VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) ("VAALCO" or the
"Company") today reported operational and selected preliminary
unaudited financial results for the fourth quarter and full
year of 2022. On October 13, 2022, VAALCO completed the
business combination with TransGlobe Energy, Inc. (“TransGlobe”);
as a result, VAALCO’s fourth quarter and full year preliminary 2022
results include the combined assets from the closing day through
the end of 2022.
The financial data presented in this press
release for the fourth quarter and year ended December 31, 2022 is
preliminary and subject to change in connection with the completion
and audit of VAALCO’s financial statements for the year ended
December 31, 2022. VAALCO is unable to file its Annual Report
on Form 10-K within the prescribed time period, without
unreasonable effort and expense. Management continues to work as
expeditiously as possible to complete the Form 10-K and believes
that it will be in a position to file the report with the SEC and
conduct an investor conference call on Thursday, April 6,
2023.
Highlights and Key Items:
- Closed the strategic and
transformational business combination with TransGlobe on October
13, 2022;
- Increased quarterly cash
dividend by 92% to $0.0625 per share of common stock for the first
quarter of 2023 ($0.25 annualized), from $0.0325 per share ($0.13
annualized) in 2022;
- Returned additional $7.5
million to shareholders through share buybacks from initiation of
program in November 2022 through March 31, 2023;
- Increased full year
(“FY”) 2022 average daily production by 47% to
10,217 net revenue interest
(“NRI”)(2) barrels
of oil equivalent per day
(“BOEPD”), or 12,177 working
interest
(“WI”)(2) BOEPD;
● Sold 3,677,000 barrels of oil equivalent in
2022;
- Delivered fourth
quarter 2022 production of 14,390 NRI BOEPD, or 18,262 WI
BOEPD;
● Sold 1,371,000 barrels of oil equivalent in fourth
quarter of 2022;
- Expects to report
FY 2022 net income of between $49 and
$55 million; ●
Expects to record fourth quarter 2022 net income of $15 to
$21 million;
- Expects to
generate record Adjusted
EBITDAX(1) of
$186.6 million in FY 2022 and
$49.8 million of Adjusted
EBITDAX in the fourth quarter of
2022;
-
Funded $159.9 million
in cash capital expenditures during 2022 with cash on hand and cash
from operations;
- Increased
year-end 2022 SEC proved reserves by 149% to 27.9 million barrels
of oil equivalent (“MMBOE”) with the
standardized measure value up 529% to $624.5
million;
-
Grew year-end management 2P
CPR WI (4) reserves, which also
includes Equatorial Guinea, by 292% to 76.4 MMBOE with 2P WI
CPR PV-10(4) value up 344% to
$815 million, using management assumptions for future
commodity
pricing;
-
Finalized multiple
substantive documents with our partners and the Ministry of Mines
& Hydrocarbons in Equatorial Guinea for Block P which includes
the Venus development;
and
-
Announced 2023 operational
and financial guidance including capital expenditure range of $70
to $90 million for full year
2023.
|
(1 |
) |
Adjusted EBITDAX is a Non-GAAP financial measure and
is described and reconciled to the closest GAAP measure in the
attached table under “Non-GAAP Financial Measures.” |
|
(2 |
) |
All NRI production rates are VAALCO's working interest volumes less
royalty volumes, where applicable. |
|
(3 |
) |
All WI production rates and volumes are VAALCO’s working interest
volumes. |
|
(4 |
) |
See “Supplemental Non-GAAP Financial Measures” below concerning 2P
CPR WI reserves and 2P CPR WI PV-10. |
George Maxwell, VAALCO’s Chief Executive Officer
commented, “In 2022, we transformed VAALCO into a diversified,
multi-country company focused on sustainable growth and returning
value to shareholders. We delivered record financial results,
completed a major acquisition and successfully executed multiple
high-impact operational projects. Production volumes grew 44% in
2022, and coupled with a strong commodity pricing environment,
VAALCO was able to generate significant operating cash flow and
record Adjusted EBITDAX. This allowed us to fully fund dividend and
share buyback programs, a $160 million capital program focused
on lowering long-term costs, and growing production while closing
on a major acquisition and remaining debt free. We are in a
financially stronger position entering 2023 with more reserves,
production and future potential than at any other time in our
history. We are a diversified, multinational exploration and
production company with 2P WI CPR reserves of 76.4 million
barrels of oil equivalent.
“This past year, we completed the
transformational combination with TransGlobe which has built a
business of scale with a stronger balance sheet and a more
diversified baseline of production that will underpin VAALCO’s
future opportunities for success. We are focused on generating
meaningful cash flow to fund our increased stockholder dividends,
share buybacks, capital expenditures and potential additional
acquisitions. We have achieved the first tranche of synergies
related to the acquisition. We now have a streamlined management
team and Board and have captured the savings from delisting TGA and
eliminating other related duplicative public company costs. We
continue to rationalize our operational and G&A costs in 2023
as we look to attain additional synergies beyond what we originally
anticipated.
“In Gabon, we are very pleased to have
successfully delivered a highly complex, full field
reconfiguration, maintenance turnaround and upgraded FSO
installation. This project was completed in October despite a
difficult global supply chain environment and is a testament to the
dedication of our workforce and partners who helped complete the
project, underlining VAALCO’s status as a quality operator. The new
FSO provides us with additional flexibility and has an effective
capacity for storage that is 50% larger than our relinquished FPSO.
It also reduces our expected storage and offloading costs by 50%
which we believe will lead to an extension of the economic field
life, resulting in a corresponding increase in recovery and
reserves at Etame. We also completed our 2021/2022 drilling
program in Gabon that materially increased production and extended
the economic life of the field. We expect full payback on the
cost of the program by later this year.
“In March 2023, we held productive meetings
with the MMH and our partners in Houston. During these meetings we
finalized multiple substantive documents for Block P which
includes the Venus development, relating to the Production Sharing
Contract. We are working on concluding remaining documents and
expect to update the market in the second quarter of 2023. We
anticipate a strong, efficient and economic development of
this exciting discovery with first oil projected for 2026. We
believe that there are clear strategic benefits in further
diversifying the revenue generation and country focus of our
portfolio. VAALCO has a proven operating track record for a
development of this kind and we look forward to demonstrating these
capabilities as we progress the Venus discovery into production and
further demonstrates the meaningful value of our asset base.
“We are clearly well-positioned for continued
success in this current commodity price environment, with no net
debt and strong free cash flow generation. We have made significant
progress integrating the TransGlobe team and assets into our
strategic vision. We are firmly focused on delivering meaningful
shareholder returns while continuing to progress our objective of
accretive growth.”
TransGlobe Combination
On July 14, 2022, VAALCO announced that it had
entered into a definitive arrangement agreement pursuant to which
VAALCO would acquire all of the outstanding common shares of
TransGlobe in a stock-for-stock strategic business combination.
Following shareholder approval by both companies, on October 13,
2022, VAALCO closed the strategic combination with TransGlobe
Energy. The combined Company is trading on the NYSE and LSE under
the ticker symbol EGY. The combined Company is a leading
African-focused operator with a strong production and reserve base,
a diverse portfolio of assets in Gabon, Egypt, Equatorial Guinea
and Canada, and significant future growth potential. The impact
from the combination is reflected in VAALCO’s fourth quarter 2022
results following the closing on October 13, 2022.
