VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) today reported
operational and financial results for the third quarter of 2020.
Highlights and Recent Key
Items:
- Achieved strong production performance of
4,405 net revenue interest
(“NRI”)(1) barrels of crude oil
per day (“BOPD”), or
5,064
working interest (“WI”)(2)
BOPD in Q3 2020, despite planned full field maintenance
shutdown in September and
production curtailment due to an OPEC+ mandate for
Gabon;
- Successfully resumed production following completion of
the planned full field annual maintenance shutdown at Etame in
September on schedule and on budget;
- Sold 412,000 barrels of oil in Q3
2020, compared to 279,000 barrels
in Q3 2019, due to the continued
strong production performance from the successful
2019/2020 drilling
campaign;
- Decreased per-unit production expense, excluding
workovers, by 35% in Q3 2020 vs Q3 2019 as a result of higher sales
volumes and lower operating costs due to proactive cost
reductions;
- Reported Q3 net income of
$7.6 million
($0.13 per diluted share),
Adjusted Net Income(3) of
$2.3 million
($0.04 per diluted share) and
generated Adjusted EBITDAX(3) of
$7.0 million;
- Maintained strong balance sheet with no debt, a cash
balance of $42.0 million,
including $6.0
million in joint venture owner advances, working capital
of $16.6 million
and Adjusted Working Capital(3)
of $29.3
million as of September 30, 2020; and
- Announced acquisition of new proprietary
three-dimensional (“3-D”) seismic data over the entire Etame Marin
block which will be used to optimize and de-risk future drilling
locations as well as identify new potential
locations.
(1) All NRI production rates and volumes
are VAALCO’s 31.1% WI less 13% royalty volumes.(2) All WI
production rates and volumes are VAALCO’s 31.1%
WI.(3) Adjusted EBITDAX, Adjusted Net Income and Adjusted
Working Capital are Non-GAAP financial measures and are described
and reconciled to the closest GAAP measure in the attached table
under “Non-GAAP Financial Measures.”
Cary Bounds, VAALCO’s Chief Executive Officer
commented: “We continued to perform well operationally in the third
quarter with net production of 4,405 BOPD, despite our annual
planned full field maintenance shutdown at Etame and production
curtailment due to an OPEC+ mandate for Gabon. From a financial
perspective, we reported net income of $7.6 million in the quarter,
even with the impact of those production curtailments and low oil
prices, and generated $7.0 million of Adjusted EBITDAX,
highlighting the economic robustness of the Etame field. Our cash
balance remained strong at $42.0 million, which includes $6.0
million in joint venture owner advances. Additionally, given that
the vast majority of our operating expenses are fixed, our higher
sales volumes and proactive measures to manage costs have helped to
drive down our unit production costs and enhanced our profit
margins year-over-year.”
“We have maintained our focus on operational
excellence and execution, which continues to allow us to maintain a
healthy cash position, and cost discipline remains a core priority
for the Company as we seek to maximize our profitability. We
completed a highly successful drilling program earlier this year
that demonstrated the quality of the Etame asset that we have been
operating and growing since 1995. Our recent announcement that we
are acquiring new proprietary 3-D seismic data over the entire
Etame Marin block underscores the confidence we have in the
long-term potential at Etame. We believe that we are well
positioned to deliver both near-term and long-term profitable
growth, as we continue to execute on our strategic objectives.”
Operational
Update
Gabon
In connection with planning for future drilling
programs at the Etame Marin block offshore Gabon, VAALCO recently
agreed to acquire new 3-D seismic data. VAALCO expects the seismic
survey to begin and conclude in the fourth quarter of 2020, with
processing to be fully completed by the fourth quarter of 2021. The
Company expects that the full field 3-D survey will optimize future
drilling locations, provide better imaging of existing satellite
and infill locations, as well as identify additional upside
opportunities. VAALCO projects the gross cost of both the
acquisition and processing of the seismic survey to be between $12
million and $15 million, or $4 million to $5 million net to VAALCO.
The Company plans to fund the costs with cash on hand and through
cash from operations.
Equatorial Guinea
VAALCO has a 43% WI in Block P offshore
Equatorial Guinea. VAALCO is continuing commercial discussions with
Levene HydroCarbon Limited (“Levene”) regarding VAALCO’s potential
assignment of a portion of the Block P interest to Levene in
exchange for Levene covering all or substantially all of VAALCO’s
cost to drill an exploratory well on Block P. Levene and VAALCO
have not executed any binding agreements, and there can be no
certainty a transaction will be completed or that the EG MMH will
approve the assignment. As of September 30, 2020, the Company had
$10.0 million recorded for the book value of the undeveloped
leasehold costs associated with the Block P license.
Financial Update
– Third Quarter of
2020
Net income of $7.6 million ($0.13 per diluted
share) for the third quarter of 2020 compared favorably with a net
loss of $3.9 million ($0.07 per diluted share) in the same period
in 2019. The third quarter of 2020 reflected an income tax benefit
of $2.8 million while the net loss in the third quarter of 2019 was
impacted by income tax expense of $7.7 million. Lower realized
crude oil prices of $43.63 per barrel for the third quarter of 2020
compared to $61.26 per barrel in the third quarter of 2019 were
more than offset by higher sales volumes year-over-year as a result
of additional production associated with the three successful wells
from the 2019/2020 drilling program. Net income of the third
quarter of 2020 additionally benefitted from lower operating costs
and expenses compared with the third quarter of 2019.
