VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) today reported
operational and financial results for the second quarter of 2022.
Highlights and Recent Key
Items:
- Reported strong Q2 2022 net income of $15.1 million
($0.25 per diluted share) and Adjusted Net
Income(1) of
$30.7 million ($0.52 per diluted
share);
- Increased Adjusted EBITDAX(1) by
81% quarter-over-quarter to $60.8 million in Q2 2022 a record high
for VAALCO driven by strong pricing and increased sales
volumes;
- Increased Q2 2022 average daily production by 14% to
9,211 net revenue interest
(“NRI”)(2) barrels
of crude oil per day (“BOPD”), or
10,587 working interest
(“WI”)(3) BOPD,
compared to Q1 2022;
- Sold record quarterly high 958,000 barrels of oil in Q2
2022;
- Announced plans to exercise extension option on
currently contracted drilling rig and add two additional wells to
current 2021/22 drilling program for a total of six wells:
- Currently drilling the ETBNM 2H-ST on the Southeast
Etame North Tchibala (“SEENT”) platform, the
fourth development well in the 2021/2022 program;
- Funded $37.1 million cash capital expenditures during
Q2 2022 with cash on hand and cash from operations;
- Maintained a strong balance sheet with no debt and an
unrestricted cash balance of $53.1 million, not including the
proceeds from the May and June liftings of $70.3 million, which
were received in July and August 2022;
- Replacement of existing Floating Production, Storage
and Offloading unit (“FPSO”) proceeds on schedule
and new Floating Storage and Offloading
(“FSO”) vessel is scheduled to
arrive offshore Gabon on August
12th;
- Submitted a plan of development
(“POD”) to the Ministry of Mines and Hydrocarbons
(“MMH”) in Equatorial Guinea for
the Venus development in Block P on July 15, 2022 in which VAALCO,
if approved, will hold an 80% WI;
- Announced quarterly cash dividend payment of $0.0325
per common share to be paid on September 23, 2022, the third
dividend approved to be paid in 2022; and
- Announced strategic and accretive combination with
TransGlobe creating a diversified African-focused E&P company
focused on supporting shareholder returns and sustainable
growth.
|
(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 had a very strong second quarter, delivering record
sales volumes, benefiting from the improved commodity price
environment, and generating significant cash flow. The combination
of these positive factors is allowing us to continue to execute on
our accretive growth strategy, fully fund our capital commitments
and firmly place VAALCO in a financially stronger position. We
delivered record Adjusted EBITDAX and net sales volumes while
continuing to generate meaningful cash to pay for our growth
and returns to our shareholders. Enhancing our production, reducing
our costs and extending the economic life at Etame is a driving
force for VAALCO’s continued success.”
“The FSO is arriving at Etame this week and we
are progressing our full field reconfiguration and FPSO to FSO
conversion as planned in the third quarter of 2022. We expect to
realize substantial and sustainable operating costs savings from
this project that will begin in the fourth quarter and carry on
through the remainder of the decade. In July, we submitted a POD in
Equatorial Guinea for the Venus development in Block P to the EG
MMH. We look forward to receiving approval of our POD in which we
will hold an 80% working interest in the Venus development as a
result of our joint venture owner opting to not
participate. We are continuing to move forward with our
discovery at Block P which is expected to add meaningful reserves
and another strong operational asset to the portfolio. As you can
see, we are poised for continued success in this strong commodity
price environment, with no debt and strong free cash flow
generation. We will remain firmly focused on delivering meaningful
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 initial
production ("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 2022 with an IP rate of approximately
3,100 gross BOPD. This is another successful development well
targeting the Gamba reservoir.
The third well drilled and completed was the
South Tchibala 1HB-ST, which discovered two potential Dentale
producing zones, the Dentale D1 sand and the Dentale D9. The first
completion was in the shallower D1 which included a hydraulic
fracture treatment to increase both the production flow rate and
recovery from the D1 interval. The additional Dentale D9 (15
meters net hydrocarbons) interval can be tested and completed in
the future and has an estimated original oil in place range of
4 to 15 MMBO.
Following the completion of the South Tchibala
1HB-ST well, the rig was mobilized to the Southeast Etame North
Tchibala ("SEENT") Platform to drill the ETBSM 2H-ST well,
targeting the Dentale formation, which is productive in other areas
in the Etame license. This mobilization was delayed by two weeks
due to weather and the rig began operations on the well in late
July. After setting up the equipment and completing operations to
re-enter the well, VAALCO began drilling the ETBSM 2H-ST well on
August 8th. The Company exercised its options to extend the
contract for the rig. As a result, the Company plans to add two
additional wells to the program, the Ebouri 4H development
well targeting the Gamba formation and a Northeast Avouma well that
is a near-field exploration well also targeting the Gamba formation
and if successful is expected to be tied into the Avouma platform
at a later date. VAALCO now estimates the total cost of the
2021/2022 drilling campaign at Etame to be between $174.0 million
and $213.0 million gross, or between $111.0 million and $135.0
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 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 is currently working with the FPSO
charterer regarding timing for commencing shutdown of production,
schedule for decommissioning and associated costs to ensure a
smooth transition to the FSO. 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 Teli, a double-hull crude tanker built in 2001 that
was re-engineered into a FSO, left the shipyard in early July 2022
following completion of sea trials and is arriving in Gabon
this week.
Modifications to the Etame platform to
support the full field reconfiguration are also on schedule.
VAALCO recently completed the first of several short facility
outages to allow for flare system upgrades and the installation of
tie-in points for the process equipment. All major deck components
arrived in Gabon and additional major components are in transit.
Installation of all equipment began in July and will continue
through August, with final hookup and commissioning expected to
occur in the third quarter, once the Teli is moored on
location.
Preparation for the subsea reconfiguration is
also underway with the first portion of the Bourbon/ RANA dive
program which began in mid-July. The DOF Skandi Constructor vessel
arrived in Gabon and will commence reconfiguration of the existing
lines and installation of the new lines.
