TIDMEGY
RNS Number : 6080M
Vaalco Energy Inc
12 May 2020
Exhibit 99.1
VAALCO ENERGY, INC. ANNOUNCES
FIRST QUARTER 2020 RESULTS
HOUSTON - May 12, 2020 - VAALCO Energy, Inc. (NYSE: EGY, LSE:
EGY) today reported operational and financial results for the first
quarter 2020.
Highlights and Recent Key Items :
-- Produced 4,944 net revenue interest ("NRI")(1) barrels of
crude oil per day ("BOPD"), or 5,683 working interest ("WI")(2)
BOPD near the high end of first quarter guidance (4,700 - 5,000 NRI
BOPD);
-- Increased first quarter 2020 production 35% compared with the
fourth quarter of 2019 due to the successful drilling campaign;
-- Reported a net loss of $52.8 million ($0.91 per diluted
share), Adjusted Net Income(3) of $6.9 million ($0.12 per diluted
share) and generated Adjusted EBITDAX(3) of $6.0 million;
-- The net loss of $52.8 million for the first quarter included
non-cash charges of $59.7 million primarily as a result of the
decrease in oil prices;
-- Completed the 2019/2020 drilling campaign with a 100% success
rate, on time and within budget, with no safety or environmental
incidents and released the Vantage Drilling jackup drilling rig on
April 9, 2020;
-- Experienced no material disruptions in operations to date due
to current worldwide COVID-19 crisis and has taken proactive
measures in response to the pandemic and the current low oil price
environment ;
-- Maintained strong balance sheet with no debt, a cash balance
of $61.0 million, including $11.3 million in joint venture owner
advances, and Adjusted Working Capital(3) of $25.8 million as of
March 31, 2020.
(1) All NRI production rates and volumes are VAALCO's 31.1% WI less 13% royalty volumes.
(2) All WI production rates and volumes are VAALCO's 31.1% WI.
(3) Adjusted EBITDAX, Adjusted Net Income (Loss) and Adjusted
Working Capital are Non-GAAP financial measures and are described
and reconciled to the closest GAAP measure in the attached table
under "Non-GAAP Financial Measures." See "Supplemental Non-GAAP
Financial Measures" below for additional information.
Cary Bounds, VAALCO's Chief Executive Officer commented: "With
the global COVID-19 pandemic coupled with supply and demand
imbalances, the energy industry is facing extraordinary challenges
never seen before. Thus far, VAALCO's operations have not been
materially disrupted by the global COVID-19 pandemic, and we have
managed through the logistical challenges that we have faced since
the outbreak. VAALCO continues to put the safety of our workers and
local stakeholders first and contingency plans are in place in the
event that we are directly impacted. In response to the decline in
Brent pricing, VAALCO has taken several actions to minimize capital
and operational spending to preserve cash flow and reduce our
breakeven costs. We released the Vantage rig in early April
following the completion of our successful 2019/2020 drilling
program, and we have no material capital expenditures remaining in
2020. While we have deferred all discretionary capital expenditures
including drilling until the global oil pricing environment
improves, we remain confident in the long-term viability of our
inventory of drilling opportunities."
"Despite this uncertain environment, we remain focused on
operational excellence, which was demonstrated in our first quarter
2020 results. We had very strong production of 4,944 BOPD for the
quarter, a 35% increase over Q4 2019. We generated $6.0 million of
Adjusted EBITDAX, and we increased our cash balance to $61.0
million, including $11.3 million in joint venture owner advances in
the first quarter of 2020. Like all companies in our industry we
have been impacted by the severe decline in oil prices, and as a
result of the current commodity price environment, we have taken a
non-cash impairment. We have a strong balance sheet with no debt, a
world-class asset in Etame and an exceptional operational team.
While we believe that our operational and financial execution has
better positioned VAALCO to weather the near-term uncertainties,
the market conditions resulting from COVID-19 have significantly
impacted us and our outlook globally and we expect that 2020 will
be a challenging year for our business."
Operational Update
Gabon
Given the current volatile pricing environment, the Company
continues to evaluate all uses of cash and is managing both
operating expenses as well as capital expenditure levels in view of
the existing and expected pricing environment.
With the drilling and completion of the South East Etame 4H well
in March 2020, VAALCO successfully completed its 2019/2020 drilling
campaign and has also satisfied the drilling commitment required
under the terms of the 2018 extension to the Etame Marin block
production sharing contract.