With respect to the second quarter of 2020, net
income was $0.6 million ($0.01 per diluted share) which reflected
the impact of lower realized crude oil prices of $28.31 per barrel.
The impact of lower prices was partially offset by higher sales
volumes for the second quarter of 2020 as a result of four
liftings. The second quarter also included a loss on derivatives of
$0.8 million ($0.01 per diluted share) and an income tax benefit of
$2.2 million.
Adjusted Net Income for the third quarter of
2020 increased to $2.3 million ($0.04 per diluted share) from an
Adjusted Net Loss of $0.6 million ($0.01 per diluted share) for the
third quarter of 2019, primarily as a result of lower general and
administrative expenses. The lower Adjusted Net Income for the
third quarter of 2020 as compared to $5.3 million ($0.09 per
diluted share) of Adjusted Net Income in the second quarter of 2020
was primarily the result of realized gains on derivatives of $6.5
million ($0.11 per diluted share) in the second quarter of
2020.
Adjusted EBITDAX totaled $7.0 million in the
third quarter of 2020 compared with $4.5 million in the same period
of 2019. In the second quarter of 2020, Adjusted EBITDAX was $10.1
million. Adjusted EBITDAX for the third quarter of 2020 was higher
than the same period in the prior year primarily due to increased
sales volumes associated with new production from the three wells
completed as part of the 2019/2020 drilling campaign and lower
operating costs and expenses, partially offset by lower realized
prices. Adjusted EBITDAX for the third quarter of 2020 was lower
than the second quarter of 2020 primarily due to realized gains on
derivatives of $6.5 million in the second quarter of 2020.
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Revenue and Sales |
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|
Q3 2020 |
|
Q3 2019 |
|
% Change Q32020 vs. Q3 2019 |
|
Q2 2020 |
|
% Change Q32020 vs. Q2 2020 |
Production (NRI BOPD) |
|
|
4,405 |
|
|
3,081 |
|
|
43 |
|
% |
|
|
5,410 |
|
|
(19 |
) |
% |
Sales (NRI BO) |
|
|
412,000 |
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|
279,000 |
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|
48 |
|
% |
|
|
631,000 |
|
|
(35 |
) |
% |
Realized crude oil price
($/BO) |
|
$ |
43.63 |
|
$ |
61.26 |
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|
(29 |
) |
% |
|
$ |
28.31 |
|
|
54 |
|
% |
Total crude oil sales
($MM) |
|
$ |
18.3 |
|
$ |
17.6 |
|
|
4 |
|
% |
|
$ |
18.0 |
|
|
2 |
|
% |
VAALCO had three liftings in the third quarter of 2020, which
resulted in total sales volumes of 412,000 barrels compared with
279,000 barrels in the same period of 2019. The increase in volumes
in the third quarter of 2020 is due to the higher production rate
resulting from the new wells. Third quarter of 2020 realized
pricing fell 29% from the third quarter of 2019 due to sharply
lower prices received due to the COVID-19 pandemic and OPEC-related
pricing issues.
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Costs and Expenses |
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Q3 2020 |
|
Q3 2019 |
|
% Change Q32020 vs. Q3 2019 |
|
Q2 2020 |
|
% Change Q32020 vs. Q2 2020 |
Production expense, excluding workovers ($MM) |
|
$ |
9.1 |
|
|
$ |
9.5 |
|
|
(4 |
) |
% |
|
$ |
12.2 |
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|
(25 |
) |
% |
Production expense, excluding
workovers ($/BO) |
|
$ |
22.21 |
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$ |
34.01 |
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(35 |
) |
% |
|
$ |
19.31 |
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|
15 |
|
% |
Workover expense ($MM) |
|
$ |
(0.2 |
) |
|
$ |
0.3 |
|
|
(167 |
) |
% |
|
$ |
(0.1 |
) |
|
|
100 |
|
% |
Depreciation, depletion and
amortization ($MM) |
|
$ |
2.2 |
|
|
$ |
1.5 |
|
|
47 |
|
% |
|
$ |
2.8 |
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(21 |
) |
% |
Depreciation, depletion and
amortization ($/BO) |
|
$ |
5.37 |
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$ |
5.41 |
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(1 |
) |
% |
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$ |
4.44 |
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21 |
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% |
General and administrative
expense, excluding non-cash compensation ($MM) |
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$ |
2.4 |
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$ |
3.6 |
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(33 |
) |
% |
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$ |
2.3 |
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|
4 |
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% |
General and administrative
expense, excluding non-cash compensation ($/BO) |
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$ |
5.89 |
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$ |
12.86 |
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(54 |
) |
% |
|
$ |
3.64 |
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|
62 |
|
% |
Stock-based compensation
expense (benefit) ($MM) |
|
$ |
(0.2 |
) |
|
$ |
1.2 |
|
|
(122 |
) |
% |
|
$ |
0.7 |
|
|
|
(134 |
) |
% |
Current income tax expense
(benefit) ($MM) |
|
$ |
2.5 |
|
|
$ |
2.6 |
|
|
(4 |
) |
% |
|
$ |
1.1 |
|
|
|
127 |
|
% |
Deferred income tax expense
(benefit) ($MM) |
|
$ |
(5.3 |
) |
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$ |
5.1 |
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(204 |
) |
% |
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$ |
(3.4 |
) |
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|
56 |
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% |
Total production expense, excluding workovers,
decreased compared to the same period in 2019 primarily due to
proactive operating cost reductions and was lower compared to the
second quarter 2020 due to lower sales volumes. The per-unit
production expense, excluding workovers, decreased significantly in
the third quarter of 2020 as compared to the third quarter of 2019
as a result of higher sales volumes and lower operating costs due
to proactive cost reductions. Production expense for the third
quarter of 2020 included approximately $0.4 million in additional
costs related to proactive employee-related measures taken in
response to the pandemic. Depreciation, depletion and
amortization (“DD&A”) expense in the third quarter of 2020 on a
per NRI barrel of crude oil sales basis was substantially unchanged
from the comparable prior year quarter. The per-unit DD&A rate
in the third quarter of 2020 was higher than the rate in the second
quarter of 2020 due to higher volumes attributable to fields with
higher depletable costs.