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. 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 and was 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 second
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.
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 North Tchibala 2H-ST well,
targeting the Dentale formation. The North Tchibala 2H-ST well is
naturally flowing with no produced water at about 250 gross barrels
of oil per day (“BOPD”) and stable reservoir pressure indicating
minimal depletion. In the fourth quarter of 2022, the Company
performed two workovers, the North Tchibala 1-H well due
to a safety valve in the well that required replacement and the
South East Etame 4H Well, which restored production of about
1,350 gross BOPD. This well went offline because of an
upper electrical submersible pump ("ESP") failure and VAALCO was
unable to restart the upper ESP or the lower ESP to restore
production.
The Company estimates the cost of the 2021/2022
drilling program with four wells and two workovers to be $180
million, or $114 million, net to VAALCO’s participating
interest. For 2022, the Company incurred approximately $148
million, or about $94 million net to VAALCO’s participating
interest. About 82% of that total spend occurred in
2022 and 18% was previously recorded in 2021.
FSO Conversion and Field
Reconfiguration
In August 2021, VAALCO and its co-venturers at
Etame approved the Bareboat Contract and Operating Agreement with
World Carrier Offshore Services Corp to replace the FPSO with
an FSO at the Etame Marin block offshore Gabon for up to
eight years with additional option periods available. The FPSO
contract was set to expire in September 2022, however, on September
9, 2022, VAALCO signed an addendum to the FPSO contract which
extended the use of the FPSO through October 4, 2022, and ratified
certain decommissioning and demobilization items associated with
exiting the contract. VAALCO worked closely 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. The Teli, a double-hull crude tanker
built in 2001, was re-engineered into a FSO for use in the
field.
VAALCO announced in October 2022 that all
related FSO and field reconfiguration processes were completed.
First oil flowed into the Teli FSO and the Company completed the
annual field-wide maintenance turnaround concurrently with the FSO
and field reconfiguration. Compared to the FPSO agreement, the new
FSO is expected to reduce storage and offloading costs.
Additionally, we have increased the effective capacity for storage
by over 50%, and led to an extension of the economic field life,
resulting in a corresponding increased recovery and reserves at
Etame. 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.
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. In March 2023, VAALCO held productive meetings with the
MMH and its partners in Houston. During these meetings VAALCO
finalized multiple substantive documents for Block P which
includes the Venus development, relating to the Production Sharing
Contract. The Company is working on concluding remaining documents
and expect to update the market in the second quarter of 2023.
VAALCO anticipates a strong, efficient and economic development of
this exciting discovery with first oil projected for 2026. The
Company believes that there are clear strategic benefits in further
diversifying the revenue generation and country focus of its
portfolio. VAALCO has a proven operating track record for a
development of this kind, and it looks forward to demonstrating
these capabilities as the Company progresses the Venus discovery
into production and further demonstrates the meaningful value of
our asset base.
Egypt
In Egypt, as of December 31, 2022, VAALCO’s
interests are spread across two regions: the Eastern Desert, which
contains the West Gharib, West Bakr and Northwest Gharib merged
concessions, and the Western Desert, which contains the South
Ghazalat concession. The Eastern Desert merged concession is
approximately 45,067 acres and the Western Desert, South Ghazalat
concession, is approximately 7,340 acres. VAALCO is the operator
and has a 100% working interest in both PSCs. Both of the Company’s
Egyptian blocks are PSCs among the Egyptian General Petroleum
Corporation (“EGPC”), Egyptian government and VAALCO. The Company’s
oil entitlement is the sum of cost oil, profit oil and excess cost
oil, if any. The government takes their share of production based
on the terms and conditions of the respective contracts. VAALCO’s
share of royalties is paid out of the government's share of
production and taxes are captured in the Egyptian government's net
entitlement oil due and therefore there is no additional tax burden
to the Company. In December 2022, VAALCO spudded the Arta77 HC
well targeting the Nukhul reservoir. The lateral was successfully
drilled through reservoir encountering laterally 1,363 meters of
good oil and gas shows.
Canada
In Harmattan, Canada, VAALCO owns production and
working interests in certain facilities in the Cardium light oil
and Mannville liquids-rich gas assets. Harmattan is located
approximately 80 kilometers north of Calgary, Alberta. This
property produces oil and associated natural gas from the Cardium
and Viking zones and liquids-rich natural gas from zones in the
Lower Mannville and Rock Creek formations at vertical depths of
1,200 to 2,600 meters. The Harmattan property covers 46,100 gross
acres of developed land and 29,300 gross acres of undeveloped land.
VAALCO also owns a 100% working interest in a large oil battery and
a compressor station where a majority of oil volumes are handled.
All gas is delivered to a third party non-operated gas plant for
processing.
Year-End 2022 Reserves
VAALCO’s SEC NRI proved reserves at December 31,
2022 increased by 149% to 27.9 MMBOE from 11.2 MMBOE
at year-end 2021. Year-end 2022 reserves included
23.6 MMBOE in proved developed reserves and 4.3 MMBOE in
proved undeveloped reserves. The Company’s SEC reserves were fully
engineered by its third-party independent reserve consultant,
Netherland, Sewell & Associates, Inc., (“NSAI”) who has
provided annual independent estimates of VAALCO’s year-end SEC
reserves for over 15 years, and GLJ Ltd ("GLJ"), who evaluates
VAALCO's Egyptian and Canadian reserves. In 2022, the Company
added 18.6 MMBOE of SEC proved reserves through the acquisition of
TransGlobe’s assets in Egypt and Canada and 2.0 MMBO due to
positive revisions. These additions were partially offset by 3.9
MMBOE of full year 2022 production which included 0.9 MMBO of
production related to TransGlobe assets. VAALCO had a reserve
replacement of 428% compared to the 3.9 MMBOE of production in
2022.
The standardized measure of VAALCO’s SEC
proved reserves, utilizing SEC pricing increased to $624.5 million
at December 31, 2022 from $99.3 million at December 31,
2021.
|
|
|
MMBOE |
|
|
Proved SEC Reserves at December 31, 2021 |
|
11.2 |
|
|
2022 Production |
|
(3.9 |
) |
|
Revisions of Previous Estimates |
|
2.0 |
|
|
Purchases |
|
18.6 |
|
| Proved SEC Reserves at
December 31, 2022 |
|
27.9 |
|
| |
|
|
|
At year-end 2022, NSAI and GLJ provided the 2P
WI CPR estimate of proven and probable reserves which was prepared
in accordance with the definitions and guidelines set forth in the
2018 Petroleum Resources Management Systems approved by the Society
of Petroleum Engineers as of December 31, 2022 using VAALCO’s
management assumptions for future commodity pricing and costs shown
below under “Supplemental Non-GAAP Financial Measures - 2P WI CPR
Reserves”. The 2P WI CPR reserves attributable to VAALCO’s
ownership are reported on a WI basis prior to deductions for
government royalties. The year-end 2022 2P WI CPR estimate of
reserves is 76.4 MMBOE to VAALCO’s WI, an increase of 292%
from 19.5 MMBO at December 31, 2021. The PV-10 value of
VAALCO’s 2P WI CPR reserves at year-end 2022, utilizing management
escalated pricing and cost assumptions, is $814.8 million, up
344% from $183.7 million at December 31, 2021.
