.2 million, or $15.47 per BOE in
the three months ended March 31, 2014. The higher DD&A
expenses are primarily due to higher sales volumes.
General and administrative expenses for the three months ended
March 31, 2015 was $4.9 million as compared to $3.6 million in
the three months ended 2014. The increase in general and
administrative cost was primarily due to personnel costs and
professional support service expenses associated with expanded
operations. General and administrative expense includes $1.7
million and $1.4 million of non-cash compensation expense for March
31, 2015 and March 31, 2014, respectively.
In the three months ended March 31, 2015, the Company recorded
an impairment loss of $5.4 million to write down its investment in
the Southeast Etame and North Tchibala fields in the Etame Marin
Block, offshore Gabon. The impairment is a result of the further
decline in the forecasted oil prices used in the impairment testing
and calculation. In the three months ended March 31, 2014, the
Company recorded no impairment losses.
Income tax expense for the first quarter of 2015 was $3.4
million compared to $6.1 million for the same period in 2014. Taxes
in both periods were all paid in Gabon. The decrease in tax was
primarily related to the decrease in revenue resulting from lower
oil prices and to significant capital costs related to the
construction of two new platforms and the drilling of new wells
from those platforms for the majority of 2015 in the Etame Marin
block. Income taxes paid to the government of Gabon are a function
of taxation on the remaining profit oil value after deducting the
royalty and the cost oil values.
Capital Investments/Balance Sheet
During the three months ended March 31, 2015, the Company
expended $28.1 million in net property and equipment additions,
primarily associated with the drilling of development wells from
the new Etame platform, offshore Gabon. The Company’s full year
2015 capital expenditures are expected to be in the range of $65.0
million to $75.0 million to further develop the Etame Marin block
offshore Gabon and for its drilling activities to-date in Gabon and
Angola.
On March 31, 2015, VAALCO had $63.6 million in cash (including
cash held as restricted primarily for future drilling commitments
offshore Angola). The Company believes that this cash balance,
combined with cash flow from operations, will be more than
sufficient to fund the Company's 2015 operations.
Conference Call
As previously announced, the Company will hold a conference call
to discuss its first quarter and results on Friday, May 8, 2015, at
10:00 a.m. Central Time (11:00 a.m. Eastern Time). Interested
parties may participate by dialing 1 (877) 531-2988. International
parties may dial 1 (612) 332-7516. The confirmation code is 357982.
This call will also be webcast on VAALCO’s website at
www.vaalco.com.
An audio replay will be available beginning approximately one
hour after the end of the conference call through June 8, 2015, on
the Company’s website and by dialing 1 (800) 475-6701.
International parties may dial 1 (320) 365-3844. The confirmation
code is 357982.
Forward Looking Statements
This document includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are those concerning VAALCO's plans,
expectations, and objectives for future drilling, completion and
other operations and activities. All statements included in this
document 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 include
expected capital expenditures, future drilling plans, prospect
evaluations, negotiations with governments and third parties,
expectations regarding processing facilities, and reserve growth.
These statements are based on assumptions made by VAALCO based on
its experience perception of historical trends, current conditions,
expected future developments and other factors it believes 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. These risks include, but are not limited
to, oil and gas price volatility, inflation, general economic
conditions, the Company's success in discovering, developing and
producing reserves, lack of availability of goods, services and
capital, environmental risks, drilling risks, foreign operational
risks, and regulatory changes. These and other risks are further
described in VAALCO's quarterly report on Form 10-Q for the three
months ended March 31, 2015, annual report on Form 10-K for the
years ended December 31, 2014, and other reports filed with the SEC
which can be reviewed at http://www.sec.gov, or which can be
received by contacting VAALCO at 9800 Richmond Avenue, Suite 700,
Houston, Texas 77042, (713) 623-0801. Investors are cautioned that
forward-looking statements are not guarantees of future performance
and that 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.
About VAALCO
VAALCO Energy, Inc. is a Houston based independent energy
company principally engaged in the acquisition, exploration,
development and production of crude oil. VAALCO's strategy is to
increase reserves and production through the exploration and
exploitation of oil and natural gas properties with high emphasis
on international opportunities. The company's properties and
exploration acreage are located primarily in Gabon, Angola and
Equatorial Guinea in West Africa.