General and administrative (“G&A”) expense,
excluding non-cash stock-based compensation, in the third quarter
of 2020 was lower than in the third quarter of 2019 as a result of
lower professional fees, legal expenses, and accounting and audit
fees, but was similar to G&A expense, excluding non-cash
stock-based compensation in the second quarter of 2020. The third
quarter of 2019 included one-time expenses associated with VAALCO’s
dual listing on the London Stock Exchange. Non-cash stock-based
compensation expense (benefit) was impacted by the change in the
SARs liability as a result of changes in the Company’s stock price
during the quarter.
Income tax was a benefit for the three months
ended September 30, 2020 of $2.8 million, and included a $5.3
million deferred tax benefit to decrease the valuation allowances
on U.S. and Gabonese deferred tax assets.
Income tax expense for the three months ended
September 30, 2019 was $7.7 million, and included a $4.8 million
charge to increase the valuation allowances on U.S. deferred tax
assets due to a decrease in future estimated taxable earnings
primarily as result of lower crude oil prices.
Income tax was a benefit for the three months
ended June 30, 2020 of $2.2 million, and included a $0.9 million
favorable crude oil price adjustment as a result of the change in
value of the government’s allocation between the time it was
produced and the time it was taken in-kind as well as a $4.1
million benefit to decrease the valuation allowances on U.S. and
Gabonese deferred tax assets.
Response to COVID-19 Pandemic and
Current Pricing Environment
VAALCO remains fully committed to the health and
safety of all its employees and contractors. In response to the
COVID-19 pandemic and the current pricing environment, VAALCO has
taken the following measures:
- Put into place social distancing measures at our work
sites;
- Actively screened and monitored employees and contractors that
come onto the Company’s Gabon facilities including testing and
quarantine periods with onsite medical supervision;
- Engaged in regular Company-wide COVID-19 updates to keep
employees informed of key developments;
- Implemented cost cutting measures with vendors;
- Implemented sharing certain costs, such as support vessels,
helicopters, and personnel with other operators in the region;
- Temporarily reduced director, executive and certain
non-executive employee compensation; and
- Ceased or deferred certain discretionary capital spending.
VAALCO expects to continue to take proactive
steps to manage any disruption in its business caused by COVID-19
and to protect the health and safety of its employees. As of
November 5, 2020, VAALCO has experienced no material impact on its
Gabon operations directly associated with COVID-19; however, the
Company has incurred higher costs related to proactive measures
taken in response to the pandemic. These costs were approximately
$0.4 million during the third quarter of 2020 and were primarily
related to additional personnel-related costs to support enhanced
health and safety measures. The situation surrounding COVID-19
remains fluid and unpredictable, and VAALCO is actively managing
its response and assessing potential impacts to its financial
position and operating results, as well as any adverse developments
that could impact the Company’s business.
Capital Investments/Balance
Sheet
As discussed above, in connection with planning
for future drilling programs at the Etame Marin block offshore
Gabon, VAALCO recently agreed to acquire new 3-D seismic data in
the fourth quarter of 2020. VAALCO projects the gross cost of both
the acquisition and processing of the seismic survey to be between
$12 million and $15 million, or $4 million to $5 million net to
VAALCO. The Company expects to incur $3.0 million to $3.5 million
net to VAALCO in the fourth quarter of 2020 and the balance in
2021. The Company plans to fund the costs with cash on hand and
through cash from operations.
At the end of the third quarter of 2020, VAALCO
had an unrestricted cash balance of $42.0 million. The unrestricted
cash balance includes $6.0 million of cash attributable to
non-operating joint venture owner advances. Working capital at
September 30, 2020 was $16.6 million compared with $11.7 million at
June 30, 2020, while Adjusted Working Capital at September 30, 2020
totaled $29.3 million, compared with $24.1 million at June 30,
2020.