See “Supplemental Non-GAAP Financial Measures”
below concerning 2P WI CPR reserves and 2P PV-10.
Financial Update –
Fourth Quarter of 2022
VAALCO expects to report net income of
between $15 to $21 million for the fourth quarter of 2022
which would be up compared with net income of $6.9 million ($0.11
per diluted share) in the third quarter of 2022 and down compared
to $34.4 million ($0.58 per diluted share) in the fourth quarter of
2021.
VAALCO expects to report adjusted EBITDAX of
$49.8 million in the fourth quarter of 2022, an increase from
the third quarter of 2022 of $42.4 million and more than double the
$22.6 million generated in the same period in 2021. The increase in
Adjusted EBITDAX compared to the prior periods is due to higher
sales volumes partially offset by lower realized prices.
| Revenue and Sales |
|
Q4 2022 |
|
|
Q4 2021 |
|
|
% ChangeQ4 2022 vs.Q4 2021 |
|
|
Q3 2022 |
|
|
% ChangeQ4 2022 vs.Q3 2022 |
|
|
Production (NRI BOEPD) |
|
|
14,390 |
|
|
|
7,554 |
|
|
90 |
% |
|
|
9,157 |
|
|
57 |
% |
| Sales (NRI BOE) |
|
|
1,371,000 |
|
|
|
709,000 |
|
|
93 |
% |
|
|
731,000 |
|
|
88 |
% |
| Realized commodity price
($/BOE) |
|
$ |
70.43 |
|
|
$ |
77.31 |
|
|
(9 |
)% |
|
$ |
103.61 |
|
|
(32 |
)% |
| Commodity (Per BOE including
realized commodity derivatives) |
|
$ |
70.24 |
|
|
$ |
66.3 |
|
|
6 |
% |
|
$ |
91.13 |
|
|
(23 |
)% |
| Total commodity sales
($MM) |
|
$ |
96.6 |
|
|
$ |
56.4 |
|
|
71 |
% |
|
$ |
78.1 |
|
|
24 |
% |
VAALCO had total sales volumes of 1,371,000 BOE
compared to 731,000 BOE in the third quarter of 2022 and 709,000
BOE for the same period in 2021. Fourth quarter of 2022
realized pricing (including the effects of derivative contracts)
was down 23% compared to the third quarter of 2022 and
increased 6% compared to the fourth quarter of 2021.
| Costs and Expenses |
|
Q4 2022 |
|
|
Q4 2021 |
|
|
% ChangeQ4 2022 vs.Q4 2021 |
|
|
Q3 2022 |
|
|
% ChangeQ4 2022 vs.Q3 2022 |
|
|
Production expense, excluding workovers and stock comp ($MM) |
|
$ |
40.8 |
|
|
$ |
19.0 |
|
|
115 |
% |
|
$ |
23.2 |
|
|
76 |
% |
| Production expense, excluding
workovers ($/BOE) |
|
$ |
29.8 |
|
|
$ |
26.8 |
|
|
11 |
% |
|
$ |
31.8 |
|
|
(6 |
)% |
| Workover expense ($MM) |
|
$ |
4.7 |
|
|
$ |
4.5 |
|
|
5 |
% |
|
$ |
- |
|
|
100 |
% |
| Depreciation, depletion and
amortization ($MM) |
|
$ |
26.3 |
|
|
$ |
4.1 |
|
|
542 |
% |
|
$ |
9.0 |
|
|
192 |
% |
| Depreciation, depletion and
amortization ($/BOE) |
|
$ |
19.2 |
|
|
$ |
5.8 |
|
|
229 |
% |
|
$ |
12.3 |
|
|
57 |
% |
| General and administrative
expense, excluding stock-based compensation ($MM) |
|
$ |
(0.3 |
) |
|
$ |
2.2 |
|
|
(114 |
)% |
|
$ |
2.0 |
|
|
(115 |
)% |
| General and administrative
expense, excluding stock-based compensation ($/BOE) |
|
$ |
(0.2 |
) |
|
$ |
3.1 |
|
|
(107 |
)% |
|
$ |
2.7 |
|
|
(108 |
)% |
| Stock-based compensation
expense ($MM) |
|
$ |
(0.1 |
) |
|
$ |
0.4 |
|
|
(132 |
)% |
|
$ |
- |
|
|
100 |
% |
Total production expense, excluding workovers
and stock compensation, increased in the fourth quarter of 2022
compared to the same period in 2021 and compared to the third
quarter of 2022. The increase was primarily driven by increased
production and costs associated with the TransGlobe combination as
well as higher costs caused by inflationary
pressures associated with boats, diesel, personnel and costs
stemming from the additional operational activities related to the
annual field-wide maintenance program, the FSO conversion and field
reconfiguration at Etame.
The fourth quarter of 2022 had $4.7 million in
offshore workover expenses. While there were no offshore workover
expenses in the third quarter of 2022, the fourth quarter of
2021 incurred $4.5 million in offshore workover expenses.
Production expense per BOE, excluding workover
costs and stock compensation, was lower than the third quarter of
2022 due to more sales barrels during the fourth quarter of 2022.
Production expense per BOE, excluding workover costs and stock
compensation, was higher than the fourth quarter of 2021 due to the
increased sales and increased costs associated with the FSO
conversion and field reconfiguration.
In the line item, FPSO demobilization, VAALCO
incurred $8.9 million in costs associated with the retirement of
the FPSO in the third quarter of 2022 as VAALCO transitioned to the
FSO. This was subsequently funded by a release from the abandonment
fund in 2023. There were no similar expenses incurred in the fourth
quarter of 2022 or 2021.
Depreciation, depletion and amortization
(“DD&A”) expense for the three months ended December 31, 2022
increased to $26.3 million which was higher than the third quarter
of 2022 of $9.0 million and higher than the $4.1 million in the
fourth quarter of 2021. The increase in depreciation, depletion and
amortization expense, compared to both periods, is due to higher
depletable costs associated with the FSO, the field reconfiguration
capital costs at Etame and the step-up to fair value of the
TransGlobe assets.
General and administrative (“G&A”) expense,
excluding stock-based compensation, decreased for the
three months ended December 31, 2022 to
($0.3) million from $2.0 million in the third quarter of 2022
and $2.2 million for the same period in prior year. The
decrease in general and administrative expense is primarily driven
by a large increase in operational projects involving a majority of
corporate resources, which realized a high percentage of costs
charged to projects.
Non-cash stock-based compensation expense was
($0.1) million for the fourth quarter of 2022 and $0.4 million for
the fourth quarter of 2021. Non-cash stock-based compensation
expense for the third quarter of 2022 was immaterial.
Financial Update - Full Year
2022
VAALCO expects to report net income for the full
year 2022 of between $49 and $55 million. This compares to net
income for the full year 2021 of $81.8 million, or $1.37 per
diluted share. The year-over-year change in net income is primarily
the result of increased sales and higher oil pricing offset by
losses from derivatives and changes in deferred taxes. The Company
estimates its Adjusted EBITDAX for the full year 2022 to be $186.6
million compared to $85.8 million in 2021. The increase was
primarily the result of stronger revenues as a result of increased
crude oil prices and higher sales volumes.
