REG - Vaalco Energy Inc - SECOND QUARTER 2024 RESULTS
07/08/2024 07:30
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RNS Number : 5187Z Vaalco Energy Inc 07 August 2024
Exhibit 99.1
VAALCO ENERGY, INC. ANNOUNCES
SECOND QUARTER 2024 RESULTS
HOUSTON - August 7, 2024 - VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY)
("VAALCO" or the "Company") today reported operational and financial results
for the second quarter of 2024.
Second Quarter 2024 Highlights and Recent Key Items:
● Closed the accretive all cash acquisition of Svenska Petroleum Exploration AB
("Svenska") for a net purchase price of $40.2 million;
● Updated third-party reserve engineer's calculation of proved
reserves as of December 31, 2023 for Svenska that shows significant increase
of SEC proved reserves to 16.9 million barrels of oil equivalent ("MMBOE")
(93% oil);
● Realized a $19.9 million bargain purchase gain on the transaction;
● Reported strong Q2 2024 net income of $28.2 million ($0.27 per diluted
share) and, Adjusted Net Income((1)) of $22.6 million ($0.22 per diluted
share);
● Increased Adjusted EBITDAX((1)) by 17% to $72.5 million compared to Q1 2024,
driven by sales increase associated with Côte d'Ivoire lifting in May
following the closing of the Svenska acquisition;
● Achieved production of 20,588 net revenue interest ("NRI")((2)) barrels of
oil equivalent per day ("BOEPD") and working interest ("WI")((3)) production
of 25,411 BOEPD; second quarter 2024 included new production of 3,329 NRI
BOEPD (3,329 WI BOEPD) from Côte d'Ivoire;
● Delivered better than expected results from the Canadian drilling program with
three wells averaging 30 day initial production ("IP")(1) rates of 464
barrels of oil per day ("BOPD"), significantly increasing the liquid ratio in
Canada;
● Reported NRI sales of 1,764,000 barrels of oil equivalent ("BOE"), or
19,386 BOEPD, above the midpoint of guidance; and 18% above the first
quarter of 2024 due to the Côte d'Ivoire lifting;
● Posted unrestricted cash of $62.9 million which is after $40.2 million paid
for the Svenska acquisition, $6.5 million paid for quarterly dividend and
$32.5 million in cash capital spending for the quarter;
● Received $8 million payment post quarter-end of back dated accounts
receivables ("AR") in Egypt from EGPC. And, in July, written confirmation
that the invoice was recognized in their June Accounts Payable as owed to us
for our Merged Concession effective date adjustment;
● Settled $30.2 million in foreign income taxes for Gabon through the government
taking its oil in-kind during a Q2 2024 lifting; and
● Announced quarterly cash dividend of $0.0625 per share of common stock to be
paid on September 20, 2024.
(1) Adjusted EBITDAX, Adjusted Net Income, Adjusted Working Capital and Free Cash
Flow(2) are Non-GAAP financial measures and are described and reconciled to
the closest GAAP measure in the attached table under "Non-GAAP Financial
Measures."
(2) All NRI production rates are VAALCO's working interest volumes less royalty
volumes, where applicable.
(3) All WI production rates and volumes are VAALCO's working interest volumes,
where applicable.
1
George Maxwell, VAALCO's Chief Executive Officer commented, "We had another
strong quarter operationally and financially, closed on a highly accretive
acquisition and continue to focus on profitably generating cash flow to fund
future projects, while maintaining our commitment to meaningful shareholder
returns through our quarterly dividend policy. We are very pleased with the
solid results from our Canadian drilling program, which improved our liquid
mix considerably in the second quarter as we had three of the four wells come
in with higher-than-expected IP30 rates. We closed the Côte d'Ivoire
transaction on April 30, had a lifting there in May and collected payment in
June."
"Looking at our highly accretive Côte d'Ivoire acquisition, we recognized a
$19.9 million non-cash bargain purchase gain, which benefited our second
quarter earnings, but it's the strategic opportunities that provide VAALCO
another strong asset to support future growth that we are most excited about.
We are very pleased with the results of our third-party reserve engineer's
calculation of proved reserves as of December 31, 2023 that shows even greater
reserves than we initially disclosed, up approximately 30% from our initial
disclosure. This strategic and highly cost-effective acquisition
strategically expands our West African focus area with a sizeable producing
asset that has significant upside potential and considerable future
development opportunities in Côte d'Ivoire, a well-established and
investment-friendly country."
"The focus for the second half of 2024 will be the preparation for major
projects expected to deliver a step-change in organic growth across the
portfolio in 2025. We expect to see an increase in capex investment through
the second half of the year associated with these numerous projects including
the drilling campaign in Gabon and the FPSO upgrade in Cote d'Ivoire. We are
excited about the future and plan to continue to generate strong operational
cash flow to fund our impressive organic opportunities moving forward, while
continuing to return capital to our shareholders through the quarterly
dividend."
Operational Update
Egypt
VAALCO focused on enhancing production in the first half of 2024 through a
series of planned workovers, as well as through interventions using the OGS-10
rig. VAALCO finalized the K-81 recompletion at the start of the first quarter
which was a carry-over from its 2023 drilling activity. The EA-55 well,
drilled in October 2023, was fracked and put online in January 2024. Three
additional workover recompletions were completed in the second quarter with
one more in progress. With the low cost of workovers, the well economics are
strongly positive.
A summary of the Egyptian workover campaign's impact in the first half of 2024
is presented below:
VAALCO Egypt 2024 Workover Wells
Well Workover date Type Completion Zone Perforation Interval (ft) IP-30 Rate (BOPD)
K-81 1-Jan-24 Recompletion Asl-D 13.1 154
EA-55 10-Jan-24 Frac & Complete Redbed Hydraulic Frac 143
H-22 7-Feb-24 Recompletion Yusr-A 9.8 82
K-65_ST1 14-Feb-24 Recompletion Asl-D 13.1 43*
K-85 16-Mar-24 Recompletion Asl-D 13.1 420
K-84 27-Mar-24 Recompletion Asl-G 16.4 58*
K-74 3-Apr-24 Water Shut-off Recompletion Asl-A 8.2 108
K-77 7-Apr-24 Recompletion Asl-A 26.2 100
K-84 13-Jun-24 Recompletion Asl-D 19.7 430
K-80 19-Jun-24 Recompletion Asl-D 13.1 188
*Production as of June 30, 2024 - Sand production - Possible Sand Screen
Required
Canada
The 2024 drilling campaign commenced in January 2024 with the drilling of
9-12-30-4W5, which was spud on January 17, 2024. The first well was drilled
to a total depth of 22,732 feet. The second well of the program, 10-12-30-4W5,
was spud on February 9, 2024, and drilled to a total depth of 21,736 feet. The
third well on the program, 11-12-30-4W5 was spud on February 23, 2024, and
drilled to a total depth of 21,624 feet. The fourth well on the program
1-18-30-3W5 was spud on March 9, 2024, and drilled to a total depth of 20,669
feet. The drilling rig was released on March 24, 2024.
