VAALCO Energy, Inc. Announces Second Quarter 2020 Results
VAALCO Energy reported strong Q2 2020 results, exceeding production guidance with 5,410 NRI BOPD. The company sold 631,000 barrels, a significant increase from Q1's 294,000. Net income reached $0.6 million ($0.01/share), while adjusted net income was $5.3 million ($0.09/share). Production costs fell 17% to $19.31 per barrel. VAALCO maintains a solid balance sheet with no debt and $44.8 million in cash. The full-year production guidance was raised to 4,850 NRI BOPD despite expected reductions in Q3 due to planned maintenance and OPEC+ cuts.
- Exceeded production guidance with 5,410 NRI BOPD.
- Increased full-year production guidance to 4,850 NRI BOPD.
- Sold 631,000 barrels in Q2 2020, a 115% increase from Q1.
- Achieved a cash balance of $44.8 million with no debt.
- Reduced production expense per barrel by 17%.
- Net income decreased significantly compared to Q1 2020.
- Realized crude oil price fell 59% from Q2 2019.
- Production expected to decline in Q3 2020 due to maintenance and OPEC+ cuts.
HOUSTON, Aug. 06, 2020 (GLOBE NEWSWIRE) -- VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) today reported operational and financial results for the second quarter of 2020.
Highlights and Recent Key Items:
- Exceeded production guidance for the quarter by producing 5,410 net revenue interest (“NRI”)(1) barrels of crude oil per day (“BOPD”), or 6,218 working interest (“WI”)(2) BOPD in Q2 2020;
- Sold 631,000 barrels of oil in Q2 2020 compared with 294,000 barrels in Q1 2020 due to a combination of four liftings in Q2 2020 compared with two liftings in Q1 2020 and higher production;
- Reported net income of
$0.6 million ($0.01 per diluted share), Adjusted Net Income(3) of$5.3 million ($0.09 per diluted share) and generated Adjusted EBITDAX(3) of$10.1 million ; - Decreased Q2 2020 per barrel production expense, excluding workovers, by
17% to$19.31 per barrel compared to$23.39 per barrel in Q1 2020; - Managed through COVID 19 challenges with no material disruptions in operations;
- Increased midpoint of full year production guidance to 4,850 NRI BOPD despite planned maintenance activity and temporary production curtailment during Q3 2020 to support OPEC+ cuts; and
- Maintained strong balance sheet with no debt, a cash balance of
$44.8 million , including$9.3 million in joint venture owner advances, working capital of$11.7 million and Adjusted Working Capital(3) of$24.1 million as of June 30, 2020.
(1) All NRI production rates and volumes are VAALCO’s
(2) All WI production rates and volumes are VAALCO’s
(3) Adjusted EBITDAX, Adjusted Net Income and Adjusted Working Capital are Non-GAAP financial measures and are described and reconciled to the closest GAAP measure in the attached table under “Non-GAAP Financial Measures.”
Cary Bounds, VAALCO’s Chief Executive Officer commented: “While the current pricing environment remains volatile, it has improved from the lows we saw in April 2020, and we believe that the current prices have enabled us to generate positive cash flow at current production levels. We have taken measures over the past few years to strengthen VAALCO operationally and financially, including eliminating all debt and growing our production base, which allow us to better navigate cyclical energy markets and leave us uniquely placed to consider growth opportunities. We remain focused on operational excellence, which was demonstrated in our second quarter 2020 results. We continued to grow our net revenue interest production to 5,410 BOPD, a
“We remain confident in our strong asset base and to date our operations remain largely unaffected by recent global developments which we believe is a testament to the commitment and professionalism of our operations team. Following the completion of our successful 2019/20 drilling campaign, VAALCO does not have any material non-discretionary capital expenditure requirements on the near-term horizon, allowing us to focus on cash flow generation while preparing for the right market conditions to begin planning the next drilling campaign at Etame. Additionally, we will continue to evaluate opportunities that are consistent with our inorganic growth strategy. We believe that we are well positioned to deliver long-term growth, in line with our strategic objectives.”