Production increased by 44% to 10,217 NRI
BOEPD or 3.7 MMBOE for full year 2022 compared to 2.6 MMBOE
for the prior year, driven by the additional production associated
with the 2021/2022 drilling campaign at Etame. In addition,
from October 2022 there is the incremental production associated
with the TransGlobe combination. For the full year 2021, production
was 7,119 NRI BOPD or 2.6 MMBOE. For the full year 2022, VAALCO’s
realized crude oil sales price was $94.77 per barrel, or 34% higher
than $70.66 per barrel that was realized for full year 2021. Sales
volumes increased 36% to 3.7 MMBOE in 2022 from 2.7 MMBOE in
2021.
For the full year 2022, total production
expense, excluding workovers, increased to $107.9 million compared
to $72.6 million in 2021. The increase was primarily driven by
higher sales and costs associated with the TransGlobe combination
as well as inflationary pressures in 2022. The production expense
rate per BOE, excluding workover costs, was $29.33 in 2022 and
$26.77 in 2021. Workover expense for 2022 totaled $4.7 million and
for 2021 totaled $8.7 million.
For the full year 2022, G&A, excluding
stock-based compensation, was $8.0 million, a decrease of 35%
compared with full year 2021 G&A, excluding stock-based
compensation, of $12.3 million. The decrease year-over-year was
primarily due to operational projects with the fourth quarter of
2022 realizing a high percentage of charged time. G&A includes
$2.1 million and $2.5 million of stock-based compensation expense
for the years ended December 31, 2022 and December 31, 2021,
respectively, that was primarily expense related to SARs.
Capital Investments/Balance
Sheet
For the fourth quarter of 2022, net capital
expenditures totaled $56.0 million on a cash basis and
$48.8 million on an accrual basis, net of TransGlobe
acquisition. These expenditures were related to costs associated
with the 2021/2022 drilling program as well as the FSO conversion
and field reconfiguration investments in Gabon and development
drilling in Egypt and Canada. For the full year 2022, VAALCO
invested $159.9 million on a cash basis and
$434.4 million on an accrual basis, including the TransGlobe
acquisition.
At the end of the fourth quarter of 2022, VAALCO
had an unrestricted cash balance of $37.0 million. In
addition, the Company had $46 million outstanding with EGPC at
December 31, 2022 associated with September to December invoices,
Canadian accounts receivable of $4.5 million for December
(collected in January), and Gabon accounts receivable of $1.7
million (collected in January).
In mid-2022, VAALCO announced entry into a new
credit agreement, effective May 16, 2022, for a new five-year
Reserve Based Lending (“RBL”) facility with Glencore Energy UK Ltd.
(“Glencore”) that includes an initial commitment of $50 million and
is expandable up to $100 million. The facility is currently
secured by the Company’s assets in Gabon and matures in
2027. Key terms and covenants under the new facility include
net debt to EBITDAX of less than three times and requires VAALCO to
maintain a minimum cash balance of $10 million. While VAALCO
intends to fund its capital shareholder returns programs with
internally generated funds, the facility enhances future financial
flexibility.
In conjunction with the TransGlobe merger,
VAALCO assumed an existing revolving loan facility with Alberta
Treasury Branches (“ATB”) and on January 5, 2023 the facility was
exited.
Cash Dividend Policy and Share Buyback
Authorization
VAALCO paid a quarterly cash dividend of $0.0325
per share of common stock for the fourth quarter of 2022 on
December 22, 2022. On February 14, 2023, the Company announced its
next quarterly cash dividend of $0.0625 per share of common stock
for the first quarter of 2023 ($0.25 annualized), to be paid on
March 31, 2023 to stockholders of record at the close of business
on March 24, 2023. As previously announced in 2022, VAALCO
increased its dividend 92% beginning with the first quarter of
2023. Future declarations of quarterly dividends and the
establishment of future record and payment dates are subject to
approval by the Board of Directors.
|
Dividend Payment Date |
|
Amount percommon share |
|
Record Date |
|
March 18, 2022 |
|
$ |
0.0325 |
|
February 18, 2022 |
|
June 24, 2022 |
|
$ |
0.0325 |
|
May 25, 2022 |
|
September 23, 2022 |
|
$ |
0.0325 |
|
August 25, 2022 |
|
December 22, 2022 |
|
$ |
0.0325 |
|
November 22, 2022 |
| Aggregate per share amount
paid in 2022 |
|
$ |
0.1300 |
|
|
On November 1, 2022, VAALCO announced that its
newly expanded Board of Directors formally ratified and approved
the share buyback program that was announced on August 8, 2022 in
conjunction with the pending business combination with
TransGlobe. The Board also directed management to implement a
Rule 10b5-1 trading plan to facilitate share purchases through open
market purchases, privately negotiated transactions, or otherwise
in compliance with Rule 10b-18 under the Securities Exchange Act of
1934. The plan provides for an aggregate purchase of currently
outstanding common stock up to $30 million. Payment for shares
repurchased under the program will be funded using the Company's
cash on hand and cash flow from operations.
The actual timing, number and value of shares
repurchased under the share buyback program will depend on a number
of factors, including constraints specified in any Rule 10b5-1
trading plans, price, general business and market conditions, and
alternative investment opportunities. Under such a trading plan,
the Company’s third-party broker, subject to Securities and
Exchange Commission regulations regarding certain price, market,
volume and timing constraints, would have authority to purchase the
Company’s common stock in accordance with the terms of the
plan. The share buyback program does not obligate the Company
to acquire any specific number of shares in any period, and may be
expanded, extended, modified or discontinued at any time.
Since inception of the buyback program in
November through March 31, 2023, VAALCO has repurchased $7.5
million in shares.