Completion of the wells began in late March and was completed in April. By
early May all wells were on production with strong initial rates as noted
below:
VAALCO Canada 2024 Wells
Well Spud date Net Pay (ft) Penetrated Pay Zones Completion Zone Perforation Interval (ft) IP-30 Rate (BOEPD)
09-12-30-4W5 1/17/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium 115 Stg x 15T Hydraulic Fracture Treatment 479
10-12-30-4W5 2/22/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium 100 Stg x 15T Hydraulic Fracture Treatment 469
11-12-30-4W5 2/23/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium 108 Stg x 15T Hydraulic Fracture Treatment 444
1-18-30-3W5 9/3/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium 106 Stg x 15T Hydraulic Fracture Treatment 182
2
Gabon
VAALCO is currently finalizing locations and planning for the next drilling
campaign at Etame that is expected to occur early in 2025. In October 2022,
VAALCO successfully completed its transition to a Floating Storage and
Offloading vessel ("FSO") and related field reconfiguration processes. This
project provides a low cost FSO solution that increases the storage capacity
for the Etame block and improved operational performance. The Company
continues to emphasize operational excellence, production uptime and
enhancement in 2024 to minimize decline until the next drilling campaign.
The focus is on the continued production optimization of the new flow line
configurations through the Etame Facility, for final processing before being
pumped to the FSO. This continued optimization and understanding of the
post-reconfiguration process dynamics of the Etame platform, have resulted in
a very high uptime of the Etame Facility.
Côte d'Ivoire
Prior to closing of the acquisition, at the beginning of Q2 2024, production
was shut in due to the planned field maintenance shutdown. The Baobab
production shutdown took place successfully and as per plan between March 21,
2024 and April 13, 2024. All nine operational production wells were
successfully restarted in mid-April with flush production rates of just over
21,000 BOEPD, which has since stabilized to around 18,000 BOEPD.
During the second quarter, one lifting took place in May of 655,715 gross
barrels or 211,294 net barrels to VAALCO, achieving a price of $81.70 per
barrel.
Work with Modec, the operator of the Baobab Floating Production and Offloading
Vessel ("FPSO"), on the drydocking project for the FPSO, projected to be
offline in 2025, continued in the second quarter of 2024. The operator
is currently preparing detailed project timetable and costings for the
partners and regulator; however preliminary work including the execution of
a letter of intent with Modec on April 4, 2024 which covers the key
contracts to be executed, including vessel purchase, EPC, and O&M
amendments, as well as selection of the disconnect and reconnect contractor,
and support for the revised yard bid from Dubai dry docks among other
activities. Additionally, in the second quarter of 2024, the outstanding tank
inspections continued in preparation for the dry dock.
3
Financial Update - Second Quarter of 2024
VAALCO reported net income of $28.2 million ($0.27 per diluted share) for the
second quarter of 2024 which was up significantly compared with net income
of $7.7 million ($0.07 per diluted share) in the first quarter of 2024 and
up compared to $6.8 million ($0.06 per diluted share) in the second quarter
of 2023. The increase in earnings is driven by the non-cash bargain purchase
gain on the acquisition, increased sales associated with Côte d'Ivoire and
was partially offset by increased production expense.
Adjusted EBITDAX totaled $72.5 million in the second quarter of 2024, an
increase from $61.7 million in the first quarter of 2024 and from $65.3
million generated in the same period in 2023. The increase was primarily
due to additional sales volumes from Côte d'Ivoire.
Quarterly Summary - Sales and Net Revenue
$ in thousands Three Months Ended June 30, 2024 Three Months Ended March 31, 2024
Gabon Egypt Canada Côte d'Ivoire Total Gabon Egypt Canada Côte d'Ivoire Total
Oil Sales 62,327 65,314 9,547 17,240 154,428 64,788 63,192 4,153 - 132,133
NGL Sales - - 1,922 - 1,922 - - 1,977 - 1,977
Gas Sales - - 384 - 384 - - 820 - 820
Gross Sales 62,327 65,314 11,854 17,240 156,734 64,788 63,192 6,951 - 134,931
Selling Costs & carried interest - (117 ) (318 ) - (435 ) 1,174 (111 ) (143 ) - 920
Royalties & taxes (8,653 ) (29,716 ) (1,152 ) - (39,521 ) (8,458 ) (26,120 ) (1,118 ) - (35,696 )
Net Revenue 53,674 35,481 10,384 17,240 116,778 57,504 36,961 5,690 - 100,155
Oil Sales MMB (working interest) 759 953 130 211 2,053 770 950 61 - 1,781
Average Oil Price Received $ 82.13 $ 68.52 $ 73.52 $ 81.70 $ 75.22 $ 84.19 $ 66.52 $ 67.83 - $ 74.21
Change 1 %
Average Brent Price - - - $ 84.65 - - - $ 83.00
Change 2 %
Gas Sales MMCF (working interest) - - 423 423 - - 469 469
Average Gas Price Received - - $ 0.91 $ 0.91 - - $ 1.75 $ 1.75
Change -48 %
Average Aeco Price ($USD) - - $ 0.84 $ 0.84 - - $ 1.46 $ 1.46
Change -42 %
NGL Sales MMB (working interest) - - 76 76 - - 76 76
Average Liquids Price Received - - $ 25.16 $ 25.16 - - $ 25.98 $ 25.98
Change -3 %
Revenue and Sales Q2 2024 Q2 2023 % Change Q2 2024 vs. Q2 2023 Q1 2024 % Change Q2 2024 vs. Q1 2024
Production (NRI BOEPD) 20,588 19,676 5 % 16,848 22 %
Sales (NRI BOE) 1,764,000 1,803,000 (2 )% 1,490,000 18 %
Realized commodity price ($/BOE) $ 66.05 $ 59.37 11 % $ 66.43 (1 )%
Commodity (Per BOE including realized commodity derivatives) $ 66.03 $ 59.34 11 % $ 66.41 (1 )%
Total commodity sales ($MM) $ 116.5 $ 109.2 7 % $ 100.2 16 %
VAALCO had net revenues increase by $16.0 million or 16% as total NRI
sales volumes of 1,764,000 BOE was higher than Q1 2024 and decreased 2%
compared to 1,803,000 BOE for Q2 2023. Q2 2024 NRI sales were toward the
upper end of VAALCO's guidance. The Company expects third quarter 2024 NRI
sales to be between 21,700 and 24,000 BOEPD, reflecting the addition of the
Côte d'Ivoire volume for an entire quarter.