As previously announced, on March 7, 2020, the South East Etame
2H well stopped producing due to an electric submersible pump
("ESP") failure. The drilling rig on the South East Etame North
Tchibala ("SEENT") platform was already scheduled to replace the
ESP in that well with a preemptive workover upon completion of the
South East Etame 4H well. The workover successfully restored 2,400
gross BOPD, or 650 BOPD NRI to VAALCO, in line with production
levels prior to the ESP failure.
VAALCO released the Vantage rig on April 9, 2020 and does not
currently expect to perform any additional workovers in order to
protect cash flow in the current uncertain environment. In addition
to increasing production by 35% in the first quarter of 2020
compared to the fourth quarter of 2019 and having a 100% success
rate, the entire drilling campaign and two workovers were completed
as planned, with no safety or environmental incidents.
In mid-April 2020, the South Tchibala 2H well stopped producing
due to a downhole mechanical failure not related to the ESP. The
well was producing approximately 830 gross BOPD, or 225 BOPD NRI to
VAALCO prior to ceasing production. The Company believes that it is
unlikely the well failure will be addressed until the next drilling
campaign when a rig is on location.
Equatorial Guinea
VAALCO has a 43% WI in Block P offshore Equatorial Guinea. The
Equatorial Guinea Ministry of Mines and Hydrocarbons ("EG MMH")
approved VAALCO's appointment as operator of Block P on November
12, 2019, and the Company is currently waiting on a production
sharing contract amendment to begin activities in Block P.
The Company acquired an additional working interest of 12% from
Atlas Petroleum, thereby increasing its working interest to 43% in
2020, i n exchange for a potential future payment of $3.1 million
in the event that there is commercial production from Block P . The
EG MMH has approved this assignment. VAALCO is in commercial
discussions with Levene HydroCarbon Limited ("Levene") where VAALCO
would assign a portion of the Block P interest to Levene and Levene
would potentially cover all or substantially all of VAALCO's cost
to drill an exploratory well on Block P. In addition, VAALCO would
serve as a non-owner operator, under a service agreement with
Levene, on Blocks 3, 4 and 19 in Equatorial Guinea. Levene and
VAALCO have executed a non-binding Memorandum of Understanding
regarding the commercial discussions; however, neither have
executed any binding agreements, and there can be no certainty a
transaction will be completed. Further, approval of the assignment
by the EG MMH must be obtained prior to any transaction being
completed. As of March 31, 2020, the Company had $10.0 million
recorded for the book value of the undeveloped leasehold costs
associated with the Block P license.
VAALCO and its current and potential future joint venture owners
are evaluating the timing and budgeting for development and
exploration activities under a development and production area in
Block P, including the approval of a development and production
plan. The production sharing contract for Block P provides for a
development and production period of 25 years from the date of
approval of a development and production plan.
Financial Update
Net loss of $52.8 million ($0.91 per diluted share) for the
first quarter of 2020 included non-cash charges/benefits for:
impairment of proved properties of $30.6 million ($0.53 per diluted
share), unrealized gains on derivatives of $6.6 million, ($0.11 per
diluted share) and deferred income tax expense of $35.6 million
($0.61 per diluted share). Excluding these and other items totaling
$59.7 million, Adjusted Net Income for the first quarter of 2020
totaled $6.9 million ($0.12 per diluted share).
Net income of $6.5 million ($0.10 per diluted share) for the
first quarter of 2019 included non-cash charges/benefits for:
income from discontinued operations of $5.7 million ($0.09 per
diluted share), unrealized derivative loss of $3.0 million ($.05
per diluted share) and deferred income tax expense of $1.7 million
($0.3 million per diluted share). Excluding these and other items
totaling $0.8 million, Adjusted Net Income was $5.7 million ($0.09
per diluted share) for the first quarter of 2019.
Net income of $1.0 million ($0.02 per diluted share) for the
fourth quarter of 2019 included non-cash charges for: unrealized
derivative losses of $3.1 million ($0.05 per diluted share) and
deferred income tax expense of $1.8 million ($0.03 per diluted
share). Excluding these and other items totaling $4.5 million,
Adjusted Net Income was $5.5 million ($0.09 per diluted share).
The increase in year-over-year Adjusted Net Income was primarily
driven by decreases in the current provision for income taxes and
general and administrative costs offset by a decrease in revenue
and an increase in production expense. Similarly, Adjusted Net
Income for the first quarter of 2020 increased from the fourth
quarter of 2019 as a result of decreases in the current provision
for income taxes and general and administrative costs offset by a
decrease in revenue.
Adjusted EBITDAX totaled $6.0 million in the first quarter of
2020 compared with $9.7 million in the same period of 2019. In the
fourth quarter of 2019, Adjusted EBITDAX was $10.4 million.
