VAALCO Energy, Inc. (NYSE:EGY) today reported results for the third
quarter of 2016.
Third Quarter 2016 and recent highlights:
- Generated operating income of $2.9 million in the third
quarter of 2016 compared with a loss of $31.0 million in the third
quarter of 2015, an improvement of $33.9 million
- Reported all ongoing costs and expenses within guidance
for the quarter
- Achieved net production expense excluding workovers of
$7.3 million compared with $7.9 million in the third quarter of
2015 and $8.0 million in the second quarter of 2016 reflecting the
Company’s continuing success in controlling costs
- Signed letters of intent to sell substantially all of
its remaining U.S. oil and gas properties in Montana and Texas for
approximately $1.1 million
- Notified Sonangol P&P on September 30 of VAALCO’s
intent to withdraw from the joint operating agreement (JOA) and as
Operator in Angola. VAALCO has decided to close its office in
Angola and not conduct any future activities in the
country
For the third quarter of 2016, VAALCO reported
income from continuing operations of $0.2 million, or $0.00 income
per diluted share. In the same period in 2015, the Company reported
a loss from continuing operations of $34.5 million, or $0.59 loss
per diluted share. The loss in 2015 included an $18.0 million
non-cash impairment charge primarily due to lower projected oil
prices and additional development costs and a $9.2 million non-cash
charge to dry hole costs to write-off the carrying costs for the
Company’s onshore Gabon investment.
As a result of the Company’s decision to
discontinue operations in Angola and withdraw from its joint
operating agreement, the operating results of the Angola segment
have been classified as discontinued operations for all periods
presented in the condensed consolidated statement of
operations. The loss from discontinued operations in the
third quarter of 2016 totaled $15.8 million, or $0.27 loss per
diluted share. This loss includes a non-cash liability accrual of
$15.0 million related to the potential maximum penalty for not
drilling the three remaining exploratory wells required under the
Angola production sharing agreement. In the third quarter of 2015,
there was income from discontinued operations of $0.9 million, or
$0.01 per diluted share.
The average realized price for crude oil in the
third quarter of 2016 was $42.31 per barrel, down 4% from $43.97
per barrel in the third quarter of 2015 and essentially flat with
$42.13 per barrel in the second quarter of 2016. Adjusted
EBITDAX totaled $4.2 million in the third quarter of 2016 compared
with $7.3 million in the same period in 2015, and $7.7 million in
the second quarter of 2016.
Adjusted EBITDAX is a Non-GAAP financial measure
and is described and reconciled to net loss in the attached table
under “Non-GAAP Financial Measures.”
Cary Bounds, VAALCO’s Chief Operating Officer
and Interim Chief Executive Officer commented: “We have recently
taken several strategic steps to narrow our operational focus,
reduce costs and enhance shareholder value. We intend to
concentrate on our production activities in Gabon and continue to
seek low risk, discovered resource opportunities in West Africa or
other similar areas internationally. Our plan to acquire an
additional interest in the Etame permit is a good example of the
first step in that process. We also decided to exit Angola
and discontinue all operations in that country. In addition, we
decided to sell the majority of our small remaining interests in
the U.S.”
Bounds continued, “Despite the mechanical issues
we encountered during the summer with our wells on the Avouma
platform, we met production guidance for the quarter and still
expect to meet our previously-announced production guidance for the
full year. We have been able to control costs and expenses and
operate safely without a recordable incident for over 15
months. With the planned deployment of the hydraulic workover
unit to replace the electrical submersible pumps on the Avouma
platform, we should see an increase in production later in the
fourth quarter. The initiatives that we have enacted in 2016 have
solidified our near-term outlook and we believe they will benefit
us further with the ultimate recovery in oil prices.”
Etame Marin Additional Interest
Acquisition
On August 1, 2016, the Company announced that it
had signed a purchase and sale agreement to acquire an additional
2.98% working interest (3.23% participating interest) in the Etame
Marin Permit located offshore Gabon from Sojitz Etame Limited
(“Sojitz”), which represents the full interest owned by Sojitz in
the concession. The transaction has an effective date of
August 1, 2016.
