REG - Vaalco Energy Inc - FIRST QUARTER 2024 RESULTS
08/05/2024 07:00
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RNS Number : 5096N Vaalco Energy Inc 08 May 2024
VAALCO ENERGY, INC. ANNOUNCES
FIRST QUARTER 2024 RESULTS
HOUSTON - May 8, 2024 - VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) ("VAALCO"
or the "Company") today reported operational and financial results for the
first quarter of 2024.
First 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;
● Following the planned shutdown for maintenance in April, the
Baobab field is back on production with a current rate in excess of 5,000
VAALCO working interest ("WI")((1)) barrels of oil equivalent per day
("BOEPD") (99% oil);
● Strategically expands West African focus area with a sizeable
producing asset that has significant upside potential and future development
opportunities in Cote d'Ivoire, a well-established and investment-friendly
country;
● Reported Q1 2024 net income of $7.7 million ($0.07 per diluted share) and
Adjusted Net Income((2)) of $6.5 million ($0.06 per diluted share);
● Delivered strong Adjusted EBITDAX((2)) of $61.7 million and funded
$16.7 million in cash capital expenditures from cash on hand and cash from
operations;
● Achieved production of 16,848 net revenue interest ("NRI")((3)) BOEPD and
WI((1)) production of 21,807 BOEPD;
● Reported NRI sales of 1,490,000 barrels of oil equivalent ("BOE"),
or 16,373 BOEPD, near the high end of guidance;
● Posted unrestricted cash of $113.3 million after paying out $6.5 million in
dividends in the quarter and completing $5.5 million in share buybacks;
● Since inception of the share buyback program, VAALCO has purchased
approximately $30 million in shares; and
● Announced quarterly cash dividend of $0.0625 per share of common stock to be
paid on June 21, 2024.
(1) All WI production rates and volumes are VAALCO's working interest volumes,
where applicable
(2) Adjusted EBITDAX, Adjusted Net Income, Adjusted Working Capital and Free Cash
Flow are Non-GAAP financial measures and are described and reconciled to the
closest GAAP measure in the attached table under "Non-GAAP Financial
Measures."
(3) All NRI production rates are VAALCO's working interest volumes less royalty
volumes, where applicable
George Maxwell, VAALCO's Chief Executive Officer commented, "We continue to
deliver strong operational and financial results in line with or ahead of our
guidance. Sales for the first quarter were near the high end of guidance and
our costs were below the low end of guidance. Coupled with a strong pricing
environment, VAALCO was able to generate solid earnings and Adjusted EBITDAX.
We continued to return meaningful cash to our shareholders through our ongoing
dividend program. Additionally, we finalized the agreements in Equatorial
Guinea and are proceeding with our Front-End Engineering Design ("FEED")
study. We anticipate the completion of the FEED study will lead to an economic
Final Investment Decision ("FID") which will enable the development of the
Venus Plan of Development ("POD"). In April, we closed the all cash Svenska
acquisition, ahead of schedule, for a net purchase price of $40.2 million. It
has been a very productive start to 2024."
"We continue to enhance our diversified portfolio by building size and scale
that allows VAALCO to generate significant free cash flow and execute our
strategic vision. We are excited to be partnering with Petroci and CNR
International, and believe the Baobab field in Cote d'Ivoire is an outstanding
asset with significant upside potential. We have updated our full year 2024
guidance and released our second quarter guidance, both of which reflects the
positive impact to production and production expense per barrel, which should
lead to improved margins and greater Adjusted EBITDAX. As you can see, this
acquisition is highly accretive on key metrics to our shareholder base and
provides another strong asset to support future growth and returning value to
shareholders."
Operational Update
Egypt
VAALCO focused on enhancing production in the first quarter 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 fraced and put online in January 2024. Three
additional workover recompletions were completed in the first 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 Q1 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 21-Mar-24 Under WO Recompletion Asl-G 16.4 In Progress
Canada
The 2024 drilling campaign commenced in January with the drilling of
9-12-30-4W5, spud on January 17th. The 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 9th, and drilled to a total depth of 21,736 feet. The third well
of the program, 11-12-30-4W5 was spud on February 23rd, and drilled to a
total depth of 21,624 feet. The fourth well of the program was spud on
March 9th, and drilled to a total depth of 20,669 feet. Each of these wells
included a 2.75 mile lateral. The drilling rig was released on March 24th.
