VAALCO Energy, Inc. (NYSE: EGY) today reported operational and
financial results for the fourth quarter and full year of 2018.
Highlights and Recent Key
Items:
- Established a long-term time horizon for continued
growth in Gabon by extending the Etame Marin Production Sharing
Contract (“PSC”) for up to 20 more years;
- Produced 3,751 barrels of oil per day (“BOPD”) net and
sold 1.4 million barrels of oil (“MMBO”) net in full year 2018; in
the fourth quarter of 2018, production totaled 3,717 BOPD while
sales totaled 0.4 MMBO;
- Reported income from continuing operations of $10.5
million ($0.17 per diluted share) for the fourth quarter of 2018
and $98.7 million ($1.63 per diluted share) for the full year of
2018;
- Grew Adjusted EBITDAX to $16.9 million in the fourth
quarter of 2018 and $56.2 million for the full year of
2018;
- Increased year-end proved reserves 76% to 5.4 MMBO with
270% production replacement, while the present value discounted at
10% (“PV-10”) of those reserves grew to $80.1 million; increased
the year-end proved and probable (“2P”) reserves to 9.7 MMBO, and
their PV-10 to $131.9 million;
- Reported $29.7 million in Working Capital from
Continuing Operations.
For the fourth quarter of 2018, VAALCO reported
income from continuing operations of $10.5 million, or $0.17 per
diluted share. This included the impact from approximately
$5.6 million, or $0.09 per diluted share for non-cash
mark-to-market gains related to the Company’s crude oil swaps and
primarily non-cash gains for employee SARs of approximately $1.5
million, or $0.02 per diluted share. In the same period in
2017, the Company reported income from continuing operations of
$3.5 million, or $0.06 per diluted share, and in the third quarter
of 2018 reported income from continuing operations of $78.6
million, or $1.28 per diluted share. The average realized
price for crude oil in the fourth quarter of 2018 was $64.52 per
barrel, an increase of 8% from $59.89 per barrel in the fourth
quarter of 2017. In the third quarter of 2018, the average
realized price for crude oil was $75.40 per barrel.
Adjusted income from continuing operations for
the fourth quarter of 2018 totaled $19.8 million, or $0.32 per
diluted share, after adding back $9.3 million in non-cash deferred
income tax expense. In the same period in 2017, adjusted
income from operations was $2.3 million, or $0.04 per diluted
share, and in the third quarter of 2018 was $9.1 million, or $0.15
per diluted share. Adjusted EBITDAX totaled $16.9
million in the fourth quarter of 2018 compared with $3.9 million in
the same period of 2017, and $16.0 million in the third quarter of
2018.
Adjusted EBITDAX, Adjusted Income from
Continuing Operations and Working Capital from Continuing
Operations are Non-GAAP financial measures and are described and
reconciled to the closest GAAP measure in the attached table under
“Non-GAAP Financial Measures.” See “Supplemental Non-GAAP Financial
Measures” below regarding 2P reserves and PV-10.
Cary Bounds, VAALCO’s Chief Executive Officer
commented: “In 2018 we successfully secured and strengthened the
future for VAALCO by signing the Gabon PSC extension, paying off
all debt, substantially increasing reserves and generating
significant Adjusted EBITDAX. Operationally we continue to deliver
consistent and predictable production from our premier Etame asset,
which has enabled us to generate sufficient cash in 2018 to pay off
all of our debt and help fund our 2019 development drilling
program. Our 2018 year-end reserve report had substantial increases
in proved, probable and PV-10 value as a result of solid production
performance, the license extension and improved pricing.”
Bounds continued, “In 2019 we plan to drill up
to three development wells and two appraisal wellbores funded from
cash on hand and cash generated from operations. We are
excited about the significant long-term opportunities at Etame, and
we will look to repeat similar drilling programs multiple times and
continue adding reserves and production for many years to
come. We are poised financially and operationally to deliver
profitable growth and add meaningful value for our
shareholders.”
Gabon
PSC Extension. On September 25, 2018,
VAALCO together with the other joint owners in the Etame Main block
(“the Consortium”) received an implementing Presidential Decree
from the government of Gabon authorizing the PSC
Extension.
The PSC Extension extends the period for the
three Exclusive Exploitation Authorizations for a period of ten
years from September 17, 2018, the effective date of the PSC
Extension. Prior to the PSC Extension, the exploitation
periods for the three exploitation areas in the Etame Marin block
would begin expiring in June 2021. The PSC Extension also
grants the Consortium the right for two additional extension
periods of five years each. The PSC Extension further allows
the Consortium to explore the potential for resources in the
exploitation area as defined in the PSC Extension.
2019 Development Drilling Program. VAALCO
and its joint owners are moving forward with executing a
development drilling program in 2019. The Company is already in
discussions to secure a rig to drill up to three development wells
and two appraisal wellbores beginning in the second half of 2019
and finishing in the first quarter of 2020. The Company believes
that there is significant reserve upside associated with the two
appraisal wellbores as they may confirm 2.8 to 5.6 MMBO of
resources that could be converted into 2P reserves at year end
2019. The Company is forecasting that the 2019 drilling program
will be funded by cash on hand and cash generated from operations.
