VAALCO Energy, Inc. (NYSE: EGY) today reported operational and
financial results for the third quarter 2018.
Highlights and Recent Key
Items:
- Established a long-term time horizon for continued
growth in Gabon by extending the Etame Marin Production Sharing
Contract (“PSC”) for 10 years from September 17, 2018, with two
additional five-year option periods, providing the opportunity to
add substantial production and reserves for up to 20 more
years;
- Progressing forward with a 2019 drilling program that
includes a minimum of two development wells, two appraisal well
bores and a possible third well, with drilling expected to begin in
the second quarter of 2019;
- Produced an average of 4,120 net barrels of oil per day
(“BOPD”) in the third quarter of 2018, above the high end of the
guidance range for the quarter;
- Reported Income from Continuing Operations of $78.6
million ($1.28 per diluted share) for the third quarter, which
includes:
- A $66.2 million ($1.08 per diluted share) non-cash
deferred tax benefit recognized in part as a result of anticipated
benefits associated with the PSC Extension;
- A $3.3 million ($0.05 per diluted share) non-cash
benefit from the deferral of asset retirement obligations
associated with the PSC extension;
- Excluding the non-cash items relating to the PSC
extension above totaling $69.5 million, ($1.13 per diluted share),
third quarter Adjusted Income from Continuing Operations would have
been $9.1 million ($0.15 per diluted share);
- Generated $16.0 million of Adjusted EBITDAX for the
third quarter of 2018, up 82% from $8.8 million in the second
quarter of 2018; the second half of 2018 is expected to be at or
above the high end of previous guidance for Adjusted EBITDAX of $27
- $30 million; and
- Reported $9.2 million in Working Capital from
Continuing Operations, following the $11.8 million payment for
VAALCO’s share of the PSC Extension signing bonus.
For the third quarter of 2018, VAALCO reported
Income from Continuing Operations of $78.6 million, or $1.28 per
diluted share and Adjusted Income from Continuing Operations of
$9.1 million, or $0.15 per diluted share. This includes a
$1.1 million or ($0.02 per diluted share) charge for a non-cash
mark-to-market charge related to the Company’s crude oil
swaps. In the same period in 2017, the Company reported a
Loss from Continuing Operations of $0.1 million, or $0.00 per
diluted share, and in the second quarter of 2018 reported Income
from Continuing Operations of $0.9 million, or $0.02 per diluted
share. The average realized price for crude oil in the third
quarter of 2018 was $75.40 per barrel, an increase of 48% from
$51.10 per barrel in the third quarter of 2017. In the second
quarter of 2018, the average realized price for crude oil was
$74.36 per barrel. Adjusted EBITDAX totaled $16.0 million in the
third quarter of 2018 compared with $5.7 million in the same period
of 2017, and $8.8 million in the second quarter of 2018.
Adjusted EBITDAX, Adjusted Income from
Continuing Operations and Working Capital from Continuing
Operations 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 have entered into a new chapter in the life of
VAALCO by extending the Etame Marin PSC for at least 10 years from
September 17, 2018. During an extended period of historic low
prices, we took the necessary steps to navigate the downturn which
resulted in VAALCO becoming a more focused and financially strong
company. Up until now, we lacked the time horizon necessary
to justify additional development in Gabon. By extending the PSC,
we now have the opportunity to unlock the substantial resource
potential of over 70 million barrels that we believe remain in the
Etame Marin block. As part of the PSC extension agreement, we
committed to drilling at least two development wells and two
appraisal well bores and are working with our joint owners and the
government to finalize plans to begin drilling in the second
quarter of 2019. With the PSC extension in place, a clean
balance sheet and strong quarterly results, VAALCO has a solid
foundation to grow our production and reserves, and to create
significant shareholder value well into the future.
Net production was 4,120 BOPD, which was above
the high end of our third quarter guidance range primarily due to
production exceeding expectations following our workover campaign
at Avouma. We generated $0.15 per diluted share of Adjusted Income
from Continuing Operations, and $16.0 million of Adjusted EBITDAX
in the quarter. With the continued solid Brent pricing environment,
strong production results and ongoing cost control, we are
generating significant cash flow and are currently forecasting that
our 2019 drilling program will be funded from cash on hand and
operational cash flow. This is an exciting time for VAALCO as we
look at all opportunities to create value for our
shareholders.”