Q2 2024 realized pricing (net of royalties) was virtually flat compared to
Q1 2024 and 11% higher compared to Q2 2023.
4
Costs and Expenses Q2 2024 Q2 2023 % Change Q2 2024 vs. Q2 2023 Q1 2024 % Change Q2 2024 vs. Q1 2024
Production expense, excluding offshore workovers and stock comp ($MM) $ 52.4 $ 38.8 35 % $ 32.1 63 %
Production expense, excluding offshore workovers ($/BOE) $ 29.70 $ 21.51 38 % $ 21.58 38 %
Offshore workover expense ($MM) $ 0.1 $ (0.2 ) 134 % $ (0.1 ) - %
Depreciation, depletion and amortization ($MM) $ 33.1 $ 38.0 (13 )% $ 25.8 28 %
Depreciation, depletion and amortization ($/BOE) $ 18.78 $ 21.10 (11 )% $ 17.33 8 %
General and administrative expense, excluding stock-based compensation ($MM) $ 6.6 $ 4.8 38 % $ 5.9 14 %
General and administrative expense, excluding stock-based compensation ($/BOE) $ 3.8 $ 2.70 40 % $ 3.9 (4 )%
Stock-based compensation expense ($MM) $ 0.9 $ 0.6 50 % $ 0.9 - %
Current income tax expense (benefit) ($MM) $ 13.3 $ 12.4 7 % $ 25.7 (48 )%
Deferred income tax expense (benefit) ($MM) $ (4.0 ) $ (0.8 ) 405 % $ (3.4 ) 17 %
Total production expense (excluding offshore workovers and stock compensation)
of $52.4 million in Q2 2024 was an increase compared to Q1 2024 and an
increase compared to the same period in 2023. The increase in Q2 2024 was
primarily driven by a non-cash purchase price adjustment for the Svenska
acquisition flowing through production expense and increased operating
expenditure associated with the addition of Côte d'Ivoire in the
quarter. VAALCO has seen withholding tax, inflationary and industry supply
chain pressure on personnel and contractor costs.
Q2 2024 had minimal offshore workover expense and was equal to workover
expense in Q1 2024.
Q2 2024 production expense per BOE, excluding offshore workover expense,
increased to $29.70 per BOE which was higher than Q2 2023 and Q1
2024 primarily due to the increased costs associated with the non-cash
purchase price adjustment for the Svenska acquisition.
DD&A expense for Q2 2024 was $33.1 million which was higher than
$25.8 million in Q1 2024 and lower than $38.0 million in Q2 2023. The
increase in Q2 2024 DD&A expense compared to Q1 2024 is due primarily
to increased depletion associated with the addition of Côte d'Ivoire. The
decrease in Q2 2024 DD&A expense compared to Q2 2023 is due to lower
depletable costs in Gabon, Egypt, and Canada partially offset by higher
depletable costs in Côte d'Ivoire.
General and administrative ("G&A") expense, excluding stock-based
compensation, increased to $6.6 million in Q2 2024 from $5.9 million in
Q1 2024 and $4.8 million in Q2 2023. The increase in general and
administrative expenses compared to Q2 2023 and Q1 2024 is primarily due to
higher professional service fees, salaries and wages, and accounting and
legal fees due to growth due to the acquisition. Q2 2024 cash G&A was
within the Company's guidance and nearly flat compared to Q1 2024 on a per
barrel basis.
Non-cash stock-based compensation expense was $0.9 million for
Q2 2024 compared to $0.6 million for Q2 2023. Non-cash stock-based
compensation expense for Q1 2024 was $0.9 million.
Other income (expense), net, was an expense of $2.0 million for Q2 2024,
compared to an expense of $0.5 million during Q2 2023 and an expense of
$1.8 million for Q1 2024. Other income (expense), net, normally consists
of foreign currency losses. Also included in Q2 2024 amount are $1.8 million
in transaction costs related to the Svenska acquisition.
Foreign income taxes for Gabon are settled by the government taking oil
in-kind. Q2 2024 income tax expense was an expense of $9.3 million and is
comprised of current tax expense of $13.3 million and deferred tax
benefit of $4.0 million. Current quarter tax was impacted by non-deductible
items (such as the Svenska transaction costs) and the change in market value
of tax barrels due to Gabon State mark-to-market at quarter
end. Q1 2024 income tax expense was an expense of $22.2 million. This was
comprised of $25.7 million of current tax expense and a deferred tax benefit
of $3.4 million. Q2 2023 income tax expense was an expense of $11.6
million. This was comprised of $12.4 million of current tax expense and a
deferred tax benefit of $0.8 million. For all periods, VAALCO's overall
effective tax rate was impacted by non-deductible items associated with tax
rates in foreign jurisdictions higher than the US statutory rate and by
non-deductible items associated with operations.
5
Financial Update - First Six Months of 2024
WI Sales for the first six months of 2024 increased to 4,134 MBOE compared
to 3,438 MBOE in the first six months of 2023. The increase was driven
primarily by the Côte d'Ivoire acquisition. Crude oil sales are a function
of the number and size of crude oil liftings in each quarter and do not always
coincide with volumes produced in any given period.
The average realized crude oil price for the first six months of 2024 was
$74.75 per barrel, representing an increase of 8.0% from $69.28 realized in
the first six months of 2023. This increase in crude oil price reflects the
increase in commodity pricing over the past year.
The Company reported net income for the six months ended June 30, 2024 of
$35.8 million, which compares to $10.2 million for the same period of 2023.
The increase in net income for the six months ended June 30, 2024 compared
to the same period in 2023 was primarily due to the bargain purchase gain
related to the Svenska acquisition in April, as well as higher sales and
realized pricing.