The current estimated net capital expenditure associated with this
drilling program is $25 million to $30 million.
Equatorial Guinea
VAALCO has a 31% working interest in an
undeveloped portion of a block offshore Equatorial Guinea that it
acquired in 2012 (the “Block P interest”). For a number of years,
the Block P interest was in suspension; however, in September 2018,
the Ministry of Mines and Hydrocarbons (“EG MMH”) lifted the
suspension. The Company is awaiting the EG MMH to approve
VAALCO’s appointment as technical operator for Block P.
Compania Nacional de Petroleos de Guinea Equatorial (“GEPetrol”)
will act as the administrative operator. Under the terms of
lifting of the suspension, by March 28, 2019 a new joint owner must
assume GEPetrol’s working interest obligations. If the joint
owner is approved, VAALCO intends to seek a partner on a promoted
basis that will cover all or substantially all of the cost to drill
an exploratory well required by the agreement. While there is
no monetary penalty for failing to meet the terms of the lifting of
the suspension, VAALCO would lose its interest in the license, and
the associated costs would become impaired. As of December
31, 2018, the Company had $10 million recorded for the book value
of the undeveloped leasehold costs associated with the Block P
license. VAALCO and its joint venture owners are evaluating
the timing and budgeting for development and exploration activities
under a development and production area in the block, including the
approval of a development and production plan. The production
sharing contract covering this development and production area
provides for a development and production period of 25 years from
the date of approval of a development and production plan.
Discontinued Operations –
Angola
The loss of $0.1 million from discontinued
operations for fourth quarter 2018 and $0.1 million in the fourth
quarter of 2017 was primarily related to ongoing administration
costs. VAALCO continues to negotiate with representatives of
Sonangol E&P to resolve the liability associated with the exit
from the Block 5 exploration area.
2018 Fourth Quarter Results
In the fourth quarter of 2018, production
totaled 3,717 BOPD compared with 3,957 BOPD in the fourth quarter
of 2017 and 4,120 BOPD in the third quarter of 2018. The fourth
quarter of 2018 was impacted primarily by a two-day field wide
shutdown for normal maintenance that temporarily reduced production
in the quarter by approximately 200 BOPD. Total oil and natural gas
sales for the fourth quarter of 2018 were $27.6 million, compared
to $17.2 million for the same period in 2017, and $25.3 million in
the third quarter of 2018. During the fourth quarter of 2018,
VAALCO sold approximately 401,000 net barrels of oil at an average
price of $64.52 per barrel, compared to 280,000 net barrels at an
average price of $59.89 per barrel in the fourth quarter of
2017. In the fourth quarter of 2018, VAALCO had multiple
liftings from its FPSO in December driving the increase in the
barrels sold.
Costs and Expenses
Total production expense, excluding workovers,
was $9.6 million, or $23.84 per barrel of oil of sales, in the
fourth quarter of 2018, compared to $8.2 million, or $29.12 per
barrel of oil of sales, in the fourth quarter of 2017, and $7.5
million, or $22.93 per barrel of oil of sales in the third quarter
of 2018. Workover costs totaled $(0.4) million, $3.4 million
and $(0.1) million in the quarters ended December 31, 2018,
December 31, 2017 and September 30, 2018, respectively.
Depreciation, depletion and amortization
(DD&A) expense was $2.3 million, or $5.75 per barrel of oil of
sales in the three months ended December 31, 2018 compared to $0.9
million, or $3.28 per barrel of oil in the comparable period in
2017, and $1.1 million, or $3.43 per barrel of oil in the third
quarter of 2018. The year over year increase in DD&A per
barrel of oil reflects an increase in depletable costs associated
with the PSC extension offset by a favorable impact of the upward
revisions to reserves at December 31, 2018.
General and administrative (G&A) expense,
excluding non-cash compensation, was $2.5 million, or $6.23 per
barrel of oil, in the fourth quarter of 2018 as compared to $1.5
million, or $5.36 per barrel of oil in the fourth quarter 2017 and
$1.8 million, or $5.47 per barrel of oil in the third quarter of
2018. G&A includes $ (1.5) million, $0.2 million, and $1.0
million of non-cash stock-based compensation expense for the
quarters ended December 31, 2018, December 31, 2017 and September
30, 2018, respectively. Stock-based compensation
expense related to SARs was $(1.5) million during the three months
ended December 31, 2018 as compared to $15 thousand in the
comparable 2017 period and $0.8 million in the third quarter of
2018.
Income tax expense for the fourth quarters of
2018 and 2017 was $11.3 million and $1.3 million respectively, and
$(62.2) million benefit in the third quarter of 2018. Income
tax expense (benefit) for the fourth quarter of 2018 includes a
$9.3 million non-cash deferred tax expense. The $62.2 million
benefit for the third quarter of 2018 includes a $66.2 million
non-cash deferred tax benefit primarily related to the recognition
of deferred tax assets and the reversal of valuation allowances on
other deferred tax assets. As a result of the PSC Extension,
the continuing higher oil prices and the production from planned
drilling in 2019, the ability to realize tax benefits has improved
significantly resulting in the recognition of the deferred tax
benefit in the third quarter of 2018. As a result of the 2017
tax legislation enacted in the U.S., the fourth quarter of 2017
included a $1.3 million non-cash deferred tax benefit related to
VAALCO’s AMT credit carryforwards. In addition to the
deferred taxes, the Company had a current tax provision of $2.0
million and $2.6 million during the fourth quarters of 2018 and
2017, and $4.0 million during the third quarter of 2018. The
current tax provision for the fourth quarter of 2018 includes
$(0.3) million for AMT credits as well as the benefit of the higher
cost recovery in Gabon as a result of the PSC Extension.
