VAALCO Energy, Inc. (NYSE: EGY) today reported operational and
financial results for the second quarter 2019.
Operational and Financial Highlights for
the second quarter of 2019 include:
- Produced an average of 3,664 barrels of oil per day
(“BOPD”) net near the midpoint of the Company’s guidance
range;
- Increased sales volumes 20% to 357,000 barrels compared
to the first quarter of 2019;
- Reported a net loss of $1.0 million ($0.01 per diluted
share);
- Reached an agreement in principle with joint venture
owners to resolve past audit findings related to 2007 – 2016 which
reduced earnings by $4.4 million ($0.07 per diluted
share);
- Reported Adjusted Net Income of $8.0 million, or $0.13
per share, after excluding net charges totaling $9.0 million ($0.15
per diluted share) related to deferred income tax, discontinued
operations, other operating income (expense), net and unrealized
gains on crude oil swaps;
- Grew Adjusted EBITDAX by 32% to $12.9 million compared
to the first quarter of 2019;
- Increased Working Capital from Continuing Operations,
excluding lease liabilities, by $4.4 million, which contributed to
the increase in cash and cash equivalents to $48.6
million;
- Implemented a common stock repurchase program for up to
$10 million in share repurchases over a 12-month
period.
Net loss totaled $1.0 million in the second
quarter of 2019 compared with net income of $0.5 million in the
same period of 2018, and $6.5 million in the first quarter of
2019. The net loss for the second quarter of 2019 was
impacted by a non-cash expense of $5.9 million ($0.10 per diluted
share) related to deferred income tax, a $4.4 million ($0.07 per
diluted share) charge related to the resolution of a legacy issue
related to Etame joint venture owners’ audit findings for the
periods from 2007 to 2016 and by a loss of $0.2 million ($0.00 per
diluted share) from discontinued operations. This was
partially offset by a non-cash benefit of $1.5 million ($0.02 per
diluted share) related to unrealized gains on crude oil
swaps. Adjusting for the net impact of these items totaling
$9.0 million, second quarter Adjusted Net Income was $8.0 million
($0.13 per diluted share). Second quarter 2019 net loss was
also impacted by a $(0.1) million ($0.00 per diluted share)
non-cash benefit for stock options, restricted stock and stock
appreciation rights (“SARs”).
Adjusted EBITDAX totaled $12.9 million in the
second quarter of 2019, up 46% compared with $8.8 million for the
same period of 2018, and up 32% compared with $9.7 million in the
first quarter of 2019. The average realized price for crude
oil in the second quarter of 2019 was $68.62 per barrel, a decrease
of 8% from $74.36 per barrel in the second quarter of 2018 but up
7% from $64.17 per barrel in the first quarter of 2019. Sales
volumes increased 12% to 357,000 barrels in the second quarter of
2019 from 319,000 barrels in the second quarter of 2018 and 20%
from 297,000 barrels sold in the first quarter of 2019.
Adjusted EBITDAX, Adjusted Net Income and
Working Capital from Continuing Operations are non-GAAP financial
measures and are described and reconciled to the closest GAAP
measure in the attached table under “Non-GAAP Financial
Measures.”
Cary Bounds, VAALCO’s Chief Executive Officer
commented: “We continue to deliver strong results operationally,
enhance our financial position and deliver value to our
shareholders. In the second quarter, we grew Adjusted EBITDAX
to $12.9 million, maintained strong production at 3,664 BOPD net,
increased sales volumes to 357,000 barrels and grew our cash
position to $48.6 million. We have also progressed with
removing meaningful financial uncertainty from our balance sheet
with the finalization of the Angola settlement and the agreement in
principle to resolve 10 years of outstanding joint venture audits
related to Etame. These material and positive corporate
developments allow us to focus completely on our 2019 drilling
program, which we expect to begin this fall.
“On June 20th, we announced a share repurchase
program that allows us to return value to our shareholders and
underscores our confidence in the strength of our balance sheet,
quality of our assets and our ongoing ability to generate free cash
flow. We believe the repurchase program is an excellent
opportunity to buy our common shares at a significant discount to
their intrinsic value and reflects the Board’s confidence in the
current value proposition of our stock. Between June
20th and August 7th, we repurchased nearly 900,000 shares of
VAALCO stock. The fact that we can execute this buyback
program and also continue to fully fund our planned 2019-2020
drilling program at Etame from cash on hand and through cash from
operations demonstrates the firm financial footing that we have
established. We are at an exciting juncture for the Company and
remain wholly focused on delivering profitable growth and
meaningful value for our shareholders.”