Gabon
Extension of Term of Etame Marin
PSC
On September 25, 2018, VAALCO together with the
other joint owners in the Etame Marin block (the “consortium”)
received an implementing Presidential Decree from the government of
Gabon authorizing a Sixth Amendment (the “PSC Extension”) to the
Etame Marin block PSC, extending the term of the exploitation
period by a minimum of 10 years to September 16, 2028. The
Company’s subsidiary, VAALCO Gabon S.A., has a 33.575%
“Participating Interest” (the Company’s own working interest plus
the Company’s pro rata share of the working interest attributable
to the carried interest owner) in the Etame Marin
block.
The PSC Extension lengthens the term for the
exploitation period of the three exploitation areas in the block
for a period of ten years from September 17, 2018, the effective
date of the PSC Extension. Prior to the extension, the
exploitation periods for the three exploitation areas in the Etame
Marin block expired beginning in June 2021. The extension
also grants the consortium the right for two additional extension
periods of five years each. The PSC Extension also enables
the consortium to pursue additional undrilled prospective leads
within the exploitation areas near the existing Etame
infrastructure. The PSC Extension further increases the Cost
Recovery Percentage, as defined below, allowing the consortium to
more rapidly recoup capital investments and operating expenses.
In consideration for the PSC Extension, the
consortium agreed to a signing bonus of $65.0 million ($21.8
million, net to VAALCO) payable to the government of Gabon.
The consortium paid $35.0 million ($11.8 million, net to VAALCO) in
cash on September 26, 2018 and paid $25.0 million ($8.4 million,
net to VAALCO) through an agreed upon reduction of the VAT
receivable owed by the government of Gabon to the consortium as of
the effective date. An additional $5.0 million ($1.7 million,
net to VAALCO) is to be paid in cash by the consortium following
the end of the drilling activities described below. VAALCO
accrued for the remaining $1.7 million share of this payment as of
September 30, 2018. The amount paid through a reduction in
VAT has been recorded at $4.2 million which represents the book
value of the receivable, net of the valuation allowance.
Under the PSC Extension, by September 16, 2020,
the consortium is required to drill two development wells and two
appraisal well bores. The Company currently estimates the
cost of these wells will be approximately $61.2 million ($20.5
million, net to VAALCO). The consortium is
planning to drill these wells and perhaps another well in the
second and third quarter of 2019. Prior to the PSC Extension,
the consortium was entitled to take up to 70% of production (“Cost
Recovery Percentage”), net of royalty, to recover its share of
costs (“Cost Account”) so long as there were amounts remaining in
its Cost Account. Under the PSC Extension, the Cost Recovery
Percentage is increased to 80% for the ten-year period from
September 17, 2018 through September 16, 2028. After
September 16, 2028, the Cost Recovery Percentage returns to
70%.
Operational Update
As disclosed in previous press releases, VAALCO
completed successful workover operations to replace the ESP systems
in the Avouma 2-H and the South Tchibala 1-HB wells and restored
production from both wells in June 2018. In addition, the Company
took advantage of the hydraulic workover unit being on the platform
to proactively upgrade the ESP system in the South Tchibala 2-H
well. Since completing the workovers, the ESP systems in the
Avouma wells have run without incident, and production from the
wells exceeded expectations in the third quarter. Average net oil
production in the third quarter of 2018 was above the high end of
guidance at 4,120 BOPD net compared with 3,549 BOPD net in the
second quarter of 2018.
Equatorial Guinea and
Angola
VAALCO has a 31% working interest in an
undeveloped portion of a block offshore Equatorial Guinea that the
Company acquired in 2012 (the “Block P interest”). The Block P
interest is currently in suspension, and the Company is working
with the Ministry of Mines and Hydrocarbons to lift the suspension
by the end of 2018. VAALCO and its joint venture owners are
evaluating the timing and budgeting for development and exploration
activities under a development and production area in the block,
including the approval of a development and production plan.
Preparation for these activities could begin as early as
2019. Expenditures related to such activities are not
expected to be significant in 2019. The Company is in
continued discussions with the Ministry of Mines and Hydrocarbons
regarding these plans.
VAALCO continues to negotiate with
representatives of Sonangol E &P to resolve the liability
associated with the exit from the Block 5 exploration area.