Offsetting this is higher income in Gabon as a result of higher
revenues.
As a result of differences between the book
basis attributable to leasehold costs incurred in connection with
the PSC Extension and the tax basis in these costs, a deferred tax
liability of $18.6 million should have been recorded in the third
quarter of 2018. To correct this error, VAALCO recorded an
adjustment as of September 30, 2018 through a restatement, which
resulted in an increase in capitalized oil and natural gas property
costs of $18.6 million and a decrease in deferred tax assets of
$18.6 million. This correction only impacted long-term assets
and had no impact on cash, total assets or working capital in the
Company’s consolidated balance sheet. This correction also
had no impact on the unaudited consolidated statements of income or
cash flows for the periods ended September 30, 2018.
Additional information regarding these accounting entries can be
found in the Company’s Form 8-K that was filed today.
Hedging
In order to limit VAALCO’s commodity price risk,
in 2018 the Company entered into commodity swaps at a Dated Brent
weighted average of $74.00 per barrel for the period from June 2018
through June 2019 for a quantity of approximately 400,000 barrels.
The Company recorded a gain of $6.3 million related to the
swaps during the fourth quarter of 2018 which was comprised of a
$5.6 million non-cash mark-to-market gain. The derivative
gain was included in “Other, net” in the Consolidated Statements of
Operations.
Year-End 2018 Reserves
VAALCO’s proved reserves at December 31, 2018
have increased by 76% to 5.4 MMBO consisting of 3.4 MMBO of proved
developed reserves and 2.0 MMBO of proved undeveloped reserves. The
Company’s reserves were fully engineered by its third-party
independent reserve consultant, Netherland, Sewell &
Associates, Inc., who has provided annual independent estimates of
VAALCO’s year-end reserves for over 15 years. In 2018, the Company
replaced 270% of production by adding a total of 3.7 MMBO of proved
reserves including 2.2 MMBO of proved reserves additions as a
result of extending the Etame Marin PSC in Gabon. VAALCO also added
1.1 MMBO of proved reserves as a result of improved reservoir
performance and another 0.4 MMBO of proved reserves as a result of
higher oil pricing. Year-end probable reserves have also increased
by 3.4 MMBO resulting in year-end 2018 proved and probable (“2P”)
reserves of 9.7 MMBO, an increase of 144% versus year-end
2017. This reserve growth occurred despite no capital being
spent on drilling new wells in 2018. VAALCO’s proved and probable
reserves are 100% oil attributable to the Etame Marin Permit area
offshore Gabon.
The PV-10 value of VAALCO’s proved reserves at
year-end 2018, utilizing SEC pricing of $70.83 per barrel of oil
(average of monthly Brent prices on the first of each month for
calendar year 2018), nearly quadrupled to $80.1 million from $22.5
million at December 31, 2017. The PV-10 value of VAALCO’s 2P
reserves at year-end 2018 utilizing SEC pricing increased by nearly
$100 million to $131.9 million from $33.9 million at year-end
2017.
|
|
Year End 2018 Proved
Reserves |
MMBO |
Proved Reserves at
December 31, 2017 |
3.0 |
|
2018
Production |
(1.4 |
) |
Additions
associated with the PSC Extension |
2.3 |
|
Revisions
of previous estimates |
1.5 |
|
Proved
Reserves at December 31, 2018 |
5.4 |
|
|
|
Probable
reserves (MBbls) |
4.3 |
|
Total
proved and probable reserves (MBbls) |
9.7 |
|
Capital Investments/Balance
Sheet
For the full year 2018, cash basis capital
expenditures totaled $14.1 million, primarily related to the $11.8
million signing bonus paid in connection with the PSC
Extension.
At the end of the fourth quarter, VAALCO had an
unrestricted cash balance of $33.4 million. The unrestricted
cash balance included $0.3 million of cash attributable to
non-operating joint venture owner advances. This does not
include an additional $0.8 million in restricted cash (related
primarily to deposits in Gabon) classified as current assets or the
additional $0.9 million of restricted cash classified as long
term. Working capital from continuing operations at December
31, 2018 totaled $29.7 million. Working capital included an
$11.6 million trade receivable due from oil sales in December 2018
that had not been converted to cash at year-end. Cash
receipts from the trade receivable were received in January
2019.
2019 Guidance
VAALCO currently estimates full year 2019
production to be between 3,300 and 3,900 BOPD, with production
during the first quarter of 2019 forecasted between 3,500 and 3,800
BOPD. Sales volumes for 2019 are currently estimated to average
3,400 to 3,800 BOPD. VAALCO’s production expense guidance
(excluding workovers) for full year 2019 is $36 to $42 million or
$26.00 to $30.00 per barrel, with production expense for the first
quarter of 2019 projected to be between $9 and $10 million or
$26.00 to $30.00 per barrel. The Company forecasts between $9 and
$10 million in cash G&A expense for full year 2019.
