VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) today reported
operational and financial results for the first quarter 2020.
Highlights and Recent Key
Items:
- Produced 4,944 net revenue interest (“NRI”)(1) barrels
of crude oil per day (“BOPD”), or 5,683 working interest (“WI”)(2)
BOPD near the high end of first quarter guidance (4,700 – 5,000 NRI
BOPD);
- Increased first quarter 2020 production 35% compared
with the fourth quarter of 2019 due to the successful drilling
campaign;
- Reported a net loss of $52.8 million ($0.91 per diluted
share), Adjusted Net Income(3) of $6.9 million ($0.12 per diluted
share) and generated Adjusted EBITDAX(3) of $6.0
million;
- The net loss of $52.8 million for the first quarter
included non-cash charges of $59.7 million primarily as a result of
the decrease in oil prices;
- Completed the 2019/2020 drilling campaign with a 100%
success rate, on time and within budget, with no safety or
environmental incidents and released the Vantage Drilling jackup
drilling rig on April 9, 2020;
- Experienced no material disruptions in operations to
date due to current worldwide COVID-19 crisis and has
taken proactive measures in response to the
pandemic and the current low oil price environment;
- Maintained strong balance sheet with no debt, a cash
balance of $61.0 million, including $11.3 million in joint venture
owner advances, and Adjusted Working Capital(3) of $25.8 million as
of March 31, 2020.
(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 (Loss) 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.” See “Supplemental
Non-GAAP Financial Measures” below for additional information.
Cary Bounds, VAALCO’s Chief Executive Officer
commented: “With the global COVID-19 pandemic coupled with supply
and demand imbalances, the energy industry is facing extraordinary
challenges never seen before. Thus far, VAALCO’s operations have
not been materially disrupted by the global COVID-19 pandemic, and
we have managed through the logistical challenges that we have
faced since the outbreak. VAALCO continues to put the safety of our
workers and local stakeholders first and contingency plans are in
place in the event that we are directly impacted. In response to
the decline in Brent pricing, VAALCO has taken several actions to
minimize capital and operational spending to preserve cash flow and
reduce our breakeven costs. We released the Vantage rig in early
April following the completion of our successful 2019/2020 drilling
program, and we have no material capital expenditures remaining in
2020. While we have deferred all discretionary capital expenditures
including drilling until the global oil pricing environment
improves, we remain confident in the long-term viability of our
inventory of drilling opportunities.”
“Despite this uncertain environment, we remain
focused on operational excellence, which was demonstrated in our
first quarter 2020 results. We had very strong production of
4,944 BOPD for the quarter, a 35% increase over Q4 2019. We
generated $6.0 million of Adjusted EBITDAX, and we increased our
cash balance to $61.0 million, including $11.3 million in joint
venture owner advances in the first quarter of 2020. Like all
companies in our industry we have been impacted by the severe
decline in oil prices, and as a result of the current commodity
price environment, we have taken a non-cash impairment. We have a
strong balance sheet with no debt, a world-class asset in Etame and
an exceptional operational team. While we believe that our
operational and financial execution has better positioned VAALCO to
weather the near-term uncertainties, the market conditions
resulting from COVID-19 have significantly impacted us and our
outlook globally and we expect that 2020 will be a challenging year
for our business.”
Operational Update
Gabon
Given the current volatile pricing environment,
the Company continues to evaluate all uses of cash and is managing
both operating expenses as well as capital expenditure levels in
view of the existing and expected pricing environment.
With the drilling and completion of the South
East Etame 4H well in March 2020, VAALCO successfully completed its
2019/2020 drilling campaign and has also satisfied the drilling
commitment required under the terms of the 2018 extension to the
Etame Marin block production sharing contract.
As previously announced, on March 7, 2020, the
South East Etame 2H well stopped producing due to an electric
submersible pump (“ESP”) failure. The drilling rig on the
South East Etame North Tchibala (“SEENT”) platform was already
scheduled to replace the ESP in that well with a preemptive
workover upon completion of the South East Etame 4H well. The
workover successfully restored 2,400 gross BOPD, or 650 BOPD NRI to
VAALCO, in line with production levels prior to the ESP
failure.
VAALCO released the Vantage rig on April 9, 2020
and does not currently expect to perform any additional workovers
in order to protect cash flow in the current uncertain
environment. In addition to increasing production by 35% in
the first quarter of 2020 compared to the fourth quarter of 2019
and having a 100% success rate, the entire drilling campaign and
two workovers were completed as planned, with no safety or
environmental incidents.