Gabon
Average net oil production in the second quarter
of 2019 was 3,664 BOPD. In the second quarter of 2018,
average net production was 3,549 BOPD and in the first quarter of
2019 it was 3,496 BOPD.
During the second quarter of 2019, the Etame 4H
well produced an average of approximately 350 BOPD gross (95 BOPD
net to VAALCO); however, in July 2019, this well stopped
producing. VAALCO is currently undertaking a technical
analysis of remedial work with a view to reestablishing
production. Separately in July, the Company performed an acid
simulation on the N. Tchibala 2H well. Subsequent to this
work, the well would not flow naturally, and VAALCO was unable to
restore production. The Company is planning to perform
additional work to restore production. During the second
quarter of 2019, this well produced an average of approximately 420
BOPD gross (113 BOPD net to VAALCO).
In the third quarter of 2019, the Company has
scheduled a planned maintenance turnaround for the Etame Marin FPSO
and platforms which includes an approximate eight-day full field
shut down which will impact third quarter production. This
was taken into consideration in determining the full year guidance
for 2019 which remains unchanged at between 3,300 BOPD and 3,900
BOPD net to VAALCO. Taking into consideration the combination
of the planned turnaround as well as the impact of deferred
production from the two wells that are not producing, the Company
expects average production for the third quarter of 2019 to be
between 3,000 BOPD and 3,300 BOPD net to VAALCO.
VAALCO and its joint owners are proceeding with
executing a development drilling program beginning in the fall of
2019. Pursuant to the PSC Extension, the joint venture owners have
made commitments for capital expenditures related to the drilling
of two wells and two appraisal wellbores at an estimated cost of
approximately $61.2 million ($20.5 million, net to VAALCO), by
September 16, 2020. The Company anticipates drilling these
wells and a possible third well in the second half of 2019 and the
first half of 2020. The third well is subject to approval by
the joint venture owners and the government of Gabon.
Equatorial Guinea
VAALCO has a 31% working interest in Block P
offshore Equatorial Guinea. VAALCO is currently awaiting the
Equatorial Guinea Ministry of Mines and Hydrocarbons (“EG MMH”) to
approve its appointment as operator of Block P. Compania
Nacional de Petroleos de Guinea Equatorial (“GEPetrol”) is the
state-owned oil company and one of the joint venture owners in
Block P. GEPetrol has fulfilled the requirement to introduce
a new joint venture owner, who will acquire GEPetrol’s
participating interest, to the EG MMH by March 28, 2019. Upon
EG MMH approving the new joint venture owner, the Contractor group
has one year to drill an exploration well. VAALCO intends to
seek a partner on a promoted basis that will cover all or
substantially all of the cost to drill an exploratory well.
If the joint venture owners fail to drill an exploration well,
VAALCO would lose its interest in the license, and the associated
costs would become impaired. As of June 30, 2019, the Company
had $10.0 million recorded for the book value of the undeveloped
leasehold costs associated with the Block P license. VAALCO
and its joint venture owners are evaluating the timing and
budgeting for development and exploration activities under a
development and production area in the block, including the
approval of a development and production plan.
Angola Settlement
Earlier this year, VAALCO executed a settlement
agreement that finalized the termination of VAALCO’s rights,
liabilities and outstanding obligations for Block 5 in Angola. The
settlement agreement included a cash payment of $4.5 million from
VAALCO and the elimination of the receivable from Sonangol P&P.
The cash payment was made by the Company in July 2019 following the
recent publishing of an executive decree from the Ministry of
Mineral Resources and Petroleum. The financial impact of the
Settlement Agreement was recognized in the first quarter of
2019.
2019 - Second Quarter Financial
Results
Total oil sales for the second quarter of 2019
were $25.2 million, compared to $24.4 million in the second quarter
of 2018 and $19.8 million in the first quarter of 2019.
During the second quarter of 2019, VAALCO sold approximately
357,000 net barrels of oil at an average price of $68.62 compared
to approximately 319,000 net barrels at an average price of $74.36
per barrel during the second quarter of 2018. During the
first quarter of 2019, the Company sold approximately 297,000 net
barrels of oil at an average price of $64.17 per barrel.
In June 2018, VAALCO executed commodity swaps at
a Dated Brent weighted average price of $74 per barrel for the
period from and including June 2018 through June 2019 for a
quantity of approximately 400,000 barrels. Adjusted EBITDAX
for the three months ended June 30, 2019 includes realized gains of
$0.4 million related to these swaps as compared to a realized loss
of $11 thousand for the three months ended June 30, 2018 and $1.1
million realized gain for the three months ended March 31,
2019.