The Company is forecasting that the 2019
drilling program, which will include up to three development wells
and two appraisal wellbores, will be funded by cash on hand and
cash generated from operations. The current estimated net capital
expenditure range for 2019 primarily associated with this drilling
program is $20 million to $25 million. For the first quarter of
2019, VAALCO expects to spend minimal capital expenditures on some
long-lead items and maintenance capital, with a range of $3 million
to $4 million.
For 2019, the Company estimates that its
operational cash flow breakeven is about $37 per barrel of oil
sales while its corporate cash flow breakeven, excluding capital
expenditures, is about $47 per barrel of oil sales. At $60
realized prices, VAALCO realizes $19.60 per barrel in operational
margin and $11.00 per barrel in corporate cash flow. At $70
realized prices, VAALCO realizes $28.10 per barrel in operational
margin and $19.50 per barrel in free cash flow. The Company
estimates that each $5 increase in realized oil price increases
annual cash flow by approximately $6 million.
Investor Presentation
The Company will post an updated investor
presentation tomorrow morning before its conference call in the
Investor Relations and Media sections of its website at
www.vaalco.com.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its fourth quarter financial and
operating results tomorrow March 7, 2019, at 9:00 a.m. Central Time
(10:00 a.m. Eastern Time). Interested parties may participate by
dialing (844) 841-1668. International parties may dial (661)
378-9859. The confirmation code is 7395109. This call
will also be webcast on VAALCO’s website at www.vaalco.com.
An archived audio replay will be available on VAALCO’s
website.
Forward Looking Statements
This document includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
historical facts, included in this document that address
activities, events, plans, expectations, objectives or developments
that VAALCO expects, believes or anticipates will or may occur in
the future are forward-looking statements. These statements
may include amounts due in connection with the Company’s withdrawal
from Angola, expected sources of future capital funding and future
liquidity, future operating losses, future changes in oil and
natural gas prices, future strategic alternatives, capital
expenditures, future drilling plans, prospect evaluations,
negotiations with governments and third parties, timing of the
settlement of Gabon income taxes, expectations regarding processing
facilities, production, sales and financial projections, reserve
growth, and other issues related to VAALCO’s exit from
Angola. These statements are based on assumptions made by
VAALCO based on its experience and perception of historical trends,
current conditions, expected future developments and other factors
it believes are appropriate in the circumstances. Such
statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond VAALCO's control.
These risks include, but are not limited to, oil and gas price
volatility, inflation, general economic conditions, the Company's
success in discovering, developing and producing reserves,
production and sales differences due to timing of liftings,
decisions by future lenders, the risks associated with liquidity,
the risk that the negotiations with the government of the Republic
of Angola will be unsuccessful, lack of availability of goods,
services and capital, environmental risks, drilling risks, foreign
regulatory and operational risks, and regulatory changes.
These and other risks are further described in VAALCO's annual
report on Form 10-K for the year ended December 31, 2018, which it
expects will be filed soon, but not later than March 18, 2019, and
other reports filed with the SEC which can be reviewed at
http://www.sec.gov, or which can be received by contacting VAALCO
at 9800 Richmond Avenue, Suite 700, Houston, Texas 77042, (713)
623-0801. Investors are cautioned that forward-looking
statements are not guarantees of future performance and that actual
results or developments may differ materially from those projected
in the forward-looking statements. VAALCO disclaims any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events,
or otherwise.
About VAALCO
VAALCO Energy, Inc. is a Houston, Texas based
independent energy company principally engaged in the acquisition,
exploration, development and production of crude oil. VAALCO’s
strategy is to increase reserves and production through the
development and exploitation of international oil and natural gas
properties. The Company's properties and exploration acreage are
located primarily in Gabon and Equatorial Guinea in West
Africa.
Supplemental Non-GAAP Financial
Measure
PV-10 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 and using SEC pricing assumptions in effect at
the end of the period. PV-10 generally differs from standardized
measure, the most directly comparable GAAP financial measure,
because it does not include the effects 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 is the same as its standardized measure for the periods
presented herein. Neither PV-10 nor the standardized measure
purports to represent the fair value of the Company’s oil and
natural gas reserves.
VAALCO has provided summations of its proved and
probable reserves and summations of its PV-10 for its proved and
probable reserves 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. 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.