Once completed, this acquisition will boost
VAALCO’s net production by 11%, and will not require any additional
staffing. The financial benefit from production between August 1st
and closing will be recognized as a purchase price adjustment. The
transaction is expected to close by December 31, 2016, subject to
customary closing conditions. Payment for the acquisition is
expected to be funded primarily by cash on hand. The Company
intends to issue a request to the IFC to borrow the $5.0 million
potentially available under its term loan agreement.
Pending Sale of U.S.
Properties
On September 21, 2016, VAALCO signed a letter of
intent to sell its interests in two wells in the Hefley field in
North Texas for $850,000. On October 17, 2016, the Company signed a
letter of intent to sell its interests in the East Poplar Dome
field in Montana for $250,000. Both of these transactions are
expected to be concluded during the fourth quarter of 2016. In
conjunction with the pending sale of these properties, an
impairment test was performed, and the Company determined that a
$0.1 million impairment was required.
Withdrawal from Angola
On September 30, 2016, VAALCO notified Sonangol
P&P, its joint venture partner in Angola, that it was
withdrawing from the joint operating agreement with Sonangol
P&P. The effective date of the withdrawal was October 31, 2016.
Further to the decision to withdraw from Angola, the Company has
taken actions to begin closing its office in Angola and does not
intend to conduct future activities in Angola. The Company
previously wrote off essentially all of its investment in
Angola. Prior to September 30, 2016, the Company had reported
$15.0 million as long-term restricted cash relating to the
Company’s share of the penalty for not drilling the three remaining
Angola exploratory well commitments. However, as a result of the
decision to withdraw from the joint operating agreement, VAALCO is
no longer reflecting the $15.0 million as restricted cash. The
Company evaluated the penalty provisions and believes that a
substantial portion of the penalty amount has been reduced due to
exploration expenditures already made. Due to the uncertainties as
to the ultimate outcome, the Company accrued a $15.0 million
liability for the penalty during the third quarter of 2016 which
represents the maximum potential amount that may be due under the
agreement.
Offshore Gabon
In the third quarter of 2016, production
decreased 20% from 4,725 barrels of oil per day (BOPD) in the
second quarter of 2016 to 3,772 BOPD. This was primarily due to the
electrical submersible pump (ESP) failures at the Avouma field. As
previously reported, VAALCO has recently experienced ESP failures
at two wells in the Avouma field. The Company is mobilizing a
hydraulic workover unit onto the Avouma platform to remove the ESPs
and have them analyzed for the cause of the failure by the
manufacturer. VAALCO is developing a plan to replace the
ESPs in the affected wells and anticipates restoring at least
a portion of the shut-in production by late fourth quarter 2016.
The Company’s net share of the cost is expected to be approximately
$3.1 million.
VAALCO continues to focus on operating
efficiently and safely. The Company has gone 15 months without a
recordable incident.
Onshore Gabon and Equatorial
Guinea
VAALCO continues to examine alternative, lower
cost development options for discoveries in the Mutamba Iroru
permit onshore Gabon, and in Block P offshore Equatorial Guinea.
These discoveries present unique development opportunities that
will be re-evaluated as prices recover.
2016 Third Quarter Financial
Results
Total oil and natural gas sales for the third
quarter of 2016 were $14.6 million, compared to $17.5 million for
the same period in 2015, and $18.8 million in the second quarter of
2016. Third quarter 2016 revenue was negatively impacted by
reduced sales volumes compared to the third quarter of 2015 and the
second quarter of 2016.
In order to partially limit VAALCO’s commodity
price risk, in April 2016, the Company entered into put contracts
on 36,000 barrels of oil per month for the period from June 2016
through February 2017 at Dated Brent of $40 per barrel. No
additional puts or other derivatives have been added since April
2016. VAALCO recorded a non-cash mark-to-market charge of
$0.2 million related to the existing puts during the third quarter
of 2016 which was included in Other expense, net in the income
statement.
During the third quarter of 2016, VAALCO sold
approximately 344,000 net barrels of oil at an average price of
$42.31 per barrel, compared to 397,000 net barrels at an average
price of $43.97 per barrel in the third quarter of 2015, and
436,000 net barrels at an average price of $42.13 per barrel in the
second quarter of 2016.