Adjusted EBITDAX for the first quarter of 2020 was lower than the
same period in the prior year and the fourth quarter of 2019
primarily due to lower realized pricing.
Revenue and
Sales
% Change Q1 2020 vs. 1Q % Change Q1 2020 vs. 4Q
Q1 2020 Q1 2019 2019 Q4 2019 2019
--------- --------- ------------------------ --------- -----------------------
Production
(NRI BOPD) 4,944 3,496 41% 3,664 35%
Sales (NRI BO) 294,000 297,000 (1)% 318,000 (8)%
Realized crude
oil price
($/BO) $ 59.54 $ 64.17 (7)% $ 65.80 (10)%
Total crude
oil sales
($MM) $ 18.4 $ 19.8 (7)% $ 21.9 (16)%
During the first quarter of 2020, VAALCO had two liftings, one
in January and one in February, but the next lifting of 85,000
barrels of oil that was scheduled for March 2020 was delayed to
April 1, 2020 due to poor weather conditions. This delay resulted
in a higher average realized oil price for the first quarter of
2020 as the quarter included price realizations for only January
and February when prices were higher and did not include any price
realizations from March when prices had declined significantly.
Costs and
Expenses
% Change Q1 2020 vs. 1Q % Change Q1 2020 vs. 4Q
Q1 2020 Q1 2019 2019 Q4 2019 2019
------- ------- ------------------------- ------- -------------------------
Production
expense,
excluding
workovers ($MM) $ 6.9 $ 8.1 (15)% $ 9.8 (30)%
Production
expense,
excluding
workovers ($/BO) $ 23.39 $ 27.30 (14)% $ 30.70 (24)%
Workover expense
($MM) $ 2.8 $ 0.1 2,722% $ - N/A
Depreciation,
depletion and
amortization
($MM) $ 3.1 $ 1.6 100% $ 2.1 47%
Depreciation,
depletion and
amortization
($/BO) $ 10.55 $ 5.23 102% $ 6.64 59%
General and
administrative
expense,
excluding
non-cash
compensation
($MM) $ 3.4 $ 2.7 25% $ 2.3 48%
General and
administrative
expense,
excluding
non-cash
compensation
($/BO) $ 11.30 $ 9.14 24% $ 6.96 62%
Stock-based
compensation
expense
(benefit) ($MM) $ (2.6) $ 1.7 (249)% $ 0.7 (449)%
Current income
tax expense
(benefit) ($MM) $ (2.1) $ 1.1 (291)% $ 2.4 (188)%
Deferred income
tax expense
($MM) $ 35.6 $ 1.7 1,994% $ 1.8 1,878%
Total production expense, excluding workovers, decreased
primarily as a result of lower sales volumes during the quarter.
Unit operating expense, excluding workovers, decreased in the first
quarter of 2020 as compared to both the first quarter of 2019 and
the fourth quarter of 2019 as a result of higher production
volumes. Workover expense for the first quarter of 2020 increased
as the Company performed two workovers in the quarter; whereas,
none were performed in 2019.
Depreciation, depletion and amortization ("DD&A") expense in
the first quarter of 2020 on a per NRI barrel of crude oil sales
basis increased over the comparable prior year quarter and the
fourth quarter of 2019 reflecting the additional costs associated
with the new Etame 11H well, South East Etame 4P appraisal wellbore
and South East Etame 4H well.
During the first quarter of 2020, impairment testing was
performed using the year-end 2019 independently prepared reserve
report and forward price curves. The Company recorded a non-cash
impairment charge of $30.6 million to write down the Company's
investment in the Etame Marine Block, offshore Gabon to its fair
value of $15.6 million. The impairment is a result of the recent
decline in the forecasted oil prices used in the impairment testing
calculation. As a result of this impairment, DD&A per NRI
barrel of crude oil sales is expected to be approximately $4.00 to
$6.00 for 2020.
General and administrative ("G&A") expense, excluding
non-cash compensation, increased in the first quarter of 2020 as
compared to the first quarter 2019 and the fourth quarter of 2019
as a result of higher professional fees. Non-cash stock-based
compensation expense (benefit) was impacted by the change in the
SARs liability as a result of changes in the Company's stock price
during the quarter. For the first quarter of 2020, the Company's
stock price decreased resulting in a reversal of expense, whereas
the Company's stock price increased during both the first and
fourth quarters of 2019 resulting in additional expense.