HedgingThe Company 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 October 26, 2022, VAALCO entered into
additional derivative contracts for the first quarter of
2023:
|
Settlement Period |
|
Type ofContract |
|
Index |
|
AverageMonthlyVolumes |
|
|
WeightedAverage PutPrice |
|
|
WeightedAverage CallPrice |
|
| |
|
|
|
|
|
(Bbls) |
|
|
(per Bbl) |
|
|
(per Bbl) |
|
|
January 2023 to March 2023 |
|
Collars |
|
Dated Brent |
|
|
101,000 |
|
|
$ |
65.00 |
|
|
$ |
120.00 |
|
The following additional hedges
were entered into in 2023:
|
Settlement Period |
|
Type ofContract |
|
Index |
|
AverageMonthlyVolumes |
|
|
WeightedAverage PutPrice |
|
|
WeightedAverage CallPrice |
|
| |
|
|
|
|
|
(Bbls) |
|
|
(per Bbl) |
|
|
(per Bbl) |
|
|
April 2023 to June 2023 |
|
Collars |
|
Dated Brent |
|
|
95,500 |
|
|
$ |
65.00 |
|
|
$ |
100.00 |
|
2023 Guidance:
|
|
|
FY 2023 |
Gabon |
Egypt |
Canada |
| Production
(BOEPD) |
WI |
20,400 – 24,400 |
8,500 – 10,300 |
9,700 – 11,500 |
2,200 – 2,600 |
| Production
(BOEPD) |
NRI |
15,300 – 18,600 |
7,400 – 9,000 |
6,000 – 7,300 |
1,900 – 2,300 |
| Sales Volume
(BOEPD) |
WI |
20,400 – 24,400 |
8,500 – 10,300 |
9,700 – 11,500 |
2,200 – 2,600 |
| Sales Volume
(BOEPD) |
NRI |
15,300 – 18,600 |
7,400 – 9,000 |
6,000 – 7,300 |
1,900 – 2,300 |
| Production Expense
(millions) |
WI & NRI |
$135.5 – $157.0 |
|
|
|
| Production Expense per
BOE |
WI |
$16.00 – $20.00 |
|
|
|
| Production Expense per
BOE |
NRI |
$21.00 – $27.00 |
|
|
|
| Offshore Workovers
(millions) |
WI & NRI |
$1 – $10 |
|
|
|
| Cash G&A
(millions) |
WI & NRI |
$15.0 – $20.0 |
|
|
|
| CAPEX
(millions) |
WI & NRI |
$70 – $90 |
|
|
|
|
|
|
Q1 2023 |
Gabon |
Egypt |
Canada |
| Production
(BOEPD) |
WI |
22,500 – 23,800 |
10,000 – 10,500 |
9,900 – 10,500 |
2,600 – 2,800 |
| Production
(BOEPD) |
NRI |
17,300 – 18,600 |
8,700 – 9,100 |
6,400 – 7,100 |
2,200 – 2,400 |
| Sales Volume
(BOEPD) |
WI |
17,500 – 18,600 |
5,700 – 6,100 |
9,200 – 9,700 |
2,600 – 2,800 |
| Sales Volume
(BOEPD) |
NRI |
12,900 – 14,100 |
4,900 – 5,300 |
5,800 – 6,400 |
2,200 – 2,400 |
| Production Expense
(millions) |
WI & NRI |
$28.0 – $34.0 |
|
|
|
| Production Expense per
BOE |
WI |
$17.50 – $21.00 |
|
|
|
| Production Expense per
BOE |
NRI |
$23.00 – $28.50 |
|
|
|
| Offshore Workovers
(millions) |
WI & NRI |
$0 – $1 |
|
|
|
| Cash G&A
(millions) |
WI & NRI |
$3.5 – $5.5 |
|
|
|
| CAPEX
(millions) |
WI & NRI |
$25 – $35 |
|
|
|
About VAALCO
VAALCO, founded in 1985 and incorporated under
the laws of Delaware, is a Houston, USA based, independent energy
company with production, development and exploration assets in
Africa and Canada.
Following its business combination with
TransGlobe in October 2022, VAALCO owns a diverse portfolio of
operated production, development and exploration assets across
Gabon, Egypt, Equatorial Guinea and Canada.
Supplemental Information
VAALCO has posted a fourth quarter and Full
Year 2022 Preliminary Supplemental Information investor deck on its
web site, www.vaalco.com, under the Investor Relations tab,
with additional information and analysis.
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 |
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) statements regarding VAALCO’s expectations with
respect to financial conditions and results for the fourth quarter
and year ended December 31, 2022; (ii) VAALCO’s ability to file,
and the timing of any such filing, of its Annual Report for the
year ended December 31, 2022; (iii) VAALCO’s ability to realize the
anticipated benefits and synergies expected from acquisition of
TransGlobe; (iv) estimates of future drilling, production, sales
and costs of acquiring crude oil and natural gas; (v) estimates of
future cost reductions, synergies, savings and efficiencies; (vi)
expectations regarding VAALCO’s ability to effectively integrate
assets and properties it acquired as a result of the acquisition of
TransGlobe into its operations; (vii) the amount and timing of
stock repurchases, if any, under the VAALCO’s stock buyback program
and VAALCO’s ability to enhance stockholder value through such
plan; (viii) expectations regarding future exploration and the
development, growth and potential of VAALCO’s operations, project
pipeline and investments, and schedule and anticipated benefits to
be derived therefrom; (ix) expectations regarding future
acquisitions, investments or divestitures; (x) expectations of
future dividends and returns to stockholders; (xi) expectations of
future balance sheet strength; (x) expectations of the continued
listing of VAALCO’s common stock on the NYSE and LSE; and (xii)
VAALCO’s ability to finalize documents and effectively execute the
POD for the Venus development in Block P.
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 risk that
the completion and audit of VAALCO’s financial statements may take
longer to complete than expected; the risk that errors are
identified, which may be material, in the Company’s financial
results, or impacts the timing of Company filings; risks relating
to any unforeseen liabilities of VAALCO; the tax treatment of the
business combination 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; the right of host governments in countries where
we operate to expropriate property and terminate contracts
(including Egypt PSCs, the Etame PSC and the Block P PSC) for
reasons of public interest, subject to reasonable compensation,
determinable by the respective government in its discretion; 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 Arrangement 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 stockholders; 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, VAALCO’s Quarterly
Reports on Form 10-Q filed with the SEC on August 10, 2022 and
November 8, 2022 and in VAALCO’s Definitive Proxy Statement on
Schedule 14A filed with the SEC on August 30, 2022.
Dividends beyond the first quarter of 2023 have
not yet been approved or declared by the Board. The declaration and
payment of future dividends and the terms of share buybacks remains
at the discretion of the Board and will be determined based on
VAALCO’s financial results, balance sheet strength, cash and
liquidity requirements, future prospects, crude oil and natural gas
prices, and other factors deemed relevant by the Board. The Board
reserves all powers related to the declaration and payment of
dividends and the terms of share buybacks. Consequently, in
determining the dividend to be declared and paid on VAALCO common
stock or the terms of share buybacks, the Board may revise or
terminate the payment level or buyback terms at any time without
prior notice.
Financial Information is Preliminary and Unaudited;
Certain Material Weaknesses
The financial data presented in this press
release for fourth quarter and year ended December 31, 2022 is
preliminary and subject to change in connection with the completion
and audit of VAALCO’s financial statements for the year ended
December 31, 2022. VAALCO is unable to file its Annual Report
on Form 10-K within the prescribed time period, without
unreasonable effort and expense. Management continues to work as
expeditiously as possible to complete the Form 10-K and believes
that it will be in a position to file the report with the SEC
and conduct an investor conference call on Thursday, April 6,
2023.
In connection with the completion of VAALCO’s
financial statements, VAALCO’s management has identified certain
material weaknesses in its internal control over financial
reporting in the areas of (i) accounting for leases, (ii)
accounting for complex areas, specifically, business combinations,
(iii) consolidation reporting related to recently acquired business
operations, and (iv) accounting for income taxes. Accordingly,
VAALCO’s preliminary financial information included in this press
release may be subject to change based on the outcome of the
completion of the accounting review required in the context of the
completion of the audit of VAALCO’s financial statements.
However, after giving consideration to these
material weaknesses, and the additional analyses and other
procedures that management has performed as of the date of this
press release with a view to ensuring that the year end 2022
preliminary unaudited financial information included in this press
release has been prepared in accordance with U.S. GAAP, as of the
date of this press release, VAALCO’s management believes that such
financial information will not be subject to material change.
Investors should not place undue reliance on
these preliminary, estimated numbers.
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 Matthew Powers, Corporate Secretary of
VAALCO.
