VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) today reported
operational and financial results for the first quarter of 2022.
Highlights and Recent Key
Items:
- Reported strong Q1 2022 net
income of $12.2 million ($0.20 per diluted share) and Adjusted Net
Income(1) of $21.1 million ($0.36
per diluted share);
- Increased Adjusted
EBITDAX(1) by 49%
quarter-over-quarter to $33.5 million in Q1 2022;
- Increased Q1 2022
production by 7% to 8,051 net revenue interest
(“NRI”)(2) barrels of crude oil
per day (“BOPD”), or 9,254 working interest
(“WI”)(3) BOPD, compared to Q4
2021;
- Exit rate for Q1 2022 production increased to
approximately 9,500 NRI BOPD
- As previously disclosed, temporary operational issues
reduced production in February;
- Sold 616,000 barrels of oil
in Q1 2022 due to field start-up operational issues which pushed
out the timing of third lifting until April
4th; VAALCO is guiding Q2 2022
sales to be between 975,000 and 1,025,000 barrels of
oil;
- Successfully drilled,
completed and placed on production the first two development wells
of the 2021/2022 drilling campaign;
- Began production from the Etame 8H-ST in February with
an initial production (“IP”) rate of approximately 5,000 gross
BOPD;
- Completed and brought online the Avouma 3H-ST in April
with an IP rate of 3,100 gross
BOPD;
- Strong IP rates for both wells exceeded internal
estimates;
- Commenced operations on the ETBSM 1HB-ST well, the
third of four currently planned wells;
- Funded $23.1 million cash
capital expenditures during Q1 2022 with cash on hand and cash from
operations;
- Maintained a strong balance
sheet with no debt and an unrestricted cash balance of $18.9
million, not including the proceeds from the March lifting of $44.6
million, which were received in April 2022, plus $3.8 million in
non-operating joint owner receivables;
- Progressing field
reconfiguration and conversion to Floating Storage and Offloading
vessel (“FSO”) at the Etame field on time and on budget;
and
- Announced quarterly cash
dividend payment of $0.0325 per
common share to be paid in Q2 2022 and physically
paid our maiden dividend of $0.0325 per common share on March 18,
2022.
(1) 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.”(2) All NRI production rates and volumes are
VAALCO’s 58.8% WI from and after February 25, 2021, less 13%
royalty volumes.(3) All WI production rates and
volumes are VAALCO’s 58.8% WI from and after February 25, 2021.
George Maxwell, VAALCO’s Chief Executive Officer
commented, “We are delivering operationally, benefiting from the
improved commodity price environment, and generating significant
cash flow, allowing us to execute on our accretive growth strategy,
fully fund our capital commitments and firmly place VAALCO in a
financially stronger position. We are very encouraged by our highly
successful 2021/2022 drilling campaign results thus far, with the
first two wells in the campaign both having initial rates above our
internal expectations. We generated $33.5 million in Adjusted
EBITDAX in Q1 2022, a nearly 50% increase over the fourth quarter,
further demonstrating our confidence that we can fully fund all of
our 2022 capital budget from cash on hand and through cash from
operations. Enhancing our production, reducing our costs and
extending the economic life at Etame is a driving force for
VAALCO’s continued success.”
“As we look to the second quarter and the
remainder of 2022, we are excited by the results of our drilling
campaign, continued strong commodity pricing, and potential organic
growth opportunities at Etame and Equatorial Guinea as well as
inorganic opportunities that we continue to evaluate. Our ability
to execute on our strategy and deliver strong operational results
allows us to continue to return meaningful cash to shareholders
through our dividend while continuing to enhance the overall value
of our assets. The current environment provides an opportunity to
return cash to our shareholders and we believe that it is important
for E&P companies to demonstrate a commitment to shareholder
returns. VAALCO is poised for continued success in this strong
commodity price environment, with no debt and strong free cash flow
generation. We remain firmly focused on maximizing shareholder
returns while we continue to progress our strategic objective of
accretive growth.”
Operational
Update
Gabon
2021/2022 Drilling Campaign
VAALCO began its 2021/2022 drilling campaign in
December 2021 with the drilling of the Etame 8H-ST development
well. The well came online in February 2022 and had an IP rate of
approximately 5,000 gross BOPD, but was choked back to about 4,200
BOPD for reservoir management purposes. VAALCO moved the contracted
jack-up rig to the Avouma platform to drill the Avouma 3H-ST
development well. The well was completed and brought online in
April with an IP rate of approximately 3,100 gross BOPD. This is
another highly successful development well targeting the Gamba
reservoir.