Foreign income taxes are attributable to Gabon and are settled
by the government taking their oil in-kind. Current income tax
expense for the first quarter of 2020 includes a $3.4 million
favorable oil price adjustment as a result of the change in value
of the government's allocation between the time it was produced and
the time it was taken in-kind. After excluding this impact, current
income taxes were $1.9 million for the period.
Deferred income tax expense for the first quarter of 2020
includes a $46.9 million charge to increase the valuation
allowances on both the U.S. and Gabon deferred tax assets offset by
an $11.8 million deferred tax benefit. As a result, the Company has
full valuation allowances against its deferred tax assets as of
March 31, 2020. This is due to a decrease in future estimated
taxable earnings primarily driven by lower crude oil prices. For
the fourth quarter of 2019 deferred income tax expense included a
reversal of the valuation allowance of $1.7 million of deferred tax
expense.
Response to COVID-19 Pandemic and Current Pricing
Environment
VAALCO remains committed to the health and safety of all its
employees and contractors. In response to the COVID-19 outbreak and
the current pricing environment, VAALCO has taken the following
measures:
-- Implemented stay-at-home initiatives for all but critical
staff and put into place social distancing measures;
-- Actively screening and monitoring employees and contractors
that come onto the Company's Gabon facilities including 14-day
quarantines and onsite medical supervision in accordance with
government guidelines;
-- Engaged in regular Company-wide COVID-19 updates to motivate
and retain employees and keep them informed of key
developments;
-- Implemented cost cutting measures with vendors;
-- Implemented sharing certain costs, such as shipping vessels,
helicopter, and personnel with other operators in the region;
-- Reduced director compensation by 25%, executive compensation
by 20% and certain non-executive employee compensation by an
average rate of 8%; and
-- Ceased or deferred discretionary capital spending.
VAALCO expects to continue to take proactive steps to manage any
disruption in its business caused by COVID-19 and to protect the
health and safety of its employees. As of May 11, 2020, VAALCO has
experienced no material impact on its Gabon operations directly
associated with COVID-19.
Capital Investments/Balance Sheet
For the first quarter of 2020, net capital expenditures totaled
$12.0 million on a cash basis and $9.4 million on an accrual basis.
Capital expenditures are primarily related to the 2019/2020
drilling program at Etame . The Company does not expect any
remaining material capital expenditures for the balance of
2020.
At the end of the first quarter, VAALCO had an unrestricted cash
balance of $61.0 million. The unrestricted cash balance includes
$11.3 million of cash attributable to non-operating joint venture
owner advances. Adjusted Working Capital at March 31, 2020 totaled
$25.8 million, an increase of $7.5 million since December 31,
2019.
Common Stock Repurchase Plan
Since inception of the stock repurchase program authorized by
the Board of Directors in June 2019, through March 31, 2020, the
Company purchased 2,549,639 shares at an average price of $1.75 for
$4.5 million. From April 1, 2020 through the settlement date of
April 2, 2020, the Company purchased 191,004 shares of its common
stock at an average price of $0.99 per share for an aggregate
purchase price of $0.2 million. These purchases have all been
funded using the Company's cash on hand. No purchases were made
after April 2, 2020, and on April 13, 2020, to preserve its cash
resources and liquidity, the Board of Directors approved
terminating the share repurchase program. The Company will continue
to review re-instituting a share repurchase program in the future
when commodity markets stabilize at higher levels.
Hedging
On May 6, 2019, the Company entered into commodity swaps at a
Dated Brent weighted average of $66.70 per barrel for the period
from and including July 2019 through June 2020 for an approximate
quantity of 500,000 barrels. These swaps settle on a monthly basis.
At March 31, 2020, the unexpired commodity swaps were for an
underlying quantity of 172,160 barrels and had a fair value asset
position of $7.3 million reflected in "Prepayments and other" line
of the consolidated balance sheet. Unless VAALCO enters into
additional hedges, after these derivative instruments expire in
June 2020, the Company will not have in place any derivative
instruments to hedge against declining oil prices.
2020 Guidance
To date, VAALCO's operations have not been materially impacted
by the worldwide COVID-19 pandemic. The Company's guidance excludes
any potential future impact not currently being experienced. VAALCO
currently estimates that the full year 2020 NRI production range
remains unchanged at 4,400 to 5,000 BOPD. For the second quarter of
2020, forecasted NRI production is expected to be between 5,000 and
5,400 BOPD. Sales NRI volumes for 2020 remain unchanged at an
estimated average of 4,400 to 5,000 BOPD. VAALCO has reacted
swiftly to the changing environment and is lowering its cost
estimates. The Company's production expense guidance (excluding
workovers) for full year 2020 has declined to $36 to $40 million or
$20.00 to $24.00 per NRI barrel of crude oil sales, with production
expense for the second quarter of 2020 projected to be between $9
and $10 million or $20.00 to $24.00 per NRI barrel of crude oil
sales. The Company forecasts between $10 and $12 million in cash
G&A expense for full year 2020. In addition, VAALCO has lowered
the range for workover expense to between $3 and $4 million for the
full year of 2020.