On May 6, 2019, the Company entered into
commodity swap agreements at a Dated Brent weighted average of
$66.70 per barrel for the period from and including July 2019
through June 2020 for a quantity of 500,000 barrels. These
swaps settle on a monthly basis.
Costs and Expenses
Total production expense, excluding workovers,
was $9.8 million, or $27.45 per barrel of oil sales, in the second
quarter of 2019, compared to $8.3 million, or $26.08 per barrel of
oil sales, in the second quarter of 2018, and $8.1 million, or
$27.30 per barrel of oil sales in the first quarter of 2019.
The year over year increase was driven by higher transportation and
personnel costs during the second quarter of 2019 compared to the
same period in 2018.VAALCO recorded no workover costs in the second
quarter of 2019 compared to $4.5 million in workovers during the
comparable 2018 period.
Depreciation, depletion and amortization
(DD&A) expense was $1.9 million, or $5.35 per barrel of oil
sales in the three months ended June 30, 2019 compared to $1.0
million, or $3.24 per barrel of oil sales in the comparable period
in 2018, and $1.6 million, or $5.23 per barrel of oil sales in the
first quarter of 2019. DD&A per barrel increased from
2018 due to the increase in depletable costs associated with the
PSC bonus payment paid in 2018.
General and administrative (G&A) expense
excluding non-cash stock compensation for the second quarter 2019
was $2.8 million, or $7.93 per barrel of oil sales, as compared to
$2.6 million, or $8.04 per barrel of oil sales in the second
quarter 2018 and $2.7 million, or $9.14 per barrel of oil sales in
the first quarter of 2019. G&A expense includes $(0.1) million,
$2.4 million and $1.7 million of stock-based compensation expense
(benefit) for the quarters ended June 30, 2019 and 2018 and March
31, 2019, respectively. Stock-based compensation expense
related to SARs was $(0.7) million benefit during the three months
ended June 30, 2019 as compared to $2.0 million expense in the
comparable 2018 period. Because the Company’s SARs are cash
settled, these awards are adjusted to fair value each period, and
as a result of the decrease in VAALCO’s stock price in the second
quarter 2019 ($2.24 per share at March 31, 2019 compared to $1.67
per share at June 30, 2019), the amount of expense decreased
significantly resulting in a credit for the second quarter of 2019.
In July 2019, the Company reached an agreement
in principle to resolve a legacy issue related to findings from
Etame joint venture owners’ audits for the periods from 2007
through 2016 for $4.4 million net to VAALCO. The agreement in
principle also provides for procedures to minimize the chances of
future audit claims. Accordingly, the Company has accrued $4.4
million which is reflected in the “Accrued liabilities and other”
line of the Company’s condensed consolidated balance sheet and is
recorded as a second quarter 2019 expense in the condensed
consolidated statements of operations in the line item “Other
operating income (expense), net”. The agreement in principle
is expected to become final upon signing of a binding settlement
agreement by all of the joint venture owners.
Income tax expense for the three months ended
June 30, 2019 was $9.2 million. This is comprised of $5.9 million
of deferred tax expense and a current tax provision of $3.3 million
and was impacted by the above referenced $4.4 million related to
the joint venture owners’ audits. Income from continuing
operations, excluding the $4.4 million, was $12.7 million. At
an effective tax rate of 79% (which was impacted by items
associated with operations and foreign taxes for which no U.S. tax
benefit was recognized), income taxes would have been $10.0
million. The $10.0 million of income tax expense is reduced
by the tax benefit of the $4.4 million expense (taxed at the U.S.
income tax rate of 21%) or $0.9 million; thus, the expected tax is
$9.2 million and consistent with the actual income tax expense
recorded of $9.2 million.
For the three months ended June 30, 2018, the
Company had a current provision of $3.6 million and no amounts
related to the deferred provision. The decrease in the current
provision is primarily attributable to Gabon income taxes which
were impacted by an increase in the amount of costs which can be
deducted as a result of the PSC Extension obtained in September
2018. With respect to deferred income tax, for periods prior
to the three months ended September 30, 2018, the Company had full
valuation allowances on its net deferred tax assets, and deferred
income tax was zero.
Capital Investments/Balance
Sheet
During the three months ended June 30, 2019,
VAALCO invested approximately $0.4 million in capital expenditures
on a cash basis, primarily for equipment and other. With
respect to the planned drilling program discussed above, VAALCO
currently expects any capital expenditures made during 2019 and
2020 related to the planned drilling program will be funded by cash
on hand and cash flow from operations.