Completion of the wells was initiated in late March, and was completed in
April, followed by equipping and tie-in, with first production forecasted to
be in May 2024.
Gabon
VAALCO is currently finalizing locations and planning for the next drilling
campaign at Etame that is expected to occur late in 2024 and into 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 and, in turn, the complete Etame
field during the first quarter of 2024. Combining this with focus on
individual well and facility chemical injection optimization and facility
pipelines has provided more stable operations resulting in lower downtime.
Through the end of 2023 and in the first quarter of 2024, this continued to
be a focus with positive results in production rates and uptime.
Financial Update - First Quarter of 2024
VAALCO reported net income of $7.7 million ($0.07 per diluted share) for the
first quarter of 2024 which was down compared with net income of $44.0
million ($0.41 per diluted share) in the fourth quarter of 2023 and up
compared to $3.4 million ($0.03 per diluted share) in the first quarter of
2023. The decrease in earnings compared to the fourth quarter of 2023 is
mainly due to decreased sales revenue, increased depreciation, depletion and
amortization ("DD&A") expense, transaction costs, and higher credit
losses, partially offset by decreased production expense and lower income
taxes. The increase in earnings compared to the first quarter of 2023 is
primarily due to higher sales revenue due to increased volumes
partially offset by higher production expense, transaction costs, higher
DD&A expense, losses on derivatives and higher income taxes.
Adjusted EBITDAX totaled $61.7 million in the first quarter of 2024,
a decrease from $95.9 million in the fourth quarter of 2023, primarily due
to lower sales and commodity pricing. The increase in first quarter
2024 Adjusted EBITDAX to $61.7 million compared with $47.8 million,
generated in the same period in 2023, is primarily due to increased
revenue as a result of increased sales.
Quarterly Summary - Sales and Net Revenue
Three Months Ended Three Months Ended
$ in thousands March 31, 2024 December 31, 2023
Gabon Egypt Canada Total Gabon Egypt Canada Total
Oil Sales 64,788 63,192 4,153 132,133 100,398 79,043 5,476 184,917
NGL Sales - - 1,977 1,977 - - 2,019 2,019
Gas Sales - - 820 820 - - 818 818
Gross Sales 64,788 63,192 6,951 134,931 100,398 79,043 8,313 187,754
Selling Costs & carried interest 1,174 (111 ) (143 ) 920 1,711 - (702 ) 1,009
Royalties & taxes (8,458 ) (26,120 ) (1,118 ) (35,696 ) (13,699 ) (24,393 ) (1,517 ) (39,609 )
Net Revenue 57,504 36,961 5,690 100,155 88,410 54,650 6,094 149,154
Oil Sales MMB (working interest) 770 950 61 1,781 1,165 1,023 77 2,265
Average Oil Price Received $ 84.19 $ 66.52 $ 67.83 $ 74.21 $ 86.18 $ 77.27 $ 71.12 $ 81.65
Change -9 %
Average Brent Price $ 83.00 $ 84.01
Change -1 %
Gas Sales MMCF (working interest) - - 469 469 - - 471 471
Average Gas Price Received - - $ 1.75 $ 1.75 - - $ 1.74 $ 1.74
Change 1 %
Average Aeco Price ($USD) - - $ 1.46 $ 1.46 $ 1.86 $ 1.86
Change -22 %
NGL Sales MMB (working interest) - - 76 76 - - 80 80
Average Liquids Price Received - - $ 25.98 $ 25.98 - - $ 25.09 $ 25.09
Change 4 %
Revenue and Sales Q1 2024 Q1 2023 % Change Q1 2024 vs. Q1 2023 Q4 2023 % Change Q1 2024 vs. Q4 2023
Production (NRI BOEPD) 16,848 18,306 (8 )% 18,065 (7 )%
Sales (NRI BOE) 1,490,000 1,224,000 22 % 1,994,000 (25 )%
Realized commodity price ($/BOE) $ 66.43 $ 65.68 1 % $ 73.96 (10 )%
Commodity (Per BOE including realized commodity derivatives) $ 66.41 $ 65.63 1 % $ 73.89 (10 )%
Total commodity sales ($MM) $ 100.2 $ 80.4 25 % $ 149.2 (33 )%
VAALCO had net revenues decrease by $49.0 million or 33% as total NRI sales
volumes of 1,490,000 BOE was lower than Q4 2023 but rose 22% compared to
1,224,000 BOE for Q1 2023. Q1 2024 NRI sales were at the higher end of
VAALCO's guidance. The Company expects second quarter 2024 NRI sales to be
between 18,100 and 20,000 BOEPD, reflecting the addition of the Svenska
acquisition volume in May and June.