The Company does not have any derivatives
currently and continues to evaluate adding derivatives in the
future, in line with its strategic objectives.
2020 Guidance
For the fourth quarter 2020 forecasted NRI
production and sales are expected to be between 4,600 and 5,000
BOPD. Production and sales NRI volumes for full year 2020 are
expected to be at an average of 4,800 to 4,900 BOPD. The Company’s
production expense guidance (excluding workovers) for full year
2020 is $37 to $38 million or $20.50 to $21.50 per NRI barrel of
crude oil sales, with production expense for the fourth quarter of
2020 projected to be between $9 and $10 million or $19.00 to $23.00
per NRI barrel of crude oil sales. The Company forecasts between
$10 and $11 million in cash G&A expense for full year 2020.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its third quarter financial and
operating results November 6, 2020, at 9:00 a.m. Central Time
(10:00 a.m. Eastern Time and 3:00 p.m. London Time). Interested
parties may participate by dialing (877) 270-2148. Parties in the
United Kingdom may participate toll-free by dialing 08082389064 and
other international parties may dial (412) 902-6510. Participants
should request to be joined to the “VAALCO Energy Third Quarter
2020 Conference Call.” This call will also be webcast on VAALCO’s
website at www.vaalco.com. An archived audio replay will be
available on VAALCO’s website.
About VAALCO
VAALCO, founded in 1985, is a Houston, USA
based, independent energy company with production, development and
exploration assets in the West African region.
The Company is an established operator within
the region, holding a 31.1% working interest in the Etame Marin
Block, located offshore Gabon, which to date has produced over 118
million barrels of crude oil and of which the Company is the
operator.
For Further Information
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|
VAALCO Energy, Inc.
(General and Investor Enquiries) |
+00 1 713 623 0801 |
Website: |
www.vaalco.com |
Al Petrie Advisors (US
Investor Relations) |
+00 1 713 543 3422 |
Al Petrie / Chris Delange |
|
Buchanan (UK Financial
PR) |
+44 (0) 207 466 5000 |
Ben Romney / Kelsey
Traynor / James Husband |
VAALCO@buchanan.uk.com |
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 statements related to the impact of the COVID-19 pandemic,
including the recent sharp decline in the global demand for and
resulting global oversupply of crude oil and the resulting steep
decline in oil prices, production quotas imposed by Gabon,
disruptions in global supply chains, quarantines of our workforce
or workforce reductions and other matters related to the pandemic,
well results, wells anticipated to be drilled and placed on
production, future levels of drilling and operational activity and
associated expectations, the implementation of the Company’s
business plans and strategy, prospect evaluations, prospective
resources and reserve growth, its activities in Equatorial Guinea,
expected sources of and potential difficulties in obtaining future
capital funding and future liquidity, its ability to restore
production in non-producing wells, future operating losses, future
changes in crude oil and natural gas prices, future strategic
alternatives, future acquisitions, capital expenditures, future
drilling plans, acquisition and interpretation of seismic data and
costs thereof, negotiations with governments and third parties,
timing of the settlement of Gabon income taxes, and expectations
regarding processing facilities, production, sales and financial
projections. 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, crude oil and natural gas price volatility, the
impact of production quotas imposed by Gabon in response to
production cuts agreed to as a member of OPEC, inflation, general
economic conditions, the outbreak of COVID-19, the Company’s
success in discovering, developing and producing reserves,
production and sales differences due to timing of liftings,
decisions by future lenders, the risks associated with liquidity,
lack of availability of goods, services and capital, environmental
risks, drilling risks, foreign regulatory and operational risks,
and regulatory changes.
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.