Costs and Expenses
Total production expense, excluding the effect
of workovers, was $7.3 million, or $21.04 per BOE of sales, for the
third quarter of 2016. This is a decrease of $0.6 million
compared to $7.9 million, or $19.55 per BOE of sales, for the third
quarter of 2015 and a decrease of $0.7 million compared to $8.0
million, or $18.16 per BOE in the second quarter of 2016. The third
quarter 2016 production costs, excluding workovers, were at the low
end of guidance. While actual costs declined compared to
prior quarters, the cost per BOE rose due to lower sales
volumes.
Depreciation, depletion and amortization
(DD&A) expense was $1.6 million, or $4.60 per BOE of sales in
the three months ended September 30, 2016 compared to $8.3 million,
or $20.34 per BOE in the comparable period in 2015, and $1.9
million, or $4.39 per BOE in the second quarter of 2016.
General and administrative (G&A) expense for
the three months ended September 30, 2016 was $2.4 million, or
$6.93 per BOE, as compared to $2.7 million, or $6.58 per BOE in the
three months ended September 30, 2015, and $3.7 million, or $8.48
per BOE in the second quarter of 2016. The Company has taken
significant steps to reduce overall G&A costs over the past 18
months, with decreases realized in personnel costs, incentive
compensation, services and various other cost categories. General
and administrative expense includes ($0.5) million, $0.7 million,
and $0.8 million of non-cash compensation expense for the quarters
ended September 30, 2016, September 30, 2015, and June 30, 2016,
respectively.
Interest expense for the third quarter of 2016
was $0.3 million, compared to $0.5 million in the third quarter of
2015, and $1.5 million in the second quarter of 2016. Interest
expense in the second quarter of 2016 includes a write off of $0.9
million of deferred financing costs in connection with the
conversion of the Company’s credit facility to a term loan in
June. In addition, none of the interest incurred on the IFC
credit facility was capitalized in the second or third quarters of
2016, while a considerable portion of the interest expense incurred
was capitalized in the prior year.
Income tax expense for the third quarter of 2016
was $2.2 million compared to $2.7 million for the same period in
2015, and $2.9 million in the second quarter of 2016. The
decrease in tax compared to prior periods is primarily attributable
to lower revenues in the Company’s operations in Gabon.
Capital Investments/Balance
Sheet
During the three months ended September 30,
2016, the Company did not undertake any new capital projects.
The Company’s full year 2016 capital expenditures on an accrual
basis are expected to be less than $1.0 million, which is mainly
for equipment and enhancements.
At the end of the third quarter, VAALCO had an
unrestricted cash balance of $26.9 million. This does not
include an additional $0.8 million in restricted cash (related
primarily to deposits in Gabon) classified as current assets or the
additional $0.8 million of restricted cash classified as long term.
Prior to September 30, 2016, the Company had reported an additional
$15.0 million as long-term restricted cash relating to the
Company’s share of the penalty for not drilling the three remaining
Angola exploratory well commitments. However, as a result of the
decision to withdraw from the joint operating agreement, VAALCO is
no longer reflecting the $15.0 million as restricted cash. The
Company evaluated the penalty provisions and believes that a
substantial portion of the penalty amount has been reduced due to
exploration expenditures already made. Due to the uncertainties as
to the ultimate outcome, the Company accrued a $15.0 million
liability for the penalty during the third quarter of 2016 which
represents the maximum potential amount that may be due under the
agreement.
At September 30, 2016, debt, net of deferred
financing costs, totaled $14.4 million, of which $6.3 million was
classified as current, reflecting the repayment terms of the new
loan agreement with the IFC.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its third quarter financial and
operating results tomorrow, Wednesday, November 9, 2016, at 10:00
a.m. Central Time (11:00 a.m. Eastern Time). Interested parties may
participate by dialing (844) 841-1668. International parties
may dial (661) 378-9859. The confirmation code is
9542206. This call will also be webcast on VAALCO’s website
at www.vaalco.com.