Year to Date Summary - Sales and Net Revenue
$ in thousands Six Months Ended June 30, 2024 Six Months Ended June 30, 2023
Gabon Egypt Canada Côte d'Ivoire Total Gabon Egypt Canada Côte d'Ivoire Total
Oil Sales 127,115 128,506 13,700 17,240 286,561 130,079 104,822 14,979 - 249,880
NGL Sales - - 3,898 3,898 - - 4,348 4,348
Gas Sales - - 1,205 1,205 - - 1,661 1,661
Gross Sales 127,115 128,506 18,802 17,240 291,663 130,079 104,822 20,988 - 255,889
Selling Costs & carried interest 1,174 (228 ) (461 ) 485 2,212 (498 ) - 1,714
Royalties & taxes (17,111 ) (55,836 ) (2,269 ) (75,216 ) (17,630 ) (48,232 ) (2,098 ) - (67,960 )
Net Revenue 111,178 72,442 16,073 17,240 216,933 114,661 56,092 18,890 - 189,643
Oil Sales MMB (working interest) 1,528 1,903 191 211 3,834 1,641 1,750 216 - 3,607
Average Oil Price Received $ 83.17 $ 67.52 $ 71.70 $ 81.70 $ 74.75 $ 79.29 $ 59.89 $ 69.27 $ - $ 69.28
Change 8 %
Average Brent Price $ 83.83 $ 79.47
Change 5 %
Gas Sales MMCF (working interest) - - 892 892 - - 857 857
Average Gas Price Received - - $ 1.35 $ 1.35 - - $ 1.94 $ 1.94
Change -30 %
Average Aeco Price ($USD) $ 1.15 $ 1.15 $ 1.96 $ 1.96
Change -41 %
NGL Sales MMB (working interest) - - 152 152 - - 155 155
Average Liquids Price Received - - $ 25.63 $ 25.63 - - $ 28.08 $ 28.08
Change -9 %
Capital Investments/Balance Sheet
For the second quarter of 2024, net capital expenditures totaled $32.5 million
on a cash basis and $22.4 million on an accrual basis. These expenditures
were primarily related to costs associated with the development drilling
programs in Egypt and Canada.
At the end of the second quarter of 2024, VAALCO had an unrestricted cash
balance of $62.9 million. Working capital at June 30, 2024 was $31.2 million
compared with $45.7 million at December 31, 2023, while Adjusted Working
Capital((2)) at June 30, 2024 totaled $43.5 million.
In Egypt, the Company received written confirmation from EGPC that $51.7
million was recognized in their June Accounts Payable as owed to Company for
our Merged Concession effective date adjustment, from which they will offset
$11.2 million to satisfy any obligation of VAALCO or its subsidiaries in
connection with the TransGlobe combination. This allowance of $11.2 million is
fully covered in the 30(th) June 2024 Balance Sheet. Having this confirmation
from EGPC is an important step in the process of getting this paid.
Quarterly Cash Dividend
VAALCO paid a quarterly cash dividend of $0.0625 per share of common stock for
the second quarter of 2024 on June 21, 2024. The Company also announced its
next quarterly cash dividend of $0.0625 per share of common stock for the
third quarter of 2024 ($0.25 annualized), to be paid on September 20,
2024 to stockholders of record at the close of business on August
23, 2024. Future declarations of quarterly dividends and the establishment
of future record and payment dates are subject to approval by the VAALCO Board
of Directors (the "Board").
Svenska Acquisition
VAALCO closed its acquisition of Svenska for the net purchase price of
$40.2 million, on April 30, 2024 after certain regulatory and government
approvals were received.
Svenska's primary license interest is a 27.39% non-operated working interest
(30.43% paying interest) in the CI-40 license, which includes the producing
Baobab field, located in deepwater offshore Côte d'Ivoire. The field is
operated by CNR International, which holds a 57.61% working interest in the
project, with the national oil company, Petroci Holding, owning the remaining
15% working interest (10% of which is carried by the other license partners).
The CI-40 license has an initial term through mid-2028 with the contractual
option to extend the license term by 10 years to 2038, subject to certain
conditions. Production in the Baobab field was approximately 5,000 WI BOEPD,
with cumulative gross production from the field has been approximately 150
MMBOE, a portion of the estimated over one billion barrels of oil equivalent
volumes initially in place.
At the time of the initial announcement of the acquisition, VAALCO disclosed
that the transaction included estimated 1P WI CPR reserves, as of October 1,
2023, of 13.0 MMBOE (99% oil) and total 2P WI CPR reserves at October 1, 2023,
of 21.7 million MMBOE (97% oil). VAALCO at that time did not have a
calculation of SEC proved reserves as of December 31, 2023 but has since
worked with its third-party reserves auditors to calculate its SEC proved
reserves. VAALCO reported on July 16, 2024 that SEC net proved reserves as
of December 31, 2023 totaled 16.9 MMBOE and that 2P WI CPR reserves for
Svenska as of December 31, 2023 are estimated at 22.5 MMBOE. On a pro-forma
basis, this results in VAALCO's year-end 2023 pro-forma SEC net proved
reserves totaling 45.6 MMBOE, a 59% increase from its reported yearend 2023
SEC net proved reserves of 28.6 MMBOE. Utilizing the net cash purchase price
of $40.2 million, VAALCO paid approximately $2.37 per net proved barrel of
reserves.
CI-40 has a long history of production and significantly de-risked reservoirs.
With almost 20 years of production to date, the FPSO is planned to come off
station at the start of 2025 for planned maintenance and upgrade work to allow
the FPSO to continue to produce through the end of the expected extended field
license in 2038. The scope of work for the FPSO upgrade is currently being
finalized. Production on Baobab is expected to re-start in 2026 following the
FPSO work program. In addition, a fully appraised development drilling program
is expected to start in 2026, targeting the significant incremental probable
reserve base on the field. VAALCO sees reduced geological risk relating to
this drilling program and the joint venture partners have already commenced
the ordering of certain long-lead drilling items. Further future drilling
phases have not yet been sanctioned, but there is significant incremental
potential in both the Baobab field itself, as well as the nearby Kossipo
development, which has also been appraised by two wells drilled in 2002 and
2019.