Supplemental Non-GAAP Financial
Measures
This press release contains crude oil and
natural gas metrics which do not have standardized meanings or
standard methods of calculation as classified by the SEC and
therefore such measures may not be comparable to similar measures
used by other companies. Such metrics have been included herein to
provide readers with additional measures to evaluate the Company’s
performance; however, such measures are not reliable indicators of
the future performance of the Company and future performance may
not compare to the performance in previous periods.
PV-10 Value and Probable Reserves
PV-10 is a non-GAAP financial measure and
represents the period-end present value of estimated future cash
inflows from VAALCO’s reserves, less future development and
production costs, discounted at 10% per annum to reflect timing of
future cash flows. PV-10 values for 2P WI CPR reserves
has been calculated using VAALCO’s management assumptions for
escalated crude oil price and cost in the case of 2P WI CPR
reserves. PV-10 generally differs from standardized measure, the
most directly comparable GAAP financial measure, because it
generally does not include the effects of income taxes; however,
VAALCO’s PV-10 does include the effect of income taxes. PV-10 is a
widely used measure within the industry and is commonly used by
securities analysts, banks and credit rating agencies to evaluate
the estimated future net cash flows from proved reserves on a
comparative basis across companies or specific properties. VAALCO’s
PV-10 includes the effect of income taxes. Neither PV-10 nor
the standardized measure purports to represent the fair value of
the Company’s crude oil and natural gas reserves.
VAALCO has provided summations of its PV-10 for
its proved and probable reserves on a 2P WI CPR basis in this press
release. The SEC strictly prohibits companies from aggregating
proved, probable and possible reserves in filings with the SEC due
to the different levels of certainty associated with each reserve
category. GAAP does not provide a measure of estimated future net
cash flows for reserves other than proved reserves and accordingly
it is not practicable to reconcile the PV-10 value of 2P WI CPR
reserves to a GAAP measure, such as the standardized measure.
Investors should be cautioned that estimates of PV-10 of probable
reserves, as well as the underlying volumetric estimates, are
inherently more uncertain of being recovered and realized than
comparable measures for proved reserves. Further, because
estimates of probable reserve volumes have not been adjusted for
risk due to this uncertainty of recovery, their summation may be of
limited use. Nonetheless, VAALCO believes that PV-10 estimates for
probable reserves present useful information for investors about
the future net cash flows of its reserves in the absence of a
comparable GAAP measure such as standardized measure.
2P WI CPR Reserves
2P WI CPR reserves represent proved plus
probable estimates as reported by NSAI and GLJ and prepared in
accordance with the definitions and guidelines set forth in the
2018 Petroleum Resources Management Systems approved by the Society
of Petroleum Engineers as of December 31, 2021 using escalated
crude oil price and cost assumptions made by VAALCO’s management.
The SEC definitions of proved and probable reserves are different
from the definitions contained in the 2018 Petroleum Resources
Management Systems approved by the Society of Petroleum Engineers
as of December 31, 2021. As a result, 2P WI CPR reserves may not be
comparable to United States standards. The SEC requires United
States oil and gas reporting companies, in their filings with the
SEC, to disclose only proved reserves after the deduction of
royalties and production due to others but permits the optional
disclosure of probable and possible reserves in accordance with SEC
definitions.
2P WI CPR reserves and the PV-10 value for 2P WI
CPR reserves, as calculated herein, may differ from the SEC
definitions of proved and probable reserves because:
- Pricing for SEC is the average closing price on the first
trading day of each month for the prior year which is then held
flat in the future, while the 2P WI CPR pricing is based on
management pricing assumptions for future Brent oil pricing for
2023 of $80.00 and $70.00 in 2024, escalated 2% per year thereafter
and for Equatorial Guinea, given the expectation of first oil
beginning in 2026, Brent oil pricing of $74.27 was assumed for
2026, escalated 2% per year thereafter;
- Lease operating expenses are not escalated in the SEC case,
while for the 2P WI CPR reserves case they are escalated at 2%
annually beginning on January 1, 2023.
Management uses 2P WI CPR reserves as a
measurement of operating performance because it assists management
in strategic planning, budgeting and economic evaluations and in
comparing the operating performance of the Company to other
companies. Management believes that the presentation of 2P WI CPR
reserves is useful to its international investors, particularly
those that invest in companies trading on the London Stock
Exchange, in order to better compare the Company’s reserve
information to other London Stock Exchange-traded companies that
report similar measures. VAALCO also believes that this information
enhances its investors’ and securities analysts’ understanding of
its business. However, 2P WI CPR reserves should not be used as a
substitute for proved reserves calculated in accordance with the
definitions prescribed by the SEC. In evaluating VAALCO’s business,
investors should rely on the Company’s SEC proved reserves and
consider 2P WI CPR reserves only supplementally.
VAALCO ENERGY, INC AND SUBSIDIARIESPreliminary Selected
Financial Data from Consolidated Statements of Operations
(Unaudited)
| |
|
Three Months Ended |
|
|
Year Ended December 31, |
|
| |
|
December31, 2022 |
|
|
December31, 2021 |
|
|
September30, 2022 |
|
|
2022 |
|
|
2021 |
|
| |
|
(in thousands except per share amounts) |
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crude oil, natural gas and natural gas liquids sales |
|
$ |
96,588 |
|
|
$ |
56,379 |
|
|
$ |
78,097 |
|
|
$ |
354,326 |
|
|
$ |
199,075 |
|
| Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production expense |
|
|
45,514 |
|
|
|
23,495 |
|
|
|
23,312 |
|
|
|
112,661 |
|
|
|
81,255 |
|
|
FPSO demobilization |
|
|
— |
|
|
|
— |
|
|
|
8,867 |
|
|
|
8,867 |
|
|
|
- |
|
|
Exploration expense |
|
|
8 |
|
|
|
293 |
|
|
|
56 |
|
|
|
258 |
|
|
|
1,579 |