An audio replay will be available beginning
approximately two hours after the end of the call and be available
through November 15, 2016 by dialing (855) 859-2056.
International parties may dial (404) 537-3406. The
confirmation code is 9542206.
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. All statements, other than statements of
historical facts, included in this document that address
activities, events, plans, expectations, objectives or developments
that VAALCO expects, believes or anticipates will or may occur in
the future are forward-looking statements. These statements
may include the completion and timing of the purchase of assets
from Sojitz, amounts due in connection with the Company’s
withdrawal from Angola, restoration of production on the Avouma
platform, expected sources of future capital funding and future
liquidity, future operating losses, future changes in oil and
natural gas prices, future strategic alternatives, capital
expenditures, future drilling plans, prospect evaluations,
negotiations with governments and third parties including with the
government of Gabon in connection with a revised production sharing
contract, expectations regarding processing facilities, reserve
growth, and other issues related to our exit from Angola.
These statements are based on assumptions made by VAALCO based on
its experience and 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,
decisions by our current lender or future lenders, the risks
associated with our ability to continue as a going concern, the
risk that the purchase of assets from Sojitz may not be consummated
or may not be consummated in a timely manner, the risk that our
negotiations with the governments of Gabon and Republic of Angola
will be unsuccessful, lack of availability of goods, services and
capital, environmental risks, drilling risks, foreign regulatory
and operational risks, and regulatory changes. These and
other risks are further described in VAALCO's annual report on Form
10-K for the year ended December 31, 2015 and quarterly report on
Form 10-Q for the quarter ended September 30, 2016, which will be
filed shortly, 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. The Company's
properties and exploration acreage are located primarily in Gabon
and Equatorial Guinea in West Africa.
|
VAALCO
ENERGY, INC AND SUBSIDIARIES |
Condensed
Consolidated Balance Sheets (Unaudited) |
(in
thousands, except share and per share amounts) |
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2016 |
|
2015 |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
|
26,883 |
|
|
$ |
|
25,357 |
|
Restricted cash |
|
|
|
788 |
|
|
|
|
1,048 |
|
Receivables: |
|
|
|
|
|
|
Trade |
|
|
|
5,940 |
|
|
|
|
5,353 |
|
Accounts
with partners |
|
|
|
1,639 |
|
|
|
|
19,765 |
|
Other,
net of allowance |
|
|
|
36 |
|
|
|
|
42 |
|
Crude oil
inventory |
|
|
|
770 |
|
|
|
|
639 |
|
Materials
and supplies |
|
|
|
145 |
|
|
|
|
194 |
|
Prepayments and other |
|
|
|
3,602 |
|
|
|
|
2,975 |
|
Current
assets - discontinued operations |
|
|
|
1,747 |
|
|
|
|
8,369 |
|
Total
current assets |
|
|
|
41,550 |
|
|
|
|
63,742 |
|
Property and equipment