Operational Update
Gabon
Given the current volatile pricing environment, the Company continues to evaluate all uses of cash and is managing both operating expenses as well as capital expenditure levels in view of the existing and expected pricing environment.
As previously announced, VAALCO completed the 2019/2020 drilling campaign in early April with no safety or environmental incidents, and achieved a
Third quarter 2020 production from the Etame Marin license will be slightly reduced as a result of a planned six-day full field shutdown to perform maintenance on the Nautipa FPSO and on the production platforms, as well as an OPEC+ mandate to reduce production through September 2020. To assist Gabon in meeting its OPEC+ production quota, the Minister of Hydrocarbons has requested that VAALCO temporarily reduce the production at Etame through September 2020. Taking into consideration the combination of the planned maintenance turnaround as well as the impact of deferred production from the OPEC+ mandate, the Company expects average production for the third quarter of 2020 to be between 4,200 BOPD and 4,600 BOPD net to VAALCO. However, due to the strong performance in the first half of 2020 VAALCO narrowed the range for its 2020 annual production guidance provided earlier this year of 4,400 to 5,000 BOPD to 4,700 to 5,000 BOPD net to VAALCO, assuming the OPEC+ mandate to reduce production is not increased or extended beyond September 2020.
Equatorial Guinea
VAALCO has a
The Company acquired an additional working interest of
VAALCO is in commercial discussions with Levene HydroCarbon Limited (“Levene”) where VAALCO would assign a portion of the Block P interest to Levene and Levene would potentially cover all or substantially all of VAALCO’s cost to drill an exploratory well on Block P. Levene and VAALCO have not executed any binding agreements, and there can be no certainty a transaction will be completed. Further, approval of the assignment by the EG MMH must be obtained prior to any transaction being completed. As of June 30, 2020, the Company had
VAALCO and its joint venture owners are evaluating the timing and budgeting for development and exploration activities under a development and production area in Block P, including the approval of a development and production plan. The production sharing contract for Block P provides for a development and production period of 25 years from the date of approval of a development and production plan.
Financial Update – Second Quarter of 2020
Net income of
In comparison, the net loss of
Adjusted Net Income for the second quarter of 2020 decreased to
Adjusted EBITDAX totaled
| Revenue and Sales | |||||||||||||||||||
| Q2 2020 | Q2 2019 | % Change Q2 2020 vs. Q2 2019 | Q1 2020 | % Change Q2 2020 vs. Q1 2020 | |||||||||||||||
| Production (NRI BOPD) | 5,410 | 3,664 | 48 | % | 4,944 | 9 | % | ||||||||||||
| Sales (NRI BO) | 631,000 | 357,000 | 77 | % | 294,000 | 115 | % | ||||||||||||
| Realized crude oil price ($/BO) | $ | 28.31 | $ | 68.62 | (59) | % | $ | 59.54 | (52) | % | |||||||||
| Total crude oil sales ($MM) | $ | 18.0 | $ | 25.2 | (29) | % | $ | 18.4 | (2) | % | |||||||||
During the first quarter of 2020, VAALCO had two liftings, one in January and one in February, but the next lifting of 85,000 barrels of oil that was scheduled for March 2020 was delayed to April 1, 2020 due to poor weather conditions. Consequently, VAALCO had four liftings in the second quarter of 2020 which resulted in total sales volumes of 631,000 barrels compared with 294,000 barrels in the first quarter of 2020. In addition, volumes available to lift increased in the second quarter of 2020 due to the higher production rate resulting from the new wells. Second quarter 2020 realized pricing fell
| Costs and Expenses | ||||||||||||||||||||||
| Q2 2020 | Q2 2019 | % Change Q2 2020 vs. Q2 2019 | Q1 2020 | % Change Q2 2020 vs. Q1 2020 | ||||||||||||||||||