In mid-April 2020, the South Tchibala 2H well
stopped producing due to a downhole mechanical failure not related
to the ESP. The well was producing approximately 830 gross
BOPD, or 225 BOPD NRI to VAALCO prior to ceasing production.
The Company believes that it is unlikely the well failure will be
addressed until the next drilling campaign when a rig is on
location.
Equatorial Guinea
VAALCO has a 43% WI in Block P offshore
Equatorial Guinea. The Equatorial Guinea Ministry of Mines
and Hydrocarbons (“EG MMH”) approved VAALCO’s appointment as
operator of Block P on November 12, 2019, and the Company is
currently waiting on a production sharing contract amendment to
begin activities in Block P.
The Company acquired an additional working
interest of 12% from Atlas Petroleum, thereby increasing its
working interest to 43% in 2020, in exchange for a potential future
payment of $3.1 million in the event that there is commercial
production from Block P. The EG MMH has approved this
assignment. VAALCO is in commercial discussions with Levene
HydroCarbon Limited (“Levene”) where VAALCO would assign a portion
of the Block P interest to Levene and Levene would potentially
cover all or substantially all of VAALCO’s cost to drill an
exploratory well on Block P. In addition, VAALCO would serve
as a non-owner operator, under a service agreement with Levene, on
Blocks 3, 4 and 19 in Equatorial Guinea. Levene and VAALCO have
executed a non-binding Memorandum of Understanding regarding the
commercial discussions; however, neither have executed any binding
agreements, and there can be no certainty a transaction will be
completed. Further, approval of the assignment by the EG MMH
must be obtained prior to any transaction being completed. As of
March 31, 2020, the Company had $10.0 million recorded for the book
value of the undeveloped leasehold costs associated with the Block
P license.
VAALCO and its current and potential future
joint venture owners are evaluating the timing and budgeting for
development and exploration activities under a development and
production area in Block P, including the approval of a development
and production plan. The production sharing contract for
Block P provides for a development and production period of 25
years from the date of approval of a development and production
plan.
Financial Update
Net loss of $52.8 million ($0.91 per diluted
share) for the first quarter of 2020 included non-cash
charges/benefits for: impairment of proved properties of $30.6
million ($0.53 per diluted share), unrealized gains on derivatives
of $6.6 million, ($0.11 per diluted share) and deferred income tax
expense of $35.6 million ($0.61 per diluted share). Excluding
these and other items totaling $59.7 million, Adjusted Net Income
for the first quarter of 2020 totaled $6.9 million ($0.12 per
diluted share).
Net income of $6.5 million ($0.10 per diluted
share) for the first quarter of 2019 included non-cash
charges/benefits for: income from discontinued operations of $5.7
million ($0.09 per diluted share), unrealized derivative loss of
$3.0 million ($.05 per diluted share) and deferred income tax
expense of $1.7 million ($0.3 million per diluted share).
Excluding these and other items totaling $0.8 million, Adjusted Net
Income was $5.7 million ($0.09 per diluted share) for the first
quarter of 2019.
Net income of $1.0 million ($0.02 per diluted
share) for the fourth quarter of 2019 included non-cash charges
for: unrealized derivative losses of $3.1 million ($0.05 per
diluted share) and deferred income tax expense of $1.8 million
($0.03 per diluted share). Excluding these and other items
totaling $4.5 million, Adjusted Net Income was $5.5 million ($0.09
per diluted share).
The increase in year-over-year Adjusted Net
Income was primarily driven by decreases in the current provision
for income taxes and general and administrative costs offset by a
decrease in revenue and an increase in production expense.
Similarly, Adjusted Net Income for the first quarter of 2020
increased from the fourth quarter of 2019 as a result of decreases
in the current provision for income taxes and general and
administrative costs offset by a decrease in revenue.
Adjusted EBITDAX totaled $6.0 million in the
first quarter of 2020 compared with $9.7 million in the same period
of 2019. In the fourth quarter of 2019, Adjusted EBITDAX was
$10.4 million. Adjusted EBITDAX for the first quarter of 2020
was lower than the same period in the prior year and the fourth
quarter of 2019 primarily due to lower realized pricing.