- successful efforts method: |
|
|
|
|
|
|
Wells,
platforms and other production facilities |
|
|
|
410,301 |
|
|
|
|
412,593 |
|
Undeveloped acreage |
|
|
|
10,000 |
|
|
|
|
10,000 |
|
Equipment
and other |
|
|
|
10,357 |
|
|
|
|
10,805 |
|
|
|
|
|
430,658 |
|
|
|
|
433,398 |
|
Accumulated
depreciation, depletion and amortization |
|
|
|
(405,080 |
) |
|
|
|
(400,041 |
) |
Net
property and equipment |
|
|
|
25,578 |
|
|
|
|
33,357 |
|
Other noncurrent
assets: |
|
|
|
|
|
|
Restricted cash |
|
|
|
830 |
|
|
|
|
15,830 |
|
Value
added tax and other receivable, net of allowance |
|
|
|
5,107 |
|
|
|
|
4,221 |
|
Deferred
finance charges |
|
|
|
- |
|
|
|
|
1,655 |
|
Abandonment funding |
|
|
|
5,137 |
|
|
|
|
5,137 |
|
Noncurrent assets - discontinued operations |
|
|
|
- |
|
|
|
|
16 |
|
Total
assets |
|
$ |
|
78,202 |
|
|
$ |
|
123,958 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
|
11,553 |
|
|
$ |
|
44,140 |
|
Accrued
liabilities and other |
|
|
|
13,551 |
|
|
|
|
18,447 |
|
Current
portion of long-term debt |
|
|
|
6,250 |
|
|
|
|
- |
|
Current
liabilities - discontinued operations |
|
|
|
18,656 |
|
|
|
|
4,129 |
|
Total
current liabilities |
|
|
|
50,010 |
|
|
|
|
66,716 |
|
Asset retirement
obligations |
|
|
|
16,849 |
|
|
|
|
16,166 |
|
Long-term debt,
excluding current portion |
|
|
|
8,134 |
|
|
|
|
15,000 |
|
Total
liabilities |
|
|
|
74,993 |
|
|
|
|
97,882 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
|
Preferred
stock, none issued, 500,000 shares authorized, $25 par value |
|
|
|
- |
|
|
|
|
- |
|
Common
stock, 66,189,032 and 66,041,338 shares issued, $0.10 par
value, 100,000,000 shares authorized |
|
|
|
6,619 |
|
|
|
|
6,604 |
|
Additional paid-in capital |
|
|
|
70,210 |
|
|
|
|
69,118 |
|
Less
treasury stock, 7,555,095 and 7,514,169 shares at cost |
|
|
|
(37,933 |
) |
|
|
|
(37,882 |
) |
Retained
deficit |
|
|
|
(35,687 |
) |
|
|
|
(11,764 |
) |
Total
shareholders' equity |
|
|
|
3,209 |
|
|
|
|
26,076 |
|
Total
liabilities and shareholders' equity |
|
$ |
|
78,202 |
|
|
$ |
|
123,958 |
|
|
|
|
|
|
|
|
|
|
|
|
VAALCO
ENERGY, INC AND SUBSIDIARIES |
Consolidated Statements of Operations |
(Unaudited) |
(in
thousands, except per share amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2016 |
|
September 30, 2015 |
|
June 30, 2016 |
Revenues: |
|
|
|
|
|
|
|
|
|
Oil and
gas sales |
|
$ |
|
14,635 |
|
|
$ |
|
17,546 |
|
|
$ |
|
18,847 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
Production expense |
|
|
|
7,162 |
|
|
|
|
7,859 |
|
|
|
|
7,341 |
|
Exploration expense |
|
|
|
2 |
|
|
|
|
8,975 |
|
|
|
|
2 |
|
Depreciation, depletion and amortization |
|
|
|
1,607 |
|
|
|
|
8,256 |
|
|
|
|
1,942 |
|
General
and administrative expense |
|
|
|
2,420 |
|
|
|
|
2,669 |
|
|
|
|
3,747 |
|
Impairment of proved properties |
|
|
|
88 |
|
|
|
|
17,988 |
|
|
|
|
- |
|
Other
operating expense |
|
|
|
324 |
|
|
|
|
- |
|
|
|
|
754 |
|
General
and administrative related to shareholder matters |
|
|
|
85 |
|
|
|
|
- |
|
|
|
|
18 |
|
Bad debt
expense (recovery) and other |
|
|
|
63 |
|
|
|
|
2,750 |
|
|
|
|
171 |
|
Total
operating costs and expenses |
|
|
|
11,751 |
|
|
|
|
48,497 |
|
|
|
|
13,975 |