2018 - Third Quarter Financial
Results
Total oil sales for the third quarter of 2018
were $25.3 million, compared to $24.4 million in the second quarter
of 2018. During the third quarter of 2018, VAALCO sold
approximately 329,000 net barrels of oil at an average price of
$75.40 compared to approximately 336,000 net barrels at an average
price of $51.10 per barrel during the third quarter of 2017. During
the second quarter of 2018, the Company sold approximately 319,000
net barrels of oil at an average price of $74.36 per barrel.
The sales volumes were lower in the three months ended September
30, 2018 as the volumes lifted by the government of Gabon in
September were less than the volumes available to be lifted and
lower than the normal monthly lifting
volumes.
In June 2018, VAALCO executed commodity swaps at
a Dated Brent weighted average price of $74 per barrel for the
period from and including June 2018 through June 2019 for a
quantity of approximately 400,000 barrels. As of September 30,
2018, the estimated mark-to-market value of the remaining commodity
price swaps for 285,000 barrels in 2018 and 2019 was a liability of
$2.1 million, which is recorded on the “Accrued liabilities and
other” line item on the condensed consolidated balance sheet.
Costs and Expenses
Total production expense, excluding workovers,
was $7.5 million, or $22.93 per barrel of oil sales, in the third
quarter of 2018, compared to $10.2 million, or $30.39 per barrel of
oil sales, in the third quarter of 2017, and $8.3 million, or
$26.08 per barrel of oil sales in the second quarter of 2018.
Third quarter 2018 costs were lower as a result of revised
estimates of contractual obligation costs. In addition, the
decrease in expense for the quarterly year-over-year periods was
also impacted by a planned maintenance turnaround and asset
integrity work that occurred in third quarter 2017.
Depreciation, depletion and amortization
(DD&A) expense was $1.1 million, or $3.43 per barrel of oil
sales in the three months ended September 30, 2018 compared to $1.7
million, or $5.06 per barrel of oil sales in the comparable period
in 2017, and $1.0 million, or $3.24 per barrel of oil sales in the
second quarter of 2018. DD&A per barrel decreased from
2017 due to the increase in proved reserves at December 31,
2017.
General and administrative (G&A) expense for
the third quarter 2018 was $2.8 million, or $8.54 per barrel of oil
sales, as compared to $2.5 million, or $7.33 per barrel of oil
sales in the third quarter 2017 and $5.0 million, or $15.70 per
barrel of oil sales in the second quarter of 2018. General and
administrative expense includes $1.0 million, $0.2 million, and
$2.4 million of stock-based compensation expense for the quarters
ended September 30, 2018 and 2017 and June 30, 2018,
respectively. Stock-based compensation expense related to
SARs was $0.8 million during the three months ended September 30,
2018 as compared to $27 thousand in the comparable 2017 period, and
therefore accounted for the bulk of the increase. Because the
Company’s SARs are cash settled, these awards are adjusted to fair
value each period, and as a result of the increase in VAALCO’s
stock price in 2018, the amount of expense has increased
significantly.
Income tax for the third quarter of 2018 was a
benefit of $62.2 million compared to an expense of $2.7 million for
the same period in 2017, and an expense of $3.6 million in the
second quarter of 2018. The $62.2 million benefit for the
third quarter of 2018 includes a $66.2 million deferred tax benefit
primarily related to the recognition of deferred tax assets and the
reversal of valuation allowances on other deferred tax
assets. As a result of the PSC Extension, the continuing
higher oil prices and the production from planned drilling in 2019,
the ability to realize tax benefits has improved significantly
resulting in the recognition of the deferred tax benefit in the
third quarter of 2018. In addition to the $66.2 million
deferred tax benefit, the Company had $4.0 million in current
income tax expense which is primarily for current income taxes
payable to the government of Gabon and is higher in 2018 than
income tax for the comparable 2017 period as a result of higher
revenues.
Capital Investments/Balance
Sheet
During the three months ended September 30,
2018, VAALCO invested approximately $12.2 million in capital
expenditures on a cash basis, primarily for the $11.8 million
signing bonus associated with the PSC Extension. The Company
has commitments for capital expenditures related to the drilling of
two development wells and two appraisal well bores at an estimated
cost of $20.5 million, net to VAALCO. The Company is planning
to drill these wells and a possible third well in the second and
third quarters of 2019. The third well is subject to approval
by the joint venture owners and the government of Gabon.