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. The energy industry is experiencing inflationary pressures
related to goods and services particularly impacting fuel prices,
services and equipment prices, availability of equipment and global
logistic cost increase and delays. These factors coupled with
additional engineering requirements for the FSO conversion and
field reconfiguration have increased current total field level
capital conversion estimates to $55 to $70 million
gross ($35 to $45 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.
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 owns a working interest in Block P
offshore Equatorial Guinea, where there are previously discovered
but undeveloped resources as well as additional exploration
potential. VAALCO has completed a feasibility study of a standalone
production development opportunity of the Venus discovery on Block
P. On July 15, 2022, VAALCO, on behalf of itself and Guinea
Ecuatorial de Petroleós (“GEPetrol”), submitted to the EG MMH a
plan of development for the Venus development in Block P. The
other Block P joint venture owner, Atlas Petroleum International
Limited, opted not to participate in the plan of
development. As a result, VAALCO will hold an 80% working
interest in the Venus development in Block P and GEPetrol will
hold a 20% carried interest. The Block P PSC provides for a
development and production period of 25 years from the date of
approval of the POD. VAALCO expects to add new 2P reserves once the
development plan is approved.
TransGlobe Combination
On July 14, 2022, VAALCO announced that they
have entered into a definitive arrangement agreement (the
“Arrangement Agreement”) pursuant to which VAALCO will acquire all
of the outstanding common shares of TransGlobe in a stock-for-stock
strategic business combination transaction valued at $307 million
(the “Transaction”). Under the terms of the Arrangement Agreement,
VAALCO will acquire each TransGlobe share for 0.6727 of a VAALCO
share of common stock, which represents a 24.9% premium per
TransGlobe common share based on the companies’ respective 30-day
volume weighted average share prices as of market close on July 13,
2022. The Transaction will result in VAALCO stockholders owning
approximately 54.5% and TransGlobe shareholders owning
approximately 45.5% of the Combined Company.
Financial Update – Second Quarter of
2022
Net income of $15.1 million ($0.25 per diluted
share) for the second quarter of 2022 was up 24% compared with net
income of $12.2 million ($0.20 per diluted share) in the first
quarter of 2022 and up 157% compared to $5.9 million ($0.10 per
diluted share) in the second quarter of 2021. The second quarter of
2022 reflected stronger revenue compared with both prior periods
driven primarily by higher realized pricing and sales volumes.
Adjusted Net Income for the second quarter of
2022 increased significantly to $30.7 million ($0.52 per diluted
share) from Adjusted Net Income of $21.1 million ($0.36 per
diluted share) in the first quarter of 2022, and Adjusted Net
Income for the second quarter of 2021 of $8.4 million ($0.14 per
diluted share). The increase for both periods was primarily
driven by improved realized pricing and increased sales partially
offset by higher production costs, higher realized losses on
derivatives and higher current income tax expense.
Adjusted EBITDAX totaled a record $60.8 million
in the second quarter of 2022, an increase of 81% compared with
$33.5 million in the first quarter of 2022 and nearly three times
the $21.9 million generated in the same period in 2021. Adjusted
EBITDAX for the second quarter of 2022 was higher compared to the
prior periods primarily due to improved realized prices and sales
volumes partially offset by higher production costs and higher
realized losses on derivatives.
Revenue and Sales |
Q2 2022 |
|
Q2 2021 |
|
% Change Q2 2022 vs. Q2 2021 |
|
Q1 2022 |
|
% Change Q2 2022 vs. Q1 2022 |
Production (NRI BOPD) |
|
9,211 |
|
|
|
8,018 |
|
|
15 |
|
% |
|
|
8,051 |
|
|
14.4 |
|
% |
Sales (NRI BO) |
|
958,000 |
|
|
|
642,000 |
|
|
49 |
|
% |
|
|
616,000 |
|
|
55.5 |
|
% |
Realized crude oil price
($/BO) |
$ |
113.38 |
|
|
$ |
69.61 |
|
|
63 |
|
% |
|
$ |
109.65 |
|
|
3 |
|
% |
Crude oil (Per Bbl including
realized commodity derivatives) |
$ |
91.39 |
|
|
$ |
62.93 |
|
|
45 |
|
% |
|
$ |
89.36 |
|
|
2 |
|
% |
Total crude oil sales
($MM) |
$ |
111.0 |
|
|
$ |
47.0 |
|
|
136 |
|
% |
|
$ |
68.7 |
|
|
62 |
|
% |
VAALCO had four liftings in the second quarter
of 2022, which resulted in total sales volumes of 958,000 barrels
compared to 616,000 barrels in the first quarter of 2022 and
642,000 barrels for the same period in 2021. Second quarter of 2022
realized pricing rose 3% compared to the first quarter of 2022 and
63% compared to the second quarter of 2021.