VAALCO incurred $9.4 million of capital expenditures on an
accrual basis and expects no material capital expenditures
remaining in 2020 after it released the Vantage drilling rig and
completed the 2019/2020 drilling campaign. Capital expenditures for
the full year are expected to be between $10 million and $12
million.
Inaugural Sustainability Report
The Company is pleased to announce that the 2019 Sustainability
Report, the Company's first such report, has been published and is
now available on its website.
Conference Call
As previously announced, the Company will hold a conference call
to discuss its fourth quarter financial and operating results May
12, 2020, at 9:00 a.m. Central Time (10:00 a.m. Eastern Time and
3:00 pm London Time). Interested parties may participate by dialing
(877) 270-2148. Parties in the United Kingdom may participate
toll-free by dialing 08082389064 and other international parties
may dial (412) 902-6510 . Participants should request to be joined
to the "VAALCO Energy First Quarter 2020 Conference Call." This
call will also be webcast on VAALCO's website at www.vaalco.com .
An archived audio replay will be available on VAALCO's website.
About VAALCO
VAALCO, founded in 1985, is a Houston, USA based, independent
energy company with production, development and exploration assets
in the West African region.
The Company is an established operator within the region,
holding a 31.1% working interest in the Etame Marin Block, located
offshore Gabon, which to date has produced over 114 million barrels
of crude oil and of which the Company is the operator.
For Further Information
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 / K elsey Traynor / James Husband VAALCO@buchanan.uk.com
Forward Looking Statements
This document includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements, other than statements of historical facts, included
in this document that address activities, events, plans,
expectations, objectives or developments that VAALCO expects,
believes or anticipates will or may occur in the future are
forward-looking statements. These statements may include statements
related to the impact of the COVID-19 pandemic, including the
recent sharp decline in the global demand for oil and the resulting
steep decline in oil prices, disruptions in global supply chains,
quarantines of our workforce or workforce reductions and other
matters related to the pandemic, well results, wells anticipated to
be drilled and placed on production, future levels of drilling and
operational activity and associated expectations, the
implementation of the Company's business plans and strategy,
prospect evaluations, prospective resources and reserve growth, the
Company's ability to regain compliance with the NYSE's continued
listing standards and the continued trading of the Company's common
stock on the NYSE, its activities in Equatorial Guinea, expected
sources of and potential difficulties in obtaining future capital
funding and future liquidity, the share repurchase program, its
ability to restore production in non-producing wells, future
operating losses, future changes in crude oil and natural gas
prices, future strategic alternatives, future acquisitions, capital
expenditures, future drilling plans, prospect evaluations,
negotiations with governments and third parties, timing of the
settlement of Gabon income taxes, expectations regarding processing
facilities, production, sales and financial projections and reserve
growth. These statements are based on assumptions made by VAALCO
based on its experience and perception of historical trends,
current conditions, expected future developments and other factors
it believes are appropriate in the circumstances. Such statements
are subject to a number of assumptions, risks and uncertainties,
many of which are beyond VAALCO's control. These risks include, but
are not limited to, crude oil and natural gas price volatility,
inflation, general economic conditions, the outbreak of COVID-19,
the Company's success in discovering, developing and producing
reserves, production and sales differences due to timing of
liftings, decisions by future lenders, the risks associated with
liquidity, lack of availability of goods, services and capital,
environmental risks, drilling risks, foreign regulatory and
operational risks, and regulatory changes.
Investors are cautioned that forward-looking statements are not
guarantees of future performance and that actual results or
developments may differ materially from those projected in the
forward-looking statements. VAALCO disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise.
References to thickness of crude oil pay or of a formation where
evidence of hydrocarbons have been encountered is not necessarily
an indicator that hydrocarbons will be recoverable in commercial
quantities or in any estimated volume. Well test results should be
considered as preliminary and not necessarily indicative of
long-term performance or of ultimate recovery. Well log
interpretations indicating crude oil accumulations are not
necessarily indicative of future production or ultimate
recovery.