VAALCO currently expects any capital expenditures made during 2019
will be funded by cash on hand and cash flow from operations.
At the end of the third quarter and after
payment of the $11.8 million signing bonus associated with the PSC
Extension, VAALCO had Working Capital from Continuing Operations of
$9.2 million, and an unrestricted cash balance of $33.7
million. The unrestricted cash balance included $5.5 million
of cash attributable to non-operating joint venture owner
advances.
Beginning with the first quarter of 2018, the
government of Gabon elected to lift its share of oil (which is
reported as current income tax expense) separately from the Etame
Marin joint interest owners. As a result, Gabon income taxes
are now being settled when the government of Gabon lifts its share
of production. Such settlements are expected to occur once or
twice per year, depending on production levels. The
government of Gabon took its first lifting of oil since making its
election in September 2018. Net to VAALCO, this lifting
resulted in $9.4 million of income taxes paid in-kind with oil
during the third quarter, and reduces VAALCO’s cash flows from oil
sales in the month following the lifting. At September 30, 2018,
VAALCO had $1.8 million of foreign taxes payable.
Outlook Projections
The Company expects to be at or above the high
end of Adjusted EBITDAX guidance of $27 - $30 million for the
second half of 2018 using average Brent strip pricing for the
remainder of 2018, and the mid-point of the Company’s production
guidance ranges. VAALCO estimates that for every $5.00 increase in
realized oil price, the Company generates approximately $6.0
million in additional annualized Adjusted EBITDAX.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its second quarter financial and
operating results November 8, 2018, at 9:00 a.m. Central Time
(10:00 a.m. Eastern Time). Interested parties may participate by
dialing (844) 841-1668. International parties may dial (661)
378-9859. The confirmation code is 6691637. 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.
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 amounts due in connection with the Company’s withdrawal
from Angola, 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, timing of the
settlement of Gabon income taxes, expectations regarding processing
facilities, production, sales and financial projections, reserve
growth, and other issues related to VAALCO’s 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,
production and sales differences due to timing of liftings,
decisions by future lenders, the risks associated with liquidity,
the risk that the negotiations with the government of the 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,
2017, quarterly reports on Form 10-Q 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, Texas based
independent energy company principally engaged in the acquisition,
exploration, development and production of crude oil. VAALCO’s
strategy is to increase reserves and production through the
development and exploitation of international oil and natural gas
properties. The Company's properties and exploration acreage are
located primarily in Gabon and Equatorial Guinea in West
Africa.
Investor ContactPhil
Patman 713-623-0801
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VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Balance Sheets
(Unaudited)(in thousands, except share and per share amounts) |
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September 30,
2018 |
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December 31,
2017 |
ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
33,715 |
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$ |
19,669 |
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Restricted cash |
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1,025 |
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|
842 |
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Receivables: |
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Trade |
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— |
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3,556 |
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Accounts with joint venture owners, net of allowance
of $0.5 million at September 30, 2018 and December 31, 2017 |
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931 |
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3,395 |
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Other |
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|
408 |
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|
100 |
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Crude oil inventory |
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2,232 |
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|
3,263 |
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Prepayments and other |
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3,058 |
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2,791 |
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Current assets - discontinued operations |
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3,222 |
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2,836 |
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Total current assets |
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44,591 |
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36,452 |
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Oil and natural gas properties, at cost - successful efforts
method: |
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Proved properties |
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398,072 |
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389,935 |
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Unproved properties |
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16,698 |
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10,000 |
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Equipment and other |
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8,821 |
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9,432 |
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423,591 |
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409,367 |
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Accumulated depreciation, depletion, amortization and
impairment |
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(388,660 |
) |
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(386,146 |
) |
Net oil and natural gas properties, equipment and
other |
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34,931 |
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23,221 |
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Other noncurrent assets: |
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Restricted cash |
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918 |
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967 |
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Value added tax and other receivables, net of
allowance of $2.1 million and $6.5 million at September 30, 2018
and December 31, 2017, respectively |
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2,306 |
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6,925 |