|
Other
operating income (loss), net |
|
|
|
(26 |
) |
|
|
|
- |
|
|
|
|
- |
|
Operating income
(loss) |
|
|
|
2,858 |
|
|
|
|
(30,951 |
) |
|
|
|
4,872 |
|
Other
income (expense): |
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
|
1 |
|
|
|
|
3 |
|
|
|
|
- |
|
Interest
expense |
|
|
|
(328 |
) |
|
|
|
(465 |
) |
|
|
|
(1,470 |
) |
Other,
net |
|
|
|
(149 |
) |
|
|
|
(401 |
) |
|
|
|
(642 |
) |
Total
other income (expense) |
|
|
|
(476 |
) |
|
|
|
(863 |
) |
|
|
|
(2,112 |
) |
Income (loss) from
continuing operations before income taxes |
|
|
|
2,382 |
|
|
|
|
(31,814 |
) |
|
|
|
2,760 |
|
Income tax expense |
|
|
|
2,198 |
|
|
|
|
2,707 |
|
|
|
|
2,894 |
|
Income (loss) from
continuing operations |
|
|
|
184 |
|
|
|
|
(34,521 |
) |
|
|
|
(134 |
) |
Income (loss) from
discontinued operations, net of tax |
|
|
|
(15,783 |
) |
|
|
|
853 |
|
|
|
|
(127 |
) |
Net loss |
|
$ |
|
(15,599 |
) |
|
$ |
|
(33,668 |
) |
|
$ |
|
(261 |
) |
|
|
|
|
|
|
|
|
|
|
Basic net loss per
share |
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations |
|
$ |
|
0.00 |
|
|
$ |
|
(0.59 |
) |
|
$ |
|
(0.00 |
) |
Income
(loss) from discontinued operations |
|
|
|
(0.27 |
) |
|
|
|
0.01 |
|
|
|
|
(0.00 |
) |
Net
loss |
|
$ |
|
(0.27 |
) |
|
$ |
|
(0.58 |
) |
|
$ |
|
(0.00 |
) |
Basic
weighted average shares outstanding |
|
|
|
58,708 |
|
|
|
|
58,392 |
|
|
|
|
58,464 |
|
Diluted net loss per
share |
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations |
|
$ |
|
0.00 |
|
|
$ |
|
(0.59 |
) |
|
$ |
|
(0.00 |
) |
Income
(loss) from discontinued operations |
|
|
|
(0.27 |
) |
|
|
|
0.01 |
|
|
|
|
(0.00 |
) |
Net
loss |
|
$ |
|
(0.27 |
) |
|
$ |
|
(0.58 |
) |
|
$ |
|
(0.00 |
) |
Basic
weighted average shares outstanding |
|
|
|
58,708 |
|
|
|
|
58,392 |
|
|
|
|
58,464 |
|
|
|
|
|
|
|
|
|
|
|
VAALCO
ENERGY, INC AND SUBSIDIARIES |
Consolidated Statements of Cash Flows |
(Unaudited) |
(in
thousands) |
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
September 30, 2016 |
|
September 30, 2015 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Loss from continuing
operations |
|
$ |
|
(15,926 |
) |
|
$ |
|
(50,046 |
) |
Adjustments to
reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
Depreciation, depletion and amortization |
|
|
|
5,787 |
|
|
|
|
23,484 |
|
Amortization of debt issuance cost |
|
|
|
1,132 |
|
|
|
|
473 |
|
Unrealized foreign exchange (gain) loss |
|
|
|
2,175 |
|
|
|
|
(2,181 |
) |
Dry hole
costs and impairment of unproved leasehold |
|
|
|
- |
|
|
|
|
9,602 |
|
Stock-based compensation |
|
|
|
1,107 |
|
|
|
|
3,024 |
|
Commodity
derivatives loss |
|
|
|
772 |
|
|
|
|
- |
|
Bad debt
expense and other |
|
|
|
577 |
|
|
|
|
2,750 |
|
Other
operating loss, net |
|
|
|
8 |
|
|
|
|
(398 |
) |
Impairment of proved properties |
|
|
|
88 |
|
|
|
|
29,208 |
|
Change in
operating assets and liabilities: |
|
|
|
|
|
|
Trade
receivables |
|
|
|
(587 |
) |
|
|
|
12,543 |
|
Accounts
with partners |
|
|
|
18,126 |
|
|
|
|
(4,658 |
) |
Other
receivables |
|
|
|
12 |
|
|
|
|
(3,191 |
) |
Crude oil
inventory |
|
|
|
(131 |
) |
|
|
|
948 |
|
Materials
and supplies |
|
|
|
49 |
|
|
|
|
54 |
|
Value
added tax and other receivable |