Investor ContactPhil
Patman 713-623-0801
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Balance
Sheets(unaudited)(in thousands, except share and per share
amounts)
|
|
|
|
|
|
|
|
|
December 31, |
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
33,360 |
|
|
$ |
19,669 |
|
Restricted cash |
|
|
804 |
|
|
|
842 |
|
Receivables: |
|
|
|
|
|
|
Trade |
|
|
11,907 |
|
|
|
3,556 |
|
Accounts
with joint venture owners, net of allowance of $0.5 million for
both years presented |
|
|
949 |
|
|
|
3,395 |
|
Other |
|
|
1,398 |
|
|
|
100 |
|
Crude oil
inventory |
|
|
785 |
|
|
|
3,263 |
|
Prepayments and other |
|
|
6,301 |
|
|
|
2,791 |
|
Current
assets - discontinued operations |
|
|
3,290 |
|
|
|
2,836 |
|
Total
current assets |
|
|
58,794 |
|
|
|
36,452 |
|
Oil and natural gas
properties and equipment - successful efforts method: |
|
|
|
|
|
|
Wells,
platforms and other production facilities |
|
|
409,487 |
|
|
|
389,935 |
|
Work-in-progress |
|
|
519 |
|
|
|
— |
|
Undeveloped acreage |
|
|
23,771 |
|
|
|
10,000 |
|
Equipment
and other |
|
|
9,552 |
|
|
|
9,432 |
|
|
|
|
443,329 |
|
|
|
409,367 |
|
Accumulated
depreciation, depletion, amortization and impairment |
|
|
(390,605 |
) |
|
|
(386,146 |
) |
Net oil
and natural gas properties, equipment and other |
|
|
52,724 |
|
|
|
23,221 |
|
Other noncurrent
assets: |
|
|
|
|
|
|
Restricted cash |
|
|
920 |
|
|
|
967 |
|
Value
added tax and other receivables, net of allowance of $2.0 million
and $6.5 million, respectively |
|
|
2,226 |
|
|
|
6,925 |
|
Deferred
tax assets |
|
|
40,077 |
|
|
|
1,260 |
|
Abandonment funding |
|
|
11,571 |
|
|
|
10,808 |
|
Total
assets |
|
$ |
166,312 |
|
|
$ |
79,633 |
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
8,083 |
|
|
$ |
11,584 |
|
Accounts
with joint venture owners |
|
|
304 |
|
|
|
— |
|
Accrued
liabilities and other |
|
|
14,138 |
|
|
|
12,991 |
|
Foreign
taxes payable |
|
|
3,274 |
|
|
|
— |
|
Current
portion of long term debt |
|
|
— |
|
|
|
6,666 |
|
Current
liabilities - discontinued operations |
|
|
15,245 |
|
|
|
15,347 |
|
Total
current liabilities |
|
|
41,044 |
|
|
|
46,588 |
|
Asset retirement
obligations |
|
|
14,816 |
|
|
|
20,163 |
|
Other long term
liabilities |
|
|
625 |
|
|
|
284 |
|
Long term debt,
excluding current portion, net |
|
|
— |
|
|
|
2,309 |
|
Total
liabilities |
|
|
56,485 |
|
|
|
69,344 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Shareholders’
equity: |
|
|
|
|
|
|
Preferred
stock, none issued, 500,000 shares authorized, $25 par value |
|
|
— |
|
|
|
— |
|
Common
stock, $0.10 par value; 100,000,000 shares authorized, 67,167,994
and 66,443,971 shares issued, 59,595,742 and 58,862,876 shares
outstanding, respectively |
|
|
6,717 |
|
|
|
6,644 |
|
Additional paid-in capital |
|
|
72,358 |
|
|
|
71,251 |
|
Less
treasury stock, 7,572,251 and 7,581,095 shares, respectively, at
cost |
|
|
(37,827 |
) |
|
|
(37,953 |
) |
Retained
earnings (deficit) |
|
|
68,579 |
|
|
|
(29,653 |
) |
Total
shareholders' equity |
|
|
109,827 |
|
|
|
10,289 |
|
Total
liabilities and shareholders' equity |
|
$ |
166,312 |
|
|
$ |
79,633 |
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Operations(unaudited)(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Year Ended |
|
|
December 31,2018 |
|
December 31,2017 |
|
September 30,2018 |
|
|
December 31,2018 |
|
December 31,2017 |
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and natural gas
sales |
|
$ |
27,606 |
|
|
$ |
17,156 |
|
|
$ |
25,266 |
|
|
|
$ |
104,943 |
|
|
$ |
77,025 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production expense |
|
|
9,157 |
|
|
|
11,549 |
|
|
|
7,481 |
|
|
|
|
40,415 |
|
|
|
39,697 |
|
Exploration expense |
|
|
2 |
|
|
|
3 |
|
|
|
— |
|
|
|
|
14 |
|
|
|
7 |
|
Depreciation, depletion and amortization |
|
|
2,307 |
|
|
|
918 |
|
|
|
1,130 |
|
|
|
|
5,596 |
|
|
|
6,457 |
|
Gain on
revision of asset retirement obligations |
|
|
— |
|
|
|
— |
|
|
|
(3,325 |
) |
|
|
|
(3,325 |
) |
|
|
— |
|
General
and administrative expense |
|
|
976 |
|
|
|
1,723 |
|
|
|
2,811 |
|
|
|
|
11,398 |
|
|
|
10,377 |
|
Bad debt
(recovery) expense and other |