Costs and Expenses |
Q2 2022 |
|
Q2 2021 |
|
% Change Q2 2022 vs. Q2 2021 |
|
Q1 2022 |
|
% Change Q2 2022 vs. Q1 2022 |
Production expense, excluding workovers ($MM) |
$ |
25.5 |
|
|
$ |
16.1 |
|
|
59 |
|
% |
|
$ |
18.4 |
|
|
38 |
|
% |
Production expense, excluding
workovers ($/BO) |
$ |
26.58 |
|
|
$ |
25.02 |
|
|
6 |
|
% |
|
$ |
29.83 |
|
|
(11 |
) |
% |
Workover expense ($MM) |
$ |
— |
|
|
$ |
0.4 |
|
|
— |
|
% |
|
$ |
— |
|
|
— |
|
% |
Depreciation, depletion and
amortization ($MM) |
$ |
8.2 |
|
|
$ |
5.8 |
|
|
41 |
|
% |
|
$ |
4.7 |
|
|
75 |
|
% |
Depreciation, depletion and
amortization ($/BO) |
$ |
8.55 |
|
|
$ |
9.05 |
|
|
(6 |
) |
% |
|
$ |
7.59 |
|
|
13 |
|
% |
General and administrative
expense, excluding stock-based compensation ($MM) |
$ |
2.7 |
|
|
$ |
4.2 |
|
|
(36 |
) |
% |
|
$ |
3.6 |
|
|
(25 |
) |
% |
General and administrative
expense, excluding stock-based compensation ($/BO) |
$ |
2.81 |
|
|
$ |
6.57 |
|
|
(57 |
) |
% |
|
$ |
5.80 |
|
|
(52 |
) |
% |
Stock-based compensation
expense ($MM) |
$ |
0.8 |
|
|
$ |
0.5 |
|
|
60 |
|
% |
|
$ |
1.4 |
|
|
100 |
|
% |
Current income tax expense
($MM) |
$ |
20.4 |
|
|
$ |
6.1 |
|
|
234 |
|
% |
|
$ |
5.7 |
|
|
258 |
|
% |
Deferred income tax expense
(benefit) ($MM) |
$ |
25.9 |
|
|
$ |
(3.3 |
) |
|
(885 |
) |
% |
|
$ |
(10.3 |
) |
|
(351 |
) |
% |
Total production expense, excluding workovers,
increased in the second quarter of 2022 compared to the first
quarter of 2022 and the same period in 2021. The increase was
primarily driven by higher costs associated with boats, personnel,
chemicals and costs associated with increased sales volumes.
Production expense for the second quarter of 2022 included
approximately $0.5 million in additional costs related to proactive
employee-related measures taken in response to the ongoing COVID-19
pandemic. There were no workover expenses in the first or second
quarters of 2022. Production expense per barrel was lower than the
first quarter of 2022 due to greater sales volumes, but slightly
above the same quarter in 2021 due to the increased costs driven in
part by price inflation.
Depreciation, depletion and amortization
(“DD&A”) expense in the second quarter of 2022 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 second quarter of 2022
was lower than both the first quarter of 2022 and the second
quarter of 2021 primarily because of lower wages and reduction
in severance costs of key personnel which occurred in second
quarter 2021.
Non-cash stock-based compensation expense for
the second quarter of 2022 was $0.8 million and was comprised of
non-SARs related expense of $0.6 million and SARs related
expense of $0.2 million. For the first quarter of 2022,
stock-based compensation was $1.4 million and for the second
quarter of 2021, stock-based compensation expense was $0.5
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 June 30, 2022 was an expense
of $46.3 million. This is comprised of $25.9 million of deferred
tax expense and a current tax expense of $20.4 million. Income tax
expense for the three months ended June 30, 2021 was $2.8 million,
comprised of $3.3 million of deferred tax benefit and a current tax
expense of $6.1 million. For both the three months ended June 30,
2022 and 2021, VAALCO’s overall effective tax rate was impacted by
non-deductible items associated with derivative losses and
corporate expenses. Additionally, the higher realized prices have
contributed to higher revenue but also higher taxes.
Financial Update –
First Six Months of 2022
Production for the first six months of 2022 was
higher by 31% at 1,563 MBbls net crude oil compared to 1,196 MBbls
net crude oil production in the first six months of 2021. The
increase was driven by production from new wells from the
2021/2022 drilling campaign and by the additional production
associated with the Sasol Acquisition completed in February 2021.
The first half of 2022 saw sales volume increase 25% to 1,574 MBbls
net crude oil compared to 1,261 MBbls for the first half of
2021. Crude oil sales are a function of the number and size of
crude oil liftings in each quarter and do not always coincide with
volumes produced in any given period.
The average realized crude oil price for the
first six months of 2022 was $111.92 per barrel, representing an
increase of 71% from $65.54 realized in the first six months of
2021. This sharp increase in crude oil price reflects the strong
recovery in 2022 following downward pressure resulting from the
COVID pandemic as well as supply and demand imbalances that
occurred in 2020 and into 2021.
The Company reported net income for the six
months ended June 30, 2022 of $27.3 million, which compares to
$15.8 million for the same period of 2021. The
meaningful increase in operating results for the six months
ended June 30, 2022 compared to the same period in 2021 was
primarily due to increased sales volumes and higher oil prices in
the first half of 2022 partially offset by higher production costs,
higher DD&A, higher losses on derivatives and higher tax
expense.
Environmental, Social and
Governance
As part of the Company’s commitment to
environmental stewardship, social awareness and good corporate
governance, VAALCO published its annual ESG report in June 2022.
The report covers VAALCO’s ESG initiatives and related key
performance indicators for the three-year period 2019 through 2021.
In the preparation of the qualitative and quantitative information
and data, the Company continued to consult the Sustainability
Accounting Standards Board’s (“SASB”) Oil and Gas Exploration and
Production Sustainability Accounting Standard, and this year took a
more meaningful dive into the recommendations of the Task Force on
Climate-related Financial Disclosures (“TCFD”). 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 August 9, 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 $0.5 million during the second quarter of 2022.
Capital Investments/Balance
Sheet
For the second quarter of 2022, net capital
expenditures totaled $37.1 million on a cash basis and $38.1
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 2022, VAALCO invested $23.1 million on a
cash basis and $31.8 million on an accrual basis.
At the end of the second quarter of 2022, VAALCO
had an unrestricted cash balance of $53.1 million. This does not
include the proceeds from the May and June lifting of $70.3
million, which were received in July and August 2022. Working
capital at June 30, 2022 was ($8.0) million compared with ($21.3)
million at March 31, 2022, while Adjusted Working Capital(1) at
June 30, 2022 totaled ($4.6) million, compared with ($14.5) million
at March 31, 2022.