At the end of the second quarter, VAALCO had
Working Capital from Continuing Operations excluding lease
liabilities of $38.1 million, and an unrestricted cash balance of
$48.6 million. The unrestricted cash balance included $3.8
million of cash attributable to non-operating joint venture owner
advances.
Common Stock Repurchase
Plan
On June 20, 2019, VAALCO announced that its
Board of Directors had authorized a stock repurchase program under
which the Company can repurchase up to $10 million of the currently
outstanding shares of the Company’s common stock, over a period of
12 months through open market purchases, privately-negotiated
transactions, or otherwise in compliance with Rule 10b-18 under the
Securities Exchange Act of 1934. The share buyback program
does not obligate the Company to acquire any specific number of
shares in any period, and may be expanded, extended, modified or
discontinued at any time. Payment for shares repurchased under the
program will be funded using the Company's cash on hand.
During the period from the implementation of the program through
June 30, 2019, the Company purchased 141,686 shares of common stock
at an average price of $1.73 per share. Subsequent to June
30, 2019 and through a settlement date of August 7, 2019, the
Company purchased 746,668 shares at an average price of $1.73 for
$1.3 million.
Dual Listing on the London Stock
Exchange
As previously announced, VAALCO has identified
an opportunity to attract greater trading liquidity and shareholder
interest by pursuing a Standard Listing on the London Stock
Exchange while maintaining its existing listing on the New York
Stock Exchange. A London listing would better position the
Company alongside its international peer group, including peers
that are focused on West Africa, and may generate increased
interest through access to specialist international oil and gas
investors and a broader range of equity research
analysts. The Company is progressing forward with the
listing application and related filings and anticipates completing
the process during the third quarter of 2019.
Conference Call
As previously announced, the Company will hold a
conference call to discuss its second quarter financial and
operating results August 8, 2019, at 9:00 a.m. Central Time (10:00
a.m. Eastern Time). Interested parties may participate by dialing
(844) 841-1668. Parties in the United Kingdom may participate
toll-free by dialing 08000288438 and other international parties
may dial (661) 378-9859. The confirmation code is
9399017. This call will also be webcast on VAALCO’s website
at www.vaalco.com. An archived audio replay will be available
on VAALCO’s website.
Forward Looking Statements
This document includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
historical facts, included in this document that address
activities, events, plans, expectations, objectives or developments
that VAALCO expects, believes or anticipates will or may occur in
the future are forward-looking statements. These statements
may include statements related to the resolution of joint venture
owners’ audits, the share repurchase program, our ability to
restore production in non-producing wells, our 2019-2020 drilling
program, our activities in Equatorial Guinea, listing on the London
Stock Exchange, expected sources of future capital funding and
future liquidity, future operating losses, future changes in oil
and natural gas prices, future strategic alternatives, capital
expenditures, future drilling plans, prospect evaluations,
negotiations with governments and third parties, timing of the
settlement of Gabon income taxes, expectations regarding processing
facilities, production, sales and financial projections and reserve
growth. These statements are based on assumptions made by
VAALCO based on its experience and perception of historical trends,
current conditions, expected future developments and other factors
it believes are appropriate in the circumstances. Such
statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond VAALCO's control.
These risks include, but are not limited to, oil and gas price
volatility, inflation, general economic conditions, the Company's
success in discovering, developing and producing reserves,
production and sales differences due to timing of liftings,
decisions by future lenders, the risks associated with liquidity,
lack of availability of goods, services and capital, environmental
risks, drilling risks, foreign regulatory and operational risks,
and regulatory changes.
These and other risks are further described in
VAALCO's annual report on Form 10-K for the year ended December 31,
2018, quarterly reports on Form 10-Q and other reports filed with
the SEC which can be reviewed at http://www.sec.gov, or which can
be received by contacting VAALCO at 9800 Richmond Avenue, Suite
700, Houston, Texas 77042, (713) 623-0801. Investors are
cautioned that forward-looking statements are not guarantees of
future performance and that actual results or developments may
differ materially from those projected in the forward-looking
statements. VAALCO disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
About VAALCO
VAALCO Energy, Inc. is a Houston, Texas based
independent energy company principally engaged in the acquisition,
exploration, development and production of crude oil. VAALCO’s
strategy is to increase reserves and production through the
development and exploitation of international oil and natural gas
properties. The Company's properties and exploration acreage are
located primarily in Gabon and Equatorial Guinea in West
Africa.