Inside Information
This announcement contains inside information as defined in
Regulation (EU) No. 596/2014 on market abuse ("MAR") and is made in
accordance with the Company's obligations under article 17 of
MAR.
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
March 31, 2020 December 31, 2019
---------------- -------------------
ASSETS (in thousands)
Current assets:
Cash and cash equivalents $ 60,973 $ 45,917
Restricted cash 994 911
Receivables:
Trade - 14,335
Accounts with joint venture owners, net of allowance of $0.0
million and $0.5 million, respectively 117 2,714
Other 2,241 1,517
Crude oil inventory 3,865 1,072
Prepayments and other 10,859 3,292
------------
Total current assets 79,049 69,758
------------ ---------------
Crude oil and natural gas properties and equipment - successful efforts
method:
Wells, platforms and other production facilities 442,866 422,651
Work-in-progress - 7,378
Undeveloped acreage 21,476 23,771
Equipment and other 9,367 11,157
------------ ---------------
473,709 464,957
Accumulated depreciation, depletion, amortization and impairment (430,209) (396,699)
------------ ---------------
Net crude oil and natural gas properties, equipment and other 43,500 68,258
------------ ---------------
Other noncurrent assets:
Restricted cash 925 925
Value added tax and other receivables, net of allowance of $1.7 million
and $1.0 million,
respectively 3,543 3,683
Right of use operating lease assets 30,448 33,383
Deferred tax assets - 24,159
Abandonment funding 11,227 11,371
------------ ---------------
Total assets $ 168,692 $ 211,537
------------ ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 14,804 $ 15,897
Accounts with joint venture owners 11,271 -
Accrued liabilities and other 22,990 29,773
Operating lease liabilities - current portion 12,050 11,990
Foreign taxes payable 4,177 5,740
Current liabilities - discontinued operations 395 350
------------ ---------------
Total current liabilities 65,687 63,750
------------ ---------------
Asset retirement obligations 16,421 15,844
Operating lease liabilities - net of current portion 18,379 21,371
Deferred tax liabilities 11,758 -
Other long term liabilities 34 852
------------ ---------------
Total liabilities 112,279 101,817
------------ ---------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $25 par value; 500,000 shares authorized, none issued - -
Common stock, $0.10 par value; 100,000,000 shares authorized,
67,799,100 and 67,673,787 shares
issued, 57,632,974 and 58,024,571 shares outstanding, respectively 6,780 6,767
Additional paid-in capital 73,681 73,549
Less treasury stock, 10,166,126 and 9,649,216 shares, respectively, at
cost (42,081) (41,429)
Retained earnings 18,033 70,833
------------ ---------------
Total shareholders' equity 56,413 109,720
------------ ---------------
Total liabilities and shareholders' equity $ 168,692 $ 211,537
------------ ---------------
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended
-----------------------------------------------------------
March 31, 2020 March 31, 2019 December 31, 2019
-------------------- ---------------- -------------------
(in thousands except per share amounts)
Revenues:
Crude oil and natural gas sales $ 18,389 $ 19,765 $ 21,923
Operating costs and expenses:
Production expense 9,749 8,219 9,815
Depreciation, depletion and amortization 3,103 1,553 2,112
Impairment of proved crude oil and natural gas
properties 30,625 - -
Gain on revision of asset retirement obligations - - (379)
General and administrative expense 754 4,439 2,950
Bad debt (recovery) expense and other 810 (29) (371)
--- --------------- --- ----------- ---------------
Total operating costs and expenses 45,041 14,182 14,127
Other operating expense, net (31) (37) (20)
--- --------------- --- ----------- ---------------
Operating income (26,683) 5,546 7,776
--- --------------- --- ----------- ---------------
Other income (expense):
Derivative instruments gain (loss), net 7,339 (1,912) (2,712)
Interest income, net 116 187 152
Other, net (31) (238) 83
--- --------------- --- ----------- ---------------
Total other income (expense), net 7,424 (1,963) (2,477)
--- --------------- --- ----------- ---------------
Income from continuing operations before income
taxes (19,259) 3,583 5,299
Income tax expense 33,478 2,753 4,248
--- --------------- --- ----------- ---------------
Income (loss) from continuing operations (52,737) 830 1,051
Income (loss) from discontinued operations, net of
tax (63) 5,671 (37)
--- --------------- --- ----------- ---------------
Net income (loss) $ (52,800) $ 6,501 $ 1,014
--- --------------- --- ----------- ---------------
Basic net income (loss) per share:
Income (loss) from continuing operations $ (0.91) $ 0.01 $ 0.02
Income (loss) from discontinued operations, net
of tax 0.00 0.09 0.00