In addition to the CI-40 license in Côte d'Ivoire, VAALCO currently owns a
21.05% working interest in the early stage Uge discovery in the OML 145
concession in Nigeria alongside partners ExxonMobil (21.05%), Chevron
(21.05%), Oando (21.05%) and NPDC (15.80%). There are minimal commitments on
this license interest and no drilling or development is currently planned.
6
Hedging
The Company continued to opportunistically hedge a portion of its expected
future production to lock in strong cash flow generation to assist in funding
its capital and shareholder returns programs.
The following includes hedges remaining in place as of the end of the
second quarter of 2024:
Settlement Period Type of Contract Index Average Monthly Volumes Weighted Average Put Price Weighted Average Call Price
(Bbls) (a) (per Bbl) (per Bbl)
July 2024 - September 2024 Collars Dated Brent 80,000 $ 65.00 $ 92.00
a) The premium for these options was $4.01 per barrel and was paid in October
2023.
Settlement Period Type of Contract Index Average Monthly Volumes Weighted Average Put Price
(Bbls) (per Bbl)
July 2024 - December 2024 Put Options Dated Brent 125,000 $ 65.00
Settlement Period Type of Contract Index Average Monthly Volumes Weighted Average SWAP Price in CAD
(GJ)(b) (per GJ)
November 2024 - March 2025 Swap AECO (7A) 67,000 $ 2.80
b) One gigajoule (GJ) equals one billion joules (J). A gigajoule of natural
gas is about 25.5 cubic metres at standard conditions.
2024 Guidance:
The Company has provided third quarter 2024 guidance and updated its full
year 2024 guidance. All of the quarterly and annual guidance is detailed in
the tables below.
FY 2024 Gabon Egypt Canada Côte d'Ivoire
Production (BOEPD) WI 23600 - 26500 8300 - 9600 9800 - 10600 2700 - 3200 2800 - 3100
Production (BOEPD) NRI 18900 - 21400 7200 - 8300 6700 - 7400 2200 - 2600 2800 - 3100
Sales Volume (BOEPD) WI 24300 - 27200 8300 - 9500 9800 - 10600 2700 - 3200 3500 - 3900
Sales Volume (BOEPD) NRI 19600 - 22200 7200 - 8300 6700 - 7400 2200 - 2600 3500 - 3900
Production Expense (millions) WI & NRI $174.0 - $189.0 MM
Production Expense per BOE WI $18.00 - $20.50
Production Expense per BOE NRI $22.00 - $26.00
Offshore Workovers (millions) WI & NRI $1 - $10 MM
Cash G&A (millions) WI & NRI $20.0 - $28.0 MM
CAPEX excluding acquisitions (millions) WI & NRI $115 - $140 MM
DD&A ($/BOE) NRI $16.00 - $20.00
Q3 2024 Gabon Egypt Canada Côte d'Ivoire
Production (BOEPD) WI 24900 - 27600 8300 - 9300 9700 - 10700 2700 - 3000 4200 - 4600
Production (BOEPD) NRI 20300 - 22800 7200 - 8200 6600 - 7500 2300 - 2500 4200 - 4600
Sales Volume (BOEPD) WI 26100 - 28700 7300 - 8000 9700 - 10700 2700 - 3000 6400 - 7000
Sales Volume (BOEPD) NRI 21700 - 24000 6400 - 7000 6600 - 7500 2300 - 2500 6400 - 7000
Production Expense (millions) WI & NRI $38.5 - $49.0 MM
Production Expense per BOE WI $14.50 - $21.00
Production Expense per BOE NRI $17.50 - $25.00
Offshore Workovers (millions) WI & NRI $0 - $0 MM
Cash G&A (millions) WI & NRI $4.5 - $6.5 MM
CAPEX excluding acquisitions (millions) WI & NRI $32 - $54 MM
DD&A ($/BOE) NRI $16.00 - $20.00
7
Conference Call
As previously announced, the Company will hold a conference call to discuss
its second quarter 2024 financial and operating results tomorrow, Wednesday,
August 7, 2024, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time and 4:00
p.m. London Time). Interested parties may participate by dialing (833)
685-0907. Parties in the United Kingdom may participate toll-free by dialing
08082389064 and other international parties may dial (412) 317-5741.
Participants should request to be joined to the "VAALCO Energy Second Quarter
2024 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.
A "Q2 2024 Supplemental Information" investor deck will be posted to
VAALCO's web site prior to its conference call on August 7, 2024 that
includes additional financial and operational information.
About VAALCO
VAALCO, founded in 1985 and incorporated under the laws of Delaware, is a
Houston, Texas, USA based, independent energy company with a diverse
portfolio of production, development and exploration assets across Gabon,
Egypt, Côte d'Ivoire, Equatorial Guinea and Canada.
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 / Barry Archer VAALCO@buchanan.uk.com
8
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) estimates
of future drilling, production, sales and costs of acquiring crude oil,
natural gas and natural gas liquids; (ii) expectations regarding VAALCO's
ability to effectively integrate assets and properties it has acquired as a
result of the Svenska acquisition into its operations; (iii) 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; (iv) expectations regarding
future acquisitions, investments or divestitures; (v) expectations of future
dividends; (vi) expectations of future balance sheet strength; and (vii)
expectations of future equity and enterprise value.
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: risks relating
to any unforeseen liabilities of VAALCO; the ability to generate cash flows
that, along with cash on hand, will be sufficient to support operations and
cash requirements; risks relating to the timing and costs of completion for
scheduled maintenance of the FPSO servicing the Baobab field; and the risks
described under the caption "Risk Factors" in VAALCO's 2023 Annual Report on
Form 10-K filed with the SEC on March 15, 2024 and subsequent Quarterly
Reports on Form 10-Q filed with the SEC.
Dividends beyond the third quarter of 2024 have not yet been approved or
declared by the Board of Directors for VAALCO. The declaration and payment of
future dividends 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. Consequently, in
determining the dividend to be declared and paid on VAALCO common stock, the
Board may revise or terminate the payment level at any time without prior
notice.
WI CPR Reserves
WI CPR reserves represent proved (1P) and proved plus probable (2P) estimates
as reported by Petroleum Development Consultants Limited 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.
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 a result, 1P and 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.
1P and 2P WI CPR reserves, as disclosed 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 1P
and 2P WI CPR pricing assumption was $79.79 per barrel of oil beginning in
2024, $69.79 in 2025, and inflating 2% thereafter;
● Lease operating expenses are typically not escalated under the SEC's rules,
while for the WI CPR reserves estimates, they are escalated at 2% annually
beginning in 2024.