| Production expense, excluding workovers ($MM) | $ | 12.2 | $ | 9.8 | 24 | % | $ | 6.9 | 77 | % | ||||||||||||
| Production expense, excluding workovers ($/BO) | $ | 19.31 | $ | 27.45 | (30) | % | $ | 23.39 | (17) | % | ||||||||||||
| Workover expense ($MM) | $ | (0.1 | ) | $ | — | N/A | $ | 2.9 | (103) | % | ||||||||||||
| Depreciation, depletion and amortization ($MM) | $ | 2.8 | $ | 1.9 | 47 | % | $ | 3.1 | (10) | % | ||||||||||||
| Depreciation, depletion and amortization ($/BO) | $ | 4.44 | $ | 5.35 | (17) | % | $ | 10.55 | (58) | % | ||||||||||||
| General and administrative expense, excluding non-cash compensation ($MM) | $ | 2.3 | $ | 2.8 | (19) | % | $ | 3.3 | (30) | % | ||||||||||||
| General and administrative expense, excluding non-cash compensation ($/BO) | $ | 3.64 | $ | 7.93 | (54) | % | $ | 11.30 | (68) | % | ||||||||||||
| Stock-based compensation expense (benefit) ($MM) | $ | 0.7 | $ | (0.1 | ) | (799) | % | $ | (2.6 | ) | (128) | % | ||||||||||
| Current income tax expense (benefit) ($MM) | $ | 1.2 | $ | 3.3 | (64) | % | $ | (2.1 | ) | (157) | % | |||||||||||
| Deferred income tax expense (benefit) ($MM) | $ | (3.4 | ) | $ | 5.9 | (158) | % | $ | 35.6 | (110) | % | |||||||||||
Total production expense, excluding workovers, increased primarily due to higher sales volumes resulting from the significant decrease in crude oil inventory during the quarter. The per-unit production expense, excluding workovers, decreased significantly in the second quarter of 2020 as compared to both the second quarter of 2019 and the first quarter of 2020 as a result of higher sales volumes. Production expense for the second quarter of 2020 included approximately
Depreciation, depletion and amortization (“DD&A”) expense in the second quarter of 2020 on a per NRI barrel of crude oil sales basis decreased from the comparable prior year quarter and the first quarter of 2020 as a result of higher sales volumes as well as the reduction in depletable costs as a result of the impairment charge that was recorded in the first quarter of 2020 due to lower oil prices.
General and administrative (“G&A”) expense, excluding non-cash stock-based compensation, was lower in the second quarter of 2020 as compared to the second quarter 2019 and the first quarter of 2020 as a result of lower professional fees, travel expenses, and accounting and audit fees. Non-cash stock-based compensation expense (benefit) was impacted by the change in the SARs liability as a result of changes in the Company’s stock price during the quarter.
Income tax was a benefit for the three months ended June 30, 2020 of
Income tax expense for the three months ended June 30, 2019 was
In the first quarter of 2020, current income tax expense included a
Financial Update – First Six Months of 2020
Production for the first six months of 2020 was higher by
The average realized crude oil price for the first six months of 2020 was
The Company incurred a net loss for the six months ended June 30, 2020 of
Response to COVID-19 Pandemic and Current Pricing Environment
VAALCO remains committed to the health and safety of all its employees and contractors. In response to the COVID-19 pandemic and the current pricing environment, VAALCO has taken the following measures:
- Implemented stay-at-home initiatives for all but critical staff and put into place social distancing measures;
- Actively screening and monitoring employees and contractors that come onto the Company’s Gabon facilities including testing and quarantines with onsite medical supervision;
- Engaged in regular Company-wide COVID-19 updates to keep employees informed of key developments;
- Implemented cost cutting measures with vendors;
- Implemented sharing certain costs, such as support vessels, helicopter, and personnel with other operators in the region;
- Temporarily reduced director, executive and certain non-executive employee compensation; and
- Ceased or deferred discretionary capital spending.