Investor ContactAl
Petrie 713-543-3422
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated
Balance Sheets (Unaudited)(in thousands, except share and per share
amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
48,557 |
|
|
$ |
33,360 |
|
Restricted cash |
|
|
799 |
|
|
|
804 |
|
Receivables: |
|
|
|
|
|
|
Trade |
|
|
13,828 |
|
|
|
11,907 |
|
Accounts with joint venture owners, net of allowance of $0.5
million for both periods presented |
|
|
130 |
|
|
|
949 |
|
Other |
|
|
1,239 |
|
|
|
1,398 |
|
Crude oil inventory |
|
|
553 |
|
|
|
785 |
|
Prepayments and other |
|
|
4,808 |
|
|
|
6,301 |
|
Current assets - discontinued operations |
|
|
— |
|
|
|
3,290 |
|
Total current assets |
|
|
69,914 |
|
|
|
58,794 |
|
Oil and natural gas properties
and equipment - successful efforts method: |
|
|
|
|
|
|
Wells, platforms and other production facilities |
|
|
409,862 |
|
|
|
409,487 |
|
Work-in-progress |
|
|
1,002 |
|
|
|
519 |
|
Undeveloped acreage |
|
|
23,771 |
|
|
|
23,771 |
|
Equipment and other |
|
|
10,903 |
|
|
|
9,552 |
|
|
|
|
445,538 |
|
|
|
443,329 |
|
Accumulated depreciation,
depletion, amortization and impairment |
|
|
(393,669 |
) |
|
|
(390,605 |
) |
Net oil and natural gas properties, equipment and other |
|
|
51,869 |
|
|
|
52,724 |
|
Other noncurrent assets: |
|
|
|
|
|
|
Restricted cash |
|
|
922 |
|
|
|
920 |
|
Value added tax and other receivables, net of allowance of $1.3
million and $2.0 million, respectively |
|
|
2,742 |
|
|
|
2,226 |
|
Right of use operating lease assets |
|
|
34,124 |
|
|
|
— |
|
Deferred tax assets |
|
|
30,946 |
|
|
|
40,077 |
|
Abandonment funding |
|
|
11,550 |
|
|
|
11,571 |
|
Total assets |
|
$ |
202,067 |
|
|
$ |
166,312 |
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable |
|
$ |
8,016 |
|
|
$ |
8,083 |
|
Accounts with joint venture owners |
|
|
3,781 |
|
|
|
304 |
|
Accrued liabilities and other |
|
|
19,539 |
|
|
|
14,138 |
|
Operating lease liabilities - current portion |
|
|
10,500 |
|
|
|
— |
|
Foreign taxes payable |
|
|
453 |
|
|
|
3,274 |
|
Current liabilities - discontinued operations |
|
|
4,847 |
|
|
|
15,245 |
|
Total current liabilities |
|
|
47,136 |
|
|
|
41,044 |
|
Asset retirement
obligations |
|
|
15,214 |
|
|
|
14,816 |
|
Operating lease liabilities -
net of current portion |
|
|
23,624 |
|
|
|
— |
|
Other long term
liabilities |
|
|
421 |
|
|
|
625 |
|
Total liabilities |
|
|
86,395 |
|
|
|
56,485 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Shareholders’ equity: |
|
|
|
|
|
|
Preferred stock, $25 par value; 500,000 shares authorized, none
issued |
|
|
— |
|
|
|
— |
|
Common stock, $0.10 par value; 100,000,000 shares authorized,
67,452,385 and 67,167,994 shares issued, 59,756,235 and 59,595,742
shares outstanding, respectively |
|
|
6,745 |
|
|
|
6,717 |
|
Additional paid-in capital |
|
|
73,059 |
|
|
|
72,358 |
|
Less treasury stock, 7,696,150 and 7,572,251 shares, respectively,
at cost |
|
|
(37,870 |
) |
|
|
(37,827 |
) |
Retained earnings |
|
|
73,738 |
|
|
|
68,579 |
|
Total shareholders' equity |
|
|
115,672 |
|
|
|
109,827 |
|
Total liabilities and shareholders' equity |
|
$ |
202,067 |
|
|
$ |
166,312 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Operations (Unaudited)(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
June 30, 2019 |
|
June 30, 2018 |
|
March 31, 2019 |
Revenues: |
|
|
|
|
|
|
|
|
|
Oil and natural gas sales |
|
$ |
25,230 |
|
|
$ |
24,426 |
|
|
$ |
19,765 |
|
Operating costs and
expenses: |
|
|
|
|
|
|
|
|
|
Production expense |
|
|
9,819 |
|
|
|
12,817 |
|
|
|
8,219 |
|
Exploration expense |
|
|
— |
|
|
|
12 |
|
|
|
— |
|
Depreciation, depletion and amortization |
|
|
1,909 |
|
|
|
1,035 |
|
|
|
1,553 |
|
General and administrative expense |
|
|
2,728 |