|
|
Depreciation, depletion and amortization |
|
|
26,316 |
|
|
|
4,132 |
|
|
|
8,963 |
|
|
|
48,143 |
|
|
|
21,060 |
|
|
General and administrative expense |
|
|
(430 |
) |
|
|
2,545 |
|
|
|
1,979 |
|
|
|
10,077 |
|
|
|
14,766 |
|
|
Bad debt expense and other |
|
|
999 |
|
|
|
61 |
|
|
|
1,020 |
|
|
|
3,082 |
|
|
|
875 |
|
|
Total operating costs and expenses |
|
|
72,407 |
|
|
|
30,526 |
|
|
|
44,197 |
|
|
|
183,088 |
|
|
|
119,535 |
|
|
Other operating income (expense), net |
|
|
43 |
|
|
|
- |
|
|
|
- |
|
|
|
38 |
|
|
|
(440 |
) |
| Operating income (loss) |
|
$ |
24,224 |
|
|
$ |
25,853 |
|
|
$ |
33,900 |
|
|
$ |
171,276 |
|
|
$ |
79,100 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESPreliminary
Consolidated Statements of Cash Flows (Unaudited)
| |
|
Year Ended December 31, |
|
| |
|
2022 |
|
|
2021 |
|
| |
|
(in thousands) |
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
| Net income (1) (2) |
|
$ |
49,390 – 54,890 |
|
|
$ |
81,836 |
|
| Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of tax |
|
|
72 |
|
|
|
98 |
|
|
Depreciation, depletion and amortization |
|
|
48,143 |
|
|
|
21,060 |
|
|
Bargain purchase gain (1) |
|
|
(9,819 – 13,319 |
) |
|
|
(7,651 |
) |
|
Deferred taxes (2) |
|
|
44,305 – 46,305 |
|
|
|
(39,978 |
) |
|
Unrealized foreign exchange (gain) loss |
|
|
(1,043 |
) |
|
|
(291 |
) |
|
Stock-based compensation |
|
|
2,200 |
|
|
|
2,459 |
|
|
Cash settlements paid on exercised stock appreciation rights |
|
|
(827 |
) |
|
|
(3,271 |
) |
|
Derivative instruments (gain) loss, net |
|
|
37,812 |
|
|
|
22,826 |
|
|
Cash settlements received (paid) on matured derivative contracts,
net |
|
|
(42,935 |
) |
|
|
(18,020 |
) |
|
Cash settlements paid on asset retirement obligations |
|
|
(6,577 |
) |
|
|
— |
|
|
Bad debt expense and other |
|
|
3,082 |
|
|
|
875 |
|
|
Other operating loss, net |
|
|
(38 |
) |
|
|
440 |
|
|
Operational expenses associated with equipment and other |
|
|
2,052 |
|
|
|
2,415 |
|
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
Trade receivables |
|
|
18,385 |
|
|
|
(11,308 |
) |
|
Accounts with joint venture owners |
|
|
(18,929 |
) |
|
|
1,594 |
|
|
Other receivables |
|
|
(9,290 |
) |
|
|
(9,736 |
) |
|
Crude oil inventory |
|
|
(1,742 |
) |
|
|
5,022 |
|
|
Prepayments and other |
|
|
(4,387 |
) |
|
|
1,617 |
|
|
Value added tax and other receivables |
|
|
(5,193 |
) |
|
|
(1,593 |
) |
|
Other long-term assets |
|
|
(2,730 |
) |
|
|
(1,176 |
) |
|
Accounts payable |
|
|
23,920 |
|
|
|
(922 |
) |
|
Foreign income taxes receivable/payable |
|
|
(5,897 |
) |
|
|
2,268 |
|
|
Accrued liabilities and other |
|
|
6,964 |
|
|
|
1,645 |
|
|
Net cash provided by continuing operating activities |
|
|
128,918 |
|
|
|
50,209 |
|
|
Net cash used in discontinued operating activities |
|
|
(72 |
) |
|
|
(92 |
) |
|
Net cash provided by operating activities |
|
|
128,846 |
|
|
|
50,117 |
|
| CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
Property and equipment expenditures |
|
|
(159,897 |
) |
|
|
(16,558 |
) |
|
Cash acquired from TransGlobe acquisition |
|
|
36,686 |
|
|
|
— |
|
|
Acquisition of crude oil and natural gas properties |
|
|
— |
|
|
|
(22,505 |
) |
|
Net cash used in continuing investing activities |
|
|
(123,211 |
) |
|
|
(39,063 |
) |
|
Net cash used in discontinued investing activities |
|
|
— |
|
|
|
— |
|
|
Net cash used in investing activities |
|
|
(123,211 |
) |
|
|
(39,063 |
) |
| CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
Proceeds from the issuances of common stock |
|
|
312 |
|
|
|
1,369 |
|
|
Dividend distribution |
|
|
(9,354 |
) |
|
|
— |
|
|
Treasury shares |
|
|
(3,805 |
) |
|
|
(1,426 |
) |
|
Deferred financing costs |
|
|
(2,069 |
) |
|
|
— |
|
|
Payments of finance lease |
|
|
(3,039 |
) |
|
|
— |
|
|
Net cash used in continuing financing activities |
|
|
(17,955 |
) |
|
|
(57 |
) |
|
Net cash used in discontinued financing activities |
|
|
— |
|
|
|
— |
|
|
Net cash used in financing activities |
|
|
(17,955 |
) |
|
|
(57 |
) |
| Effects of exchange rate
changes on cash |
|
|
(218 |
) |
|
|
— |
|
| NET CHANGE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
|
(12,538 |
) |
|
|
10,997 |
|
| CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
72,314 |
|
|
|
61,317 |
|
| CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF PERIOD |
|
$ |
59,776 |
|
|
$ |
72,314 |
|
|
(1 |
) |
The Company is in the process of finalizing its deferred income tax
calculation and the impact on its consolidated financial
statements, including the deferred tax impacts associated with the
TransGlobe business combination. The Company currently estimates
any impact from deferred income tax adjustments will affect the
bargain purchase gain from ($1.0) million - $2.5 million, its
balance sheet deferred tax assets and liabilities from ($1.5)
million - $0.5 million and its impact on net income can range
from ($2.5) million - $3.0 million. These estimates are preliminary
and are subject to change, possibly materially. Investors should
not place undue reliance on these preliminary, estimated
numbers. |
|
(2 |
) |
For purposes of the preliminary consolidated cash flow statement
for the year ended December 31, 2022, the Company has used a
net income amount of $51.9 million, a bargain purchase gain of
$10.8 million and deferred tax expenses of $44.8 million. |
VAALCO ENERGY, INC AND SUBSIDIARIESSelected
Financial and Operating Statistics (Unaudited)
| |
|
Three Months Ended |
|
|
Year Ended December 31, |
|
| |
|
December31, 2022 |
|
|
December31, 2021 |
|
|
September30, 2022 |
|
|
2022 |
|
|
2021 |
|
|
NRI SALES DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Crude oil, natural gas and
natural gas liquids sales (MBOE) |
|
|
1,371 |
|
|
|
709 |
|
|
|
731 |
|
|
|
3,677 |
|
|
|
2,711 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| WI PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Etame Crude oil (MBbl) |
|
|
650 |
|
|
|
799 |
|
|
|
968 |
|
|
|
3,415 |
|
|
|
3,188 |
|
| Egypt Crude oil (MBbl) |
|
|
818 |
|
|
|
— |
|
|
|
— |
|
|
|
818 |
|
|
|
— |
|
| Canada Crude oil, natural gas
and natural gas liquids sales (MBOE) |
|
|
211 |
|
|
|
— |
|
|
|
— |
|
|
|
211 |
|
|
|
— |
|
| Total Crude oil, natural gas
and natural gas liquids sales (MBOE) |
|
|
1,680 |
|
|
|
799 |
|
|
|
968 |
|
|
|
4,445 |
|
|
|
3,188 |
|
| Average daily production
volumes (BOEPD) |
|
|
18,262 |
|
|
|
8,685 |
|
|
|
10,525 |
|
|
|
12,177 |
|
|
|
8,734 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NRI PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Etame Crude oil (MBbl) |