VAALCO is currently drilling the ETBSM 1HB-ST
well, also on the Avouma platform, which is targeting the Gamba
reservoir while also testing the Dentale formation, which is
productive in other areas in the Etame license, with the potential
to complete and produce from the Dentale in this well. The Company
is currently planning to drill a fourth well following the ETBSM
1HB-ST well as part of its 2021/2022 drilling campaign. VAALCO
continues to estimate the total cost of the 2021/2022 drilling
campaign at Etame to be between $117.0 million and $143.0 million
gross, or between $74.0 million and $91.0 million net to VAALCO’s
63.6% participating interest.
FSO Conversion and Field
Reconfiguration
In August 2021, VAALCO and its co-venturers at
Etame approved the Bareboat Contract and Operating Agreement
(collectively, the “FSO Agreements”) with World Carrier Offshore
Services Corp to replace the existing Floating Production, Storage
and Offloading unit (“FPSO”) with an FSO at the Etame Marin block
offshore Gabon for up to eight years with additional option periods
available. The current FPSO contract expires in September 2022.
VAALCO currently believes that all of the associated engineering,
long-lead equipment and significant contracts are proceeding
in-line with the anticipated timelines and expected delivery
schedules for the deployment of the FSO in the third quarter of
2022. Field reconfiguration began in March 2022, as planned. The
Cap Diamant, a double-hull crude tanker built in 2001 that is being
re-engineered as the new FSO, entered the shipyard in late February
2022 on schedule in Bahrain, for the final modifications and
certifications. VAALCO expects the vessel will begin sea trials in
late June before being mobilized to Gabon.
In March, VAALCO announced that it had
contracted with DOF Subsea to perform subsea construction and
installation services to support the subsea reconfiguration
associated with the conversion to the FSO. DOF Subsea will provide
all personnel, crew and equipment necessary to assist with
reconfiguring the Etame field subsea infrastructure to flow field
production to the replacement FSO. Engineering and design work in
relation to the field infrastructure upgrade has been completed
with subsea work planned to commence in July and be completed
before the FSO is operational in September 2022.
Compared to the current FPSO agreement, the new
FSO is expected to significantly reduce storage and offloading
costs by almost 50%, increase effective capacity for storage by
over 50%, and lead to an extension of the economic field life,
resulting in a corresponding increase in recovery and reserves at
Etame. Current total field level capital conversion estimates are
$40 to $50 million gross ($26 to $32 million net to VAALCO). This
capital investment is projected to save approximately $20 to $25
million gross per year ($13 to $16 million net to VAALCO) in
operational costs through 2030, which would give the project a very
attractive payback period of less than two and a half years.
Consortium Provisionally Awarded Two
Offshore Blocks in Gabon
The consortium of VAALCO, BW Energy and Panoro
Energy (the “BWE Consortium”) has been provisionally awarded two
blocks in the 12th Offshore Licensing Round in Gabon. The award is
subject to finalizing the terms of the production sharing contracts
(“PSC”) with the Gabonese government. BW Energy will be the
operator with a 37.5% working interest, with VAALCO (37.5% working
interest) and Panoro Energy (25% working interest) as non-operating
joint owners. The two blocks, G12-13 and H12-13, are adjacent to
VAALCO’s Etame PSC as well as BW Energy and Panoro’s Dussafu PSC
offshore Southern Gabon, and cover an area of 2,989 square
kilometers and 1,929 square kilometers, respectively. Both Etame
and Dussafu have been highly successful exploration, development
and production projects undertaken by the BWE Consortium members
over the past 20 years with approximately 250 million barrels
discovered to date.
The two blocks will be held by the BWE
Consortium and the PSCs will provide for two exploration periods
totaling eight years which may be extended by two additional years.
During the first exploration period, the joint owners intend to
reprocess existing seismic and carry out a 3-D seismic campaign and
have also committed to drilling one exploration well on each of the
two blocks. In the event the consortium elects to enter the second
exploration period, the BWE Consortium will be committed to
drilling at least one exploration well on each of the awarded
blocks.
Equatorial Guinea
VAALCO will have a 45.9% WI in Block P offshore
Equatorial Guinea, once the Ministry of Mines and Hydrocarbons
approves the new amendment to the PSC. VAALCO has completed a
feasibility study of a standalone production development
opportunity of the Venus discovery on Block P. The Company is now
proceeding to a field development plan and will work closely with
the other joint venture owners to complete this over the coming
months. The Block P PSC provides for a development and production
period of 25 years from the date of approval of a development and
production plan.
Financial Update – First Quarter of
2022
Net income of $12.2 million ($0.20 per diluted
share) for the first quarter of 2022 was up 23% compared with net
income of $9.9 million ($0.17 per diluted share) in the first
quarter of 2021 but was lower than $34.4 million ($0.58 per diluted
share) in the fourth quarter of 2021. The first quarter of 2022
reflected stronger revenue compared with both prior periods driven
primarily by higher realized pricing while sales volumes were below
the prior periods due to the temporary operational issues
experienced during February 2022. The fourth quarter 2021 earnings
benefitted from a $16.1 million non-cash deferred tax benefit.