VAALCO expects to continue to take proactive steps to manage any disruption in its business caused by COVID-19 and to protect the health and safety of its employees. As of August 6, 2020, VAALCO has experienced no material impact on its Gabon operations directly associated with COVID-19; however, the Company has incurred higher costs related to proactive measures taken in response to the pandemic. These were approximately
Capital Investments/Balance Sheet
For the second quarter of 2020, net capital expenditures totaled
At the end of the second quarter, VAALCO had an unrestricted cash balance of
Hedging
On May 6, 2019, the Company entered into commodity swaps at a Dated Brent weighted average of
2020 Guidance
To date, VAALCO’s operations have not been materially impacted by the worldwide COVID-19 pandemic and the Company’s guidance assumes that there are no material changes to the impact of the pandemic on the Company’s operations for the remainder of 2020 and that the OPEC+ mandates to reduce production are not increased or extended beyond September 2020. VAALCO currently estimates that the full year 2020 NRI production range will increase to between 4,700 and 5,000 BOPD due to strong performance in the first half of 2020. For the third quarter of 2020, forecasted NRI production is expected to be between 4,200 and 4,600 BOPD. The decrease in production for the third quarter as compared to the second quarter reflects reductions imposed by the State of Gabon in response to production cuts agreed to as a member of OPEC. In addition, third quarter production reflects a planned six-day full field shut-in for scheduled maintenance. Sales NRI volumes for 2020 increased in line with production to at an estimated average of 4,700 to 5,000 BOPD. The Company’s production expense guidance (excluding workovers) for full year 2020 is
Conference Call
As previously announced, the Company will hold a conference call to discuss its second quarter financial and operating results August 7, 2020, at 8:00 a.m. Central Time (9:00 a.m. Eastern Time and 2:00 pm London Time). Interested parties may participate by dialing (877) 270-2148. Parties in the United Kingdom may participate toll-free by dialing 08082389064 and other international parties may dial (412) 902-6510. Participants should request to be joined to the “VAALCO Energy Second Quarter 2020 Conference Call.” This call will also be webcast on VAALCO’s website at www.vaalco.com. An archived audio replay will be available on VAALCO’s website.
About VAALCO
VAALCO, founded in 1985, is a Houston, USA based, independent energy company with production, development and exploration assets in the West African region.
The Company is an established operator within the region, holding a
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 / Kelsey Traynor / James Husband | VAALCO@buchanan.uk.com |
Forward Looking Statements
This document includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this document that address activities, events, plans, expectations, objectives or developments that VAALCO expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements may include statements related to the impact of the COVID-19 pandemic, including the recent sharp decline in the global demand for and resulting global oversupply of crude oil and the resulting steep decline in oil prices, production quotas imposed by Gabon, disruptions in global supply chains, quarantines of our workforce or workforce reductions and other matters related to the pandemic, well results, wells anticipated to be drilled and placed on production, future levels of drilling and operational activity and associated expectations, the implementation of the Company’s business plans and strategy, prospect evaluations, prospective resources and reserve growth, its activities in Equatorial Guinea, expected sources of and potential difficulties in obtaining future capital funding and future liquidity, its ability to restore production in non-producing wells, future operating losses, future changes in crude oil and natural gas prices, future strategic alternatives, future acquisitions, capital expenditures, future drilling plans, prospect evaluations, negotiations with governments and third parties, timing of the settlement of Gabon income taxes, expectations regarding processing facilities, production, sales and financial projections and reserve growth. These statements are based on assumptions made by VAALCO based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond VAALCO’s control. These risks include, but are not limited to, crude oil and natural gas price volatility, the impact of production quotas imposed by Gabon in response to production cuts agreed to as a member of OPEC, inflation, general economic conditions, the outbreak of COVID-19, the Company’s success in discovering, developing and producing reserves, production and sales differences due to timing of liftings, decisions by future lenders, the risks associated with liquidity, lack of availability of goods, services and capital, environmental risks, drilling risks, foreign regulatory and operational risks, and regulatory changes.
Investors are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. VAALCO disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Inside Information
This announcement contains inside information as defined in Regulation (EU) No. 596/2014 on market abuse (“MAR”) and is made in accordance with the Company’s obligations under article 17 of MAR.