Cash Dividend Policy
VAALCO paid a quarterly cash dividend of $0.0325
per share of common stock for the second quarter of 2022 on June
24, 2022. On August 5, 2022, the Company announced its next
quarterly cash dividend of $0.0325 per share of common stock for
the third quarter of 2022 ($0.13 annualized), to be paid on
September 23, 2022 to stockholders of record at the close of
business on August 24, 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 July 25, 2022, the Company entered
into a costless commodity collar arrangement for a quantity of
326,000 barrels with a weighted average put price of $70 per barrel
and a weighted average call price of $122 per barrel.
At June 30, 2022, the unexpired commodity swaps
were for an underlying quantity of 375,000 barrels and had a
fair value of $12.5 million and is reflected in “Accrued
liabilities and other” line of the condensed consolidated balance
sheet.
See the following table for the unexpired
barrels for the third and fourth quarters of 2022.
Settlement Period |
|
Type of Contract |
|
Index |
|
Average Monthly
Volumes |
|
Weighted Average
Price |
|
Weighted AveragePut
Price |
|
Weighted AverageCall
Price |
|
|
|
|
|
|
(Bbls) |
|
(per Bbl) |
|
(per Bbl) |
|
(per Bbl) |
July 2022 to September 2022 |
|
Swaps |
|
Dated Brent |
|
125,000 |
|
|
$ |
76.53 |
|
|
|
— |
|
|
|
— |
|
October 2022 to December
2022 |
|
Collars |
|
Dated Brent |
|
109,000 |
|
|
|
— |
|
|
$ |
70.00 |
|
|
$ |
122.00 |
|
Guidance
Third quarter 2022 production guidance is
expected to be 8,000 to 8,700 NRI BOPD, which is temporarily
impacted by the FPSO to FSO changeover and full field turnaround.
Third quarter 2022 sales guidance is 6,100 to 8,600 NRI BOPD, which
takes into account potentially two or three liftings in the
quarter. Following the completion of the FPSO to FSO changeover and
full field turnaround, as well as expected success from the new
wells, the Company expects the 2022 exit rate for December to
be between 10,500 and 11,500 net BOPD.
Third quarter 2022 production expense, excluding
workovers, is expected to be $30.00 to $33.00 per barrel of oil
sales, which is higher due to FPSO to FSO changeover and full field
turnaround. Workover expense for the third quarter 2022 is expected
to be between $0 and $3.0 million. Cash G&A expense for the
third quarter is expected to be between $2.0 and $3.0 million.
Capital expense for the third quarter 2022 is expected to be
between $40.0 and $50.0 million.
For the full year 2022, VAALCO recently updated
its guidance range for production and sales to be 9,000 to 9,500
NRI BOPD or 10,350 to 10,900 WI BOPD. Production expense, excluding
workovers increased primarily due to inflationary impacts and
higher expected costs associated with the decommissioning of the
FPSO and is expected to range from $82 to
$90 million or $24.00 to $28.00 per barrel of oil. Workover
expense is expected to be $2.0 to $6.0 million and Cash
G&A $9.5 to $11.5 million.
For the full year 2022, the Company has updated
its total capital expenditures to be between $130 and $150 million
net to VAALCO, which reflects the addition of two new wells and
increased costs associated with the FSO conversion and full field
reconfiguration. VAALCO expects to fund its 2022 capital
expenditures fully from cash on hand and cash flow from operations.
All the Company’s guidance metrics are in the Q2 2022 Supplemental
Information presentation that will be posted to its website
tomorrow morning prior to the conference call.
Transaction costs associated with the proposed
combination with TransGlobe will be included in “Other income
(expense)” on the income statement and an estimate for the
transaction will be detailed in the upcoming proxy.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its second quarter 2022 financial and
operating results on Thursday, August 11, 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 Second 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 / Chris Judd |
VAALCO@buchanan.uk.com |
Forward Looking Statements
This press release includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended (the “Securities Act”) and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to
be covered by the safe harbors created by those laws and other
applicable laws and “forward-looking information” within the
meaning of applicable Canadian securities laws. Where a
forward-looking statement expresses or implies an expectation or
belief as to future events or results, such expectation or belief
is expressed in good faith and believed to have a reasonable basis.
All statements other than statements of historical fact may be
forward-looking statements. The words “anticipate,” “believe,”
“estimate,” “expect,” “intend,” “forecast,” “outlook,” “aim,”
“target,” “will,” “could,” “should,” “may,” “likely,” “plan” and
“probably” or similar words may identify forward-looking
statements, but the absence of these words does not mean that a
statement is not forward-looking. Forward-looking statements in
this press release include, but are not limited to, statements
relating to (i) the Transaction and its expected timing and
closing; (ii) estimates of future drilling, production and sales of
crude oil and natural gas; (iii) estimates of future cost
reductions, synergies, including pre-tax synergies, savings and
efficiencies; (iv) expectations regarding VAALCO’s ability to
effectively integrate assets and properties it may acquire as a
result of the Transaction into its operations; (v) expectations
regarding future exploration and the development, growth and
potential of VAALCO’s and TransGlobe’s operations, project pipeline
and investments, and schedule and anticipated benefits to be
derived therefrom; (vi) expectations regarding future investments
or divestitures; (vii) expectations of future dividends and returns
to stockholders; (viii) expectations of future balance sheet
strength; (ix) expectations of future equity and enterprise value;
(x) VAALCO’s ability to effectively and timely demobilize the FPSO
and deploy the FSO unit; (xi) expectations of the continued listing
of VAALCO’s common stock on the NYSE and LSE; (xii) expectations of
future plans, priorities and focus and benefits of the Transaction;
and (xiii) VAALCO’s environmental, social and governance related
focus and commitments, and the anticipated benefits derived
therefrom. Forward-looking statements regarding the percentage
share of the Combined Company that are expected to be owned by
existing VAALCO stockholders and TransGlobe shareholders have been
calculated based on each company’s vested outstanding shares as of
the date of the Arrangement Agreement.