Inside Information
This announcement contains inside information as defined in
Regulation (EU) No. 596/2014 on market abuse (“MAR”) and is made in
accordance with the Company’s obligations under article 17 of
MAR.VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Balance Sheets
(Unaudited)
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September 30, 2020 |
|
December 31, 2019 |
ASSETS |
|
(in thousands) |
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
41,986 |
|
|
$ |
45,917 |
|
Restricted cash |
|
|
82 |
|
|
|
911 |
|
Receivables: |
|
|
|
|
|
|
Trade |
|
|
6,080 |
|
|
|
14,335 |
|
Accounts with joint venture owners, net of allowance of $0.0
million and $0.5 million, respectively |
|
|
— |
|
|
|
2,714 |
|
Foreign income taxes receivable |
|
|
1,124 |
|
|
|
— |
|
Other |
|
|
81 |
|
|
|
1,517 |
|
Crude oil inventory |
|
|
781 |
|
|
|
1,072 |
|
Prepayments and other |
|
|
4,264 |
|
|
|
3,292 |
|
Total current assets |
|
|
54,398 |
|
|
|
69,758 |
|
|
|
|
|
|
|
|
Crude oil and natural gas
properties, equipment and other - successful efforts method,
net |
|
|
38,845 |
|
|
|
68,258 |
|
Other noncurrent assets: |
|
|
|
|
|
|
Restricted cash |
|
|
925 |
|
|
|
925 |
|
Value added tax and other receivables, net of allowance of $2.1
million and $1.0 million, respectively |
|
|
3,684 |
|
|
|
3,683 |
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Right of use operating lease assets |
|
|
25,700 |
|
|
|
33,383 |
|
Deferred tax assets |
|
|
— |
|
|
|
24,159 |
|
Abandonment funding |
|
|
11,885 |
|
|
|
11,371 |
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Total assets |
|
$ |
135,437 |
|
|
$ |
211,537 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
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Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
4,702 |
|
|
$ |
15,897 |
|
Accounts with joint venture owners |
|
|
5,984 |
|
|
|
— |
|
Accrued liabilities and other |
|
|
14,426 |
|
|
|
29,773 |
|
Operating lease liabilities - current portion |
|
|
12,696 |
|
|
|
11,990 |
|
Foreign income taxes payable |
|
|
— |
|
|
|
5,740 |
|
Current liabilities - discontinued operations |
|
|
15 |
|
|
|
350 |
|
Total current liabilities |
|
|
37,823 |
|
|
|
63,750 |
|
Asset retirement
obligations |
|
|
17,105 |
|
|
|
15,844 |
|
Operating lease liabilities -
net of current portion |
|
|
12,993 |
|
|
|
21,371 |
|
Deferred tax liabilities |
|
|
2,802 |
|
|
|
— |
|
Other long-term
liabilities |
|
|
43 |
|
|
|
852 |
|
Total liabilities |
|
|
70,766 |
|
|
|
101,817 |
|
Commitments and
contingencies |
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Shareholders’ equity: |
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Preferred stock, $25 par value; 500,000 shares authorized, none
issued |
|
|
— |
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— |
|
Common stock, $0.10 par value; 100,000,000 shares authorized,
67,819,242 and 67,673,787 shares issued, 57,456,139 and 58,024,571
shares outstanding, respectively |
|
|
6,782 |
|
|
|
6,767 |
|
Additional paid-in capital |
|
|
74,061 |
|
|
|
73,549 |
|
Less treasury stock, 10,363,103 and 9,649,216 shares, respectively,
at cost |
|
|
(42,419 |
) |
|
|
(41,429 |
) |
Retained earnings |
|
|
26,247 |
|
|
|
70,833 |
|
Total shareholders' equity |
|
|
64,671 |
|
|
|
109,720 |
|
Total liabilities and shareholders' equity |
|
$ |
135,437 |
|
|
$ |
211,537 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Operations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended September 30, |
|
|
September 30,2020 |
|
September 30,2019 |
|
June 30, 2020 |
|
2020 |
|
2019 |
|
|
(in thousands except per share amounts) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and natural gas sales |
|
$ |
18,256 |
|
|
$ |
17,603 |
|
|
$ |
17,974 |
|
|
$ |
54,619 |
|
|
$ |
62,598 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production expense |
|
|
8,984 |
|
|
|
9,836 |
|
|
|
12,126 |
|
|
|
30,859 |
|
|
|
27,874 |
|
Exploration expense |
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
|
|
— |
|
Depreciation, depletion and amortization |
|
|
2,212 |
|
|
|
1,509 |
|
|
|
2,801 |
|
|
|
8,116 |
|
|
|
4,971 |
|
Impairment of proved crude oil and natural gas properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,625 |
|
|
|
— |
|
General and administrative expense |
|
|
2,178 |
|
|
|
4,738 |
|
|
|
3,019 |
|
|
|
5,951 |
|
|
|
11,905 |
|
Bad debt expense and other |
|
|
151 |
|
|
|
54 |
|
|
|
179 |
|
|
|
1,140 |
|
|
|
30 |
|
Total operating costs and expenses |
|
|
13,541 |
|
|
|
16,137 |
|
|
|
18,125 |
|
|
|
76,707 |
|
|
|
44,780 |
|
Other operating income (expense), net |
|
|
(37 |
) |
|
|
35 |
|
|
|
(815 |
) |
|
|
(883 |
) |
|
|
(4,401 |
) |
Operating income (loss) |
|
|
4,678 |
|
|
|
1,501 |
|
|
|
(966 |
) |
|
|
(22,971 |
) |
|
|