--- --------------- --- ----------- ---------------
Net income (loss) per share $ (0.91) $ 0.10 $ 0.02
--- --------------- --- ----------- ---------------
Basic weighted average shares outstanding 57,975 59,630 58,212
--- --------------- --- ----------- ---------------
Diluted net income (loss) per share:
Income (loss) from continuing operations $ (0.91) $ 0.01 $ 0.02
Income (loss) from discontinued operations, net
of tax 0.00 0.09 0.00
--- --------------- --- ----------- ---------------
Net income (loss) per share $ (0.91) $ 0.10 $ 0.02
--- --------------- --- ----------- ---------------
Diluted weighted average shares outstanding 57,975 60,683 59,136
--- --------------- --- ----------- ---------------
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
--------------------------------
2020 2019
------------------ ------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (52,800) $ 6,501
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
(Income) loss from discontinued operations 63 (5,671)
Depreciation, depletion and amortization 3,103 1,553
Impairment of proved crude oil and natural gas properties 30,625 -
Other amortization 60 60
Deferred taxes 35,638 1,742
Unrealized foreign exchange gain (22) (12)
Stock-based compensation (2,569) 1,723
Derivatives instruments (gain) loss (7,339) 1,912
Cash settlements received on matured derivative contracts, net 718 1,131
Bad debt (recovery) expense and other 810 (29)
Other operating loss, net 31 37
Operational expenses associated with equipment and other 578 (109)
Change in operating assets and liabilities:
Trade receivables 14,335 2,871
Accounts with joint venture owners 13,812 4,986
Other receivables (755) 311
Crude oil inventory (2,793) (489)
Prepayments and other (993) (202)
Value added tax and other receivables (370) 738
Accounts payable (1,130) (3,923)
Foreign taxes payable (1,284) 1,037
Accrued liabilities and other (2,073) (581)
-------------- -----------
Net cash provided by continuing operating activities 27,645 13,586
-------------- -----------
Net cash used in discontinued operating activities (18) (101)
-------------- -----------
Net cash provided by operating activities 27,627 13,485
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (11,980) (788)
-------------- -----------
Net cash used in continuing investing activities (11,980) (788)
-------------- -----------
Net cash used in discontinued investing activities - -
-------------- -----------
Net cash used in investing activities (11,980) (788)
-------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock - 47
Treasury shares (652) (105)
-------------- -----------
Net cash used in continuing financing activities (652) (58)
-------------- -----------
Net cash used in discontinued financing activities - -
-------------- -----------
Net cash used in financing activities (652) (58)
-------------- -----------
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 14,995 12,639
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 59,124 46,655
-------------- -----------
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT OF PERIOD $ 74,119 $ 59,294
-------------- -----------
VAALCO ENERGY, INC AND SUBSIDIARIES
Selected Financial and Operating Statistics
(Unaudited)
Three Months Ended
-------------------------------------------------------
March 31, 2020 March 31, 2019 December 31, 2019
---------------- ---------------- -------------------
NRI SALES DATA:
Crude oil (MBbls) 294 297 318
Average daily sales volumes (bbls/day) 3,231 3,300 3,457
NRI PRODUCTION DATA
Crude oil (MBbls) 450 315 337
Average daily production volumes (bbls/day) 4,944 3,496 3,664
AVERAGE SALES PRICES:
Crude oil (MBbls) $ 59.54 $ 64.17 $ 65.80
COSTS AND EXPENSES (PER BOPD OF SALES):
Production expense $ 33.16 $ 27.67 $ 30.86
Production expense, excluding workovers* 23.39 27.30 30.70
Depreciation, depletion and amortization 10.55 5.23 6.64
General and administrative expense** 2.56 14.95 9.28
Property and equipment expenditures, cash basis (in
thousands) $ 11,980 $ 788 $ 6,966
*Workover costs excluded from the three months ended March 31,
2020 and 2019 and December 31, 2019 are $2.8 million, $0.1 million
and none, respectively.
**General and administrative expenses include $ (8.74), $5.80
and $2.31 barrel of oil of sales of stock-based compensation
expense in the three months ended March 31, 2020, and 2019 and
December 31, 2019, respectively.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDAX is a supplemental non-GAAP financial measure
used by VAALCO's management and by external users of the Company's
financial statements, such as industry analysts, lenders, rating
agencies, investors and others who follow the industry as an
indicator of the Company's ability to internally fund exploration
and development activities and to service or incur additional debt.