Such forward-looking statements are subject to
risks, uncertainties and other factors, which could cause actual
results to differ materially from future results expressed,
projected or implied by the forward-looking statements. These risks
and uncertainties include, but are not limited to: the ability to
obtain stockholder, shareholder, court and regulatory approvals, if
any, of the Transaction; the ability to complete the Transaction on
anticipated terms and timetable; the possibility that various
closing conditions for the transaction may not be satisfied or
waived; risks relating to any unforeseen liabilities of VAALCO or
TransGlobe; the tax treatment of the Transaction in the United
States and Canada; declines in oil or natural gas prices; the level
of success in exploration, development and production activities;
adverse weather conditions that may negatively impact development
or production activities; transition to the new FSO could
result in additional costs, interruption in production and delayed
sales to customers, potentially materially; the timing and costs of
exploration and development expenditures; inaccuracies of reserve
estimates or assumptions underlying them; revisions to reserve
estimates as a result of changes in commodity prices; impacts to
financial statements as a result of impairment write-downs; the
ability to generate cash flows that, along with cash on hand, will
be sufficient to support operations and cash requirements; the
ability to attract capital or obtain debt financing arrangements;
currency exchange rates and regulations; actions by joint venture
co-owners; hedging decisions, including whether or not to enter
into derivative financial instruments; international, federal and
state initiatives relating to the regulation of hydraulic
fracturing; failure of asses to yield oil or gas in commercially
viable quantities; uninsured or underinsured losses resulting from
oil and gas operations; inability to access oil and gas markets due
to market conditions or operational impediments; the impact and
costs of compliance with laws and regulations governing oil and gas
operations; the ability to replace oil and natural gas reserves;
any loss of senior management or technical personnel; competition
in the oil and gas industry; the risk that the Transaction may not
increase VAALCO’s relevance to investors in the international
E&P industry, increase capital market access through scale and
diversification or provide liquidity benefits for stakeholders; and
other risks described under the caption “Risk Factors” in VAALCO’s
2021 Annual Report on Form 10-K filed with the SEC on March 11,
2022.
Certain Assumptions Relating to Forward
Looking Statements
Forward-looking statements or information are
based on a number of factors and assumptions which have been used
to develop such statements and information, but which may prove to
be incorrect. Although VAALCO believes the expectations reflected
in such forward-looking statements or information are reasonable,
undue reliance should not be placed on forward-looking statements
because VAALCO can give no assurance that such expectations will
prove to be correct. Many factors could cause actual results to
differ materially from those expressed or implied in any
forward-looking statements contained herein.
In addition to other factors and assumptions
which may be identified in this document, assumptions have been
made regarding, among other things, anticipated production volumes;
the timing of receipt of regulatory and shareholder approvals for
the arrangement; the ability of the combined business to realize
the anticipated benefits of the arrangement; ability to effectively
integrate assets and property as a result of the arrangement;
ability to obtain qualified staff and equipment in a timely and
cost-efficient manner; regulatory framework governing royalties,
taxes and environmental matters in the jurisdictions in which
TransGlobe and VAALCO conducts and the combined business will
conduct its business; future capital expenditures; future sources
of funding for capital programs; current commodity prices and
royalty regimes; future exchange rates; the price of oil; the
impact of increasing competition; conditions in general economic
and financial markets; availability of drilling and related
equipment; effects of regulation by governmental agencies; future
operating costs; uninterrupted access to areas of operation and
infrastructure; recoverability of reserves and future production
rates; the combined business will have sufficient cash flow, debt
and equity sources or other financial resources required to fund
its capital and operating expenditures and requirements as needed;
results of operations will be consistent with expectations; current
or, where applicable, proposed industry conditions, laws and
regulations will continue in effect; the estimates of reserves and
resource volumes and the assumptions related thereto are accurate
in all material respects; and other matters.
Inside Information
This announcement contains inside information as
defined in Regulation (EU) No. 596/2014 on market abuse which is
part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 (“MAR”) and is made in accordance with the
Company’s obligations under article 17 of MAR. The person
responsible for arranging the release of this announcement on
behalf of VAALCO is Michael Silver, Corporate Secretary of
VAALCO.