Adjusted Net Income for the first quarter of
2022 increased significantly to $21.1 million ($0.36 per diluted
share) from Adjusted Net Income of $8.7 million or ($0.15 per
diluted share) in the first quarter of 2021, and Adjusted Net
Income for the fourth quarter of 2021 of $12.5 million ($0.21 per
diluted share). The increase was primarily driven by improved
realized pricing partially offset by higher realized losses on
derivatives.
Adjusted EBITDAX totaled $33.5 million in the
first quarter of 2022, an increase of 49% compared with $22.6
million in the fourth quarter of 2021 and nearly double the $18.0
million generated in the same period in 2021. Adjusted EBITDAX for
the first quarter of 2022 was higher compared to the prior periods
primarily due to improved realized prices partially offset by
higher realized losses on derivatives and, for the fourth quarter
of 2021, lower workover costs.
Revenue and Sales |
|
Q1 2022 |
|
Q1 2021 |
|
% Change Q12022 vs. Q1 2021 |
|
Q4 2021 |
|
% Change Q12022 vs. Q4 2021 |
Production (NRI BOPD) |
|
|
8,051 |
|
|
5,180 |
|
|
55 |
|
% |
|
|
7,554 |
|
|
7 |
|
% |
Sales (NRI BO) |
|
|
616,000 |
|
|
619,000 |
|
|
(0 |
) |
% |
|
|
709,000 |
|
|
(13 |
) |
% |
Realized crude oil price
($/BO) |
|
$ |
109.65 |
|
$ |
61.31 |
|
|
79 |
|
% |
|
$ |
77.31 |
|
|
42 |
|
% |
Total crude oil sales
($MM) |
|
$ |
68.7 |
|
$ |
39.8 |
|
|
73 |
|
% |
|
$ |
56.4 |
|
|
22 |
|
% |
VAALCO had two liftings in the first quarter of
2022, which resulted in total sales volumes of 616,000 barrels
compared to 709,000 barrels in the fourth quarter of 2021 and
619,000 barrels for the same period in 2021. The Company
experienced higher production in Q1 2022, but due to operational
and weather factors, only two liftings occurred. First quarter of
2022 realized pricing rose 42% compared to the fourth quarter of
2021 and 79% compared to the first quarter of 2021.
Costs and Expenses |
|
Q1 2022 |
|
Q1 2021 |
|
% Change Q12022 vs. Q1 2021 |
|
Q4 2021 |
|
% Change Q12022 vs. Q4 2021 |
Production expense, excluding workovers ($MM) |
|
$ |
18.4 |
|
|
$ |
16.1 |
|
|
|
14 |
|
% |
|
$ |
19.0 |
|
|
|
(3 |
) |
% |
Production expense, excluding
workovers ($/BO) |
|
$ |
29.83 |
|
|
$ |
26.02 |
|
|
|
15 |
|
% |
|
$ |
26.82 |
|
|
|
11 |
|
% |
Workover expense ($MM) |
|
$ |
— |
|
|
$ |
— |
|
|
|
— |
|
% |
|
$ |
4.5 |
|
|
|
(100 |
) |
% |
Depreciation, depletion and
amortization ($MM) |
|
$ |
4.7 |
|
|
$ |
4.1 |
|
|
|
15 |
|
% |
|
$ |
4.1 |
|
|
|
15 |
|
% |
Depreciation, depletion and
amortization ($/BO) |
|
$ |
7.59 |
|
|
$ |
6.70 |
|
|
|
13 |
|
% |
|
$ |
5.83 |
|
|
|
30 |
|
% |
General and administrative
expense, excluding stock-based compensation ($MM) |
|
$ |
3.6 |
|
|
$ |
3.0 |
|
|
|
20 |
|
% |
|
$ |
2.2 |
|
|
|
64 |
|
% |
General and administrative
expense, excluding stock-based compensation ($/BO) |
|
$ |
5.80 |
|
|
$ |
4.83 |
|
|
|
20 |
|
% |
|
$ |
3.08 |
|
|
|
88 |
|
% |
Stock-based compensation
expense ($MM) |
|
$ |
1.4 |
|
|
$ |
1.6 |
|
|
|
(13 |
) |
% |
|
$ |
0.4 |
|
|
|
100 |
|
% |
Current income tax expense
($MM) |
|
$ |
5.7 |
|
|
$ |
3.4 |
|
|
|
68 |
|
% |
|
$ |
5.2 |
|
|
|
10 |
|
% |
Deferred income tax benefit
($MM) |
|
$ |
(10.3 |
) |
|
$ |
(0.3 |
) |
|
|
3,333 |
|
% |
|
$ |
(16.1 |
) |
|
|
(36 |
) |
% |
Total production expense, excluding workovers,
increased compared to the same period in 2021 and was slightly
lower than the fourth quarter 2021. The increase compared to Q1
2021 was primarily driven by a full quarter of production in Q1
2022 from the acquisition of Sasol’s interest in Etame that closed
in February 2021, compared with just over one month in Q1 2021.