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
| June 30, 2020 | December 31, 2019 | |||||||
| ASSETS | (in thousands) | |||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 44,841 | $ | 45,917 | ||||
| Restricted cash | 1,090 | 911 | ||||||
| Receivables: | ||||||||
| Trade | 9,521 | 14,335 | ||||||
| Accounts with joint venture owners, net of allowance of | 134 | 2,714 | ||||||
| Other | 2,350 | 1,517 | ||||||
| Crude oil inventory | 853 | 1,072 | ||||||
| Prepayments and other | 3,445 | 3,292 | ||||||
| Total current assets | 62,234 | 69,758 | ||||||
| Crude oil and natural gas properties and equipment - successful efforts method: | ||||||||
| Wells, platforms and other production facilities | 442,665 | 422,651 | ||||||
| Work-in-progress | — | 7,378 | ||||||
| Undeveloped acreage | 21,476 | 23,771 | ||||||
| Equipment and other | 10,184 | 11,157 | ||||||
| 474,325 | 464,957 | |||||||
| Accumulated depreciation, depletion, amortization and impairment | (432,977 | ) | (396,699 | ) | ||||
| Net crude oil and natural gas properties, equipment and other | 41,348 | 68,258 | ||||||
| Other noncurrent assets: | ||||||||
| Restricted cash | 925 | 925 | ||||||
| Value added tax and other receivables, net of allowance of | 3,812 | 3,683 | ||||||
| Right of use operating lease assets | 27,918 | 33,383 | ||||||
| Deferred tax assets | — | 24,159 | ||||||
| Abandonment funding | 11,420 | 11,371 | ||||||
| Total assets | $ | 147,657 | $ | 211,537 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 9,250 | $ | 15,897 | ||||
| Accounts with joint venture owners | 9,259 | — | ||||||
| Accrued liabilities and other | 16,299 | 29,773 | ||||||
| Operating lease liabilities - current portion | 12,274 | 11,990 | ||||||
| Foreign taxes payable | 3,368 | 5,740 | ||||||
| Current liabilities - discontinued operations | 48 | 350 | ||||||
| Total current liabilities | 50,498 | 63,750 | ||||||
| Asset retirement obligations | 16,643 | 15,844 | ||||||
| Operating lease liabilities - net of current portion | 15,631 | 21,371 | ||||||
| Deferred tax liabilities | 8,098 | — | ||||||
| Other long term liabilities | 56 | 852 | ||||||
| Total liabilities | 90,926 | 101,817 | ||||||
| Commitments and contingencies | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, | — | — | ||||||
| Common stock, | 6,782 | 6,767 | ||||||
| Additional paid-in capital | 73,739 | 73,549 | ||||||
| Less treasury stock, 10,363,103 and 9,649,216 shares, respectively, at cost | (42,419 | ) | (41,429 | ) | ||||
| Retained earnings | 18,629 | 70,833 | ||||||
| Total shareholders' equity | 56,731 | 109,720 | ||||||
| Total liabilities and shareholders' equity | $ | 147,657 | $ | 211,537 | ||||
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
| Three Months Ended | Six Months Ended June 30, | |||||||||||||||||||
| June 30, 2020 | June 30, 2019 | March 31, 2020 | 2020 | 2019 | ||||||||||||||||
| (in thousands except per share amounts) | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Crude oil and natural gas sales | $ | 17,974 | $ | 25,230 | $ | 18,389 | $ | 36,363 | $ | 44,995 | ||||||||||
| Operating costs and expenses: | ||||||||||||||||||||
| Production expense | 12,126 | 9,819 | 9,749 | 21,875 | 18,038 | |||||||||||||||
| Depreciation, depletion and amortization | 2,801 | 1,909 | 3,103 | 5,904 | 3,462 | |||||||||||||||
| Impairment of proved crude oil and natural gas properties | — | — | 30,625 | 30,625 | — | |||||||||||||||
| General and administrative expense | 3,019 | 2,728 | 754 | 3,773 | 7,167 | |||||||||||||||
| Bad debt expense and other | 179 | 5 | 810 | 989 | (24 | ) | ||||||||||||||