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated
Balance Sheets (Unaudited)
|
As of June 30, 2022 |
|
December 31, 2021 |
ASSETS |
(in thousands) |
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
53,062 |
|
|
$ |
48,675 |
|
Restricted cash |
|
216 |
|
|
|
79 |
|
Receivables: |
|
|
|
|
|
|
|
Trade, net |
|
70,274 |
|
|
|
22,464 |
|
Accounts with joint venture owners, net of allowance of $0.0
million in both periods presented |
|
692 |
|
|
|
345 |
|
Other, net |
|
10,699 |
|
|
|
9,977 |
|
Crude oil inventory |
|
13,867 |
|
|
|
1,593 |
|
Prepayments and other |
|
8,064 |
|
|
|
5,156 |
|
Total current assets |
|
156,874 |
|
|
|
88,289 |
|
|
|
|
|
|
|
|
|
Crude oil and natural gas
properties, equipment and other - successful efforts method,
net |
|
151,718 |
|
|
|
94,324 |
|
Other noncurrent assets: |
|
|
|
|
|
|
|
Restricted cash |
|
1,752 |
|
|
|
1,752 |
|
Value added tax and other receivables, net of allowance of $6.4
million and $5.7 million, respectively |
|
5,723 |
|
|
|
5,536 |
|
Right of use operating lease assets |
|
3,435 |
|
|
|
10,227 |
|
Right of use finance lease assets |
|
1,713 |
|
|
|
— |
|
Deferred tax assets |
|
24,447 |
|
|
|
39,978 |
|
Abandonment funding |
|
20,091 |
|
|
|
21,808 |
|
Other long-term assets |
|
3,811 |
|
|
|
1,176 |
|
Total assets |
$ |
369,564 |
|
|
$ |
263,090 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
19,151 |
|
|
$ |
18,797 |
|
Accounts with joint venture owners |
|
13,863 |
|
|
|
3,233 |
|
Accrued liabilities and other |
|
99,220 |
|
|
|
49,444 |
|
Operating lease liabilities - current portion |
|
3,123 |
|
|
|
9,642 |
|
Finance lease liabilities - current portion |
|
326 |
|
|
|
— |
|
Foreign income taxes payable |
|
29,221 |
|
|
|
3,128 |
|
Current liabilities - discontinued operations |
|
7 |
|
|
|
13 |
|
Total current liabilities |
|
164,911 |
|
|
|
84,257 |
|
Asset retirement
obligations |
|
34,809 |
|
|
|
33,949 |
|
Operating lease liabilities -
net of current portion |
|
332 |
|
|
|
587 |
|
Finance lease liabilities -
net of current portion |
|
1,331 |
|
|
|
— |
|
Other long-term
liabilities |
|
— |
|
|
|
- |
|
Total liabilities |
|
201,383 |
|
|
|
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,
70,125,626 and 69,562,774 shares issued, 59,068,105 and 58,623,451
shares outstanding, respectively |
|
7,013 |
|
|
|
6,956 |
|
Additional paid-in capital |
|
77,919 |
|
|
|
76,700 |
|
Less treasury stock, 11,057,521 and 10,939,323 shares,
respectively, at cost |
|
(44,635 |
) |
|
|
(43,847 |
) |
Retained earnings |
|
127,884 |
|
|
|
104,488 |
|
Total shareholders' equity |
|
168,181 |
|
|
|
144,297 |
|
Total liabilities and shareholders' equity |
$ |
369,564 |
|
|
$ |
263,090 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Operations (Unaudited)
|
Three Months Ended |
|
Six Months Ended June 30, |
|
June 30, 2022 |
|
June 30, 2021 |
|
March 31, 2022 |
|
2022 |
|
2021 |
|
(in thousands except per share amounts) |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil and natural gas sales |
$ |
110,985 |
|
|
$ |
47,023 |
|
|
$ |
68,656 |
|
|
$ |
179,641 |
|
|
$ |
86,797 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production expense |
|
25,475 |
|
|
|
16,419 |
|
|
|
18,360 |
|
|
|
43,835 |
|
|
|
32,552 |
|
Exploration expense |
|
67 |
|
|
|
665 |
|
|
|
127 |
|
|
|
194 |
|
|
|
807 |
|
Depreciation, depletion and amortization |
|
8,191 |
|
|
|
5,810 |
|
|
|
4,673 |
|
|
|
12,864 |
|
|
|
9,958 |
|
General and administrative expense |
|
3,534 |
|
|
|
4,734 |
|
|
|
4,994 |
|
|
|
8,528 |
|
|
|
9,281 |
|
Bad debt expense and other |
|
571 |
|
|
|
395 |
|
|
|
492 |
|
|
|
1,063 |
|
|
|
496 |
|
Total operating costs and expenses |
|
37,838 |
|
|
|
28,023 |
|
|
|
28,646 |
|
|
|
66,484 |
|
|
|
53,094 |
|
Other operating expense, net |
|
— |
|
|
|
(126 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(486 |
) |
Operating income |
|
73,147 |
|
|
|
18,874 |
|
|
|
40,005 |
|
|
|
113,152 |
|
|
|
33,217 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instruments loss, net |
|
(9,542 |
) |
|
|
(9,969 |
) |
|
|
(31,758 |
) |
|
|
(41,300 |
) |
|
|
(15,923 |
) |
Interest (expense) income, net |
|
(118 |
) |
|
|
1 |
|
|
|
(3 |
) |
|
|
(121 |
) |
|
|
6 |
|
Other (expense) income, net |
|
(2,111 |
) |
|
|
(164 |
) |
|
|
(696 |
) |
|
|
(2,807 |
) |
|
|
4,416 |
|
Total other expense, net |
|
(11,771 |
) |
|
|
(10,132 |
) |
|
|
(32,457 |
) |
|
|
(44,228 |
) |
|
|
(11,501 |
) |
Income from continuing
operations before income taxes |
|
61,376 |
|
|
|
8,742 |
|
|
|
7,548 |
|
|
|
68,924 |
|
|
|
21,716 |
|
Income tax expense
(benefit) |
|
46,252 |
|
|
|
2,825 |
|
|
|
(4,628 |
) |
|
|
41,624 |
|
|
|
5,911 |
|
Income from continuing
operations |
|
15,124 |
|
|
|
5,917 |
|
|
|
12,176 |
|
|
|
27,300 |
|
|
|
15,805 |
|
Loss from discontinued
operations, net of tax |
|
(20 |
) |
|
|
(33 |
) |
|
|
(12 |
) |
|
|