|
|
|
5,008 |
|
|
|
4,439 |
|
Bad debt (recovery) expense |
|
|
5 |
|
|
|
145 |
|
|
|
(29 |
) |
Total operating costs and expenses |
|
|
14,461 |
|
|
|
19,017 |
|
|
|
14,182 |
|
Other operating income (expense), net |
|
|
(4,399 |
) |
|
|
314 |
|
|
|
(37 |
) |
Operating income |
|
|
6,370 |
|
|
|
5,723 |
|
|
|
5,546 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
Derivative instruments gain (loss), net |
|
|
1,911 |
|
|
|
(1,010 |
) |
|
|
(1,912 |
) |
Interest income (expense), net |
|
|
201 |
|
|
|
(30 |
) |
|
|
187 |
|
Other, net |
|
|
(145 |
) |
|
|
(214 |
) |
|
|
(238 |
) |
Total other income (expense), net |
|
|
1,967 |
|
|
|
(1,254 |
) |
|
|
(1,963 |
) |
Income from continuing
operations before income taxes |
|
|
8,337 |
|
|
|
4,469 |
|
|
|
3,583 |
|
Income tax expense |
|
|
9,208 |
|
|
|
3,582 |
|
|
|
2,753 |
|
Income (loss) from continuing
operations |
|
|
(871 |
) |
|
|
887 |
|
|
|
830 |
|
Income (loss) from
discontinued operations, net of tax |
|
|
(162 |
) |
|
|
(343 |
) |
|
|
5,671 |
|
Net income (loss) |
|
$ |
(1,033 |
) |
|
$ |
544 |
|
|
$ |
6,501 |
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per
share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
0.01 |
|
Income (loss) from discontinued operations, net of tax |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
0.09 |
|
Net income (loss) per share |
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
|
$ |
0.10 |
|
Basic weighted average shares outstanding |
|
|
59,801 |
|
|
|
59,090 |
|
|
|
59,630 |
|
Diluted net income (loss) per
share: |
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.01 |
) |
|
$ |
0.02 |
|
|
$ |
0.01 |
|
Income (loss) from discontinued operations, net of tax |
|
|
0.00 |
|
|
|
(0.01 |
) |
|
|
0.09 |
|
Net income (loss) per share |
|
$ |
(0.01 |
) |
|
$ |
0.01 |
|
|
$ |
0.10 |
|
Diluted weighted average shares outstanding |
|
|
59,801 |
|
|
|
59,851 |
|
|
|
60,683 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESConsolidated Statements of
Cash Flows (Unaudited)(in thousands)
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, |
|
|
2019 |
|
2018 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
|
Net income |
|
$ |
5,468 |
|
|
$ |
9,203 |
|
Adjustments to reconcile net
income to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
(Income) loss from discontinued operations |
|
|
(5,509 |
) |
|
|
395 |
|
Depreciation, depletion and amortization |
|
|
3,462 |
|
|
|
2,159 |
|
Other amortization |
|
|
121 |
|
|
|
191 |
|
Deferred taxes |
|
|
7,667 |
|
|
|
— |
|
Unrealized foreign exchange loss |
|
|
21 |
|
|
|
79 |
|
Stock-based compensation |
|
|
1,620 |
|
|
|
2,756 |
|
Cash settlements paid on exercised stock appreciation rights |
|
|
(261 |
) |
|
|
(82 |
) |
Derivatives instruments loss |
|
|
1 |
|
|
|
1,010 |
|
Cash settlements received (paid) on matured derivative contracts,
net |
|
|
1,563 |
|
|
|
(11 |
) |
Bad debt (recovery) expense |
|
|
(24 |
) |
|
|
89 |
|
Other operating (income) loss, net |
|
|
37 |
|
|
|
(338 |
) |
Operational expenses associated with equipment and other |
|
|
(60 |
) |
|
|
1,739 |
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
Trade receivables |
|
|
(1,921 |
) |
|
|
(6,051 |
) |
Accounts with joint venture owners |
|
|
4,291 |
|
|
|
13,203 |
|
Other receivables |
|
|
158 |
|
|
|
(23 |
) |
Crude oil inventory |
|
|
232 |
|
|
|
1,965 |
|
Prepayments and other |
|
|
(1,175 |
) |
|
|
(764 |
) |
Value added tax and other receivables |
|
|
718 |
|
|
|
(249 |
) |
Accounts payable |
|
|
(730 |
) |
|
|
(535 |
) |
Foreign taxes payable |
|
|
(2,865 |
) |
|
|
5,431 |
|
Accrued liabilities and other |
|
|
3,858 |
|
|
|
1,381 |
|
Net cash provided by continuing operating activities |
|
|
16,672 |
|
|
|
31,548 |
|