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Revenue and Sales |
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Q1 2020 |
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Q1 2019 |
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% Change Q1 2020 vs. 1Q 2019 |
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Q4 2019 |
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% Change Q1 2020 vs. 4Q 2019 |
Production (NRI BOPD) |
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4,944 |
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3,496 |
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41 |
% |
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3,664 |
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35 |
% |
Sales (NRI BO) |
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294,000 |
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297,000 |
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(1 |
)% |
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318,000 |
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(8 |
)% |
Realized crude oil price
($/BO) |
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$ |
59.54 |
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$ |
64.17 |
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(7 |
)% |
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$ |
65.80 |
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(10 |
)% |
Total crude oil sales
($MM) |
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$ |
18.4 |
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$ |
19.8 |
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(7 |
)% |
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$ |
21.9 |
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(16 |
)% |
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During the first quarter of 2020, VAALCO had two
liftings, one in January and one in February, but the next lifting
of 85,000 barrels of oil that was scheduled for March 2020 was
delayed to April 1, 2020 due to poor weather conditions. This
delay resulted in a higher average realized oil price for the first
quarter of 2020 as the quarter included price realizations for only
January and February when prices were higher and did not include
any price realizations from March when prices had declined
significantly.
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Costs and Expenses |
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Q1 2020 |
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Q1 2019 |
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% Change Q1 2020 vs. 1Q 2019 |
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Q4 2019 |
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% Change Q1 2020 vs. 4Q 2019 |
Production expense, excluding workovers ($MM) |
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$ |
6.9 |
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$ |
8.1 |
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(15 |
)% |
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$ |
9.8 |
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(30 |
)% |
Production expense, excluding
workovers ($/BO) |
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$ |
23.39 |
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$ |
27.30 |
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(14 |
)% |
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$ |
30.70 |
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(24 |
)% |
Workover expense ($MM) |
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$ |
2.8 |
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$ |
0.1 |
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2,722 |
% |
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$ |
— |
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N/A |
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Depreciation, depletion and
amortization ($MM) |
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$ |
3.1 |
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$ |
1.6 |
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100 |
% |
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$ |
2.1 |
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47 |
% |
Depreciation, depletion and
amortization ($/BO) |
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$ |
10.55 |
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$ |
5.23 |
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102 |
% |
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$ |
6.64 |
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59 |
% |
General and administrative
expense, excluding non-cash compensation ($MM) |
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$ |
3.4 |
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$ |
2.7 |
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25 |
% |
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$ |
2.3 |
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48 |
% |
General and administrative
expense, excluding non-cash compensation ($/BO) |
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$ |
11.30 |
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$ |
9.14 |
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24 |
% |
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$ |
6.96 |
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62 |
% |
Stock-based compensation
expense (benefit) ($MM) |
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$ |
(2.6 |
) |
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$ |
1.7 |
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(249 |
)% |
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$ |
0.7 |
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(449 |
)% |
Current income tax expense
(benefit) ($MM) |
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$ |
(2.1 |
) |
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$ |
1.1 |
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(291 |
)% |
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$ |
2.4 |
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(188 |
)% |
Deferred income tax expense
($MM) |
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$ |
35.6 |
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$ |
1.7 |
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1,994 |
% |
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$ |
1.8 |
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1,878 |
% |
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Total production expense, excluding workovers,
decreased primarily as a result of lower sales volumes during the
quarter. Unit operating expense, excluding workovers,
decreased in the first quarter of 2020 as compared to both the
first quarter of 2019 and the fourth quarter of 2019 as a result of
higher production volumes. Workover expense for the first
quarter of 2020 increased as the Company performed two workovers in
the quarter; whereas, none were performed in 2019.
Depreciation, depletion and amortization
(“DD&A”) expense in the first quarter of 2020 on a per NRI
barrel of crude oil sales basis increased over the comparable prior
year quarter and the fourth quarter of 2019 reflecting the
additional costs associated with the new Etame 11H well, South East
Etame 4P appraisal wellbore and South East Etame 4H well.
During the first quarter of 2020, impairment
testing was performed using the year-end 2019 independently
prepared reserve report and forward price curves. The Company
recorded a non-cash impairment charge of $30.6 million to write
down the Company’s investment in the Etame Marine Block, offshore
Gabon to its fair value of $15.6 million. The impairment is a
result of the recent decline in the forecasted oil prices used in
the impairment testing calculation. As a result of this
impairment, DD&A per NRI barrel of crude oil sales is expected
to be approximately $4.00 to $6.00 for 2020.
General and administrative (“G&A”) expense,
excluding non-cash compensation, increased in the first quarter of
2020 as compared to the first quarter 2019 and the fourth quarter
of 2019 as a result of higher professional fees. 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. For the first
quarter of 2020, the Company’s stock price decreased resulting in a
reversal of expense, whereas the Company’s stock price increased
during both the first and fourth quarters of 2019 resulting in
additional expense.
Foreign income taxes are attributable to Gabon
and are settled by the government taking their oil in-kind.
Current income tax expense for the first quarter of 2020 includes a
$3.4 million favorable 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. After
excluding this impact, current income taxes were $1.9 million for
the period.