Production expense for the first quarter of 2022 included
approximately $0.9 million in additional costs related to proactive
employee-related measures taken in response to the pandemic. There
were no workover expenses in the first quarter of 2022. Production
expense per barrel was near the midpoint of guidance and was
impacted by the lower sales volumes in the first quarter due to due
to operational and weather factors.
Depreciation, depletion and amortization
(“DD&A”) expense in the first quarter of 2022 on a per NRI
barrel of crude oil sales basis was higher compared to the prior
periods presented due to higher depletable costs associated with
the 2021/2022 drilling campaign.
General and administrative (“G&A”) expense,
excluding stock-based compensation, in the first quarter of 2022
was higher than both the fourth quarter of 2021 and the first
quarter of 2021 primarily as a result of higher salary and wages
and audit related costs partially offset by lower legal fees.
Non-cash stock-based compensation expense for
the first quarter of 2022 was $1.4 million and was comprised of
non-SARs related expense of $0.4 million and SARs related expense
of $1.0 million. For the fourth quarter of 2021, stock-based
compensation was $0.4 million and for the first quarter of 2021,
stock-based compensation expense was $1.6 million.
Foreign income taxes are attributable to Gabon
and are settled by the government taking their oil in-kind. Income
tax expense for the three months ended March 31, 2022 was a benefit
of ($4.6) million. This is comprised of ($10.3) million of deferred
tax benefit and a current tax expense of $5.7 million. Income tax
expense for the three months ended March 31, 2021 was $3.1 million,
comprised of ($0.3) million of deferred tax benefit and a current
tax expense of $3.4 million. For both the three months ended March
31, 2022 and 2021, VAALCO’s overall effective tax rate was impacted
by non-deductible items associated with operations and deducting
foreign taxes rather than crediting them for United States tax
purposes. For the fourth quarter of 2021, income tax was a benefit
of ($10.9) million, comprised of ($16.1) million of deferred
tax benefit and a current expense of $5.2 million.
Environmental, Social and Governance
As part of the Company’s commitment to
environmental stewardship, social awareness and good corporate
governance, VAALCO is publishing its annual ESG report in the
second quarter of 2022. VAALCO remains focused on showing progress
and improvement in its environmental, social and governance
metrics.
Response to COVID-19
Pandemic
VAALCO remains fully committed to the health and
safety of all its employees and contractors. The Company continues
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 3, 2022, VAALCO has experienced no
material impact on its Gabon facilities 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 $0.9 million during the first quarter of
2022.
Capital Investments/Balance
Sheet
For the first quarter of 2022, net capital
expenditures, excluding acquisitions, totaled $23.1 million on a
cash basis and $31.8 million on an accrual basis. These
expenditures were primarily related to costs associated with the
2021/2022 drilling program as well as the FSO conversion and field
reconfiguration investments. In the first quarter of 2021, VAALCO
invested $17.9 million in acquisitions of crude oil and natural gas
properties related to the Sasol interest purchase.
At the end of the first quarter of 2022, VAALCO
had an unrestricted cash balance of $18.9 million. This does not
include the proceeds from the March lifting of $44.6 million, which
were received in April 2022, plus $3.8 million in non-operating
joint owner receivables. Working capital at March 31, 2022 was
($21.3) million compared with $4.0 million at December 31, 2021,
while Adjusted Working Capital(1) at March 31, 2022 totaled ($14.5)
million, compared with $13.7 million at December 31, 2021.
Cash Dividend Policy
The Company announced its quarterly cash
dividend of $0.0325 per share of common stock for the second
quarter of 2022 ($0.13 annualized), which is payable June 24, 2022
to stockholders of record at the close of business on May 25, 2022.
Future declarations of quarterly dividends and the establishment of
future record and payment dates are subject to approval by the
Board of Directors.
Hedging
The Company has continued to opportunistically
hedge a portion of its expected production in 2022 to lock in
strong cash flow generation to assist in funding its capital
program and dividend. On September 24, 2021, VAALCO entered into
additional commodity swaps at a Dated Brent weighted average price
of $72.00 per barrel for the period from and including March 2022
to June 2022 for a quantity of 460,000 barrels. On January 6, 2022,
the Company entered into additional commodity swaps at a Dated
Brent weighted average price of $76.53 per barrel for the period
from and including July 2022 to September 2022 for a quantity of
375,000 barrels. On February 23, 2022, VAALCO entered into
additional commodity swaps at a Dated Brent weighted average price
of $85.01 per barrel for the period from and including April 2022
to June 2022 for a quantity of 234,000 barrels.