VAALCO ENERGY, INC. AND SUBSIDIARIES CONDENSED
CONSOLIDATED BALANCE SHEETS (in thousands, except number of
shares and par value amounts)
March
31,2015 December 31,2014
(Unaudited) ASSETS
Current assets: Cash and cash equivalents
$ 46,552 $
69,051 Restricted cash
1,197 1,584 Receivables: Trade
19,209 19,527 Accounts with partners, net of allowance $7.6
million at March 31, 2015 and December 31, 2014
30,283
10,903 Other, net of allowance of $2.4 million at March 31, 2015
and December 31, 2014
6,089 3,285 Crude oil inventory
1,692 1,905 Materials and supplies
233 286
Prepayments and other
5,854 6,509
Total current assets
111,109
113,050 Property and equipment - successful efforts method:
Wells, platforms and other production facilities
359,105
338,641 Undeveloped acreage
19,412 22,133 Work in progress
17,213 25,157 Equipment and other
11,290
11,907
407,020 397,838 Accumulated
depreciation, depletion and amortization
(300,014
) (289,714 ) Net property and equipment
107,006 108,124 Other assets:
Restricted cash
15,830 20,830 Deferred tax asset
1,349 1,349 Deferred finance charge
1,799 1,959
Abandonment funding
3,537 3,537
Total Assets
$ 240,630 $ 248,849
LIABILITIES AND EQUITY Current liabilities: Accounts payable and
accrued liabilities
$ 61,942 $ 38,540 Accounts with
partners
4,812 - Total current
liabilities
66,754 38,540 Asset
retirement obligations
15,290 14,846 Long term debt
15,000 15,000 Total liabilities
97,044 68,386 Commitments and
contingencies VAALCO Energy Inc. shareholders’ equity:
Common stock, $0.10 par value, 100,000,000
authorized shares, 65,823,346 and 65,194,828 shares issued with
7,508,699 and 7,393,714 shares in treasury at March 31, 2015 and
December 31, 2014, respectively
6,554 6,519 Additional paid-in capital
67,016 64,351
Retained earnings
107,887 146,892 Less treasury stock, at
cost
(37,871 ) (37,299 ) Total Equity
143,586 180,463 Total
Liabilities and Equity
$ 240,630 $ 248,849
VAALCO ENERGY, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED OPERATIONS
(unaudited) (in thousands, except per share amounts)
Three Months Ended March 31, 2015
2014 Revenues: Oil and gas sales
$
18,239 $ 28,071 Operating costs and expenses:
Production expense
9,911 9,650 Exploration expense
27,459 11,323 Depreciation, depletion and amortization
5,935 4,160 General and administrative expense
4,873
3,588 Other, net
280 - Impairment of proved properties
5,399 - Total operating costs
and expenses
53,857 28,721 Other
operating income, net
340 -
Operating income (loss)
(35,278 ) (650 ) Other
income (expense): Interest income
4 29 Interest expense
(310 ) - Other, net
(56 )
(291 ) Total other income (expense)
(362 )
(262 ) Income (loss) before income taxes
(35,640
) (912 ) Income tax expense
3,365
6,126 Net income (loss) attributable to VAALCO
Energy, Inc.
$ (39,005 ) $ (7,038 )
Basic net income (loss) per share
attributable to VAALCO Energy, Inc. common shareholders
$ (0.67 ) $ (0.12 )
Diluted net income (loss) per share
attributable to VAALCO Energy, Inc. common shareholders
$ (0.67 ) $ (0.12 ) Basic weighted average
shares outstanding
57,981 56,860
Diluted weighted average shares outstanding
57,981
56,860
VAALCO ENERGY, INC.
AND SUBSIDIARIES CONDENSED STATEMENTS OF CONSOLIDATED CASH
FLOWS (Unaudited) (in thousands)
Three
Months Ended March 31, 2015 2014
CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss)
$
(39,005 ) $ (7,038 )
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization
5,935 4,160
Amortization of debt issuance cost
160 - Unrealized foreign
exchange (gain) loss
- 22 Dry hole costs and impairment loss
on unproved leasehold
27,222 10,505 Stock based compensation
1,654 1,417 Gains on disposal of oil and gas properties
(340 ) - Impairment loss
5,399 - Change in
operating assets and liabilities: Trade receivables
318
16,885 Accounts with partners
(14,568 ) (42,192 )
Other receivables
(2,774 ) (108 ) Crude oil inventory
213 (996 ) Materials and supplies
53 (304 )
Prepayments and other
655 (3,975 ) Accounts payable and
other liabilities
14,477 (1,918 ) Net
cash provided by (used in) operating activities
(601
) (23,542 ) CASH FLOWS FROM INVESTING ACTIVITIES
Decrease/(increase) in restricted cash
5,387 207 Property
and equipment expenditures
(28,070 ) (24,751 )
Proceeds from sales of oil and gas properties
340
- Net cash used in investing activities
(22,343 ) (24,544 ) CASH FLOWS FROM FINANCING
ACTIVITIES Proceeds from the issuance of common stock
1,017
- Debt issuance costs
- (1,722 ) Purchase of treasury stock
(572 ) - Net cash provided by
(used in) financing activities
445
(1,722 ) NET CHANGE IN CASH AND CASH EQUIVALENTS
(22,499
) (49,808 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
69,051 130,529 CASH AND CASH
EQUIVALENTS AT END OF PERIOD
$ 46,552 $ 80,721
Supplemental disclosure of cash flow information: Cash paid
for income taxes
$ 3,403 $ 9,538
Supplemental disclosure of non- cash investing and financing
activities:
Property and equipment additions incurred
during the period but not paid at period end
$ 27,907 $ 11,304 Receivable from
employees for stock option exercise
$ 29 $ -
VAALCO ENERGY, INC. AND SUBSIDIARIES
Other Financial Results (Unaudited)
Three Months Ended March 31, 2015
2014 Net oil sales (MBbls) 372 257 Net gas sales (MMCF) 46
69 Net oil and gas sales (MBOE) 379.93 269 Average oil price
($/Bbl) $48.65 $107.98 Average gas price ($/MCF) $2.82 $3.95
Average price ($/BOE) $48.01 $104.36 Production costs, excluding
workover costs ($/BOE) * $26.09 $23.98 DD&A costs ($/BOE)
$15.62 $15.47 General and administrative costs ($/BOE) $12.83
$13.34 Capital Expenditures (thousands) $28,070 $24,751
*The amounts for the three months ended March 31, 2015 includes
$3.60/BOE related to the expensed costs for design work on a
centralized processing facility.
VAALCO Energy, Inc.Gregory R. Hullinger, 713-623-0801Chief
Financial OfficerorAl Petrie, 713-543-3422Investor Relations
Coordinator
Vaalco Energy (NYSE:EGY)
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