Q1 2024 realized pricing (net of royalties) was 10% lower compared to
Q4 2023 but slightly higher compared to Q1 2023.
Costs and Expenses Q1 2024 Q1 2023 % Change Q1 2024 vs. Q1 2023 Q4 2023 % Change Q1 2024 vs. Q4 2023
Production expense, excluding offshore workovers and stock comp ($MM) $ 32.1 $ 29.3 10 % $ 46.3 (31 )%
Production expense, excluding offshore workovers ($/BOE) $ 21.58 $ 23.90 (10 )% $ 23.27 (7 )%
Offshore workover expense ($MM) $ (0.1 ) $ (1.1 ) 93.5 % $ - - %
Depreciation, depletion and amortization ($MM) $ 25.8 $ 24.4 6 % $ 20.3 27 %
Depreciation, depletion and amortization ($/BOE) $ 17.3 $ 19.90 (13 )% $ 10.20 70 %
General and administrative expense, excluding stock-based compensation ($MM) $ 5.9 $ 4.6 27 % $ 6.1 (4 )%
General and administrative expense, excluding stock-based compensation ($/BOE) $ 3.9 $ 3.70 6 % $ 3.0 31 %
Stock-based compensation expense ($MM) $ 0.9 $ 0.6 50.0 % $ 0.9 - %
Current income tax expense (benefit) ($MM) $ 25.7 $ 12.3 109 % $ 14.3 80 %
Deferred income tax expense (benefit) ($MM) $ (3.4 ) $ 2.5 (238 )% $ (2.6 ) 32 %
Total production expense (excluding offshore workovers and stock compensation)
of $32.1 million in Q1 2024 was lower compared to Q4 2023 and slightly
higher than the same period in 2023. The decrease in Q1 2024 expense
compared to Q4 2023 was driven primarily by lower costs related to
lower sales volumes. The increase in Q1 2024 compared to Q1 2023 was
primarily driven by increased expense associated with higher sales as well as
higher costs associated with boats, diesel and operating costs. VAALCO has
seen withholding tax, inflationary and industry supply chain pressure on
personnel and contractor costs.
Q1 2024 had no offshore workovers, and the slightly negative workover
expense in Q1 2024 was the result of a reversal of accruals.
Q1 2024 production expense per BOE, excluding offshore workover expense,
decreased to $21.58 per BOE which was down compared with Q4 2023 and Q1
2023 partially due to the devaluation of the Egyptian pound on local costs and
lower engineering and maintenance spend mainly due to the timing of planned
projects partially offset by higher workover costs in Egypt.
DD&A expense for Q1 2024 was $25.8 million which was higher than
$20.3 million in Q4 2023 and higher than $24.4 million in Q1 2023. The
increase in Q1 2024 DD&A expense compared to Q4 2023 and Q1 2023 is
due to higher depletable costs in Gabon, Egypt, and Canada.