Management uses 1P and 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 Svenska to
other companies. Management believes that the presentation of 1P and 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 reserve information to other London Stock Exchange-traded companies
that report similar measures. However, 1P and 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 VAALCO's SEC proved reserves and consider 1P and 2P WI CPR
reserves only supplementally.
9
Other Oil and Gas Advisories
Investors are cautioned when viewing BOEs in isolation. The Svenska reserves
estimates as of October 1, 2023 were calculated using a BOE conversion ratio
of six thousand cubic feet of natural gas to one barrel of oil equivalent (6
MCF: 1 Bbl). The Svenska reserves estimates as of December 31, 2023 were
calculated using a BOE conversion ratio of five thousand eight hundred cubic
feet of natural gas to one barrel of oil equivalent (5.8 MCF: 1 Bbl). BOE
conversion ratio is based on an energy equivalency conversion method primarily
applicable at the burner tip and does not represent a value equivalency at the
wellhead. Given that the value ratio based on the current price of crude oil
as compared to natural gas is significantly different from the energy
equivalencies described above, utilizing such equivalencies may be incomplete
as an indication of value.
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.
10
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
As of June 30, 2024 As of December 31, 2023
ASSETS (in thousands)
Current assets:
Cash and cash equivalents $ 62,890 $ 121,001
Restricted cash 139 114
Receivables:
Trade, net of allowances for credit loss and other of $0.2 and $0.5 million, 64,934 44,888
respectively
Accounts with joint venture owners, net of allowance for credit losses of $0.8 721 1,814
and $0.8 million, respectively
Egypt receivables and other, net of allowances for credit loss and other of 40,628 45,942
$11.2 and $4.6 million, respectively
Crude oil inventory 8,586 1,948
Prepayments and other 17,509 12,434
Total current assets 195,407 228,141
Crude oil, natural gas and NGLs properties and equipment, net 548,415 459,786
Other noncurrent assets:
Restricted cash 8,788 1,795
Value added tax and other receivables, net of allowances for credit loss and 6,109 4,214
other of $0.0 and $0.0 million, respectively
Right of use operating lease assets 580 2,378
Right of use finance lease assets 86,342 89,962
Deferred tax assets 64,859 29,242
Abandonment funding 6,268 6,268
Other long-term assets 1,216 1,430
Total assets $ 917,984 $ 823,216
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,605 $ 22,152
Accounts with joint venture owners 896 5,990
Accrued liabilities and other 116,006 67,597
Operating lease liabilities - current portion 574 2,396
Finance lease liabilities - current portion 11,751 10,079
Foreign income taxes payable 12,361 19,261
Total current liabilities 164,193 127,475
Asset retirement obligations 65,373 47,343
Operating lease liabilities - net of current portion - 33
Finance lease liabilities - net of current portion 74,388 78,293
Deferred tax liabilities 111,535 73,581
Other long-term liabilities 8,847 17,709
Total liabilities 424,336 344,434
Commitments and contingencies
Shareholders' equity:
Preferred stock, $25 par value; 500,000 shares authorized, none issued - -
Common stock, $0.10 par value; 160,000,000 shares authorized, 122,304,124 and 12,230 12,140
121,397,553 shares issued, 103,743,163 and 104,346,233 shares outstanding,
respectively
Additional paid-in capital 359,803 357,498
Accumulated other comprehensive income (642 ) 2,880
Less treasury stock, 18,560,961 and 17,051,320 shares, respectively, at cost (78,024 ) (71,222 )
Retained earnings 200,281 177,486
Total shareholders' equity 493,648 478,782
Total liabilities and shareholders' equity $ 917,984 $ 823,216
11
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, 2024 June 30, 2023 March 31, 2024 June 30, 2024 June 30, 2023
(in thousands except per share amounts)
Revenues:
Crude oil, natural gas and natural gas liquids sales $ 116,778 $ 109,240 $ 100,155 $ 216,933 $ 189,643
Operating costs and expenses:
Production expense 52,446 38,604 32,089 84,535 66,804
FPSO demobilization and other costs - 5,647 - - 5,647
Exploration expense - 57 48 48 65
Depreciation, depletion and amortization 33,132 38,003 25,824 58,956 62,420
General and administrative expense 7,591 5,395 6,710 14,301 10,619
Credit losses and other 3,341 680 1,812 5,153 1,615
Total operating costs and expenses 96,510 88,386 66,483 162,993 147,170
Other operating income (expense), net 132 (303 ) (166 ) (34 ) (303 )
Operating income 20,400 20,551 33,506 53,906 42,170
Other income (expense):
Derivative instruments gain (loss), net 257 31 (847 ) (590 ) 52
Interest expense, net (1,117 ) (1,703 ) (935 ) (2,052 ) (3,949 )
Bargain purchase gain 19,898 - - 19,898 -
Other income (expense), net (1,984 ) (539 ) (1,800 ) (3,784 ) (1,692 )
Total other income (expense), net 17,054 (2,211 ) (3,582 ) 13,472 (5,589 )
Income before income taxes 37,454 18,340 29,924 67,378 36,581
Income tax expense 9,303 11,588 22,238 31,541 26,359
Net income $ 28,151 $ 6,752 $ 7,686 $ 35,837 $ 10,222
Other comprehensive income (loss)
Currency translation adjustments (1,068 ) 2,006 (2,454 ) (3,522 ) 1,881
Comprehensive income $ 27,083 $ 8,758 $ 5,232 $ 32,315 $ 12,103
Basic net income (loss) per share:
Net income (loss) per share $ 0.27 $ 0.06 $ 0.07 $ 0.34 $ 0.10
Basic weighted average shares outstanding 103,528 106,965 103,659 103,594 107,175
Diluted net income (loss) per share:
Net income (loss) per share $ 0.27 $ 0.06 $ 0.07 $ 0.34 $ 0.09
Diluted weighted average shares outstanding 103,676 107,613 104,541 103,677 108,050
12
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
2024 2023
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 35,837 $ 10,222
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization 58,956 62,420
Bargain purchase gain (19,898 ) 1,412
Deferred taxes (7,407 ) 1,618
Unrealized foreign exchange loss (196 ) 313
Stock-based compensation 1,883 1,254