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Deferred tax assets |
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68,807 |
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1,260 |
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Abandonment funding |
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10,808 |
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10,808 |
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Total assets |
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$ |
162,361 |
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$ |
79,633 |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
7,219 |
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$ |
11,584 |
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Accounts with joint venture owners |
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5,496 |
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— |
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Accrued liabilities and other |
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17,662 |
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12,991 |
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Foreign taxes payable |
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1,775 |
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— |
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Current portion of long term debt |
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— |
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6,666 |
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Current liabilities - discontinued operations |
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15,191 |
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15,347 |
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Total current liabilities |
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47,343 |
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46,588 |
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Asset retirement obligations |
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14,459 |
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20,163 |
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Other long-term liabilities |
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1,264 |
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284 |
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Long term debt, excluding current portion, net |
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— |
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2,309 |
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Total liabilities |
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63,066 |
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69,344 |
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Commitments and contingencies |
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Shareholders’ equity: |
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Preferred stock, none issued, 500,000 shares
authorized, $25 par value |
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— |
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— |
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Common stock, $0.10 par value; 100,000,000 shares
authorized, 67,092,825 and 66,443,971 shares issued, 59,538,878 and
58,862,876 shares outstanding |
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6,709 |
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6,644 |
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Additional paid-in capital |
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72,229 |
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71,251 |
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Less treasury stock, 7,553,947 and 7,581,095 shares
at cost |
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(37,798 |
) |
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(37,953 |
) |
Retained earnings (deficit) |
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58,155 |
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(29,653 |
) |
Total shareholders' equity |
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99,295 |
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10,289 |
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Total liabilities and shareholders' equity |
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$ |
162,361 |
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$ |
79,633 |
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VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Operations (Unaudited)(in thousands, except per share amounts) |
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Three Months
Ended |
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September 30,
2018 |
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September 30,
2017 |
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June 30,
2018 |
Revenues: |
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Oil and natural gas sales |
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$ |
25,266 |
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$ |
18,178 |
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$ |
24,426 |
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Operating costs and expenses: |
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Production expense |
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7,481 |
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10,336 |
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12,817 |
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Exploration expense |
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— |
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4 |
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12 |
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Depreciation, depletion and amortization |
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1,130 |
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1,700 |
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1,035 |
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Gain on revision of asset retirement
obligations |
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(3,325 |
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— |
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— |
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General and administrative expense |
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2,811 |
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2,463 |
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5,008 |
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Bad debt expense (recovery) and other |
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(157 |
) |
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(49 |
) |
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145 |
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Total operating costs and expenses |
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7,940 |
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14,454 |
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19,017 |
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Other operating income (loss), net |
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(6 |