At March 31, 2022, the unexpired commodity swaps
were for an underlying quantity of 954 MBbls and had a fair value
of $24.1 million and is reflected in “Accrued liabilities and
other” line of the condensed consolidated balance sheet.
See the following table for the unexpired
barrels as of April, 2022.
Settlement Period |
|
|
Type of Contract |
|
|
Index |
|
|
Barrels |
|
Weighted Average Price |
May 2022 to June 2022 |
|
|
Swaps |
|
|
Dated Brent |
|
|
230,000 |
|
$ |
72.00 |
May 2022 to June 2022 |
|
|
Swaps |
|
|
Dated Brent |
|
|
156,000 |
|
$ |
85.01 |
July 2022 to September 2022 |
|
|
Swaps |
|
|
Dated Brent |
|
|
375,000 |
|
$ |
76.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Guidance
Second quarter 2022 production guidance is
expected to be 10,000 to 10,700 BOPD, which represents a 29%
increase at the midpoint compared to the first quarter of 2022.
Second quarter 2022 sales guidance is 10,700 to 11,300 BOPD, which
represents a 61% increase at the midpoint compared to the first
quarter of 2022. Production expense, excluding workovers, is
expected to be $22.00 to $25.00 which represents a decrease at the
midpoint compared to the first quarter of 2022 of 20%. Workover
expense for the second quarter 2022 is expected to be between $0
and $2 million. Cash G&A expense for the second quarter is
expected to be between $2.5 and $3.5 million. Capital expense for
the second quarter 2022 is expected to be between $40.0 and $50.0
million. VAALCO reaffirms full year 2022 guidance for all
metrics.
The Company plans to drill and complete four
wells as part of its 2021/2022 drilling campaign. VAALCO expects to
fund its 2022 capital expenditures fully from cash on hand and cash
flow from operations. All of the Company’s guidance metrics are in
the Q1 2022 Supplemental Information presentation that will be
posted to its website tomorrow morning prior to the conference
call.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its first quarter 2022 financial and
operating results on Wednesday, May 4, 2022, 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 (833) 685-0907.
Parties in the United Kingdom may participate toll-free by dialing
08082389064 and other international parties may dial (412)
317-5741. Participants should request to be joined to the “VAALCO
Energy First Quarter 2022 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 63.6% participating interest in the Etame
Marin Block, located offshore Gabon, which to date has produced
over 126 million barrels of crude oil and of which the Company is
the operator.
For Further Information
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 / Jon Krinks/ 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 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 VAALCO’s 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, VAALCO’s 2021/2022 drilling campaign,
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,
prospect evaluations, 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)
|
|
As ofMarch 31, 2022 |
|
As ofDecember 31, 2021 |
ASSETS |
|
(in thousands) |
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
18,939 |
|
|
$ |
48,675 |
|
Restricted cash |
|
|
4,230 |
|
|
|
79 |
|
Receivables: |
|
|
|
|
|
|
Trade, net |
|
|
44,616 |
|
|
|
22,464 |
|
Accounts with joint venture owners, net of allowance of $0.0
million in both periods presented |
|
|
3,764 |
|
|
|
345 |
|
Other, net |
|
|
11,612 |
|
|
|
9,977 |
|
Crude oil inventory |
|
|
4,634 |
|
|
|
1,593 |
|
Prepayments and other |
|
|
8,408 |
|
|
|
5,156 |
|
Total current assets |
|
|
96,203 |
|
|
|
88,289 |
|
|
|
|
|
|
|
|
Crude oil and natural gas
properties, equipment and other - successful efforts method,
net |
|
|
121,935 |
|
|
|
94,324 |
|
Other noncurrent assets: |
|
|
|
|
|
|
Restricted cash |
|
|
1,752 |
|
|
|
1,752 |
|
Value added tax and other receivables, net of allowance of $6.1
million and $5.7 million, respectively |
|
|
5,692 |
|
|
|
5,536 |
|
Right of use operating lease assets |
|
|