(32 |
) |
|
|
(52 |
) |
Net income |
$ |
15,104 |
|
|
$ |
5,884 |
|
|
$ |
12,164 |
|
|
$ |
27,268 |
|
|
$ |
15,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
0.21 |
|
|
$ |
0.46 |
|
|
$ |
0.27 |
|
Loss from discontinued operations, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income per share |
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
0.21 |
|
|
$ |
0.46 |
|
|
$ |
0.27 |
|
Basic weighted average shares
outstanding |
|
58,925 |
|
|
|
58,072 |
|
|
|
58,702 |
|
|
|
58,814 |
|
|
|
57,855 |
|
Diluted net income per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
0.20 |
|
|
$ |
0.45 |
|
|
$ |
0.27 |
|
Loss from discontinued operations, net of tax |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net income per share |
$ |
0.25 |
|
|
$ |
0.10 |
|
|
$ |
0.20 |
|
|
$ |
0.45 |
|
|
$ |
0.27 |
|
Diluted weighted average
shares outstanding |
|
59,361 |
|
|
|
58,574 |
|
|
|
59,179 |
|
|
|
59,278 |
|
|
|
58,527 |
|
VAALCO ENERGY, INC AND SUBSIDIARIES Consolidated Statements
of Cash Flows (Unaudited)
|
Six Months Ended June 30, |
|
2022 |
|
2021 |
|
(in thousands) |
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
Net income |
$ |
27,268 |
|
|
$ |
15,753 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
32 |
|
|
|
52 |
|
Depreciation, depletion and amortization |
|
12,864 |
|
|
|
9,958 |
|
Bargain purchase gain |
|
- |
|
|
|
(7,651 |
) |
Deferred taxes |
|
15,531 |
|
|
|
(1,511 |
) |
Unrealized foreign exchange loss (gain) |
|
360 |
|
|
|
(308 |
) |
Stock-based compensation |
|
2,264 |
|
|
|
2,073 |
|
Cash settlements paid on exercised stock appreciation rights |
|
(805 |
) |
|
|
(2,933 |
) |
Derivative instruments loss, net |
|
41,300 |
|
|
|
15,923 |
|
Cash settlements paid on matured derivative contracts, net |
|
(33,559 |
) |
|
|
(6,003 |
) |
Bad debt expense and other |
|
1,063 |
|
|
|
496 |
|
Other operating expense, net |
|
5 |
|
|
|
486 |
|
Operational expenses associated with equipment and other |
|
718 |
|
|
|
521 |
|
Cash advance for other long-term assets |
|
(1,072 |
) |
|
|
— |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
Trade receivables |
|
(47,810 |
) |
|
|
(17,645 |
) |
Accounts with joint venture owners |
|
10,283 |
|
|
|
642 |
|
Other receivables |
|
(943 |
) |
|
|
(131 |
) |
Crude oil inventory |
|
(12,274 |
) |
|
|
3,508 |
|
Prepayments and other |
|
1,570 |
|
|
|
(8,622 |
) |
Value added tax and other receivables |
|
(2,249 |
) |
|
|
(500 |
) |
Accounts payable |
|
(857 |
) |
|
|
(10,597 |
) |
Foreign income taxes receivable/payable |
|
26,093 |
|
|
|
11,673 |
|
Accrued liabilities and other |
|
29,263 |
|
|
|
8,028 |
|
Net cash provided by continuing operating activities |
|
69,045 |
|
|
|
13,212 |
|
Net cash used in discontinued operating activities |
|
(38 |
) |
|
|
(52 |
) |
Net cash provided by operating activities |
|
69,007 |
|
|
|
13,160 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Property and equipment expenditures |
|
(60,278 |
) |
|
|
(4,301 |
) |
Acquisition of crude oil and natural gas properties |
|
— |
|
|
|
(22,505 |
) |
Net cash used in continuing investing activities |
|
(60,278 |
) |
|
|
(26,806 |
) |
Net cash used in discontinued investing activities |
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
(60,278 |
) |
|
|
(26,806 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the issuances of common stock |
|
257 |
|
|
|
1,053 |
|
Dividend distribution |
|
(3,872 |
) |
|
|
— |
|
Treasury shares |
|
(788 |
) |
|
|
(1,168 |
) |
Deferred financing costs |
|
(1,451 |
) |
|
|
— |
|
Payments of finance lease |
|
(68 |
) |
|
|
— |
|
Net cash used in continuing financing activities |
|
(5,922 |
) |
|
|
(115 |
) |
Net cash used in discontinued financing activities |
|
— |
|
|
|
— |
|
Net cash used in financing activities |
|
(5,922 |
) |
|
|
(115 |
) |
NET CHANGE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
2,807 |
|
|
|
(13,761 |
) |
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF PERIOD |
|
72,314 |
|
|
|
61,317 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF PERIOD |
$ |
75,121 |
|
|
$ |
47,556 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESSelected Financial and
Operating Statistics(Unaudited)
|
Three Months Ended |
|
Six Months Ended June 30, |
|
June 30, 2022 |
|
June 30, 2021 |
|
March 31, 2022 |
|
2022 |
|
2021 |
NRI SALES DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
958 |
|
|
|
642 |
|
|
|
616 |
|
|
|
1,574 |
|
|
|
1,261 |
|
NRI PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (MBbls) |
|
838 |
|
|
|
730 |
|
|
|
725 |
|
|
|
1,563 |
|
|
|
1,196 |
|
Average daily production volumes (BOPD) |
|
9,211 |
|
|
|
8,018 |
|
|
|
8,051 |
|
|
|
8,634 |
|
|
|
6,607 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE SALES PRICES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil (Per Bbl) |
$ |
113.38 |
|
|
$ |
69.61 |
|
|
$ |