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(3 |
) |
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314 |
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Operating income |
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17,320 |
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3,721 |
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5,723 |
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Other income (expense): |
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Interest income (expense), net |
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|
111 |
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(327 |
) |
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(30 |
) |
Other, net |
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(1,029 |
) |
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(793 |
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(1,224 |
) |
Total other expense, net |
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(918 |
) |
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(1,120 |
) |
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(1,254 |
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Income from continuing operations before income taxes |
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|
16,402 |
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2,601 |
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4,469 |
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Income tax expense (benefit) |
|
|
(62,224 |
) |
|
|
2,749 |
|
|
|
3,582 |
|
Income (loss) from continuing operations |
|
|
78,626 |
|
|
|
(148 |
) |
|
|
887 |
|
Loss from discontinued operations |
|
|
(21 |
) |
|
|
(174 |
) |
|
|
(343 |
) |
Net income (loss) |
|
$ |
78,605 |
|
|
$ |
(322 |
) |
|
$ |
544 |
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
1.31 |
|
|
$ |
0.00 |
|
|
$ |
0.02 |
|
Loss from discontinued operations |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Net income (loss) per share |
|
$ |
1.31 |
|
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
Basic weighted average shares outstanding |
|
|
59,481 |
|
|
|
58,817 |
|
|
|
59,090 |
|
Diluted net income (loss) per share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
1.28 |
|
|
$ |
0.00 |
|
|
$ |
0.02 |
|
Loss from discontinued operations |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Net income (loss) per share |
|
$ |
1.28 |
|
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
Diluted weighted average shares outstanding |
|
|
60,818 |
|
|
|
58,817 |
|
|
|
59,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of Cash
Flows (Unaudited)(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
|
2018 |
|
|
2017 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
$ |
87,808 |
|
|
$ |
6,220 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
Loss from discontinued operations |
|
|
416 |
|
|
|
518 |
|
Depreciation, depletion and amortization |
|
|
3,289 |
|
|
|
5,539 |
|
Gain on revision of asset retirement
obligations |
|
|
(3,325 |
) |
|
|
— |
|
Other amortization |
|
|
357 |
|
|
|
293 |
|
Unrealized foreign exchange (gain)/loss |
|
|
819 |
|
|
|
(512 |
) |
Stock-based compensation |
|
|
3,782 |
|
|
|
933 |
|
Commodity derivatives loss |
|
|
2,064 |
|
|
|
971 |
|
Cash settlements received on derivative
contracts |
|
|
14 |
|
|
|
195 |
|
Bad debt expense and other |
|
|
(68 |
) |
|
|
232 |
|
Deferred tax benefit |
|
|
(66,191 |
) |
|
|
— |
|
Other operating gain, net |
|
|
(332 |
) |
|
|
(164 |
) |
Operational expenses associated with equipment and
other |
|
|
1,695 |
|
|
|
— |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
Trade receivables |
|
|
3,556 |
|
|
|
(452 |
) |
Accounts with joint venture owners |
|
|
7,961 |
|
|
|
542 |
|
Other receivables |
|
|
(313 |
) |
|
|
274 |
|
Crude oil inventory |
|
|
1,031 |
|
|
|
(247 |
) |
Prepayments and other |
|
|
(13 |
) |
|
|
1,559 |
|
Value added tax and other receivables |
|
|
(658 |
) |
|
|
(2,783 |
) |
Deferred tax assets |
|
|
(1,356 |
) |
|
|
— |
|
Accounts payable |
|
|
(4,314 |
) |
|
|
(5,250 |
) |
Foreign taxes payable |
|
|
1,775 |
|
|
|
— |
|
Accrued liabilities and other |
|
|
(999 |
) |
|
|
(432 |
) |
Net cash provided by continuing operating
activities |
|
|
36,998 |
|
|
|
7,436 |
|
Net cash used in discontinued operating
activities |
|
|
(958 |
) |
|
|
(4,204 |
) |
Net cash provided by operating activities |
|
|
36,040 |
|
|
|
3,232 |
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
Oil and natural gas properties, equipment and other
expenditures |
|
|
(13,205 |
) |
|
|
(1,300 |
) |
Acquisitions |
|
|
— |
|
|
|
64 |
|
Proceeds from sale of oil and natural gas
properties |
|
|
— |
|
|
|
250 |
|
Net cash used in continuing investing
activities |
|
|
(13,205 |
) |
|
|
(986 |
) |
Net cash used in discontinued investing
activities |
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(13,205 |
) |
|
|
(986 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the issuances of common stock |
|
|
533 |
|
|
|
38 |
|
Treasury shares |
|
|
(22 |
) |
|
|
(8 |
) |
Debt repayment |
|
|
(9,166 |
) |
|
|
(7,917 |
) |
Borrowings |
|
|
— |
|
|
|
4,167 |
|
Net cash used in continuing financing
activities |
|
|
(8,655 |
) |
|
|
(3,720 |
) |
Net cash provided by discontinued financing
activities |
|
|
— |
|
|
|
— |
|
Net cash used in financing activities |
|
|
(8,655 |
) |
|
|
(3,720 |
) |
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
|
|
14,180 |
|
|
|
(1,474 |
) |
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF
PERIOD |
|
|
32,286 |
|
|
|
30,643 |
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD |
|
$ |
46,466 |
|
|
$ |
29,169 |
|
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESSelected Financial and Operating
Statistics(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
|
|
September 30,
2018 |
|
September 30,
2017 |
|
June 30,
2018 |
NET SALES DATA: |
|
|
|
|
|
|
|
|
|
Oil (MBbls) |
|
|
329 |
|
|
336 |
|
|
319 |
|
|
|
|
|
|
|
|
|
|
Average daily sales volumes (bbls/day) |
|
|
3,576 |
|
|
3,652 |
|
|
3,505 |
NET PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
Oil (MBbls) |
|
|
379 |
|
|
341 |
|
|
323 |
Average daily production volumes
(MBbls/day) |
4,120 |
|
|
3,707 |
|
|
3,549 |
AVERAGE SALES PRICES: |
|
|
|
|
|
|
|
|
|
Oil ($/Bbl) |
|
$ |
75.40 |
|
$ |
51.10 |
|
$ |
74.36 |
COSTS AND EXPENSES (PER Bbl OF SALES): |
|
|
|
|
|
|
|
|
|
Production expense |
|
$ |
22.74 |
|
$ |
30.76 |
|
$ |
40.18 |
Production expense, excluding workovers* |
|
|
22.93 |
|
|
30.39 |
|
|
26.08 |
Depreciation, depletion and amortization |
|
|
3.43 |
|
|
5.06 |
|
|
3.24 |
General and administrative expense** |
|
|
8.54 |
|
|
7.33 |
|
|
15.70 |
Property and equipment expenditures, cash basis (in thousands) |
|
$ |
12,229 |
|
$ |
268 |
|
$ |
553 |
*Workover costs excluded from the three months ended September
30, 2018 and 2017 and June 30, 2018 are $ (0.1) million, $0.1
million and $4.5 million, respectively.**General and administrative
expenses include $2.96, $0.46 and $7.66 barrel of oil of sales of
stock-based compensation expense in the three months ended
September 30, 2018, and 2017 and June 30, 2018, 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, impairment of proved
properties, exploration expense, non-cash and other items including
stock compensation expense and unrealized commodity derivative
loss.