13,417 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments gain (loss), net |
|
|
— |
|
|
|
2,267 |
|
|
|
(756 |
) |
|
|
6,583 |
|
|
|
2,266 |
|
Interest income, net |
|
|
23 |
|
|
|
193 |
|
|
|
11 |
|
|
|
150 |
|
|
|
581 |
|
Other, net |
|
|
147 |
|
|
|
(138 |
) |
|
|
47 |
|
|
|
163 |
|
|
|
(521 |
) |
Total other income, net |
|
|
170 |
|
|
|
2,322 |
|
|
|
(698 |
) |
|
|
6,896 |
|
|
|
2,326 |
|
Income (loss) from continuing
operations before income taxes |
|
|
4,848 |
|
|
|
3,823 |
|
|
|
(1,664 |
) |
|
|
(16,075 |
) |
|
|
15,743 |
|
Income tax expense
(benefit) |
|
|
(2,759 |
) |
|
|
7,681 |
|
|
|
(2,249 |
) |
|
|
28,470 |
|
|
|
19,642 |
|
Income (loss) from continuing
operations |
|
|
7,607 |
|
|
|
(3,858 |
) |
|
|
585 |
|
|
|
(44,545 |
) |
|
|
(3,899 |
) |
Income (loss) from
discontinued operations, net of tax |
|
|
11 |
|
|
|
(61 |
) |
|
|
11 |
|
|
|
(41 |
) |
|
|
5,448 |
|
Net income (loss) |
|
$ |
7,618 |
|
|
$ |
(3,919 |
) |
|
$ |
596 |
|
|
$ |
(44,586 |
) |
|
$ |
1,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.13 |
|
|
$ |
(0.07 |
) |
|
$ |
0.01 |
|
|
$ |
(0.77 |
) |
|
$ |
(0.07 |
) |
Income (loss) from discontinued operations, net of tax |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.09 |
|
Net income (loss) per share |
|
$ |
0.13 |
|
|
$ |
(0.07 |
) |
|
$ |
0.01 |
|
|
$ |
(0.77 |
) |
|
$ |
0.02 |
|
Basic weighted average shares outstanding |
|
|
57,456 |
|
|
|
58,953 |
|
|
|
57,456 |
|
|
|
57,628 |
|
|
|
59,457 |
|
Diluted net income (loss) per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
0.13 |
|
|
$ |
(0.07 |
) |
|
$ |
0.01 |
|
|
$ |
(0.77 |
) |
|
$ |
(0.07 |
) |
Income (loss) from discontinued operations, net of tax |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.09 |
|
Net income (loss) per share |
|
$ |
0.13 |
|
|
$ |
(0.07 |
) |
|
$ |
0.01 |
|
|
$ |
(0.77 |
) |
|
$ |
0.02 |
|
Diluted weighted average shares outstanding |
|
|
57,741 |
|
|
|
58,953 |
|
|
|
57,594 |
|
|
|
57,628 |
|
|
|
59,457 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
|
(in thousands) |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net income (loss) |
|
$ |
(44,586 |
) |
|
$ |
1,549 |
|
Adjustments to reconcile net
income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
(Income) loss from discontinued operations |
|
|
41 |
|
|
|
(5,448 |
) |
Depreciation, depletion and amortization |
|
|
8,116 |
|
|
|
4,971 |
|
Impairment of proved crude oil and natural gas properties |
|
|
30,625 |
|
|
|
— |
|
Other amortization |
|
|
181 |
|
|
|
181 |
|
Deferred taxes |
|
|
26,972 |
|
|
|
12,725 |
|
Unrealized foreign exchange gain |
|
|
(60 |
) |
|
|
(46 |
) |
Stock-based compensation |
|
|
(2,097 |
) |
|
|
2,770 |
|
Cash settlements paid on exercised stock appreciation rights |
|
|
— |
|
|
|
(261 |
) |
Derivatives instruments gain |
|
|
(6,583 |
) |
|
|
(2,266 |
) |
Cash settlements received on matured derivative contracts, net |
|
|
7,216 |
|
|
|
2,056 |
|
Bad debt expense and other |
|
|
1,140 |
|
|
|
30 |
|
Other operating loss, net |
|
|
83 |
|
|
|
37 |
|
Operational expenses associated with equipment and other |
|
|
1,418 |
|
|
|
(62 |
) |
Change in operating assets and liabilities: |
|
|
|
|
|
|
Trade receivables |
|
|
8,255 |
|
|
|
4,404 |
|
Accounts with joint venture owners |
|
|
8,642 |
|
|
|
12,354 |
|
Other receivables |
|
|
1,333 |
|
|
|
219 |
|
Crude oil inventory |
|
|
291 |
|
|
|
10 |
|
Prepayments and other |
|
|
(1,153 |
) |
|
|
(1,979 |
) |
Value added tax and other receivables |
|
|
(919 |
) |
|
|
664 |
|
Accounts payable |
|
|
(9,318 |
) |
|
|
(2,154 |
) |
Foreign income taxes receivable/payable |
|
|
(6,875 |
) |
|
|
(122 |
) |
Accrued liabilities and other |
|
|
(3,285 |
) |
|
|
4,092 |
|
Net cash provided by continuing operating activities |
|
|
19,437 |
|
|
|
33,724 |
|
Net cash used in discontinued operating activities |
|
|
(376 |
) |
|
|
(4,673 |
) |
Net cash provided by operating activities |
|
|
19,061 |
|
|
|
29,051 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Property and equipment expenditures |
|
|
(22,317 |
) |
|
|
(3,382 |
) |
Net cash used in continuing investing activities |
|
|
(22,317 |
) |
|
|
(3,382 |
) |
Net cash used in discontinued investing activities |
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(22,317 |
) |
|
|
(3,382 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the issuances of common stock |
|
|
— |
|
|
|
133 |
|
Treasury shares |
|
|
(990 |
) |
|
|
(2,425 |
) |
Net cash used in continuing
financing activities |
|
|
(990 |
) |
|
|
(2,292 |
) |
Net cash used in discontinued
financing activities |
|
|
— |
|
|
|
— |
|
Net cash used in financing
activities |
|
|
(990 |
) |
|
|
(2,292 |
) |
NET CHANGE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
|
(4,246 |
) |
|
|
23,377 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