Deferred income tax expense for the first
quarter of 2020 includes a $46.9 million charge to increase the
valuation allowances on both the U.S. and Gabon deferred tax assets
offset by an $11.8 million deferred tax benefit. As a result,
the Company has full valuation allowances against its deferred tax
assets as of March 31, 2020. This is due to a decrease in
future estimated taxable earnings primarily driven by lower crude
oil prices. For the fourth quarter of 2019 deferred income
tax expense included a reversal of the valuation allowance of $1.7
million of deferred tax expense.
Response to COVID-19 Pandemic and
Current Pricing Environment
VAALCO remains committed to the health and
safety of all its employees and contractors. In response to
the COVID-19 outbreak and the current pricing environment, VAALCO
has taken the following measures:
- Implemented stay-at-home initiatives for all but critical staff
and put into place social distancing measures;
- Actively screening and monitoring employees and contractors
that come onto the Company’s Gabon facilities including 14-day
quarantines and onsite medical supervision in accordance with
government guidelines;
- Engaged in regular Company-wide COVID-19 updates to motivate
and retain employees and keep them informed of key
developments;
- Implemented cost cutting measures with vendors;
- Implemented sharing certain costs, such as shipping vessels,
helicopter, and personnel with other operators in the region;
- Reduced director compensation by 25%, executive compensation by
20% and certain non-executive employee compensation by an average
rate of 8%; and
- Ceased or deferred 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
May 11, 2020, VAALCO has experienced no material impact on its
Gabon operations directly associated with COVID-19.
Capital Investments/Balance
Sheet
For the first quarter of 2020, net capital
expenditures totaled $12.0 million on a cash basis and $9.4 million
on an accrual basis. Capital expenditures are primarily
related to the 2019/2020 drilling program at Etame. The
Company does not expect any remaining material capital expenditures
for the balance of 2020.
At the end of the first quarter, VAALCO had an
unrestricted cash balance of $61.0 million. The unrestricted cash
balance includes $11.3 million of cash attributable to
non-operating joint venture owner advances. Adjusted Working
Capital at March 31, 2020 totaled $25.8 million, an increase of
$7.5 million since December 31, 2019.
Common Stock Repurchase
Plan
Since inception of the stock repurchase program
authorized by the Board of Directors in June 2019, through March
31, 2020, the Company purchased 2,549,639 shares at an average
price of $1.75 for $4.5 million. From April 1, 2020 through
the settlement date of April 2, 2020, the Company purchased 191,004
shares of its common stock at an average price of $0.99 per share
for an aggregate purchase price of $0.2 million. These purchases
have all been funded using the Company’s cash on hand. No purchases
were made after April 2, 2020, and on April 13, 2020, to preserve
its cash resources and liquidity, the Board of Directors approved
terminating the share repurchase program. The Company will
continue to review re-instituting a share repurchase program in the
future when commodity markets stabilize at higher levels.
Hedging
On May 6, 2019, the Company entered into
commodity swaps at a Dated Brent weighted average of $66.70 per
barrel for the period from and including July 2019 through June
2020 for an approximate quantity of 500,000 barrels. These
swaps settle on a monthly basis. At March 31, 2020, the
unexpired commodity swaps were for an underlying quantity of
172,160 barrels and had a fair value asset position of $7.3 million
reflected in “Prepayments and other” line of the consolidated
balance sheet. Unless VAALCO enters into additional hedges, after
these derivative instruments expire in June 2020, the Company will
not have in place any derivative instruments to hedge against
declining oil prices.
2020 Guidance
To date, VAALCO’s operations have not been
materially impacted by the worldwide COVID-19 pandemic. The
Company’s guidance excludes any potential future impact not
currently being experienced. VAALCO currently estimates that
the full year 2020 NRI production range remains unchanged at 4,400
to 5,000 BOPD. For the second quarter of 2020, forecasted NRI
production is expected to be between 5,000 and 5,400 BOPD. Sales
NRI volumes for 2020 remain unchanged at an estimated average of
4,400 to 5,000 BOPD. VAALCO has reacted swiftly to the
changing environment and is lowering its cost estimates. The
Company’s production expense guidance (excluding workovers) for
full year 2020 has declined to $36 to $40 million or $20.00 to
$24.00 per NRI barrel of crude oil sales, with production expense
for the second quarter of 2020 projected to be between $9 and $10
million or $20.00 to $24.00 per NRI barrel of crude oil sales. The
Company forecasts between $10 and $12 million in cash G&A
expense for full year 2020. In addition, VAALCO has lowered
the range for workover expense to between $3 and $4 million for the
full year of 2020.