General and administrative ("G&A") expense, excluding stock-based
compensation, decreased to $5.9 million in Q1 2024 from $6.1 million in
Q4 2023 and increased from $4.6 million in Q1 2023. The increase in
general and administrative expenses compared to Q1 2023 is primarily due to
higher professional service fees, salaries and wages, and accounting and
legal fees. Q1 2024 cash G&A was within the Company's guidance. The
Company has made meaningful progress toward reducing absolute G&A costs
when compared against the combined TransGlobe and VAALCO Q1 2023 costs.
Non-cash stock-based compensation expense was $0.9 million for
Q1 2024 compared to $0.6 million for Q1 2023. Non-cash stock-based
compensation expense for Q4 2023 was $0.9 million.
Other income (expense), net, was an expense of ($0.5) million for Q1 2024,
compared to an expense of ($1.2) million during Q1 2023 and an expense of
($0.8) million for Q4 2023. Other income (expense), net, normally consists
of foreign currency losses.
Foreign income taxes for Gabon are settled by the government taking their oil
in-kind. Q1 2024 income tax expense was an expense of $22.2 million and is
comprised of current tax expense of $25.7 million and deferred tax benefit of
$3.4 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. Q4 2023 income tax
expense was an expense of $37.6 million. This was comprised of $41.1 million
of current tax expense and a deferred tax benefit of $3.5 million.
Q1 2023 income tax expense was an expense of $14.8 million. This was
comprised of $12.3 million of deferred tax expense and a current tax expense
of $2.5 million. For all periods, VAALCO's overall effective tax rate was
impacted by non-deductible items associated with derivative losses and
corporate expenses.
Capital Investments/Balance Sheet
For the first quarter of 2024, net capital expenditures totaled $16.6 million
on a cash basis and $24.0 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 first quarter of 2024, VAALCO had an unrestricted cash
balance of $113.3 million. Working capital at March 31, 2024 was $86.5
million compared with $100.7 million at December 31, 2023, while Adjusted
Working Capital((3)) at March 31, 2024 totaled $99.0 million.
Cash Dividend Policy and Share Buyback Authorization
VAALCO paid a quarterly cash dividend of $0.0625 per share of common stock for
the first quarter of 2024 on March 28, 2024. The Company also announced its
next quarterly cash dividend of $0.0625 per share of common stock for the
second quarter of 2024 ($0.25 annualized), to be paid on June 21, 2024 to
stockholders of record at the close of business on May 17, 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").
On November 1, 2022, VAALCO announced that its newly expanded Board formally
ratified and approved the share buyback program that was announced on August
8, 2022 in conjunction with the pending business combination with
TransGlobe. The Board also directed management to implement a Rule 10b5-1
trading plan to facilitate share purchases through open market purchases,
privately negotiated transactions, or otherwise in compliance with Rule 10b-18
under the Securities Exchange Act of 1934. The plan provided for an aggregate
purchase of currently outstanding common stock up to $30 million. Payment for
shares repurchased under the program were funded using the Company's cash on
hand and cash flow from operations. The share buyback program was completed on
March 12, 2024. Under the share buyback program, VAALCO purchased a total of
6,797,711 shares at an average price of $4.41 per share.
Svenska Acquisition
VAALCO closed its acquisition of Svenska for the net purchase price of
$40.2 million, on April 30, 2024 after 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 Cote 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. Current production from the Baobab field is approximately 5,000 WI
BOEPD, with 1P WI CPR reserves of 13.0 MMBOE (99% oil), and 2P WI CPR
reserves of 21.7 MMBOE (97% oil) as of October 1, 2023. These reserve figures
reflect currently sanctioned development activities; however, CI-40 has a
significant growth runway with incremental development potential on the Baobab
field, as well as the nearby Kossipo field, expected to provide a material
uplift to the reserve and production volumes, supporting long-term production
of the asset into the late 2030s. 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.
CI-40 has a long history of production and significantly de-risked reservoirs.
With almost 20 years of production to date, the floating, production, storage
and offloading vessel ("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 Cote d'Ivoire, Svenska 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.