| Total operating costs and expenses | 18,125 | 14,461 | 45,041 | 63,166 | 28,643 | |||||||||||||||
| Other operating expense, net | (815 | ) | (4,399 | ) | (31 | ) | (846 | ) | (4,436 | ) | ||||||||||
| Operating income (loss) | (966 | ) | 6,370 | (26,683 | ) | (27,649 | ) | 11,916 | ||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Derivative instruments gain (loss), net | (756 | ) | 1,911 | 7,339 | 6,583 | (1 | ) | |||||||||||||
| Interest income, net | 11 | 201 | 116 | 127 | 388 | |||||||||||||||
| Other, net | 47 | (145 | ) | (31 | ) | 16 | (383 | ) | ||||||||||||
| Total other income (expense), net | (698 | ) | 1,967 | 7,424 | 6,726 | 4 | ||||||||||||||
| Income (loss) from continuing operations before income taxes | (1,664 | ) | 8,337 | (19,259 | ) | (20,923 | ) | 11,920 | ||||||||||||
| Income tax expense (benefit) | (2,249 | ) | 9,208 | 33,478 | 31,229 | 11,961 | ||||||||||||||
| Income (loss) from continuing operations | 585 | (871 | ) | (52,737 | ) | (52,152 | ) | (41 | ) | |||||||||||
| Income (loss) from discontinued operations, net of tax | 11 | (162 | ) | (63 | ) | (52 | ) | 5,509 | ||||||||||||
| Net income (loss) | $ | 596 | $ | (1,033 | ) | $ | (52,800 | ) | $ | (52,204 | ) | $ | 5,468 | |||||||
| Basic net income (loss) per share: | ||||||||||||||||||||
| Income (loss) from continuing operations | $ | 0.01 | $ | (0.01 | ) | $ | (0.91 | ) | $ | (0.90 | ) | $ | 0.00 | |||||||
| Income (loss) from discontinued operations, net of tax | 0.00 | 0.00 | 0.00 | 0.00 | 0.09 | |||||||||||||||
| Net income (loss) per share | $ | 0.01 | $ | (0.01 | ) | $ | (0.91 | ) | $ | (0.90 | ) | $ | 0.09 | |||||||
| Basic weighted average shares outstanding | 57,456 | 59,801 | 57,975 | 57,716 | 59,716 | |||||||||||||||
| Diluted net income (loss) per share: | ||||||||||||||||||||
| Income (loss) from continuing operations | $ | 0.01 | $ | (0.01 | ) | $ | (0.91 | ) | $ | (0.90 | ) | $ | 0.00 | |||||||
| Income (loss) from discontinued operations, net of tax | 0.00 | 0.00 | 0.00 | 0.00 | 0.09 | |||||||||||||||
| Net income (loss) per share | $ | 0.01 | $ | (0.01 | ) | $ | (0.91 | ) | $ | (0.90 | ) | $ | 0.09 | |||||||
| Diluted weighted average shares outstanding | 57,594 | 59,801 | 57,975 | 57,716 | 59,716 | |||||||||||||||
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
| Six Months Ended June 30, | ||||||||
| 2020 | 2019 | |||||||
| (in thousands) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | (52,204 | ) | $ | 5,468 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||
| (Income) loss from discontinued operations | 52 | (5,509 | ) | |||||
| Depreciation, depletion and amortization | 5,904 | 3,462 | ||||||
| Impairment of proved crude oil and natural gas properties | 30,625 | — | ||||||
| Other amortization | 121 | 121 | ||||||
| Deferred taxes | 32,271 | 7,667 | ||||||
| Unrealized foreign exchange (gain ) loss | (19 | ) | 21 | |||||
| Stock-based compensation | (1,849 | ) | 1,620 | |||||
| Cash settlements paid on exercised stock appreciation rights | — | (261 | ) | |||||
| Derivatives instruments (gain) loss | (6,583 | ) | 1 | |||||
| Cash settlements received on matured derivative contracts, net | 7,216 | 1,563 | ||||||
| Bad debt (recovery) expense and other | 989 | (24 | ) | |||||
| Other operating loss, net | 46 | 37 | ||||||
| Operational expenses associated with equipment and other | 1,077 | (60 | ) | |||||
| Change in operating assets and liabilities: | ||||||||
| Trade receivables | 4,814 | (1,921 | ) | |||||
| Accounts with joint venture owners | 11,783 | 4,291 | ||||||