|
|
(9 |
) |
|
|
220 |
|
|
|
(157 |
) |
|
|
|
(77 |
) |
|
|
452 |
|
Total
operating costs and expenses |
|
|
12,433 |
|
|
|
14,413 |
|
|
|
7,940 |
|
|
|
|
54,021 |
|
|
|
56,990 |
|
Other
operating income (expense), net |
|
|
33 |
|
|
|
(248 |
) |
|
|
(6 |
) |
|
|
|
365 |
|
|
|
(84 |
) |
Operating income |
|
|
15,206 |
|
|
|
2,495 |
|
|
|
17,320 |
|
|
|
|
51,287 |
|
|
|
19,951 |
|
Other
income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
128 |
|
|
|
(306 |
) |
|
|
111 |
|
|
|
|
(145 |
) |
|
|
(1,414 |
) |
Other,
net |
|
|
6,516 |
|
|
|
2,684 |
|
|
|
(1,029 |
) |
|
|
|
4,332 |
|
|
|
2,113 |
|
Total
other income (expense) |
|
|
6,644 |
|
|
|
2,378 |
|
|
|
(918 |
) |
|
|
|
4,187 |
|
|
|
699 |
|
Income from continuing
operations before income taxes |
|
|
21,850 |
|
|
|
4,873 |
|
|
|
16,402 |
|
|
|
|
55,474 |
|
|
|
20,650 |
|
Income tax expense
(benefit) |
|
|
11,346 |
|
|
|
1,339 |
|
|
|
(62,224 |
) |
|
|
|
(43,254 |
) |
|
|
10,378 |
|
Income from continuing
operations |
|
|
10,504 |
|
|
|
3,534 |
|
|
|
78,626 |
|
|
|
|
98,728 |
|
|
|
10,272 |
|
Loss from discontinued
operations |
|
|
(80 |
) |
|
|
(103 |
) |
|
|
(21 |
) |
|
|
|
(496 |
) |
|
|
(621 |
) |
Net income |
|
$ |
10,424 |
|
|
$ |
3,431 |
|
|
$ |
78,605 |
|
|
|
$ |
98,232 |
|
|
$ |
9,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss)
per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations |
|
$ |
0.17 |
|
|
$ |
0.06 |
|
|
$ |
1.31 |
|
|
|
$ |
1.65 |
|
|
$ |
0.17 |
|
Loss from
discontinued operations |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Net
income per share |
|
$ |
0.17 |
|
|
$ |
0.06 |
|
|
$ |
1.31 |
|
|
|
$ |
1.64 |
|
|
$ |
0.16 |
|
Basic
weighted average shares outstanding |
|
|
59,547 |
|
|
|
58,819 |
|
|
|
59,481 |
|
|
|
|
59,248 |
|
|
|
58,717 |
|
Diluted net income
(loss) per share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations |
|
$ |
0.17 |
|
|
$ |
0.06 |
|
|
$ |
1.28 |
|
|
|
$ |
1.63 |
|
|
$ |
0.17 |
|
Loss from
discontinued operations |
|
|
0.00 |
|
|
|
0.00 |
|
|
|
0.00 |
|
|
|
|
(0.01 |
) |
|
|
(0.01 |
) |
Net
income per share |
|
$ |
0.17 |
|
|
$ |
0.06 |
|
|
$ |
1.28 |
|
|
|
$ |
1.62 |
|
|
$ |
0.16 |
|
Diluted
weighted average shares outstanding |
|
|
60,445 |
|
|
|
58,819 |
|
|
|
60,818 |
|
|
|
|
59,997 |
|
|
|
58,720 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Cash Flows(unaudited)(in thousands)
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
2018 |
|
2017 |
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
$ |
98,232 |
|
|
$ |
9,651 |
|
Adjustments to reconcile
net income to net cash provided by (used in) operating
activities: |
|
|
|
|
|
|
Loss from
discontinued operations |
|
|
496 |
|
|
|
621 |
|
Depreciation, depletion and amortization |
|
|
5,596 |
|
|
|
6,457 |
|
Gain on
revision of asset retirement obligations |
|
|
(3,325 |
) |
|
|
— |
|
Other
amortization |
|
|
417 |
|
|
|
369 |
|
Deferred
taxes |
|
|
(56,907 |
) |
|
|
(1,260 |
) |
Unrealized foreign exchange (gain) loss |
|
|
834 |
|
|
|
(576 |
) |
Stock-based compensation |
|
|
2,306 |
|
|
|
1,098 |
|
Commodity
derivatives (gain) loss |
|
|
(3,520 |
) |
|
|
1,032 |
|
Cash
settlements (paid)/received on matured derivative contracts,
net |
|
|
(744 |
) |
|
|
195 |
|
Bad debt
(recovery) expense |
|
|
(77 |
) |
|
|
452 |
|
Other
operating (income) loss, net |
|
|
(570 |
) |
|
|
84 |
|
Operational expenses associated with equipment and other |
|
|
1,604 |
|
|
|
1,189 |
|
Change in
operating assets and liabilities: |
|
|
|
|
|
|
Trade
receivables |
|
|
(8,351 |
) |
|
|
3,195 |
|
Accounts
with joint venture owners |
|
|
2,747 |
|
|
|
(108 |
) |
Other
receivables |
|
|
(1,330 |
) |
|
|
(43 |
) |
Crude oil
inventory |
|
|
2,478 |
|
|
|
(2,350 |
) |
Prepayments and other |
|
|
420 |
|
|
|
1,646 |
|
Value
added tax and other receivables |
|
|
(777 |
) |
|
|
(3,025 |
) |
Accounts
payable |
|
|
(3,409 |
) |
|
|
(7,297 |
) |
Foreign
taxes payable |
|
|
2,751 |
|
|
|
— |
|
Accrued
liabilities and other |
|
|
(643 |
) |
|
|
2,050 |
|
Net cash
provided by (used in) continuing operating activities |
|
|
38,228 |
|
|
|
13,380 |
|
Net cash