Adjusted EBITDAX is a non-GAAP financial measure and as used herein
represents net income before discontinued operations, interest
income (expense) net, income tax expense, depletion, depreciation
and amortization, exploration expense, non-cash and other items
including stock compensation expense and unrealized commodity
derivative loss.
Management uses Adjusted Net Income (Loss) to evaluate operating
and financial performance and believes the measure is useful to
investors because it eliminates the impact of certain noncash
and/or other items that management does not consider to be
indicative of the Company's performance from period to period.
Management also believes this non-GAAP measure is useful to
investors to evaluate and compare the Company's operating and
financial performance across periods, as well as facilitating
comparisons to others in the Company's industry.
Management uses Adjusted Working Capital as a measurement tool
to assess the working capital position of the Company's continuing
operations excluding leasing obligations because it eliminates the
impact of discontinued operations as well as the impact lease
liabilities. Under the new leasing standard, lease liabilities
related to assets used in joint operations include both the
Company's share of expenditures as well as the share of lease
expenditures which its non-operator joint venture owners' will be
obligated to pay under joint operating agreements.
Adjusted EBITDAX and Adjusted Net Income (Loss) have significant
limitations, including that they do not reflect the Company's cash
requirements for capital expenditures, contractual commitments,
working capital or debt service. Adjusted EBITDAX and Adjusted Net
Income (Loss) should not be considered as substitutes for net
income (loss), operating income (loss), cash flows from operating
activities or any other measure of financial performance or
liquidity presented in accordance with GAAP. Adjusted EBITDAX and
Adjusted Net Income (Loss) exclude some, but not all, items that
affect net income (loss) and operating income (loss) and these
measures may vary among other companies. Therefore, the Company's
Adjusted EBITDAX and Adjusted Net Income (Loss) may not be
comparable to similarly titled measures used by other
companies.
The tables below reconcile the most directly comparable GAAP
financial measures to Adjusted Net Income (Loss), Adjusted EBITDAX
and Working Capital from Continuing Operations.
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Three Months Ended
-------------------------------------------------------
Reconciliation of Net Income (Loss) to Adjusted Net
Income (Loss) March 31, 2020 March 31, 2019 December 31, 2019
---------------- ---------------- -------------------
Net income (loss) $ (52,800) $ 6,501 $ 1,014
Adjustment for discrete items:
Discontinued operations, net of tax 63 (5,671) 37
Impairment of proved crude oil and natural gas
properties 30,625 - -
Unrealized derivative instruments (gain) loss (6,621) 3,043 3,095
Deferred income tax expense 35,638 1,742 1,755
Other operating income, net 31 37 20
Gain on revision of asset retirement obligations - - (379)
------------ ------------ --- --------------
Adjusted Net Income $ 6,936 $ 5,652 $ 5,542
------------ ------------ --- --------------
Three Months Ended
-------------------------------------------------------
Reconciliation of Net Income (Loss) to Adjusted
EBITDAX March 31, 2020 March 31, 2019 December 31, 2019
---------------- ---------------- -------------------
Net income (loss) $ (52,800) $ 6,501 $ 1,014
Add back:
Impact of discontinued operations 63 (5,671) 37
Interest income, net (116) (187) (152)
Income tax expense 33,478 2,753 4,248
Depreciation, depletion and amortization 3,103 1,553 2,112
Impairment of proved crude oil and natural gas
properties 30,625 - -
Non-cash or unusual items:
Stock-based compensation (2,569) 1,723 736
Unrealized derivative instruments (gain) loss (6,621) 3,043 3,095
Other operating expense, net 31 37 20
Gain on revision of asset retirement obligations - - (379)
Bad debt (recovery) recovery and other 810 (29) (371)
------------ ------------ --- --------------
Adjusted EBITDAX $ 6,004 $ 9,723 $ 10,360
------------ ------------ --- --------------
Reconciliation of Working Capital to Adjusted Working
Capital March 31, 2020 December 31, 2019 Change
---------------- ------------------- ---------
Current assets $ 79,049 $ 69,758 $ 9,291
Current liabilities (65,687) (63,750) (1,937)
Operating lease liabilities - current portion 12,050 11,990 60
Current liabilities - discontinued operations 395 350 45
------------ --------------- --------
Current liabilities from continuing operations, excluding
leases (53,242) (51,410) (1,832)
Adjusted Working Capital $ 25,807 $ 18,348 $ 7,459
------------ --------------- --------
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
QRFSFASIEESSEDI
(END) Dow Jones Newswires
May 12, 2020 02:00 ET (06:00 GMT)
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