Net cash used in discontinued operating activities |
|
|
(91 |
) |
|
|
(892 |
) |
Net cash provided by operating activities |
|
|
16,581 |
|
|
|
30,656 |
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
Property and equipment expenditures |
|
|
(1,163 |
) |
|
|
(976 |
) |
Net cash used in continuing investing activities |
|
|
(1,163 |
) |
|
|
(976 |
) |
Net cash used in discontinued investing activities |
|
|
— |
|
|
|
— |
|
Net cash used in investing activities |
|
|
(1,163 |
) |
|
|
(976 |
) |
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
Proceeds from the issuances of common stock |
|
|
107 |
|
|
|
445 |
|
Treasury shares |
|
|
(352 |
) |
|
|
— |
|
Debt repayment |
|
|
— |
|
|
|
(9,166 |
) |
Net cash used in continuing
financing activities |
|
|
(245 |
) |
|
|
(8,721 |
) |
Net cash used in discontinued
financing activities |
|
|
— |
|
|
|
— |
|
Net cash used in financing
activities |
|
|
(245 |
) |
|
|
(8,721 |
) |
NET CHANGE IN CASH, CASH
EQUIVALENTS AND RESTRICTED CASH |
|
|
15,173 |
|
|
|
20,959 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT BEGINNING OF PERIOD |
|
|
46,655 |
|
|
|
32,286 |
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH AT END OF PERIOD |
|
$ |
61,828 |
|
|
$ |
53,245 |
|
VAALCO ENERGY, INC AND SUBSIDIARIESSelected Financial and
Operating Statistics(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
June 30, 2019 |
|
June 30, 2018 |
|
March 31, 2019 |
NET SALES DATA: |
|
|
|
|
|
|
|
|
|
Oil (MBbls) |
|
|
357 |
|
|
319 |
|
|
297 |
Average daily sales volumes (bbls/day) |
|
|
3,923 |
|
|
3,505 |
|
|
3,300 |
NET PRODUCTION DATA |
|
|
|
|
|
|
|
|
|
Oil (MBbls) |
|
|
333 |
|
|
323 |
|
|
315 |
Average daily production volumes (bbls/day) |
|
|
3,664 |
|
|
3,549 |
|
|
3,496 |
|
|
|
|
|
|
|
|
|
|
AVERAGE SALES PRICES: |
|
|
|
|
|
|
|
|
|
Oil ($/Bbl) |
|
$ |
68.62 |
|
$ |
74.36 |
|
$ |
64.17 |
COSTS AND EXPENSES (PER BOPD
OF SALES): |
|
|
|
|
|
|
|
|
|
Production expense |
|
$ |
27.50 |
|
$ |
40.18 |
|
$ |
27.67 |
Production expense, excluding workovers* |
|
|
27.45 |
|
|
26.08 |
|
|
27.30 |
Depreciation, depletion and amortization |
|
|
5.35 |
|
|
3.24 |
|
|
5.23 |
General and administrative expense** |
|
|
7.64 |
|
|
15.70 |
|
|
14.95 |
Property and equipment
expenditures, cash basis (in thousands) |
|
$ |
375 |
|
$ |
553 |
|
$ |
788 |
*Workover costs excluded from the three months ended June 30,
2019 and 2018 and March 31, 2019 are $21 thousand, $4.5 million and
$0.1 million, respectively.**General and administrative expenses
include $ (0.29), $7.66 and $5.80 barrel of oil of sales of
stock-based compensation expense in the three months ended June 30,
2019, and 2018 and March 31, 2019, respectively.
NON-GAAP FINANCIAL MEASURES
Adjusted EBITDAX is a supplemental non-GAAP
financial measure used by VAALCO’s management and by external users
of the Company’s financial statements, such as industry analysts,
lenders, rating agencies, investors and others who follow the
industry as an indicator of the Company’s ability to internally
fund exploration and development activities and to service or incur
additional debt. Adjusted EBITDAX is a non-GAAP financial measure
and as used herein represents net income before discontinued
operations, interest income (expense) net, income tax expense,
depletion, depreciation and amortization, exploration expense,
non-cash and other items including stock compensation expense and
unrealized commodity derivative loss.
Management uses Adjusted Net Income to evaluate
operating and financial performance and believes the measure is
useful to investors because it eliminates the impact of certain
noncash and/or other items that management does not consider to be
indicative of the Company’s performance from period to period.