109.65 |
|
|
$ |
111.92 |
|
|
$ |
65.54 |
|
Crude oil (Per Bbl including realized commodity derivatives) |
$ |
91.39 |
|
|
$ |
62.93 |
|
|
$ |
89.36 |
|
|
$ |
90.60 |
|
|
$ |
60.78 |
|
COSTS AND EXPENSES (Per Bbl of
sales): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production expense |
$ |
26.59 |
|
|
$ |
25.57 |
|
|
$ |
29.81 |
|
|
$ |
27.85 |
|
|
$ |
25.81 |
|
Production expense, excluding workovers* |
|
26.58 |
|
|
|
25.02 |
|
|
|
29.83 |
|
|
|
27.85 |
|
|
|
25.52 |
|
Depreciation, depletion and amortization |
|
8.55 |
|
|
|
9.05 |
|
|
|
7.59 |
|
|
|
8.17 |
|
|
|
7.90 |
|
General and administrative expense** |
|
3.69 |
|
|
|
7.37 |
|
|
|
8.11 |
|
|
|
5.42 |
|
|
|
7.36 |
|
Property and equipment expenditures, cash basis (in thousands) |
$ |
37,130 |
|
|
$ |
3,103 |
|
|
$ |
14,689 |
|
|
$ |
60,278 |
|
|
$ |
4,301 |
|
*Workover costs excluded from the three months ended June 30,
2022 and 2021 and March 31, 2022 are $0.0 million, $0.4 million and
$0.0 million, respectively.**General and administrative expenses
include $0.88, $0.80 and $2.31 per barrel of oil related
to stock-based compensation expense in the three months ended
June 30, 2022, and 2021 and March 31, 2022, 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 |
|
Six Months Ended June 30, |
Reconciliation of Net
Income to Adjusted Net Income |
June 30, 2022 |
|
June 30, 2021 |
|
March 31, 2022 |
|
2022 |
|
2021 |
Net income |
$ |
15,104 |
|
|
$ |
5,884 |
|
|
$ |
12,164 |
|
|
$ |
27,268 |
|
|
$ |
15,753 |
|
Adjustment for discrete
items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
20 |
|
|
|
33 |
|
|
|
12 |
|
|
|
32 |
|
|
|
52 |
|
Unrealized derivative instruments loss (gain) |
|
(11,517 |
) |
|
|
5,676 |
|
|
|
19,258 |
|
|
|
7,741 |
|
|
|
9,920 |
|
Gain on Sasol Acquisition, net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,491 |
) |
Arrangement costs |
|
1,199 |
|
|
|
— |
|
|
|
— |
|
|
|
1,199 |
|
|
|
— |
|
Deferred income tax (benefit) expense |
|
25,850 |
|
|
|
(3,323 |
) |
|
|
(10,319 |
) |
|
|
15,531 |
|
|
|
(3,672 |
) |
Other operating expense, net |
|
— |
|
|
|
126 |
|
|
|
5 |
|
|
|
5 |
|
|
|
486 |
|
Adjusted Net Income |
$ |
30,656 |
|
|
$ |
8,396 |
|
|
$ |
21,120 |
|
|
$ |
51,776 |
|
|
$ |
17,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Adjusted Net Income
per Share |
$ |
0.52 |
|
|
$ |
0.14 |
|
|
$ |
0.36 |
|
|
$ |
0.87 |
|
|
$ |
0.29 |
|
Diluted weighted average
shares outstanding (1) |
|
59,361 |
|
|
|
58,574 |
|
|
|
59,179 |
|
|
|
59,278 |
|
|
|
58,527 |
|
(1) No adjustments to weighted average shares outstanding
|
Three Months Ended |
|
Six Months Ended June 30, |
Reconciliation of Net
Income to Adjusted EBITDAX |
June 30, 2022 |
|
June 30, 2021 |
|
March 31, 2022 |
|
2022 |
|
2021 |
Net income |
$ |
15,104 |
|
|
$ |
5,884 |
|
|
$ |
12,164 |
|
|
$ |
27,268 |
|
|
$ |
15,753 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of discontinued operations |
|
20 |
|
|
|
33 |
|
|
|
12 |
|
|
|
32 |
|
|
|
52 |
|
Interest expense (income), net |
|
118 |
|
|
|
(1 |
) |
|
|
3 |
|
|
|
121 |
|
|
|
(6 |
) |
Income tax expense (benefit) |
|
46,252 |
|
|
|
2,825 |
|
|
|
(4,628 |
) |
|
|
41,624 |
|
|
|
5,911 |
|
Depreciation, depletion and amortization |
|
8,191 |
|
|
|
5,810 |
|
|
|
4,673 |
|
|
|
12,864 |
|
|
|
9,958 |
|
Exploration expense |
|
67 |
|
|
|
665 |
|
|
|
127 |
|
|
|
194 |
|
|
|
807 |
|
Non-cash or unusual
items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
842 |
|
|
|
514 |
|
|
|
1,422 |
|
|
|
2,264 |
|
|
|
2,073 |
|
Unrealized derivative instruments loss (gain) |
|
(11,517 |
) |
|
|
5,676 |
|
|
|
19,258 |
|
|
|
7,741 |
|
|
|
9,920 |
|
Gain on Sasol Acquisition, net |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(5,491 |
) |
Arrangement costs |
|
1,199 |
|
|
|
— |
|
|
|
— |
|
|
|
1,199 |
|
|
|
— |
|
Other operating expense, net |
|
— |
|
|
|
126 |
|
|
|
5 |
|
|
|
5 |
|
|
|
486 |
|
Bad debt expense and other |
|
571 |
|
|
|
395 |
|
|
|
492 |
|
|
|
1,063 |
|
|
|
496 |
|
Adjusted EBITDAX |
$ |
60,847 |
|
|
$ |
21,927 |
|
|
$ |
33,528 |
|
|
$ |
94,375 |
|
|
$ |
39,959 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations of Non-GAAP
Financial Measures(Unaudited)(in thousands)
Reconciliation of
Working Capital to Adjusted Working Capital |
As of June 30, 2022 |
|
December 31, 2021 |
|
Change |
Current assets |
$ |
156,874 |
|
|
$ |
88,289 |
|
|
$ |
68,585 |
|
Current liabilities |
|
(164,911 |
) |
|
|
(84,257 |
) |
|
|
(80,654 |
) |
Working
capital |
|
(8,037 |
) |
|
|
4,032 |
|
|
|
(12,069 |
) |
Add: lease liabilities -
current portion |
|
3,449 |
|
|
|
9,642 |
|
|
|
(6,193 |
) |
Add: current liabilities -
discontinued operations |
|
7 |
|
|
|
13 |
|
|
|
(6 |
) |
Adjusted Working
Capital |
$ |
(4,581 |
) |
|
$ |
13,687 |
|
|
$ |
(18,268 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
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