Cash settlements paid on exercised stock appreciation rights (154 ) (233 )
Derivative instruments (gain) loss, net 590 (52 )
Cash settlements paid on matured derivative contracts, net (33 ) (63 )
Cash settlements paid on asset retirement obligations (82 ) (374 )
Credit losses and other 5,474 1,615
Other operating loss, net 34 62
Operational expenses associated with equipment and other 1,029 (1,196 )
Change in operating assets and liabilities:
Trade, net (20,046 ) (5,208 )
Accounts with joint venture owners, net (4,603 ) 21,746
Egypt receivables and other, net 1,306 (1,868 )
Crude oil inventory 8,343 (7,465 )
Prepayments and other (3,829 ) (69 )
Value added tax and other receivables (2,007 ) (2,302 )
Other long-term assets 699 1,508
Accounts payable (727 ) (10,897 )
Foreign income taxes receivable/(payable) (6,563 ) 15,344
Deferred tax liability - (3,081 )
Accrued liabilities and other (27,211 ) (7,137 )
Net cash provided by (used in) operating activities 21,395 77,569
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (49,099 ) (54,832 )
Cash paid in business combination (40,166 ) -
Cash received in business combination 40,578 -
Net cash provided by (used in) investing activities (48,687 ) (54,832 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock 447 382
Dividend distribution (13,042 ) (13,452 )
Treasury shares (6,802 ) (11,403 )
Deferred financing costs (1 ) (30 )
Payments of finance lease (4,169 ) (3,379 )
Net cash provided by (used in) in financing activities (23,567 ) (27,882 )
Effects of exchange rate changes on cash (234 ) (285 )
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (51,093 ) (5,430 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 129,178 59,776
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 78,085 $ 54,346
13
VAALCO ENERGY, INC AND SUBSIDIARIES
Selected Financial and Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2024 June 30, 2023 March 31, 2024 June 30, 2024 June 30, 2023
NRI SALES DATA
Crude oil, natural gas and natural gas liquids sales (MBOE) 1,764 1,803 1,490 3,254 3,027
Average daily sales volumes (BOE) 19,386 19,813 16,374 17,881 16,724
WI PRODUCTION DATA
Etame Crude oil (MBbl) 780 934 819 1,599 1,876
Egypt Crude oil (MBbl) 953 1,054 950 1,903 1,957
Canada Crude Oil (MBbl) 130 123 61 191 216
Canada Natural Gas (Mcf) 423 442 469 892 857
Canada Natural Gas Liquid (MBOE) 76 78 76 152 155
Canada Crude oil, natural gas and natural gas liquids (MBOE) 277 275 215 492 514
Côte d'Ivoire Crude oil (MBbl) 303 - - 303 -
Total Crude oil, natural gas and natural gas liquids production (MBOE) 2,313 2,263 1,984 4,297 4,347
Gabon Average daily production volumes (BOEPD) 8,566 10,262 9,001 8,784 10,364
Egypt Average daily production volumes (BOEPD) 10,474 11,579 10,440 10,457 10,810
Canada Average daily production volumes (BOEPD) 3,041 3,021 2,363 2,702 2,839
Côte d'Ivoire Average daily production volumes (BOEPD) 3,329 - - 1,664 -
Average daily production volumes (BOEPD) 25,411 24,863 21,807 23,607 24,013
NRI PRODUCTION DATA
Etame Crude oil (MBbl) 678 812 713 1,391 1,632
Egypt Crude oil (MBbl) 643 726 641 1,284 1,342
Canada Crude Oil (MBbl) 117 113 51 169 195
Canada Natural Gas (Mcf) 381 406 392 787 773
Canada Natural Gas Liquid (MBOE) 69 72 63 134 140
Canada Crude oil, natural gas and natural gas liquids (MBOE) 250 253 179 429 464
Côte d'Ivoire Crude oil (MBbl) 303 - - 303 -
Total Crude oil, natural gas and natural gas liquids production (MBOE) 1,873 1,791 1,533 3,406 3,438
Gabon Average daily production volumes (BOEPD) 7,451 8,923 7,835 7,642 9,017
Egypt Average daily production volumes (BOEPD) 7,066 7,978 7,044 7,053 7,414
Canada Average daily production volumes (BOEPD) 2,742 2,776 1,971 2,356 2,563
Côte d'Ivoire Average daily production volumes (BOEPD) 3,329 - - 1,664 -
Average daily production volumes (BOEPD) 20,588 19,676 16,848 18,716 18,994
AVERAGE SALES PRICES:
Crude oil, natural gas and natural gas liquids sales (per BOE) - WI basis $ 70.92 $ 64.67 $ 69.62 $ 70.31 $ 65.41
Crude oil, natural gas and natural gas liquids sales (per BOE) - NRI basis $ 66.05 $ 59.37 $ 66.43 $ 66.22 $ 61.92
Crude oil, natural gas and natural gas liquids sales (Per BOE including $ 66.03 $ 59.34 $ 66.41 $ 66.21 $ 61.90
realized commodity derivatives)
COSTS AND EXPENSES (Per BOE of sales):
Production expense $ 29.74 $ 21.41 $ 21.54 $ 25.98 $ 22.07
Production expense, excluding offshore workovers and stock compensation* 29.68 21.51 21.56 25.96 22.48
Depreciation, depletion and amortization 18.78 21.08 17.33 18.12 20.62
General and administrative expense** 4.30 2.99 4.50 4.39 3.51
Property and equipment expenditures, cash basis (in thousands) $ 32,481 $ 27,132 $ 16,618 $ 49,099 $ 54,832
*Offshore workover costs excluded from the three months ended June 30,
2024 and 2023 and March 31, 2024 are $(0.1) million, $(0.2) million and
$(0.1) million, respectively.
*Stock compensation associated with production expense excluded from the three
months ended June 30, 2024 and 2023 and March 31, 2024 are immaterial.
**General and administrative expenses include $0.51, $0.33 and $0.60 per
barrel of oil related to stock-based compensation expense in the three
months ended June 30, 2024 and 2023 and March 31, 2024, respectively.
14
NON-GAAP FINANCIAL MEASURES
Management uses Adjusted Net Income to evaluate operating and financial
performance and believes the measure is useful to investors because it
eliminates the impact of certain non-cash and/or other items that management
does not consider to be indicative of the Company's performance from period to
period. Management also believes this non-GAAP measure is useful to investors
to evaluate and compare the Company's operating and financial performance
across periods, as well as facilitating comparisons to others in the Company's
industry. Adjusted Net Income is a non-GAAP financial measure and as used
herein represents net income before discontinued operations, impairment of
proved crude oil and natural gas properties, deferred income tax expense,
unrealized commodity derivative loss, gain on the Sasol Acquisition and
non-cash and other items.