provided by (used in) discontinued operating activities |
|
|
(1,052 |
) |
|
|
(4,423 |
) |
Net cash
provided by (used in) operating activities |
|
|
37,176 |
|
|
|
8,957 |
|
CASH FLOWS
FROM INVESTING ACTIVITIES: |
|
|
|
|
Acquisitions |
|
|
— |
|
|
|
64 |
|
Property
and equipment expenditures |
|
|
(14,127 |
) |
|
|
(1,813 |
) |
Proceeds
from the sale of oil and gas properties |
|
|
— |
|
|
|
250 |
|
Net cash
used in continuing investing activities |
|
|
(14,127 |
) |
|
|
(1,499 |
) |
Net cash
used in discontinued investing activities |
|
|
— |
|
|
|
— |
|
Net cash
used in investing activities |
|
|
(14,127 |
) |
|
|
(1,499 |
) |
CASH FLOWS
FROM FINANCING ACTIVITIES: |
|
|
|
|
Proceeds
from the issuances of common stock |
|
|
544 |
|
|
|
39 |
|
Treasury
shares |
|
|
(58 |
) |
|
|
(20 |
) |
Debt
repayment |
|
|
(9,166 |
) |
|
|
(10,001 |
) |
Borrowings |
|
|
— |
|
|
|
4,167 |
|
Net cash used in
continuing financing activities |
|
|
(8,680 |
) |
|
|
(5,815 |
) |
Net cash used in
discontinued financing activities |
|
|
— |
|
|
|
— |
|
Net cash used in
financing activities |
|
|
(8,680 |
) |
|
|
(5,815 |
) |
NET CHANGE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
|
14,369 |
|
|
|
1,643 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF YEAR |
|
|
32,286 |
|
|
|
30,643 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF YEAR |
|
$ |
46,655 |
|
|
$ |
32,286 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESSelected Financial and
Operating Statistics(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Year Ended |
|
|
December 31,2018 |
|
December 31,2017 |
|
September 30,2018 |
|
|
December 31,2018 |
|
December 31,2017 |
NET SALES DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbls) |
|
|
401 |
|
|
280 |
|
|
329 |
|
|
|
1,442 |
|
|
1,423 |
Average
daily sales volumes (bbls/day) |
|
|
4,359 |
|
|
3,043 |
|
|
3,576 |
|
|
|
3,951 |
|
|
3,899 |
NET PRODUCTION
DATA |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbls) |
|
|
342 |
|
|
364 |
|
|
379 |
|
|
|
1,369 |
|
|
1,518 |
Average
daily production volumes (bbls/day) |
|
|
3,717 |
|
|
3,957 |
|
|
4,120 |
|
|
|
3,751 |
|
|
4,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE SALES
PRICES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
($/Bbl) |
|
$ |
64.52 |
|
$ |
59.89 |
|
$ |
75.40 |
|
|
$ |
70.32 |
|
$ |
52.58 |
COSTS AND EXPENSES (PER
BOPD OF SALES): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production expense |
|
$ |
22.84 |
|
$ |
41.25 |
|
$ |
22.74 |
|
|
$ |
28.03 |
|
$ |
27.90 |
Production expense, excluding workovers* |
|
|
23.84 |
|
|
29.12 |
|
|
22.93 |
|
|
|
25.04 |
|
|
25.37 |
Depreciation, depletion and amortization |
|
|
5.75 |
|
|
3.28 |
|
|
3.43 |
|
|
|
3.88 |
|
|
4.54 |
General
and administrative expense** |
|
|
2.43 |
|
|
6.15 |
|
|
8.54 |
|
|
|
7.90 |
|
|
7.29 |
Property and equipment
expenditures, cash basis (in thousands) |
|
$ |
922 |
|
$ |
513 |
|
$ |
12,229 |
|
|
$ |
14,127 |
|
$ |
1,813 |
*Workover costs excluded from the three months ended December
31, 2018, December 31, 2017 and September 30, 2018 are $ (0.4)
million, $3.4 million and $ (0.1) million.**General and
administrative expenses include $ (3.71), $ 0.59 and $2.96 barrel
of oil of non-cash stock-based compensation expense in the three
months ended December 31, 2018, December 31, 2017 and September 30,
2018.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDAX is a supplemental non-GAAP
financial measure used by VAALCO’s management and by external users
of the Company’s financial statements, such as industry analysts,
lenders, rating agencies, investors and others who follow the
industry as an indicator of the Company’s ability to internally
fund exploration and development activities and to service or incur
additional debt. Adjusted EBITDAX is a non-GAAP financial measure
and as used herein represents net income before discontinued
operations, interest income (expense) net, income tax expense,
depletion, depreciation and amortization, impairment of proved
properties, exploration expense, non-cash and other items including
stock compensation expense and commodity derivative loss.