6,872 |
|
|
|
10,227 |
|
Right of use finance lease assets |
|
|
1,795 |
|
|
|
— |
|
Deferred tax assets |
|
|
50,296 |
|
|
|
39,978 |
|
Abandonment funding |
|
|
21,369 |
|
|
|
21,808 |
|
Other long-term assets |
|
|
2,596 |
|
|
|
1,176 |
|
Total assets |
|
$ |
308,510 |
|
|
$ |
263,090 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
10,509 |
|
|
$ |
18,797 |
|
Accounts with joint venture owners |
|
|
— |
|
|
|
3,233 |
|
Accrued liabilities and other |
|
|
91,409 |
|
|
|
49,444 |
|
Operating lease liabilities - current portion |
|
|
6,429 |
|
|
|
9,642 |
|
Finance lease liabilities - current portion |
|
|
341 |
|
|
|
— |
|
Foreign income taxes payable |
|
|
8,819 |
|
|
|
3,128 |
|
Current liabilities - discontinued operations |
|
|
7 |
|
|
|
13 |
|
Total current liabilities |
|
|
117,514 |
|
|
|
84,257 |
|
Asset retirement
obligations |
|
|
34,377 |
|
|
|
33,949 |
|
Operating lease liabilities -
net of current portion |
|
|
461 |
|
|
|
587 |
|
Finance lease liabilities -
net of current portion |
|
|
1,411 |
|
|
|
— |
|
Total liabilities |
|
|
153,763 |
|
|
|
118,793 |
|
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,
69,862,217 and 69,562,774 shares issued, 58,858,901 and 58,623,451
shares outstanding, respectively |
|
|
6,986 |
|
|
|
6,956 |
|
Additional paid-in capital |
|
|
77,272 |
|
|
|
76,700 |
|
Less treasury stock, 11,003,316 and 10,939,323 shares,
respectively, at cost |
|
|
(44,234 |
) |
|
|
(43,847 |
) |
Retained earnings |
|
|
114,723 |
|
|
|
104,488 |
|
Total shareholders' equity |
|
|
154,747 |
|
|
|
144,297 |
|
Total liabilities and shareholders' equity |
|
$ |
308,510 |
|
|
$ |
263,090 |
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Operations (Unaudited)
|
|
Three Months Ended |
|
|
|
March 31,2022 |
|
March 31,2021 |
|
December 31,2021 |
|
|
|
(in thousands except per share amounts) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
Crude oil and natural gas sales |
|
$ |
68,656 |
|
|
$ |
39,774 |
|
|
$ |
56,379 |
|
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
Production expense |
|
|
18,360 |
|
|
|
16,133 |
|
|
|
23,495 |
|
|
Exploration expense |
|
|
127 |
|
|
|
142 |
|
|
|
293 |
|
|
Depreciation, depletion and amortization |
|
|
4,673 |
|
|
|
4,148 |
|
|
|
4,132 |
|
|
General and administrative expense |
|
|
4,994 |
|
|
|
4,547 |
|
|
|
2,545 |
|
|
Bad debt expense and other |
|
|
492 |
|
|
|
101 |
|
|
|
61 |
|
|
Total operating costs and expenses |
|
|
28,646 |
|
|
|
25,071 |
|
|
|
30,526 |
|
|
Other operating expense, net |
|
|
(5 |
) |
|
|
(360 |
) |
|
|
- |
|
|
Operating income |
|
|
40,005 |
|
|
|
14,343 |
|
|
|
25,853 |
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
Derivative instruments loss, net |
|
|
(31,758 |
) |
|
|
(5,954 |
) |
|
|
(1,756 |
) |
|
Interest (expense) income, net |
|
|
(3 |
) |
|
|
5 |
|
|
|
1 |
|
|
Other (expense) income, net |
|
|
(696 |
) |
|
|
4,580 |
|
|
|
(594 |
) |
|
Total other expense, net |
|
|
(32,457 |
) |
|
|
(1,369 |
) |
|
|
(2,349 |
) |
|
Income from continuing
operations before income taxes |
|
|
7,548 |
|
|
|
12,974 |
|
|
|
23,504 |
|
|
Income tax expense
(benefit) |
|
|
(4,628 |
) |
|
|
3,086 |
|
|
|
(10,884 |
) |
|
Income from continuing
operations |
|
|
12,176 |
|
|
|
9,888 |
|
|
|
34,388 |
|
|
Income from discontinued
operations, net of tax |
|
|
(12 |
) |
|
|
(19 |
) |
|
|
(26 |
) |
|
Net income |
|
$ |
12,164 |
|
|
$ |
9,869 |
|
|
$ |
34,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share: |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.21 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
Loss from discontinued operations, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income per share |
|
$ |
0.21 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
Basic weighted average shares outstanding |
|
|
58,702 |
|
|
|
57,636 |
|
|
|
58,613 |
|
|
Diluted net income per
share: |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
$ |
0.20 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