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.
Management uses Adjusted Working Capital as a transition tool to assess the
working capital position of the Company's continuing operations excluding
leasing obligations because it eliminates the impact of discontinued
operations as well as the impact of lease liabilities. Under the lease
accounting standards, lease liabilities related to assets used in joint
operations include both the Company's share of expenditures as well as the
share of lease expenditures which its non-operator joint venture owners' will
be obligated to pay under joint operating agreements. Adjusted Working Capital
is a non-GAAP financial measure and as used herein represents working capital
excluding working capital attributable to discontinued operations and current
liabilities associated with lease obligations.
Management uses Free Cash Flow to evaluate financial performance and to
determine the total amount of cash over a specified period available to be
used in connection with returning cash to shareholders, and believes the
measure is useful to investors because it provides the total amount of net
cash available for returning cash to shareholders by adding cash generated
from operating activities, subtracting amounts used in financing and investing
activities, and adding back amounts used for dividend payments and stock
repurchases. Free Cash Flow is a non-GAAP financial measure and as used herein
represents net change in cash, cash equivalents and restricted cash and adds
the amounts paid under dividend distributions and share repurchases over a
specified period.
Free Cash Flow has significant limitations, including that it does not
represent residual cash flows available for discretionary purposes and should
not be used as a substitute for cash flow measures prepared in accordance with
GAAP. Free Cash Flow should not be considered as a substitute for cashflows
from operating activities before discontinued operations or any other
liquidity measure presented in accordance with GAAP. Free Cash Flow may vary
among other companies. Therefore, the Company's Free Cash Flow may not be
comparable to similarly titled measures used by other companies.
Adjusted EBITDAX and Adjusted Net Income have significant limitations,
including that they do not reflect the Company's cash requirements for capital
expenditures, contractual commitments, working capital or debt service.
Adjusted EBITDAX, Adjusted Net Income, Adjusted Working Capital and Free Cash
Flow should not be considered as substitutes for net income (loss), operating
income (loss), cash flows from operating activities or any other measure of
financial performance or liquidity presented in accordance with GAAP. Adjusted
EBITDAX and Adjusted Net Income exclude some, but not all, items that affect
net income (loss) and operating income (loss) and these measures may vary
among other companies. Therefore, the Company's Adjusted EBITDAX, Adjusted Net
Income, Adjusted Working Capital and Free Cash Flow may not be comparable to
similarly titled measures used by other companies.
15
The tables below reconcile the most directly comparable GAAP financial
measures to Adjusted Net Income, Adjusted EBITDAX, Adjusted Working Capital
and Free Cash Flow.
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
Reconciliation of Net Income to Adjusted Net Income June 30, 2024 June 30, 2023 March 31, 2024 June 30, 2024 June 30, 2023
Net income $ 28,151 $ 6,752 $ 7,686 $ 35,837 $ 10,222
Adjustment for discrete items:
Unrealized derivative instruments loss (gain) (266 ) (35 ) 823 557 (115 )
(Gain) /adjustment of acquisition price, net (19,898 ) 1,412 - (19,898 ) 1,412
FPSO demobilization - 5,647 - - 5,647
Deferred income tax expense (benefit) (2,021 ) (813 ) (3,441 ) (5,462 ) 1,658
Non-cash purchase price adjustment 14,981 - - 14,981 -
Transaction costs related to acquisition 1,762 - 1,313 3,075 303
Other operating (income) expense, net (132 ) 303 166 - -
Adjusted Net Income $ 22,577 $ 13,266 $ 6,547 $ 29,090 $ 19,127
Diluted Adjusted Net Income per Share $ 0.22 $ 0.12 $ 0.06 $ 0.28 $ 0.18
Diluted weighted average shares outstanding (1) 103,676 107,613 104,541 103,677 108,050
(1) No adjustments to weighted average shares outstanding
Three Months Ended Six Months Ended
Reconciliation of Net Income to Adjusted EBITDAX June 30, 2024 June 30, 2023 March 31, 2024 June 30, 2024 June 30, 2023
Net income $ 28,151 $ 6,752 $ 7,686 $ 35,837 $ 10,222
Add back:
Interest expense (income), net 1,117 1,703 935 2,052 3,949
Income tax expense (benefit) 9,303 11,588 22,238 31,541 26,359
Depreciation, depletion and amortization 33,132 38,003 25,824 58,956 62,420
Exploration expense - 57 48 48 65
FPSO demobilization - 5,647 - - 5,647
Non-cash or unusual items:
Stock-based compensation 984 605 899 1,883 1,254
Unrealized derivative instruments loss (gain) (266 ) (35 ) 823 557 (115 )
Bargain purchase gain (19,898 ) - - (19,898 ) 1,412
Other operating (income) expense, net (132 ) 303 166 34 303
Non-cash purchase price adjustment 14,981 - - 14,981 -
Transaction costs related to acquisition 1,762 - 1,313 3,075 -
Credit losses and other 3,341 680 1,812 5,153 1,615
Adjusted EBITDAX $ 72,475 $ 65,303 $ 61,744 $ 134,219 $ 113,131
16
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Reconciliation of Working Capital to Adjusted Working Capital As of June 30, 2024 As of December 31, 2023 Change
Current assets $ 195,407 $ 199,367 $ (3,960 )
Current liabilities (164,193 ) (153,703 ) (10,490 )
Working capital 31,214 45,664 (14,450 )
Add: lease liabilities - current portion 12,325 9,351 2,974
Add: current liabilities - discontinued operations - 673 (673 )
Adjusted Working Capital $ 43,539 $ 55,688 $ (11,476 )
Six Months Ended June 30, 2024
Reconciliation of Free Cash Flow
Net cash provided by Operating activities $ 21,395
Net cash used in Investing activities (49,099 )
Net cash used in Financing activities (23,567 )
Effects of exchange rate changes on cash (234 )
Total net cash change (51,505 )
Add back shareholder cash out:
Dividends paid 13,042
Stock buyback 5,502
Total cash returned to shareholders 18,544
Free Cash Flow $ (32,961 )
17
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. END IR QDLBBZVLFBBZRecent news on VAALCO Energy
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