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 tables below reconcile the most directly
comparable GAAP financial measures to Adjusted EBITDAX Adjusted
Income from Continuing Operations and Working Capital from
Continuing Operations.
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations
of Non-GAAP Measures(Unaudited)(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Reconciliation of Net income to Adjusted
EBITDAX |
|
September 30,
2018 |
|
September 30,
2017 |
|
June 30,
2018 |
Net income (loss) |
|
$ |
78,605 |
|
|
$ |
(322 |
) |
|
$ |
544 |
|
Add back: |
|
|
|
|
|
|
|
|
|
Impact of discontinued operations |
|
|
21 |
|
|
|
174 |
|
|
|
343 |
|
Interest (income) expense, net |
|
|
(111 |
) |
|
|
327 |
|
|
|
30 |
|
Income tax expense (benefit) |
|
|
(62,224 |
) |
|
|
2,749 |
|
|
|
3,582 |
|
Depreciation, depletion and amortization |
|
|
1,130 |
|
|
|
1,700 |
|
|
|
1,035 |
|
Exploration expense |
|
|
— |
|
|
|
4 |
|
|
|
12 |
|
Non-cash or unusual items: |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
973 |
|
|
|
154 |
|
|
|
2,442 |
|
Commodity derivative loss, unrealized |
|
|
1,065 |
|
|
|
921 |
|
|
|
999 |
|
Equipment recovery |
|
|
6 |
|
|
|
— |
|
|
|
(314 |
) |
Gain on revision of asset retirement
obligations |
|
|
(3,325 |
) |
|
|
— |
|
|
|
— |
|
Bad debt expense (recovery) and other |
|
|
(157 |
) |
|
|
(49 |
) |
|
|
145 |
|
Adjusted EBITDAX |
|
$ |
15,983 |
|
|
$ |
5,658 |
|
|
$ |
8,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended |
Reconciliation of Income (loss) from Continuing Operations
to Adjusted Income (loss) from Continuing Operations |
|
September 30,
2018 |
|
September 30,
2017 |
|
June 30,
2018 |
Income (loss) from continuing operations |
|
$ |
78,626 |
|
|
$ |
(148 |
) |
|
$ |
887 |
Adjustment for discrete items |
|
|
|
|
|
|
|
|
|
Deferred income tax benefit |
|
|
(66,191 |
) |
|
|
— |
|
|
|
— |
Gain on revision of asset retirement
obligations |
|
|
(3,325 |
) |
|
|
— |
|
|
|
— |
Adjusted income (loss) from continuing operations |
|
$ |
9,110 |
|
|
$ |
(148 |
) |
|
$ |
887 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Changes in Working Capital from
continuing operations |
|
September 30,
2018 |
|
December 31,
2017 |
|
Change |
Current assets |
|
$ |
41,369 |
|
$ |
33,616 |
|
$ |
7,753 |
Current liabilities |
|
|
32,152 |
|
|
31,241 |
|
|
911 |
Working capital from continuing operations(1) |
|
$ |
9,217 |
|
$ |
2,375 |
|
$ |
6,842 |
|
|
|
|
|
|
|
|
|
|
- Excludes current assets and current liabilities attributable to
discontinued operations.
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