VAALCO incurred $9.4 million of capital
expenditures on an accrual basis and expects no material capital
expenditures remaining in 2020 after it released the Vantage
drilling rig and completed the 2019/2020 drilling campaign.
Capital expenditures for the full year are expected to be between
$10 million and $12 million.
Inaugural Sustainability
Report
The Company is pleased to announce that the 2019
Sustainability Report, the Company’s first such report, has been
published and is now available on its website.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its fourth quarter financial and
operating results May 12, 2020, at 9:00 a.m. Central Time (10:00
a.m. Eastern Time and 3:00 pm 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 First 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 114
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 |
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Al Petrie Advisors (US
Investor Relations) |
+00 1 713 543 3422 |
Al Petrie / Chris Delange |
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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 oil and the resulting steep decline in oil prices, 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, the Company’s ability to regain compliance with the
NYSE’s continued listing standards and the continued trading of the
Company’s common stock on the NYSE, its activities in Equatorial
Guinea, expected sources of and potential difficulties in obtaining
future capital funding and future liquidity, the share repurchase
program, 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, prospect evaluations,
negotiations with governments and third parties, timing of the
settlement of Gabon income taxes, expectations regarding processing
facilities, production, sales and financial projections and reserve
growth. 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, 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.
References to thickness of crude oil pay or of a
formation where evidence of hydrocarbons have been encountered is
not necessarily an indicator that hydrocarbons will be recoverable
in commercial quantities or in any estimated volume. Well test
results should be considered as preliminary and not necessarily
indicative of long-term performance or of ultimate recovery. Well
log interpretations indicating crude oil accumulations are not
necessarily indicative of future production or ultimate
recovery.
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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March 31, 2020 |
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December 31, 2019 |
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ASSETS |
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(in thousands) |
Current assets: |
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Cash and cash equivalents |
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$ |
60,973 |
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$ |
45,917 |
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Restricted cash |
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994 |
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911 |
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Receivables: |
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Trade |
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— |
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14,335 |
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Accounts with joint venture owners, net of allowance of $0.0
million and $0.5 million, respectively |
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117 |
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2,714 |
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Other |
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2,241 |
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1,517 |
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Crude oil inventory |
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3,865 |
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1,072 |
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Prepayments and other |
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10,859 |
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|
3,292 |
|
Total current assets |
|
|
79,049 |
|
|
|
69,758 |
|
Crude oil and natural gas
properties and equipment - successful efforts method: |
|
|
|
|
|
|
Wells, platforms and other production facilities |
|
|
442,866 |
|
|
|
422,651 |
|
Work-in-progress |
|
|
— |
|
|
|
7,378 |
|
Undeveloped acreage |
|
|
21,476 |
|
|
|
23,771 |
|
Equipment and other |
|
|
9,367 |
|
|
|
11,157 |
|
|
|
|
473,709 |
|
|
|
464,957 |
|
Accumulated depreciation,