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 first
quarter of 2024:
Settlement Period Type of Contract Index Average Monthly Volumes Weighted Average Put Price Weighted Average Call Price
(Bbls) (per Bbl) (per Bbl)
April 2024 - June 2024 Collars Dated Brent 65,000 $ 65.00 $ 100.00
July 2024 - September 2024 Collars Dated Brent 80,000 $ 65.00 $ 92.00
2024 Guidance:
The Company has provided second quarter 2024 guidance and updated its full
year 2024 guidance to reflect the closing of the Svenska acquisition in
April. All of the quarterly and annual guidance is detailed in the tables
below.
FY 2024 Gabon Egypt Canada Cote 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 19200 - 21800 7200 - 8300 6700 - 7400 2200 - 2600 3100 - 3500
Production Expense (millions) WI & NRI $162.0 - $174.5 MM
Production Expense per BOE WI $16.00 - $19.00
Production Expense per BOE NRI $21.00 - $24.00
Offshore Workovers (millions) WI & NRI $1 - $10 MM
Cash G&A (millions) WI & NRI $20.0 - $28.0 MM
CAPEX (millions) WI & NRI $115 - $140 MM
DD&A ($/BOE) NRI $20.00 - $22.00
Q2 2024 Gabon Egypt Canada Cote d'Ivoire
Production (BOEPD) WI 23800 - 27000 8000 - 9200 10000 - 11300 3000 - 3300 2800 - 3200
Production (BOEPD) NRI 19000 - 21800 7000 - 8000 6900 - 7800 2500 - 2800 2800 - 3200
Sales Volume (BOEPD) WI 22800 - 25400 7400 - 8100 10000 - 11300 3000 - 3300 2400 - 2700
Sales Volume (BOEPD) NRI 18100 - 20000 6500 - 7000 6900 - 7800 2500 - 2800 2200 - 2400
Production Expense (millions) WI & NRI $35.5 - $45.5 MM
Production Expense per BOE WI $11.50 - $16.50
Production Expense per BOE NRI $15.00 - $20.00
Offshore Workovers (millions) WI & NRI $0 - $0 MM
Cash G&A (millions) WI & NRI $5.0 - $7.0 MM
CAPEX (millions) WI & NRI $30 - $50 MM
DD&A ($/BOE) NRI $20.00 - $22.00
Conference Call
As previously announced, the Company will hold a conference call to discuss
its first quarter 2024 financial and operating results tomorrow, Wednesday,
May 8, 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 First 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 "Q1 2024 Supplemental Information" investor deck will be posted to
VAALCO's web site prior to its conference call on May 8, 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, Cote 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
Endnote
1. Reserves estimates in this announcement were prepared in
accordance with the definitions and guidelines set forth in the 2018 Petroleum
Resources Management Systems approved by the Society of Petroleum Engineers.
See "Oil and Natural Gas Reserves" for further information.
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, buybacks and other potential returns to stockholders; (vi)
expectations of future balance sheet strength; (vii) expectations of future
equity and enterprise value; and (viii) VAALCO's ability to finalize documents
and effectively execute the POD for the Venus development in Block P.
Such forward-looking statements are subject to risks, uncertainties and other
factors, which could cause actual results to differ materially from future
results expressed, projected or implied by the forward-looking statements.
These risks and uncertainties include, but are not limited to: 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.
Dividends beyond the second 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.
Oil and Natural Gas Reserves
This press release contains crude oil and natural gas metrics which do not
have standardized meanings or standard methods of calculation as classified by
the Securities and Exchange Commission (the "SEC") and therefore such measures
may not be comparable to similar measures used by other companies. Such
metrics have been included herein to provide readers with additional measures
to evaluate the acquisition of Svenska; however, such measures may not be
reliable indicators of future performance.
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 is based on pricing assumptions for future Brent oil
pricing for 2023 of $84.5 and up to 2030 the Brent Oil price follows the
average of four available forecasts and assumes flat real thereafter. Oil
price is escalated 2% per year;
● 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. As a result of the consummation of the
Acquisition, VAALCO will report Svenska's reserves in accordance with the
definitions and regulations promulgated by the SEC.