| Other receivables | (857 | ) | 158 | |||||
| Crude oil inventory | 219 | 232 | ||||||
| Prepayments and other | (779 | ) | (1,175 | ) | ||||
| Value added tax and other receivables | (695 | ) | 718 | |||||
| Accounts payable | (5,819 | ) | (730 | ) | ||||
| Foreign taxes payable | (2,386 | ) | (2,865 | ) | ||||
| Accrued liabilities and other | (3,333 | ) | 3,858 | |||||
| Net cash provided by continuing operating activities | 20,593 | 16,672 | ||||||
| Net cash used in discontinued operating activities | (354 | ) | (91 | ) | ||||
| Net cash provided by operating activities | 20,239 | 16,581 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Property and equipment expenditures | (20,097 | ) | (1,163 | ) | ||||
| Net cash used in continuing investing activities | (20,097 | ) | (1,163 | ) | ||||
| Net cash used in discontinued investing activities | — | — | ||||||
| Net cash used in investing activities | (20,097 | ) | (1,163 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from the issuances of common stock | — | 107 | ||||||
| Treasury shares | (990 | ) | (352 | ) | ||||
| Net cash used in continuing financing activities | (990 | ) | (245 | ) | ||||
| Net cash used in discontinued financing activities | — | — | ||||||
| Net cash used in financing activities | (990 | ) | (245 | ) | ||||
| NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | (848 | ) | 15,173 | |||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | 59,124 | 46,655 | ||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 58,276 | $ | 61,828 | ||||
VAALCO ENERGY, INC AND SUBSIDIARIES
Selected Financial and Operating Statistics
(Unaudited)
| Three Months Ended | Six Months Ended June 30, | ||||||||||||||
| June 30, 2020 | June 30, 2019 | March 31, 2020 | 2020 | 2019 | |||||||||||
| NRI SALES DATA: | |||||||||||||||
| Crude oil (MBbls) | 631 | 357 | 294 | 925 | 654 | ||||||||||
| NRI PRODUCTION DATA | |||||||||||||||
| Crude oil (MBbls) | 492 | 333 | 450 | 942 | 648 | ||||||||||
| Average daily production volumes (bbls/day) | 5,410 | 3,664 | 4,944 | 5,177 | 3,581 | ||||||||||
| AVERAGE SALES PRICES: | |||||||||||||||
| Crude oil (per Bbls) | $ | 28.31 | $ | 68.62 | $ | 59.54 | $ | 38.24 | $ | 66.60 | |||||
| COSTS AND EXPENSES (PER BBL OF SALES): | |||||||||||||||
| Production expense | $ | 19.22 | $ | 27.50 | $ | 33.16 | $ | 23.65 | $ | 27.58 | |||||
| Production expense, excluding workovers* | 19.31 | 27.45 | 23.39 | 20.61 | 27.38 | ||||||||||
| Depreciation, depletion and amortization | 4.44 | 5.35 | 10.55 | 6.38 | 5.29 | ||||||||||
| General and administrative expense** | 4.78 | 7.64 | 2.56 | 4.08 | 10.96 | ||||||||||
| Property and equipment expenditures, cash basis (in thousands) | $ | 8,117 | $ | 375 | $ | 11,980 | $ | 20,097 | $ | 1,163 | |||||
*Workover costs excluded from the three months ended June 30, 2020 and 2019 and March 31, 2020 are
**General and administrative expenses include
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 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 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, deferred income tax expense, unrealized commodity derivative loss and non-cash and other items.
Management uses Adjusted Working Capital as a measurement tool to assess the working capital position of the Company’s continuing operations excluding leasing obligations because it eliminates the impact of discontinued operations as well as the impact 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.
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 Net Income, Adjusted EBITDAX and Adjusted Working Capital.