depletion, amortization and impairment |
|
|
(430,209 |
) |
|
|
(396,699 |
) |
Net crude oil and natural gas properties, equipment and other |
|
|
43,500 |
|
|
|
68,258 |
|
Other noncurrent assets: |
|
|
|
|
|
|
Restricted cash |
|
|
925 |
|
|
|
925 |
|
Value added tax and other receivables, net of allowance of $1.7
million and $1.0 million, respectively |
|
|
3,543 |
|
|
|
3,683 |
|
Right of use operating lease assets |
|
|
30,448 |
|
|
|
33,383 |
|
Deferred tax assets |
|
|
— |
|
|
|
24,159 |
|
Abandonment funding |
|
|
11,227 |
|
|
|
11,371 |
|
Total assets |
|
$ |
168,692 |
|
|
$ |
211,537 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
14,804 |
|
|
$ |
15,897 |
|
Accounts with joint venture owners |
|
|
11,271 |
|
|
|
— |
|
Accrued liabilities and other |
|
|
22,990 |
|
|
|
29,773 |
|
Operating lease liabilities - current portion |
|
|
12,050 |
|
|
|
11,990 |
|
Foreign taxes payable |
|
|
4,177 |
|
|
|
5,740 |
|
Current liabilities - discontinued operations |
|
|
395 |
|
|
|
350 |
|
Total current liabilities |
|
|
65,687 |
|
|
|
63,750 |
|
Asset retirement
obligations |
|
|
16,421 |
|
|
|
15,844 |
|
Operating lease liabilities -
net of current portion |
|
|
18,379 |
|
|
|
21,371 |
|
Deferred tax liabilities |
|
|
11,758 |
|
|
|
— |
|
Other long term
liabilities |
|
|
34 |
|
|
|
852 |
|
Total liabilities |
|
|
112,279 |
|
|
|
101,817 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
Preferred stock, $25 par value; 500,000 shares authorized, none
issued |
|
|
— |
|
|
|
— |
|
Common stock, $0.10 par value; 100,000,000 shares authorized,
67,799,100 and 67,673,787 shares issued, 57,632,974 and 58,024,571
shares outstanding, respectively |
|
|
6,780 |
|
|
|
6,767 |
|
Additional paid-in capital |
|
|
73,681 |
|
|
|
73,549 |
|
Less treasury stock, 10,166,126 and 9,649,216 shares, respectively,
at cost |
|
|
(42,081 |
) |
|
|
(41,429 |
) |
Retained earnings |
|
|
18,033 |
|
|
|
70,833 |
|
Total shareholders' equity |
|
|
56,413 |
|
|
|
109,720 |
|
Total liabilities and shareholders' equity |
|
$ |
168,692 |
|
|
$ |
211,537 |
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Operations (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2020 |
|
March 31, 2019 |
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
(in thousands except per share amounts) |
Revenues: |
|
|
|
|
|
|
|
|
|
Crude oil and natural gas sales |
|
$ |
18,389 |
|
|
$ |
19,765 |
|
|
$ |
21,923 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
Production expense |
|
|
9,749 |
|
|
|
8,219 |
|
|
|
9,815 |
|
Depreciation, depletion and amortization |
|
|
3,103 |
|
|
|
1,553 |
|
|
|
2,112 |
|
Impairment of proved crude oil and natural gas properties |
|
|
30,625 |
|
|
|
— |
|
|
|
— |
|
Gain on revision of asset retirement obligations |
|
|
— |
|
|
|
— |
|
|
|
(379 |
) |
General and administrative expense |
|
|
754 |
|
|
|
4,439 |
|
|
|
2,950 |
|
Bad debt (recovery) expense and other |
|
|
810 |
|
|
|
(29 |
) |
|
|
(371 |
) |
Total operating costs and expenses |
|
|
45,041 |
|
|
|
14,182 |
|
|
|
14,127 |
|
Other operating expense, net |
|
|
(31 |
) |
|
|
(37 |
) |
|
|
(20 |
) |
Operating income |
|
|
(26,683 |
) |
|
|
5,546 |
|
|
|
7,776 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Derivative instruments gain (loss), net |
|
|
7,339 |
|
|
|
(1,912 |
) |
|
|
(2,712 |
) |
Interest income, net |
|
|
116 |
|
|
|
187 |
|
|
|
152 |
|
Other, net |
|
|
(31 |
) |
|
|
(238 |
) |
|
|
83 |
|
Total other income (expense), net |
|
|
7,424 |
|
|
|
(1,963 |
) |
|
|
(2,477 |
) |
Income from continuing
operations before income taxes |
|
|
(19,259 |
) |
|
|
3,583 |
|
|
|
5,299 |
|
Income tax expense |
|
|
33,478 |
|
|
|
2,753 |
|
|
|
4,248 |
|
Income (loss) from continuing
operations |
|
|
(52,737 |
) |
|
|
830 |
|
|
|
1,051 |
|
Income (loss) from
discontinued operations, net of tax |
|
|
(63 |
) |
|
|
5,671 |
|
|
|
(37 |
) |
Net income (loss) |
|
$ |
(52,800 |
) |
|
$ |
6,501 |
|
|
$ |
1,014 |
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per
share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.91 |
) |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
Income (loss) from discontinued operations, net of tax |
|
|
0.00 |
|
|
|
0.09 |
|
|
|
0.00 |
|
Net income (loss) per share |
|
$ |
(0.91 |
) |
|
$ |
0.10 |
|
|
$ |
0.02 |
|
Basic weighted average shares outstanding |
|
|
57,975 |
|
|
|
59,630 |
|
|
|
58,212 |
|
Diluted net income (loss) per
share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.91 |
) |
|
$ |
0.01 |
|
|
$ |
0.02 |
|
Income (loss) from discontinued operations, net of tax |
|
|
0.00 |
|
|
|
0.09 |
|
|
|
0.00 |
|
Net income (loss) per share |
|
$ |
(0.91 |
) |
|
$ |
0.10 |
|
|
$ |
0.02 |
|
Diluted weighted average shares outstanding |
|
|
57,975 |
|
|
|
60,683 |
|
|
|