Other Oil and Gas Advisories
Investors are cautioned when viewing BOEs in isolation. A BOE conversation
ratio of six thousand cubic feet of natural gas to one barrel of oil
equivalent (6 MCF: 1 Bbl) 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 equivalency of 6:1, utilizing a conversion on a 6:1 basis may be an
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.
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
As of March 31, 2024 As of December 31, 2023
ASSETS (in thousands)
Current assets:
Cash and cash equivalents $ 113,321 $ 121,001
Restricted cash 140 114
Receivables:
Trade, net of allowances for credit loss and other of $0.8 and $0.5 million, 44,897 44,888
respectively
Accounts with joint venture owners, net of allowance for credit losses of $0.8 35 1,814
and $0.8 million, respectively
Egypt receivables and other, net of allowances for credit loss and other of 44,591 45,942
$6.0 and $4.6 million, respectively
Crude oil inventory 2,386 1,948
Prepayments and other 12,374 12,434
Total current assets 217,744 228,141
Crude oil, natural gas and NGLs properties and equipment, net 457,419 459,786
Other noncurrent assets:
Restricted cash - 1,795
Value added tax and other receivables, net of allowances for credit loss and 5,033 4,214
other of $0.0 and $0.0 million, respectively
Right of use operating lease assets 1,444 2,378
Right of use finance lease assets 89,587 89,962
Deferred tax assets 30,329 29,242
Abandonment funding 6,268 6,268
Other long-term assets 1,323 1,430
Total assets $ 809,147 $ 823,216
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 16,747 $ 22,152
Accounts with joint venture owners 3,836 5,990
Accrued liabilities and other 60,345 67,597
Operating lease liabilities - current portion 1,466 2,396
Finance lease liabilities - current portion 10,974 10,079
Foreign income taxes payable 37,836 19,261
Total current liabilities 131,204 127,475
Asset retirement obligations 47,644 47,343
Operating lease liabilities - net of current portion - 33
Finance lease liabilities - net of current portion 77,802 78,293
Deferred tax liabilities 71,228 73,581
Other long-term liabilities 8,679 17,709
Total liabilities 336,557 344,434
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, 121,940,831 and 12,194 12,140
121,397,553 shares issued, 103,455,525 and 104,346,233 shares outstanding,
respectively
Additional paid-in capital 358,827 357,498
Accumulated other comprehensive income 426 2,880
Less treasury stock, 18,485,306 and 17,051,320 shares, respectively, at cost (77,566 ) (71,222 )
Retained earnings 178,709 177,486
Total shareholders' equity 472,590 478,782
Total liabilities and shareholders' equity $ 809,147 $ 823,216
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31, 2024 March 31, 2023 December 31, 2023
(in thousands except per share amounts)
Revenues:
Crude oil, natural gas and natural gas liquids sales $ 100,155 $ 80,403 $ 149,154
Operating costs and expenses:
Production expense 32,089 28,200 46,397
FPSO demobilization and other costs - - 1,837
Exploration expense 48 8 706
Depreciation, depletion and amortization 25,824 24,417 20,344
Transaction costs related to acquisition 1,313 - -
General and administrative expense 6,710 5,224 7,005
Credit losses and other 1,812 935 (7,343 )
Total operating costs and expenses 67,796 58,784 68,946
Other operating income (expense), net (166 ) - 731
Operating income 32,193 21,619 80,939
Other income (expense):
Derivative instruments gain (loss), net (847 ) 21 2,500
Interest expense, net (935 ) (2,246 ) (1,077 )
Other income (expense), net (487 ) (1,153 ) (797 )
Total other income (expense), net (2,269 ) (3,378 ) 626
Income before income taxes 29,924 18,241 81,565
Income tax expense 22,238 14,771 37,574
Net income $ 7,686 $ 3,470 $ 43,991
Other comprehensive income (loss)
Currency translation adjustments (2,454 ) (125 ) 2,036
Comprehensive income $ 5,232 $ 3,345 $ 46,027
Basic net income (loss) per share:
Net income (loss) per share $ 0.07 $ 0.03 $ 0.41
Basic weighted average shares outstanding 103,659 107,387 104,893
Diluted net income (loss) per share:
Net income (loss) per share $ 0.07 $ 0.03 $ 0.41
Diluted weighted average shares outstanding 104,541 108,752 105,020
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31,
2024 2023