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
| Three Months Ended | Six Months Ended June 30, | |||||||||||||||||||
| Reconciliation of Net Income (Loss) to Adjusted Net Income | June 30, 2020 | June 30, 2019 | March 31, 2020 | 2020 | 2019 | |||||||||||||||
| Net income (loss) | $ | 596 | $ | (1,033 | ) | $ | (52,800 | ) | $ | (52,204 | ) | $ | 5,468 | |||||||
| Adjustment for discrete items: | ||||||||||||||||||||
| Discontinued operations, net of tax | (11 | ) | 162 | 63 | 52 | (5,509 | ) | |||||||||||||
| Impairment of proved crude oil and natural gas properties | — | — | 30,625 | 30,625 | — | |||||||||||||||
| Unrealized derivative instruments (gain) loss | 7,254 | (1,479 | ) | (6,621 | ) | 633 | 1,564 | |||||||||||||
| Deferred income tax expense (benefit) | (3,367 | ) | 5,925 | 35,638 | 32,271 | 7,667 | ||||||||||||||
| Other operating expense, net | 815 | 4,399 | 31 | 846 | 4,436 | |||||||||||||||
| Adjusted Net Income | $ | 5,287 | $ | 7,974 | $ | 6,936 | $ | 12,223 | $ | 13,626 | ||||||||||
| Three Months Ended | Six Months Ended June 30, | |||||||||||||||||||
| Reconciliation of Net Income (Loss) to Adjusted EBITDAX | June 30, 2020 | June 30, 2019 | March 31, 2020 | 2020 | 2019 | |||||||||||||||
| Net income (loss) | $ | 596 | $ | (1,033 | ) | $ | (52,800 | ) | $ | (52,204 | ) | $ | 5,468 | |||||||
| Add back: | ||||||||||||||||||||
| Impact of discontinued operations | (11 | ) | 162 | 63 | 52 | (5,509 | ) | |||||||||||||
| Interest income, net | (11 | ) | (201 | ) | (116 | ) | (127 | ) | (388 | ) | ||||||||||
| Income tax expense (benefit) | (2,249 | ) | 9,208 | 33,478 | 31,229 | 11,961 | ||||||||||||||
| Depreciation, depletion and amortization | 2,801 | 1,909 | 3,103 | 5,904 | 3,462 | |||||||||||||||
| Impairment of proved crude oil and natural gas properties | — | — | 30,625 | 30,625 | — | |||||||||||||||
| Non-cash or unusual items: | ||||||||||||||||||||
| Stock-based compensation | 720 | (103 | ) | (2,569 | ) | (1,849 | ) | 1,620 | ||||||||||||
| Unrealized derivative instruments (gain) loss | 7,254 | (1,479 | ) | (6,621 | ) | 633 | 1,564 | |||||||||||||
| Other operating expense, net | 815 | 4,399 | 31 | 846 | 4,436 | |||||||||||||||
| Bad debt expense and other | 179 | 5 | 810 | 989 | (24 | ) | ||||||||||||||
| Adjusted EBITDAX | $ | 10,094 | $ | 12,867 | $ | 6,004 | $ | 16,098 | $ | 22,590 | ||||||||||
| Reconciliation of Working Capital to Adjusted Working Capital | June 30, 2020 | March 31, 2020 | December 31, 2019 | |||||||||
| Current assets | $ | 62,234 | $ | 79,049 | $ | 69,758 | ||||||
| Current liabilities | (50,498 | ) | (65,687 | ) | (63,750 | ) | ||||||
| Working capital | 11,736 | 13,362 | 6,008 | |||||||||
| Add: operating lease liabilities - current portion | 12,274 | 12,050 | 11,990 | |||||||||
| Add: current liabilities - discontinued operations | 48 | 395 | 350 | |||||||||
| Adjusted Working Capital | $ | 24,058 | $ | 25,807 | $ | 18,348 | ||||||
FAQ
What are VAALCO Energy's production results for Q2 2020?
What is the adjusted net income for VAALCO in Q2 2020?
How has VAALCO Energy's cash position changed in 2020?
What is VAALCO's production guidance for the full year 2020?
How did the realized crude oil price change for VAALCO in Q2 2020?