59,136 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
Three Months Ended March 31, |
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
(in thousands) |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
$ |
(52,800 |
) |
|
$ |
6,501 |
|
Adjustments to reconcile net
income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
(Income) loss from discontinued operations |
|
|
63 |
|
|
|
(5,671 |
) |
Depreciation, depletion and amortization |
|
|
3,103 |
|
|
|
1,553 |
|
Impairment of proved crude oil and natural gas properties |
|
|
30,625 |
|
|
|
— |
|
Other amortization |
|
|
60 |
|
|
|
60 |
|
Deferred taxes |
|
|
35,638 |
|
|
|
1,742 |
|
Unrealized foreign exchange gain |
|
|
(22 |
) |
|
|
(12 |
) |
Stock-based compensation |
|
|
(2,569 |
) |
|
|
1,723 |
|
Derivatives instruments (gain) loss |
|
|
(7,339 |
) |
|
|
1,912 |
|
Cash settlements received on matured derivative contracts, net |
|
|
718 |
|
|
|
1,131 |
|
Bad debt (recovery) expense and other |
|
|
810 |
|
|
|
(29 |
) |
Other operating loss, net |
|
|
31 |
|
|
|
37 |
|
Operational expenses associated with equipment and other |
|
|
578 |
|
|
|
(109 |
) |
Change in operating assets and liabilities: |
|
|
|
|
|
|
Trade receivables |
|
|
14,335 |
|
|
|
2,871 |
|
Accounts with joint venture owners |
|
|
13,812 |
|
|
|
4,986 |
|
Other receivables |
|
|
(755 |
) |
|
|
311 |
|
Crude oil inventory |
|
|
(2,793 |
) |
|
|
(489 |
) |
Prepayments and other |
|
|
(993 |
) |
|
|
(202 |
) |
Value added tax and other receivables |
|
|
(370 |
) |
|
|
738 |
|
Accounts payable |
|
|
(1,130 |
) |
|
|
(3,923 |
) |
Foreign taxes payable |
|
|
(1,284 |
) |
|
|
1,037 |
|
Accrued liabilities and other |
|
|
(2,073 |
) |
|
|
(581 |
) |
Net cash provided by continuing operating activities |
|
|
27,645 |
|
|
|
13,586 |
|
Net cash used in discontinued operating activities |
|
|
(18 |
) |
|
|
(101 |
) |
Net cash provided by operating activities |
|
|
27,627 |
|
|
|
13,485 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Property and equipment expenditures |
|
|
(11,980 |
) |
|
|
(788 |
) |
Net cash used in continuing investing activities |
|
|
(11,980 |
) |
|
|
(788 |
) |
Net cash used in discontinued investing activities |
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(11,980 |
) |
|
|
(788 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the issuances of common stock |
|
|
— |
|
|
|
47 |
|
Treasury shares |
|
|
(652 |
) |
|
|
(105 |
) |
Net cash used in continuing
financing activities |
|
|
(652 |
) |
|
|
(58 |
) |
Net cash used in discontinued
financing activities |
|
|
— |
|
|
|
— |
|
Net cash used in financing
activities |
|
|
(652 |
) |
|
|
(58 |
) |
NET CHANGE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
|
14,995 |
|
|
|
12,639 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
59,124 |
|
|
|
46,655 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF PERIOD |
|
$ |
74,119 |
|
|
$ |
59,294 |
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESSelected Financial and
Operating Statistics(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 31, 2020 |
|
March 31, 2019 |
|
December 31, 2019 |
NRI SALES DATA: |
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
|
294 |
|
|
297 |
|
|
318 |
Average daily sales volumes (bbls/day) |
|
|
3,231 |
|
|
3,300 |
|
|
3,457 |
NRI PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
|
450 |
|
|
315 |
|
|
337 |
Average daily production volumes (bbls/day) |
|
|
4,944 |
|
|
3,496 |
|
|
3,664 |
|
|
|
|
|
|
|
|
|
|
AVERAGE SALES PRICES: |
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
$ |
59.54 |
|
$ |
64.17 |
|
$ |
65.80 |
COSTS AND EXPENSES (PER BOPD
OF SALES): |
|
|
|
|
|
|
|
|
|
Production expense |
|
$ |
33.16 |
|
$ |
27.67 |
|
$ |
30.86 |
Production expense, excluding workovers* |
|
|
23.39 |
|
|
27.30 |
|
|
30.70 |
Depreciation, depletion and amortization |
|
|
10.55 |
|
|
5.23 |
|
|
6.64 |
General and administrative expense** |
|
|
2.56 |
|
|
14.95 |
|
|
9.28 |
Property and equipment
expenditures, cash basis (in thousands) |
|
$ |
11,980 |
|
$ |
788 |
|
$ |
6,966 |
* Workover costs excluded from the three months ended March 31,
2020 and 2019 and December 31, 2019 are $2.8 million, $0.1 million
and none, respectively.** General and administrative expenses
include $ (8.74), $5.80 and $2.31 barrel of oil of sales of
stock-based compensation expense in the three months ended March
31, 2020, and 2019 and December 31, 2019, 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 (expense) 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 (Loss) to
evaluate operating and financial performance and believes the
measure is useful to investors because it eliminates the impact of
certain noncash 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.