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,686 $ 3,470
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization 25,824 24,417
Bargain purchase loss - 1,412
Deferred taxes (3,441 ) 2,471
Unrealized foreign exchange loss (102 ) 512
Stock-based compensation 898 649
Cash settlements paid on exercised stock appreciation rights (154 ) (233 )
Derivative instruments (gain) loss, net 847 (21 )
Cash settlements paid on matured derivative contracts, net (24 ) (59 )
Cash settlements paid on asset retirement obligations (29 ) (123 )
Credit losses and other 1,812 935
Other operating loss, net 166 13
Operational expenses associated with equipment and other 302 (640 )
Change in operating assets and liabilities:
Trade, net (9 ) 21,357
Accounts with joint venture owners, net (683 ) 18,911
Egypt receivables and other, net 1,346 (2,309 )
Crude oil inventory (438 ) (8,443 )
Prepayments and other (2,278 ) 983
Value added tax and other receivables (2,734 ) (1,361 )
Other long-term assets (1,017 ) 1,051
Accounts payable (5,984 ) (6,739 )
Foreign income taxes receivable/(payable) 18,912 8,193
Deferred tax liability - (3,250 )
Accrued liabilities and other (19,068 ) (19,190 )
Net cash provided by (used in) operating activities 21,832 42,006
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (16,618 ) (27,700 )
Net cash provided by (used in) investing activities (16,618 ) (27,700 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock 447 274
Dividend distribution (6,463 ) (6,735 )
Treasury shares (6,344 ) (5,377 )
Payments of finance lease (2,095 ) (1,701 )
Net cash provided by (used in) in financing activities (14,455 ) (13,539 )
Effects of exchange rate changes on cash (208 ) (309 )
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (9,449 ) 458
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 129,178 59,776
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 119,729 $ 60,234
VAALCO ENERGY, INC AND SUBSIDIARIES
Selected Financial and Operating Statistics
(Unaudited)
Three Months Ended
March 31, 2024 March 31, 2023 December 31, 2023
NRI SALES DATA
Crude oil, natural gas and natural gas liquids sales (MBOE) 1,490 1,224 1,994
WI PRODUCTION DATA
Etame Crude oil (MBbl) 819 942 887
Egypt Crude oil (MBbl) 950 903 1,024
Canada Crude Oil (MBbl) 61 93 77
Canada Natural Gas (Mcf) 469 415 471
Canada Natural Gas Liquid (MBbl) 76 77 81
Canada Crude oil, natural gas and natural gas liquids (MBOE) 215 239 236
Total Crude oil, natural gas and natural gas liquids production (MBOE) 1,984 2,084 2,146
Gabon Average daily production volumes (BOEPD) 9,001 10,463 9,641
Egypt Average daily production volumes (BOEPD) 10,440 10,033 11,126
Canada Average daily production volumes (BOEPD) 2,363 2,656 2,563
Average daily production volumes (BOEPD) 21,807 23,152 23,330
NRI PRODUCTION DATA
Etame Crude oil (MBbl) 713 820 772
Egypt Crude oil (MBbl) 641 616 697
Canada Crude Oil (MBbl) 51 82 63
Canada Natural Gas (Mcf) 392 367 384
Canada Natural Gas Liquid (MBbl) 63 68 66
Canada Crude oil, natural gas and natural gas liquids (MBOE) 179 211 193
Total Crude oil, natural gas and natural gas liquids production (MBOE) 1,533 1,647 1,662
Gabon Average daily production volumes (BOEPD) 7,835 9,115 8,391
Egypt Average daily production volumes (BOEPD) 7,044 6,844 7,576
Canada Average daily production volumes (BOEPD) 1,971 2,347 2,098
Average daily production volumes (BOEPD) 16,848 18,306 18,065
AVERAGE SALES PRICES:
Crude oil, natural gas and natural gas liquids sales (per BOE) - WI basis $ 69.62 $ 66.42 $ 73.98
Crude oil, natural gas and natural gas liquids sales (per BOE) - NRI basis $ 66.43 $ 65.68 $ 73.96
Crude oil, natural gas and natural gas liquids sales (Per BOE including $ 66.41 $ 65.63 $ 73.89
realized commodity derivatives)
COSTS AND EXPENSES (Per BOE of sales):
Production expense $ 21.54 $ 23.04 $ 23.27
Production expense, excluding offshore workovers and stock compensation* 21.56 23.91 23.25
Depreciation, depletion and amortization 17.33 19.95 10.20
General and administrative expense** 4.50 4.27 3.51
Property and equipment expenditures, cash basis (in thousands) $ 16,618 $ 27,700 $ 42,391
*Offshore workover costs excluded from the three months ended March 31,
2024 and 2023 and December 31, 2023 are $(0.1) million, $(1.1) million
and $0.0 million, respectively.