|
|
|
(1,526 |
) |
|
|
|
- |
|
Prepayments and other |
|
|
|
(552 |
) |
|
|
|
1,145 |
|
Accounts
payable |
|
|
|
(24,339 |
) |
|
|
|
18,730 |
|
Accrued
liabilities and other |
|
|
|
24 |
|
|
|
|
(2,671 |
) |
Net cash
provided by (used in) continuing operating activities |
|
|
|
(13,204 |
) |
|
|
|
38,816 |
|
Net cash
provided by (used in) discontinued operating activities |
|
|
|
13,168 |
|
|
|
|
(1,297 |
) |
Net cash
provided by (used in) operating activities |
|
|
|
(36 |
) |
|
|
|
37,519 |
|
CASH FLOWS
FROM INVESTING ACTIVITIES: |
|
|
|
|
Decrease
in restricted cash |
|
|
|
15,260 |
|
|
|
|
5,512 |
|
Property
and equipment expenditures |
|
|
|
(12,781 |
) |
|
|
|
(53,276 |
) |
Proceeds
from sales of oil and gas properties |
|
|
|
- |
|
|
|
|
398 |
|
Other,
net |
|
|
|
(824 |
) |
|
|
|
- |
|
Net cash
provided by (used in) continuing investing activities |
|
|
|
1,655 |
|
|
|
|
(47,366 |
) |
Net cash
provided by discontinued investing activities |
|
|
|
- |
|
|
|
|
(18,955 |
) |
Net cash
provided by (used in) investing activities |
|
|
|
1,655 |
|
|
|
|
(66,321 |
) |
CASH FLOWS
FROM FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the
issuances of common stock |
|
|
|
- |
|
|
|
|
452 |
|
Debt
issuance costs |
|
|
|
(93 |
) |
|
|
|
- |
|
Net cash
provided by (used in) financing activities |
|
|
|
(93 |
) |
|
|
|
452 |
|
NET CHANGE IN CASH AND
CASH EQUIVALENTS |
|
|
|
1,526 |
|
|
|
|
(28,350 |
) |
CASH AND CASH EQUIVALENTS
-- |
|
|
|
|
|
|
BEGINNING OF
PERIOD |
|
|
|
25,357 |
|
|
|
|
69,051 |
|
END OF
PERIOD |
|
$ |
|
26,883 |
|
|
$ |
|
40,701 |
|
|
|
|
|
|
|
|
|
|
|
|
VAALCO
ENERGY, INC AND SUBSIDIARIES |
Selected
Financial and Operating Statistics |
(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2016 |
|
September 30, 2015 |
|
June 30, 2016 |
NET SALES DATA: |
|
|
|
|
|
|
|
|
|
Oil
(MBbls) |
|
|
344 |
|
|
397 |
|
|
436 |
Natural
Gas (MMcf) |
|
|
32 |
|
|
53 |
|
|
35 |
Oil
equivalents (MBOE) |
|
|
349 |
|
|
406 |
|
|
442 |
Average
daily sales volumes (BOE/day) |
|
|
3,793 |
|
|
4,411 |
|
|
4,857 |
NET PRODUCTION
DATA |
|
|
|
|
|
|
|
|
|
Oil
(MBbls) |
|
|
348 |
|
|
432 |
|
|
431 |
Natural
Gas (MMcf) |
|
|
32 |
|
|
53 |
|
|
35 |
Oil
equivalents (MBOE) |
|
|
353 |
|
|
441 |
|
|
436 |
Average
daily production volumes (BOE/day) |
|
|
3,836 |
|
|
4,792 |
|
|
4,796 |
AVERAGE SALES
PRICES: |
|
|
|
|
|
|
|
|
|
Oil
($/Bbl) |
|
$ |
42.31 |
|
$ |
43.97 |
|
$ |
42.13 |
Natural
Gas ($/Mcf) |
|
|
2.37 |
|
|
2.75 |
|
|
1.64 |
Weighted
average price ($/BOE) |
|
|
42.05 |
|
|
43.37 |
|
|
42.64 |
COSTS AND EXPENSES (PER
BOE OF SALES): |
|
|
|
|
|
|
|
|
|
Production expense |
|
$ |
20.52 |
|
$ |
19.37 |
|
$ |
16.61 |
Production expense, excluding workovers* |
|
|
21.04 |
|
|
19.55 |
|
|
18.16 |
Depreciation, depletion and amortization |
|
|
4.60 |
|
|
20.34 |
|
|
4.39 |
General
and administrative expense |
|
|
6.93 |
|
|
6.58 |
|
|
8.48 |
Property and equipment
expenditures, cash basis |
|
$ |
- |
|
$ |
17,726 |
|
$ |
8,947 |
|
|
|
|
|
|
|
|
|
|
*Workover costs excluded from the three months
ended September 30, 2016, September 30, 2015 and June 30, 2016 are
($0.2 million), ($0.1 million) and ($0.7 million).