Management also believes this non-GAAP measure is useful to
investors to evaluate and compare the Company’s operating and
financial performance across periods, as well as facilitating
comparisons to others in the Company’s industry.
Management uses Working Capital from Continuing
Operations as a measurement tool to assess the working capital
position of the Company’s continuing operations excluding leasing
obligations because it eliminates the impact of discontinued
operations as well as the impact lease liabilities. Under the
new leasing standard, lease liabilities related to assets used in
joint operations include both the Company’s share of expenditures
as well as the share of lease expenditures which its non-operator
joint venture owners’ will be obligated to pay under joint
operating agreements.
Adjusted EBITDAX and Adjusted Net Income have
significant limitations, including that they do not reflect the
Company’s cash requirements for capital expenditures, contractual
commitments, working capital or debt service. Adjusted EBITDAX and
Adjusted Net Income 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 and Adjusted Net Income may not be comparable to similarly
titled measures used by other companies.
The tables below reconcile the most directly
comparable GAAP financial measures to Adjusted EBITDAX Adjusted
Income from Continuing Operations and Working Capital from
Continuing Operations.
VAALCO ENERGY, INC AND SUBSIDIARIESReconciliations of Non-GAAP
Financial Measures(Unaudited)(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Reconciliation of Net
Income (Loss) to Adjusted Net Income |
|
June 30, 2019 |
|
June 30, 2018 |
|
March 31, 2019 |
Net income (loss) |
|
$ |
(1,033 |
) |
|
$ |
544 |
|
|
$ |
6,501 |
|
Adjustment for discrete
items: |
|
|
|
|
|
|
|
|
|
Discontinued operations, net of tax |
|
|
162 |
|
|
|
343 |
|
|
|
(5,671 |
) |
Unrealized derivative instruments (gain) loss |
|
|
(1,479 |
) |
|
|
999 |
|
|
|
3,043 |
|
Other operating income (expense), net |
|
|
4,399 |
|
|
|
(314 |
) |
|
|
37 |
|
Deferred income tax expense |
|
|
5,925 |
|
|
|
— |
|
|
|
1,742 |
|
Adjusted net income |
|
$ |
7,974 |
|
|
$ |
1,572 |
|
|
$ |
5,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
Reconciliation of Net
Income (Loss) to Adjusted EBITDAX |
|
June 30, 2019 |
|
June 30, 2018 |
|
March 31, 2019 |
Net income (loss) |
|
$ |
(1,033 |
) |
|
$ |
544 |
|
|
$ |
6,501 |
|
Add back: |
|
|
|
|
|
|
|
|
|
Impact of discontinued operations |
|
|
162 |
|
|
|
343 |
|
|
|
(5,671 |
) |
Interest expense (income), net |
|
|
(201 |
) |
|
|
30 |
|
|
|
(187 |
) |
Income tax expense |
|
|
9,208 |
|
|
|
3,582 |
|
|
|
2,753 |
|
Depreciation, depletion and amortization |
|
|
1,909 |
|
|
|
1,035 |
|
|
|
1,553 |
|
Exploration expense |
|
|
— |
|
|
|
12 |
|
|
|
— |
|
Non-cash or unusual
items: |
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
(103 |
) |
|
|
2,442 |
|
|
|
1,723 |
|
Unrealized derivative instruments (gain) loss |
|
|
(1,479 |
) |
|
|
999 |
|
|
|
3,043 |
|
Other operating income (expense), net |
|
|
4,399 |
|
|
|
(314 |
) |
|
|
37 |
|
Bad debt recovery and other |
|
|
5 |
|
|
|
145 |
|
|
|
(29 |
) |
Adjusted EBITDAX |
|
$ |
12,867 |
|
|
$ |
8,818 |
|
|
$ |
9,723 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Changes in Working Capital from Continuing Operations |
|
June 30, 2019 |
|
March 31, 2019 |
|
Change |
Current assets |
|
$ |
69,914 |
|
|
$ |
62,026 |
|
|
$ |
7,888 |
|
Current liabilities |
|
|
(47,136 |
) |
|
|
(43,267 |
) |
|
|
(3,869 |
) |
Operating lease liabilities -
current portion |
|
|
10,500 |
|
|
|
10,334 |
|
|
|
166 |
|
Current liabilities -
discontinued operations |
|
|
4,847 |
|
|
|
4,675 |
|
|
|
172 |
|
Working capital from
continuing operations |
|
$ |
38,125 |
|
|
$ |
33,768 |
|
|
$ |
4,357 |
|
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