*Stock compensation associated with production expense excluded from the three
months ended March 31, 2024 and 2023 and December 31, 2023 are immaterial.
**General and administrative expenses include $0.58, $0.52 and $0.50 per
barrel of oil related to stock-based compensation expense in the three
months ended March 31, 2024 and 2023 and December 31, 2023, respectively.
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.
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
Reconciliation of Net Income to Adjusted Net Income March 31, 2024 March 31, 2023 December 31, 2023
Net income $ 7,686 $ 3,470 $ 43,991
Adjustment for discrete items:
Discontinued operations, net of tax - 13 -
Unrealized derivative instruments loss (gain) 823 (80 ) (2,565 )
(Gain) /adjustment of acquisition price, net - 1,412 -
FPSO demobilization - - 1,837
Deferred income tax expense (benefit) (3,441 ) 2,471 (3,538 )
Transaction costs related to acquisition 1,313 - -
Other operating (income) expense, net 166 - (731 )
Adjusted Net Income $ 6,547 $ 7,286 $ 38,994
Diluted Adjusted Net Income per Share $ 0.06 $ 0.07 $ 0.37
(1) No adjustments to weighted average shares outstanding
Three Months Ended
Reconciliation of Net Income to Adjusted EBITDAX March 31, 2024 March 31, 2023 December 31, 2023
Net income $ 7,686 $ 3,470 $ 43,991
Add back:
Impact of discontinued operations - 13 -
Interest expense (income), net 935 2,246 1,077
Income tax expense (benefit) 22,238 14,771 37,574
Depreciation, depletion and amortization 25,824 24,417 20,344
Exploration expense 48 8 706
FPSO demobilization - - 1,837
Non-cash or unusual items:
Stock-based compensation 899 649 991
Unrealized derivative instruments loss (gain) 823 (80 ) (2,565 )
(Gain) /adjustment of acquisition price, net - 1,412 -
Other operating (income) expense, net 166 - (731 )
Transaction costs related to acquisition 1,313 - -
Credit losses and other 1,812 935 (7,343 )
Adjusted EBITDAX $ 61,744 $ 47,841 $ 95,881
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Reconciliation of Working Capital to Adjusted Working Capital As of March 31, 2024 As of December 31, 2023 Change
Current assets $ 217,744 $ 228,141 $ (10,397 )
Current liabilities (131,204 ) (127,475 ) (3,729 )
Working capital 86,540 100,666 (14,126 )
Add: lease liabilities - current portion 12,440 12,475 (35 )
Add: current liabilities - discontinued operations - 673 (673 )
Adjusted Working Capital $ 98,980 $ 113,814 $ (14,161 )
Three Months Ended March 31, 2024
Reconciliation of Free Cash Flow
Net cash provided by Operating activities $ 21,832
Net cash used in Investing activities (16,618 )
Net cash used in Financing activities (14,455 )
Effects of exchange rate changes on cash (208 )
Total net cash change (9,449 )
Add back shareholder cash out:
Dividends paid 6,463
Stock buyback 5,502
Total cash returned to shareholders 11,965
Free Cash Flow $ 2,516
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