**General and administrative expenses include
($1.46), $1.71 and $1.71 per BOE of non-cash stock-based
compensation expense in the three months ended September 30, 2016,
September 30, 2015 and June 30, 2016.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDAX is a supplemental non-GAAP
financial measure used by VAALCO’s management and by external users
of the Company’s financial statements, such as industry analysts,
lenders, rating agencies, investors and others who follow the
industry as an indicator of the Company’s ability to internally
fund exploration and development activities and to service or incur
additional debt. Adjusted EBITDAX is a non-GAAP financial measure
and as used herein represents net income before interest income
(expense) net, income tax expense, depletion, depreciation and
amortization, impairment of proved properties, exploration expense,
non-cash and other items including stock compensation expense.
Adjusted EBITDAX has significant limitations,
including that it does not reflect the Company’s cash requirements
for capital expenditures, contractual commitments, working capital
or debt service. Adjusted EBITDAX should not be considered as a
substitute for net income (loss), operating income (loss), cash
flows from operating activities or any other measure of financial
performance or liquidity presented in accordance with GAAP.
Adjusted EBITDAX excludes some, but not all, items that affect net
income (loss) and operating income (loss) and these measures may
vary among other companies. Therefore, the Company’s Adjusted
EBITDAX may not be comparable to similarly titled measures used by
other companies.
The table below reconciles the most directly
comparable GAAP financial measures to Adjusted EBITDAX.
|
VAALCO
ENERGY, INC AND SUBSIDIARIES |
Reconciliations of Non-GAAP Measures |
(Unaudited) |
(in
thousands) |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net loss to Adjusted
EBITDAX |
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
September 30, 2016 |
|
September 30, 2015 |
|
June 30, 2016 |
Net loss |
|
$ |
|
(15,599 |
) |
|
$ |
|
(33,668 |
) |
|
$ |
|
(261 |
) |
Add back: |
|
|
|
|
|
|
|
|
|
Impact of
discontinued operations |
|
|
|
15,783 |
|
|
|
|
(853 |
) |
|
|
|
127 |
|
Interest
(income) expense, net |
|
|
|
327 |
|
|
|
|
462 |
|
|
|
|
1,470 |
|
Income
tax expense |
|
|
|
2,198 |
|
|
|
|
2,707 |
|
|
|
|
2,894 |
|
Depreciation, depletion and amortization |
|
|
|
1,607 |
|
|
|
|
8,256 |
|
|
|
|
1,942 |
|
Impairment of proved properties |
|
|
|
88 |
|
|
|
|
17,988 |
|
|
|
|
- |
|
Exploration expense |
|
|
|
2 |
|
|
|
|
8,975 |
|
|
|
|
2 |
|
Non-cash or unusual
items: |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
|
(509 |
) |
|
|
|
692 |
|
|
|
|
757 |
|
Shareholder matters |
|
|
|
85 |
|
|
|
|
- |
|
|
|
|
18 |
|
Commodity
derivative loss |
|
|
|
194 |
|
|
|
|
- |
|
|
|
|
578 |
|
Bad debt
expense |
|
|
|
63 |
|
|
|
|
2,750 |
|
|
|
|
171 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAX |
|
$ |
|
4,239 |
|
|
$ |
|
7,309 |
|
|
$ |
|
7,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investor Contact
Elizabeth Prochnow 713-623-0801
Vaalco Energy (NYSE:EGY)
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