Adjusted EBITDAX has significant limitations,
including that it does not reflect the Company’s cash requirements
for capital expenditures, contractual commitments, working capital
or debt service. Adjusted EBITDAX should not be considered as a
substitute for net income (loss), operating income (loss), cash
flows from operating activities or any other measure of financial
performance or liquidity presented in accordance with GAAP.
Adjusted EBITDAX excludes some, but not all, items that affect net
income (loss) and operating income (loss) and these measures may
vary among other companies. Therefore, the Company’s Adjusted
EBITDAX may not be comparable to similarly titled measures used by
other companies.
The tables below reconcile the most directly comparable GAAP
financial measures to Adjusted EBITDAX, Adjusted Income from
Continuing Operations and Working Capital from Continuing
Operations.
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations of Non-GAAP
Measures(Unaudited)(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Year Ended |
Reconciliation
of Net income to Adjusted EBITDAX |
|
December 31,2018 |
|
December 31,2017 |
|
September 30,2018 |
|
|
December 31,2018 |
|
December 31,2017 |
Net income |
|
$ |
10,424 |
|
|
$ |
3,431 |
|
|
$ |
78,605 |
|
|
|
$ |
98,232 |
|
|
$ |
9,651 |
|
Add back: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impact of
discontinued operations |
|
|
80 |
|
|
|
103 |
|
|
|
21 |
|
|
|
|
496 |
|
|
|
621 |
|
Interest
expense (income), net |
|
|
(128 |
) |
|
|
306 |
|
|
|
(111 |
) |
|
|
|
145 |
|
|
|
1,414 |
|
Income
tax expense (benefit) |
|
|
11,346 |
|
|
|
1,339 |
|
|
|
(62,224 |
) |
|
|
|
(43,254 |
) |
|
|
10,378 |
|
Depreciation, depletion and amortization |
|
|
2,307 |
|
|
|
918 |
|
|
|
1,130 |
|
|
|
|
5,596 |
|
|
|
6,457 |
|
Exploration expense |
|
|
2 |
|
|
|
3 |
|
|
|
— |
|
|
|
|
14 |
|
|
|
7 |
|
Non-cash or unusual
items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(1,486 |
) |
|
|
165 |
|
|
|
973 |
|
|
|
|
2,306 |
|
|
|
1,098 |
|
Accrued
liabilities reversal |
|
|
— |
|
|
|
(2,614 |
) |
|
|
— |
|
|
|
|
— |
|
|
|
(2,614 |
) |
Commodity
derivative (gain) loss |
|
|
(5,584 |
) |
|
|
61 |
|
|
|
1,065 |
|
|
|
|
(3,520 |
) |
|
|
1,032 |
|
Equipment
recovery (disposal) |
|
|
(33 |
) |
|
|
— |
|
|
|
6 |
|
|
|
|
(365 |
) |
|
|
— |
|
Gain on
revision of asset retirement obligation |
|
|
— |
|
|
|
— |
|
|
|
(3,325 |
) |
|
|
|
(3,325 |
) |
|
|
— |
|
Bad debt
expense (recovery) and other |
|
|
(9 |
) |
|
|
220 |
|
|
|
(157 |
) |
|
|
|
(77 |
) |
|
|
452 |
|
Adjusted EBITDAX |
|
$ |
16,919 |
|
|
$ |
3,932 |
|
|
$ |
15,983 |
|
|
|
$ |
56,248 |
|
|
$ |
28,496 |
|
|
|
Three Months Ended |
|
|
|
Year Ended |
Reconciliation
of Income from Continuing Operations to Adjusted Income from
Continuing Operations |
|
December 31, 2018 |
|
|
December 31, 2017 |
|
September 30, 2018 |
|
|
December 31, 2018 |
|
December 31, 2017 |
Income from continuing
operations |
|
$ |
10,504 |
|
|
$ |
3,534 |
|
|
|
78,626 |
|
|
|
$ |
98,728 |
|
|
$ |
10,272 |
|
Adjustment for discrete
items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
income tax expense (benefit) |
|
|
9,284 |
|
|
|
(1,260 |
) |
|
|
(66,191 |
) |
|
|
|
(56,907 |
) |
|
|
(1,260 |
) |
Gain on
revision of asset retirement obligations |
|
|
— |
|
|
|
— |
|
|
|
(3,325 |
) |
|
|
|
(3,325 |
) |
|
|
— |
|
Adjusted income from
continuing operations |
|
$ |
19,788 |
|
|
$ |
2,274 |
|
|
$ |
9,110 |
|
|
|
$ |
38,496 |
|
|
$ |
9,012 |
|
|
|
December 31, |
|
|
|
Reconciliation
of changes in working capital from continuing
operations |
|
2018 |
|
|
2017 |
|
Change |
Current assets |
|
$ |
55,504 |
|
|
$ |
33,616 |
|
|
$ |
21,888 |
|
Current
liabilities |
|
|
25,799 |
|
|
|
31,241 |
|
|
|
(5,442 |
) |
Working capital from
continuing operations (1) |
|
$ |
29,705 |
|
|
$ |
2,375 |
|
|
$ |
27,330 |
|
- Excludes current assets and current liabilities attributable to
discontinued operations.
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