59,124 |
|
|
|
46,655 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF PERIOD |
|
$ |
54,878 |
|
|
$ |
70,032 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESSelected Financial and
Operating Statistics(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended September 30, |
|
|
September 30,2020 |
|
September 30,2019 |
|
June 30, 2020 |
|
2020 |
|
2019 |
NRI SALES DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
|
412 |
|
|
279 |
|
|
631 |
|
|
1,337 |
|
|
933 |
NRI PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
|
405 |
|
|
283 |
|
|
492 |
|
|
1,347 |
|
|
932 |
Average daily production volumes (BOPD) |
|
|
4,405 |
|
|
3,081 |
|
|
5,410 |
|
|
4,918 |
|
|
3,412 |
REALIZED DERIVATIVE
INSTRUMENTS GAIN (LOSS) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized derivative instruments gain (loss), net, in thousands |
|
$ |
0.00 |
|
$ |
493 |
|
$ |
6,498 |
|
$ |
7,216 |
|
$ |
2,056 |
Realized derivative instruments gain (loss), net (Per Bbls) |
|
|
0.00 |
|
|
1.77 |
|
|
10.30 |
|
|
5.40 |
|
|
2.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE SALES PRICES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (Per Bbls) |
|
$ |
43.63 |
|
$ |
61.26 |
|
$ |
28.31 |
|
$ |
39.90 |
|
$ |
65.00 |
COSTS AND EXPENSES (Per Bbl of
sales): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production expense |
|
$ |
21.81 |
|
$ |
35.25 |
|
$ |
19.22 |
|
$ |
23.08 |
|
$ |
29.88 |
Production expense, excluding workovers* |
|
|
22.21 |
|
|
34.01 |
|
|
19.31 |
|
|
21.10 |
|
|
29.36 |
Depreciation, depletion and amortization |
|
|
5.37 |
|
|
5.41 |
|
|
4.44 |
|
|
6.07 |
|
|
5.33 |
General and administrative expense** |
|
|
5.29 |
|
|
16.98 |
|
|
4.78 |
|
|
4.45 |
|
|
12.76 |
Property and equipment expenditures, cash basis (in thousands) |
|
$ |
2,220 |
|
$ |
2,219 |
|
$ |
8,117 |
|
$ |
22,317 |
|
$ |
3,382 |
*Workover costs excluded from the three months ended September
30, 2020 and 2019 and June 30, 2020 are $(0.2) million, $0.3
million and $(0.1) million, respectively.**General and
administrative expenses include $(0.60), $4.12 and $1.14 per barrel
of oil of sales of stock-based compensation expense in the three
months ended September 30, 2020, and 2019 and June 30, 2020,
respectively.
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 discontinued
operations, interest income net, income tax expense, depletion,
depreciation and amortization, exploration expense, non-cash and
other items including stock compensation expense and unrealized
commodity derivative loss.
Management uses Adjusted Net Income to evaluate
operating and financial performance and believes the measure is
useful to investors because it eliminates the impact of certain
non-cash and/or other items that management does not consider to be
indicative of the Company’s performance from period to period.
Management also believes this non-GAAP measure is useful to
investors to evaluate and compare the Company’s operating and
financial performance across periods, as well as facilitating
comparisons to others in the Company’s industry. Adjusted Net
Income is a non-GAAP financial measure and as used herein
represents net income before discontinued operations, deferred
income tax expense, unrealized commodity derivative loss and
non-cash and other items.
Management uses Adjusted Working Capital as a
measurement tool to assess the working capital position of the
Company’s continuing operations excluding leasing obligations
because it eliminates the impact of discontinued operations as well
as the impact of lease liabilities. Under the lease accounting
standards, lease liabilities related to assets used in joint
operations include both the Company’s share of expenditures as well
as the share of lease expenditures which its non-operator joint
venture owners’ will be obligated to pay under joint operating
agreements. Adjusted Working Capital is a non-GAAP financial
measure and as used herein represents working capital excluding
working capital attributable to discontinued operations and current
liabilities associated with lease obligations.
Adjusted EBITDAX and Adjusted Net Income have
significant limitations, including that they do not reflect the
Company’s cash requirements for capital expenditures, contractual
commitments, working capital or debt service. Adjusted EBITDAX and
Adjusted Net Income should not be considered as substitutes 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 and
Adjusted Net Income exclude 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 and Adjusted Net Income may not be comparable to similarly
titled measures used by other companies.
The tables below reconcile the most directly
comparable GAAP financial measures to Adjusted Net Income, Adjusted
EBITDAX and Adjusted Working Capital.