Loss from discontinued operations, net of tax |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net income per share |
|
$ |
0.20 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
Diluted weighted average shares outstanding |
|
|
59,179 |
|
|
|
58,461 |
|
|
|
59,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIES (Need to be
updated)Consolidated Statements of Cash Flows (Unaudited)
|
|
Three Months Ended March 31, |
|
|
2022 |
|
|
2021 |
|
|
|
(in thousands) |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
$ |
12,164 |
|
|
$ |
9,869 |
|
Adjustments to reconcile net
income to net cash (used in) provided by operating activities: |
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
|
12 |
|
|
|
19 |
|
Depreciation, depletion and amortization |
|
|
4,673 |
|
|
|
4,148 |
|
Bargain purchase gain |
|
|
- |
|
|
|
(7,651 |
) |
Deferred taxes |
|
|
(10,318 |
) |
|
|
1,809 |
|
Unrealized foreign exchange loss (gain) |
|
|
116 |
|
|
|
(400 |
) |
Stock-based compensation |
|
|
1,422 |
|
|
|
1,559 |
|
Cash settlements paid on exercised stock appreciation rights |
|
|
(205 |
) |
|
|
(852 |
) |
Derivative instruments loss, net |
|
|
31,758 |
|
|
|
5,954 |
|
Cash settlements paid on matured derivative contracts, net |
|
|
(12,500 |
) |
|
|
(1,710 |
) |
Bad debt expense and other |
|
|
492 |
|
|
|
101 |
|
Other operating expense, net |
|
|
5 |
|
|
|
360 |
|
Operational expenses associated with equipment and other |
|
|
240 |
|
|
|
247 |
|
Cash advance for other long-term assets |
|
|
(1,452 |
) |
|
|
— |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
Trade receivables |
|
|
(22,152 |
) |
|
|
(12,647 |
) |
Accounts with joint venture owners |
|
|
(6,652 |
) |
|
|
275 |
|
Other receivables |
|
|
(1,723 |
) |
|
|
(53 |
) |
Crude oil inventory |
|
|
(3,041 |
) |
|
|
5,795 |
|
Prepayments and other |
|
|
(876 |
) |
|
|
(3,240 |
) |
Value added tax and other receivables |
|
|
(1,076 |
) |
|
|
(149 |
) |
Accounts payable |
|
|
(10,132 |
) |
|
|
(6,627 |
) |
Foreign income taxes receivable/payable |
|
|
5,691 |
|
|
|
5,524 |
|
Accrued liabilities and other |
|
|
12,814 |
|
|
|
(576 |
) |
Net cash (used in) provided by continuing operating activities |
|
|
(740 |
) |
|
|
1,755 |
|
Net cash used in discontinued operating activities |
|
|
(18 |
) |
|
|
(13 |
) |
Net cash (used in) provided by operating activities |
|
|
(758 |
) |
|
|
1,742 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Property and equipment expenditures |
|
|
(23,148 |
) |
|
|
(1,198 |
) |
Acquisition of crude oil and natural gas properties |
|
|
— |
|
|
|
(17,858 |
) |
Net cash used in continuing investing activities |
|
|
(23,148 |
) |
|
|
(19,056 |
) |
Net cash used in discontinued investing activities |
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(23,148 |
) |
|
|
(19,056 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the issuances of common stock |
|
|
198 |
|
|
|
347 |
|
Dividend distribution |
|
|
(1,929 |
) |
|
|
— |
|
Treasury shares |
|
|
(387 |
) |
|
|
(403 |
) |
Net cash used in continuing
financing activities |
|
|
(2,118 |
) |
|
|
(56 |
) |
Net cash used in discontinued
financing activities |
|
|
— |
|
|
|
— |
|
Net cash used in financing
activities |
|
|
(2,118 |
) |
|
|
(56 |
) |
NET CHANGE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
|
(26,024 |
) |
|
|
(17,370 |
) |
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
72,314 |
|
|
|
61,317 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF PERIOD |
|
$ |
46,290 |
|
|
$ |
43,947 |
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESSelected Financial and
Operating Statistics(Unaudited)
|
|
Three Months Ended |
|
|
|
March 31,2022 |
|
March 31,2021 |
|
December 31,2021 |
|
NRI SALES DATA |
|
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
|
616 |
|
|
619 |
|
|
709 |
|
NRI PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
|
725 |
|
|
466 |
|
|
695 |
|
Average daily production volumes (BOPD) |
|
|
8,051 |
|
|
5,180 |
|
|
7,554 |