|
|
566 |
|
|
|
695 |
|
|
|
842 |
|
|
|
2,971 |
|
|
|
2,599 |
|
| Egypt Crude oil (MBbl) |
|
|
547 |
|
|
|
— |
|
|
|
— |
|
|
|
547 |
|
|
|
— |
|
| Canada Crude oil, natural gas
and natural gas liquids sales (MBOE) |
|
|
211 |
|
|
|
— |
|
|
|
— |
|
|
|
211 |
|
|
|
— |
|
| Total Crude oil, natural gas
and natural gas liquids sales (MBOE) |
|
|
1,324 |
|
|
|
695 |
|
|
|
842 |
|
|
|
3,729 |
|
|
|
2,599 |
|
| Average daily production
volumes (BOEPD) |
|
|
14,390 |
|
|
|
7,554 |
|
|
|
9,157 |
|
|
|
10,217 |
|
|
|
7,119 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| AVERAGE SALES PRICES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Crude oil, natural gas and
natural gas liquids sales (per BOE) |
|
$ |
70.43 |
|
|
$ |
77.31 |
|
|
$ |
103.61 |
|
|
$ |
94.77 |
|
|
$ |
70.66 |
|
| Crude oil, natural gas and
natural gas liquids sales (Per BOE including realized commodity
derivatives) |
|
$ |
70.24 |
|
|
$ |
66.26 |
|
|
$ |
91.13 |
|
|
$ |
83.10 |
|
|
$ |
64.01 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| COSTS AND EXPENSES (Per BOE of
sales): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Production expense |
|
$ |
33.19 |
|
|
$ |
33.14 |
|
|
$ |
31.89 |
|
|
$ |
30.64 |
|
|
$ |
29.97 |
|
| Production expense, excluding
workovers and stock compensation* |
|
|
29.73 |
|
|
|
26.82 |
|
|
|
31.79 |
|
|
|
29.33 |
|
|
|
26.77 |
|
| Depreciation, depletion and
amortization |
|
|
19.19 |
|
|
|
5.83 |
|
|
|
12.26 |
|
|
|
13.09 |
|
|
|
7.77 |
|
| General and administrative
expense** |
|
|
(0.31 |
) |
|
|
3.59 |
|
|
|
2.71 |
|
|
|
2.74 |
|
|
|
5.45 |
|
| Property and equipment
expenditures, cash basis (in thousands) |
|
$ |
56,044 |
|
|
$ |
8,099 |
|
|
$ |
43,575 |
|
|
$ |
159,897 |
|
|
$ |
16,558 |
|
| * |
Workover costs excluded from the
three months ended December 31, 2022 and 2021 and
September 30, 2022 are $4.7 million, $4.5 million
and $0.0 million, respectively. Workover costs excluded from the
year ended December 31, 2022 and 2021 are
$4.7 million and $8.7 million, respectively. |
| ** |
General and administrative
expenses include $(0.09), $0.51 and $(0.03) per BOE of sales
of stock-based compensation expense in the three months
ended December 31, 2022, and 2021 and September 30,
2022, respectively. General and administrative expenses include
$0.57 and $0.91 per BOE of sales of stock-based
compensation expense for the years ended December 31, 2022,
and 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, impairment of
proved crude oil and natural gas properties, non-cash and other
items including stock compensation expense, gain on the Sasol
Acquisition and unrealized commodity derivative loss.
Adjusted EBITDAX has 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 should not be
considered as a substitute for net income (loss), operating
income (loss), cash flows from operating activities or any other
measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EBITDAX excludes some, but not all,
items that affect net income (loss) and operating income (loss) and
these measures may vary among other companies. Therefore, the
Company’s Adjusted EBITDAX may not be comparable to similarly
titled measures used by other companies.
The tables below reconcile the most directly
comparable GAAP financial measure to Adjusted EBITDAX.
VAALCO ENERGY, INC AND SUBSIDIARIESPreliminary
Reconciliations of Non-GAAP Financial Measures(Unaudited)(in
thousands)
| |
|
Three Months Ended |
|
|
Year Ended December 31, |
|
| Reconciliation of Net
Income to Adjusted EBITDAX |
|
December 31,2022 |
|
|
December 31,2021 |
|
|
September 30,2022 |
|
|
2022 |
|
|
2021 |
|
|
Net income (1)(2) |
|
$ |
15,254 – 20,754 |
|
|
$ |
34,362 |
|
|
$ |
6,868 |
|
|
$ |
49,390 – 54,890 |
|
|
$ |
81,836 |
|
| Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of discontinued operations |
|
|
14 |
|
|
|
26 |
|
|
|
26 |
|
|
|
72 |
|
|
|
98 |
|
|
Interest expense (income), net |
|
|
1,679 |
|
|
|
(1 |
) |
|
|
234 |
|
|
|
2,034 |
|
|
|
(10 |
) |
|
Income tax expense (benefit) (1)(2) |
|
|
6, 453 – 8,453 |
|
|
|
(10,884 |
) |
|
|
22,843 |
|
|
|
70,920 – 72,920 |
|
|
|
(22,156 |
) |
|
Depreciation, depletion and amortization |
|
|
26,316 |
|
|
|
4,132 |
|
|
|
8,963 |
|
|
|
48,143 |
|
|
|
21,060 |
|
|
Exploration expense |
|
|
8 |
|
|
|
293 |
|
|
|
56 |
|
|
|
258 |
|
|
|
1,579 |
|
|
FPSO demobilization |
|
|
— |
|
|
|
— |
|
|
|
8,867 |
|
|
|
8,867 |
|
|
|
— |
|
|
Impairment of proved crude oil and natural gas properties |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Non-cash or unusual items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(100 |
) |
|
|
361 |
|
|
|
36 |
|
|
|
2,200 |
|
|
|
2,459 |
|
|
Unrealized derivative instruments loss (gain) |
|
|
38 |
|
|
|
(6,075 |
) |
|
|
(12,902 |
) |
|
|
(5,123 |
) |
|
|
4,806 |
|
|
Gain on Acquisition, net (1)(2) |
|
|
(9,819 – 13,319 |
) |
|
|
302 |
|
|
|
— |
|
|
|
(9,819 – 13,319 |
) |
|
|
(5,189 |
) |
|
Arrangement Costs |
|
|
7,006 |
|
|
|
— |
|
|
|
6,424 |
|
|
|
14,630 |
|
|
|
— |
|
|
Other operating (income) expense, net |
|
|
(43 |
) |
|
|
— |
|
|
|
— |
|
|
|
(38 |
) |
|
|
440 |
|
|
Gain on revision of asset retirement obligations |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Bad debt expense and other |
|
|
999 |
|
|
|
61 |
|
|
|
1,020 |
|
|
|
3,082 |
|
|
|
875 |
|
| Adjusted EBITDAX |
|
$ |
49,807 |
|
|
$ |
22,577 |
|
|
$ |
42,435 |
|
|
$ |
186,618 |
|
|
$ |
85,798 |
|
|
(1 |
) |
The Company is in the process of finalizing its deferred income tax
calculation and the impact on its consolidated financial
statements, including the deferred tax impacts associated with the
TransGlobe business combination. The Company currently estimates
any impact from deferred income tax adjustments will affect the
bargain purchase gain from ($1.0) million -$2.5 million, its
balance sheet deferred tax assets and liabilities from ($1.5)
million - $0.5 million and its impact on net income can range
from ($2.5) million -$3.0 million. These estimates are preliminary
and are subject to change, possibly materially. Investors should
not place undue reliance on these preliminary, estimated
numbers. |
|
(2 |
) |
For purposes of the preliminary Adjusted EBITDAX reconciliation for
the quarter and year ended December 31, 2022, the Company has
used a net income amount of $17.8 million and $51.9 million,
respectively and a bargain purchase gain of $10.8 million for both
periods, respectively, and tax expenses of $6.9 million and $71.4
million, respectively. |
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