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 lease liabilities. Under the new leasing
standard, 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 EBITDAX and Adjusted Net Income (Loss)
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 (Loss) 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 (Loss) 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
(Loss) 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 (Loss),
Adjusted EBITDAX and Working Capital from Continuing
Operations.
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations of Non-GAAP
Financial Measures(Unaudited)(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Reconciliation of Net
Income (Loss) to Adjusted Net Income (Loss) |
|
March 31, 2020 |
|
March 31, 2019 |
|
December 31, 2019 |
Net income (loss) |
|
$ |
(52,800 |
) |
|
$ |
6,501 |
|
|
$ |
1,014 |
|
Adjustment for discrete
items: |
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
63 |
|
|
|
(5,671 |
) |
|
|
37 |
|
Impairment of proved crude oil and natural gas properties |
|
|
30,625 |
|
|
|
— |
|
|
|
— |
|
Unrealized derivative instruments (gain) loss |
|
|
(6,621 |
) |
|
|
3,043 |
|
|
|
3,095 |
|
Deferred income tax expense |
|
|
35,638 |
|
|
|
1,742 |
|
|
|
1,755 |
|
Other operating income, net |
|
|
31 |
|
|
|
37 |
|
|
|
20 |
|
Gain on revision of asset retirement obligations |
|
|
— |
|
|
|
— |
|
|
|
(379 |
) |
Adjusted Net Income |
|
$ |
6,936 |
|
|
$ |
5,652 |
|
|
$ |
5,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Reconciliation of Net
Income (Loss) to Adjusted EBITDAX |
|
March 31, 2020 |
|
March 31, 2019 |
|
December 31, 2019 |
Net income (loss) |
|
$ |
(52,800 |
) |
|
$ |
6,501 |
|
|
$ |
1,014 |
|
Add back: |
|
|
|
|
|
|
|
|
|
Impact of discontinued operations |
|
|
63 |
|
|
|
(5,671 |
) |
|
|
37 |
|
Interest income, net |
|
|
(116 |
) |
|
|
(187 |
) |
|
|
(152 |
) |
Income tax expense |
|
|
33,478 |
|
|
|
2,753 |
|
|
|
4,248 |
|
Depreciation, depletion and amortization |
|
|
3,103 |
|
|
|
1,553 |
|
|
|
2,112 |
|
Impairment of proved crude oil and natural gas properties |
|
|
30,625 |
|
|
|
— |
|
|
|
— |
|
Non-cash or unusual
items: |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(2,569 |
) |
|
|
1,723 |
|
|
|
736 |
|
Unrealized derivative instruments (gain) loss |
|
|
(6,621 |
) |
|
|
3,043 |
|
|
|
3,095 |
|
Other operating expense, net |
|
|
31 |
|
|
|
37 |
|
|
|
20 |
|
Gain on revision of asset retirement obligations |
|
|
— |
|
|
|
— |
|
|
|
(379 |
) |
Bad debt (recovery) recovery and other |
|
|
810 |
|
|
|
(29 |
) |
|
|
(371 |
) |
Adjusted EBITDAX |
|
$ |
6,004 |
|
|
$ |
9,723 |
|
|
$ |
10,360 |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Working Capital to Adjusted Working Capital |
|
March 31, 2020 |
|
December 31, 2019 |
|
Change |
Current assets |
|
$ |
79,049 |
|
|
$ |
69,758 |
|
|
$ |
9,291 |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
(65,687 |
) |
|
|
(63,750 |
) |
|
|
(1,937 |
) |
Operating lease liabilities -
current portion |
|
|
12,050 |
|
|
|
11,990 |
|
|
|
60 |
|
Current liabilities -
discontinued operations |
|
|
395 |
|
|
|
350 |
|
|
|
45 |
|
Current liabilities from
continuing operations, excluding leases |
|
|
(53,242 |
) |
|
|
(51,410 |
) |
|
|
(1,832 |
) |
|
|
|
|
|
|
|
|
|
|
Adjusted Working Capital |
|
$ |
25,807 |
|
|
$ |
18,348 |
|
|
$ |
7,459 |
|
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