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE SALES PRICES: |
|
|
|
|
|
|
|
|
|
|
Crude oil (Per Bbl) |
|
$ |
109.65 |
|
$ |
61.31 |
|
$ |
77.31 |
|
COSTS AND EXPENSES (Per Bbl of
sales): |
|
|
|
|
|
|
|
|
|
|
Production expense |
|
$ |
29.81 |
|
$ |
26.06 |
|
$ |
33.14 |
|
Production expense, excluding workovers* |
|
|
29.83 |
|
|
26.02 |
|
|
26.82 |
|
Depreciation, depletion and amortization |
|
|
7.59 |
|
|
6.70 |
|
|
5.83 |
|
General and administrative expense** |
|
|
8.11 |
|
|
7.35 |
|
|
3.59 |
|
Property and equipment expenditures, cash basis (in thousands) |
|
$ |
14,689 |
|
$ |
1,198 |
|
$ |
8,099 |
|
*Workover costs excluded from the three months ended March 31,
2022 and 2021 and December 31, 2021 are $0.0 million, $0.0 million
and $4.5 million, respectively.**General and administrative
expenses include $2.31, $2.52 and $0.51 per barrel of oil of sales
of stock-based compensation expense in the three months ended March
31, 2022, and 2021 and December 31, 2021, 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 |
|
Reconciliation of Net
Income to Adjusted Net Income |
|
March 31,2022 |
|
March 31,2021 |
|
December 31,2021 |
|
Net income |
|
$ |
12,164 |
|
|
$ |
9,869 |
|
|
$ |
34,362 |
|
|
Adjustment for discrete
items: |
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
12 |
|
|
|
19 |
|
|
|
26 |
|
|
Unrealized derivative instruments loss (gain) |
|
|
19,258 |
|
|
|
4,244 |
|
|
|
(6,075 |
) |
|
Gain on Sasol Acquisition, net |
|
|
— |
|
|
|
(5,491 |
) |
|
|
302 |
|
|
Deferred income tax benefit |
|
|
(10,319 |
) |
|
|
(349 |
) |
|
|
(16,067 |
) |
|
Other operating expense, net |
|
|
5 |
|
|
|
360 |
|
|
|
— |
|
|
Adjusted Net Income |
|
$ |
21,120 |
|
|
$ |
8,652 |
|
|
$ |
12,548 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Adjusted Net Income
(Loss) per Share |
|
$ |
0.36 |
|
|
$ |
0.15 |
|
|
$ |
0.21 |
|
|
Diluted weighted average
shares outstanding (1) |
|
|
59,179 |
|
|
|
58,461 |
|
|
|
59,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) No adjustments to weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Reconciliation of Net
Income to Adjusted EBITDAX |
|
March 31,2022 |
|
March 31,2021 |
|
December 312021 |
|
Net income |
|
$ |
12,164 |
|
|
$ |
9,869 |
|
|
$ |
34,362 |
|
|
Add back: |
|
|
|
|
|
|
|
|
|
|
Impact of discontinued operations |
|
|
12 |
|
|
|
19 |
|
|
|
26 |
|
|
Interest income, net |
|
|
3 |
|
|
|
(5 |
) |
|
|
(1 |
) |
|
Income tax expense (benefit) |
|
|
(4,628 |
) |
|
|
3,086 |
|
|
|
(10,884 |
) |
|
Depreciation, depletion and amortization |
|
|
4,673 |
|
|
|
4,148 |
|
|
|
4,132 |
|
|
Exploration expense |
|
|
127 |
|
|
|
142 |
|
|
|
293 |
|
|
Impairment of proved crude oil and natural gas properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Non-cash or unusual
items: |
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
1,422 |
|
|
|
1,559 |
|
|
|
361 |
|
|
Unrealized derivative instruments loss (gain) |
|
|
19,258 |
|
|
|
4,244 |
|
|
|
(6,075 |
) |
|
Gain on Sasol Acquisition, net |
|
|
— |
|
|
|
(5,491 |
) |
|
|
302 |
|
|
Other operating expense, net |
|
|
5 |
|
|
|
360 |
|
|
|
— |
|
|
Bad debt expense and other |
|
|
492 |
|
|
|
101 |
|
|
|
61 |
|
|
Adjusted EBITDAX |
|
$ |
33,528 |
|
|
$ |
18,032 |
|
|
$ |
22,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations of Non-GAAP
Financial Measures(Unaudited)(in thousands)
Reconciliation of
Working Capital to Adjusted Working Capital |
|
As ofMarch 31, 2022 |
|
As ofDecember 31, 2021 |
|
Change |
Current assets |
|
$ |
96,203 |
|
|
$ |
88,289 |
|
|
$ |
7,914 |
|
Current liabilities |
|
|
(117,514 |
) |
|
|
(84,257 |
) |
|
|
(33,257 |
) |
Working
capital |
|
|
(21,311 |
) |
|
|
4,032 |
|
|
|
(25,343 |
) |
Add: operating lease
liabilities - current portion |
|
|
6,770 |
|
|
|
9,642 |
|
|
|
(2,872 |
) |
Add: current liabilities -
discontinued operations |
|
|
7 |
|
|
|
13 |
|
|
|
(6 |
) |
Adjusted Working
Capital |
|
$ |
(14,534 |
) |
|
$ |
13,687 |
|
|
$ |
(28,221 |
) |
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