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations of Non-GAAP
Financial Measures(Unaudited)(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended September 30, |
Reconciliation of Net
Income (Loss) to Adjusted Net Income (Loss) |
|
September 30,2020 |
|
September 30,2019 |
|
June 30, 2020 |
|
2020 |
|
2019 |
Net income (loss) |
|
$ |
7,618 |
|
|
$ |
(3,919 |
) |
|
$ |
596 |
|
|
$ |
(44,586 |
) |
|
$ |
1,549 |
|
Adjustment for discrete
items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
(11 |
) |
|
|
61 |
|
|
|
(11 |
) |
|
|
41 |
|
|
|
(5,448 |
) |
Impairment of proved crude oil and natural gas properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,625 |
|
|
|
— |
|
Unrealized derivative instruments (gain) loss |
|
|
— |
|
|
|
(1,774 |
) |
|
|
7,254 |
|
|
|
633 |
|
|
|
(210 |
) |
Deferred income tax expense (benefit) |
|
|
(5,299 |
) |
|
|
5,058 |
|
|
|
(3,367 |
) |
|
|
26,972 |
|
|
|
12,725 |
|
Other operating expense, net |
|
|
37 |
|
|
|
(35 |
) |
|
|
815 |
|
|
|
883 |
|
|
|
4,401 |
|
Adjusted Net Income
(Loss) |
|
$ |
2,345 |
|
|
$ |
(609 |
) |
|
$ |
5,287 |
|
|
$ |
14,568 |
|
|
$ |
13,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted adjusted net income
(loss) per share |
|
$ |
0.04 |
|
|
$ |
(0.01 |
) |
|
$ |
0.09 |
|
|
$ |
0.25 |
|
|
$ |
0.22 |
|
Diluted weighted average
shares outstanding (1) |
|
|
57,741 |
|
|
|
58,953 |
|
|
|
57,594 |
|
|
|
57,628 |
|
|
|
59,457 |
|
(1) No adjustments to weighted
average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended September 30, |
Reconciliation of Net
Income (Loss) to Adjusted EBITDAX |
|
September 30,2020 |
|
September 30,2019 |
|
June 30, 2020 |
|
2020 |
|
2019 |
Net income (loss) |
|
$ |
7,618 |
|
|
$ |
(3,919 |
) |
|
$ |
596 |
|
|
$ |
(44,586 |
) |
|
$ |
1,549 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of discontinued operations |
|
|
(11 |
) |
|
|
61 |
|
|
|
(11 |
) |
|
|
41 |
|
|
|
(5,448 |
) |
Interest income, net |
|
|
(23 |
) |
|
|
(193 |
) |
|
|
(11 |
) |
|
|
(150 |
) |
|
|
(581 |
) |
Income tax expense (benefit) |
|
|
(2,759 |
) |
|
|
7,681 |
|
|
|
(2,249 |
) |
|
|
28,470 |
|
|
|
19,642 |
|
Depreciation, depletion and amortization |
|
|
2,212 |
|
|
|
1,509 |
|
|
|
2,801 |
|
|
|
8,116 |
|
|
|
4,971 |
|
Exploration expense |
|
|
16 |
|
|
|
— |
|
|
|
— |
|
|
|
16 |
|
|
|
— |
|
Impairment of proved crude oil and natural gas properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
30,625 |
|
|
|
— |
|
Non-cash or unusual
items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(248 |
) |
|
|
1,150 |
|
|
|
720 |
|
|
|
(2,097 |
) |
|
|
2,770 |
|
Unrealized derivative instruments (gain) loss |
|
|
— |
|
|
|
(1,774 |
) |
|
|
7,254 |
|
|
|
633 |
|
|
|
(210 |
) |
Other operating expense, net |
|
|
37 |
|
|
|
(35 |
) |
|
|
815 |
|
|
|
883 |
|
|
|
4,401 |
|
Bad debt expense and other |
|
|
151 |
|
|
|
54 |
|
|
|
179 |
|
|
|
1,140 |
|
|
|
30 |
|
Adjusted EBITDAX |
|
$ |
6,993 |
|
|
$ |
4,534 |
|
|
$ |
10,094 |
|
|
$ |
23,091 |
|
|
$ |
27,124 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations of Non-GAAP
Financial Measures(Unaudited)(in thousands)
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Working Capital to Adjusted Working Capital |
|
September 30, 2020 |
|
June 30, 2020 |
|
December 31, 2019 |
Current assets |
|
$ |
54,398 |
|
|
$ |
62,234 |
|
|
$ |
69,758 |
|
Current liabilities |
|
|
(37,823 |
) |
|
|
(50,498 |
) |
|
|
(63,750 |
) |
Working
capital |
|
|
16,575 |
|
|
|
11,736 |
|
|
|
6,008 |
|
Add: operating lease
liabilities - current portion |
|
|
12,696 |
|
|
|
12,274 |
|
|
|
11,990 |
|
Add: current liabilities -
discontinued operations |
|
|
15 |
|
|
|
48 |
|
|
|
350 |
|
Adjusted Working
Capital |
|
$ |
29,286 |
|
|
$ |
24,058 |
|
|
$ |
18,348 |
|
|
|
|
|
|
|
|
|
|
|
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