REG - Vaalco Energy Inc - Q4 & FY23 FINANCIAL RESULTS
14/03/2024 07:00
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RNS Number : 7815G Vaalco Energy Inc 14 March 2024
VAALCO ENERGY, INC. ANNOUNCES FOURTH QUARTER
AND FULL YEAR 2023 FINANCIAL AND OPERATING RESULTS
VAALCO Reports Record Financial Results and Shareholder Returns Following Year
of Expansion
HOUSTON - March 14, 2024 - VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY)
("VAALCO" or the "Company") today reported operational and financial results
for the fourth quarter and full year of 2023. The Company also provided 2024
operational and financial guidance for the first quarter and full year of
2024.
2023 Full Year Highlights:
● Reported full year ("FY") 2023 net income of $60.4 million ($0.56 per diluted
share) and net cash from operating activities of $223.6 million;
● Generated record Adjusted EBITDAX((1)) of $280.4 million and $119.7 million of
Free Cash Flow ("FCF")((1)) in FY 2023;
● Returned $50.3 million or 42% of FCF to shareholders in 2023 through
dividends and buybacks;
● Raised production in 2023 by 83% year-over-year to 18,710 net revenue
interest ("NRI")((2)) barrels of oil equivalent per day ("BOEPD"), at the
higher end of the Company's increased guidance;
● FY 2023 working interest ("WI")((3)) production of 23,946 BOEPD
was at the top of the increased guidance range;
● Increased year-end 2023 SEC proved reserves by 3% to 28.6 million barrels of
oil equivalent ("MMBOE");
Generated record Adjusted EBITDAX((1)) of $280.4 million and $119.7 million of
Free Cash Flow ("FCF")((1)) in FY 2023;
●
Returned $50.3 million or 42% of FCF to shareholders in 2023 through
dividends and buybacks;
●
Raised production in 2023 by 83% year-over-year to 18,710 net revenue
interest ("NRI")((2)) barrels of oil equivalent per day ("BOEPD"), at the
higher end of the Company's increased guidance;
● FY 2023 working interest ("WI")((3)) production of 23,946 BOEPD
was at the top of the increased guidance range;
●
Increased year-end 2023 SEC proved reserves by 3% to 28.6 million barrels of
oil equivalent ("MMBOE");
● Integrated a major acquisition and invested over $70 million in a capital
program focused on Egypt and Canada; and
● Increased cash at December 31, 2023 to $121 million, all while remaining bank
debt free.
Increased cash at December 31, 2023 to $121 million, all while remaining bank
debt free.
Fourth Quarter 2023 Highlights:
● Reported Q4 2023 net income of $44.0 million ($0.41 per diluted share);
● Generated record Adjusted EBITDAX((1)) of $95.9 million;
● Produced 18,065 NRI BOEPD (23,330 WI BOEPD); and
● Sold 21,674 BOEPD in Q4 2023, at the high end of guidance.
2024 Key Items and Outlook:
● Announced accretive all cash acquisition with sales and purchase agreement
("SPA") to acquire Svenska Petroleum Exploration AB ("Svenska");
● Currently producing approximately 4,500 BOEPD (99% oil);
● Includes estimated 1P WI CPR reserves(4) as of October 1, 2023,
of 13.0 MMBOE (99% oil) and total 2P WI CPR(4) reserves at October 1, 2023,
of 21.7 million MMBOE (97% oil);
● Planning a 2024 capital budget of $70 to $90 million; and
● Target to return over $25 million of FCF to shareholders.
(1) 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."
(2) All NRI production rates are VAALCO's working interest volumes less royalty
volumes, where applicable
(3) All WI production rates and volumes are VAALCO's working interest volumes,
where applicable
(4) A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel
of oil equivalent (6 MCF: 1Bbl) is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Reserves estimates 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.
All NRI production rates are VAALCO's working interest volumes less royalty
volumes, where applicable
(3)
All WI production rates and volumes are VAALCO's working interest volumes,
where applicable
(4)
A BOE conversion ratio of six thousand cubic feet of natural gas to one barrel
of oil equivalent (6 MCF: 1Bbl) is based on an energy equivalency conversion
method primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead. Reserves estimates 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.
George Maxwell, VAALCO's Chief Executive Officer commented, "In 2023, we
delivered record financial results, successfully integrated a major
acquisition and continued to return a meaningful amount of value to our
shareholders through dividends and share buybacks. Sales and production
volumes nearly doubled, we grew our cash position at year-end by nearly
$84 million and we generated record Adjusted EBITDAX of $280 million. This
allowed us to fully fund, with cash on hand, the return of over $50 million to
shareholders through our dividend and buyback programs and over $70 million in
a capital program focused on Egypt and Canada, all while remaining bank debt
free which demonstrates the strong financial position of the Company today.
Our 2023 proved reserves saw 3% growth year-over-year, despite a year of
record production across our asset portfolio and significant decreases in SEC
pricing. We were able to more than replace our 2023 production through strong
positive revisions that more than offset production and reserve reductions due
to lower SEC pricing."
"In early 2024, we announced our intent to utilize a portion of this strong
cash position to add to our diversified portfolio of high performing assets in
line with our strategic vision. With our all-cash deal to buy Svenska, which
provides us with a new country entry and strong production and reserves from
a proven producing asset as well as a significant organic upside opportunity,
we are enhancing VAALCO's ability to generate sustainable cash flow and
continue to return cash to our shareholders for many years to come.
The acquisition is expected to close in Q2 2024 and is highly accretive on
key metrics to our shareholder base and provides another strong asset to
support future growth."
"Our ability to execute on our strategic vision has led to unprecedented
growth in production, reserves and cash flow, all while extending our runway
for future opportunities. We are in the strongest position in VAALCO's history
and are entering 2024 with more reserves, production and future potential. We
are adding to that position through the Svenska acquisition, and we remain
focused on prioritizing our organic and inorganic growth opportunities as we
continue to build a balanced business of scale that is capable of maximizing
value for our shareholders. We are excited about the future and believe that
2024 could be another record-breaking year for VAALCO."
Operational Update
Egypt
In Egypt, VAALCO continued to use the EDC-64 rig in the Eastern Desert
drilling campaign. The Company continued drilling the EA-55 development
well in the fourth quarter which was the last well of the 2023 campaign.
Through operational efficiencies, VAALCO drilled an average of two wells per
month with the EDC-64 rig, nearly twice as fast as in 2022 and, VAALCO
drilled 18 wells in 2023, while also completing the Arta-77Hz well at the
beginning of 2023. The 2023 firm and contingent work program was drilled
faster and cheaper compared to budget, adding to its economic returns.
A summary of the Egyptian drilling campaign's impact during 2023 is presented
below:
VAALCO Egypt 2023 Wells
Well Spud date Net Pay (ft) Penetrated Pay Zones Completion Zone Perforation Interval (ft) IP-30 Rate (BOPD)
EastArta-53 1/15/2023 14.8 Redbed Redbed Hydraulic Frac 35
K-81 2/2/2023 68.9 Asl-D and E Asl-E 13.1 255
K-79 2/21/2023 190 Asl-A, B, D, E and F Asl-B1 and B2 59 150
Arta-80 3/10/2023 33 Redbed Redbed 32 440
Arta-81 3/21/2023 28.5 Redbed Redbed 26 340
HE-4 4/2/2023 27.9 Asl-B1 and B2 Asl-B2 13.1 440
HE-5 Injector 4/16/2023 4.9 Asl-B2 Asl-B2 9.8 NA
HE-3 5/10/2023 9.2 Asl-B1 and B2 Asl-B2 16.4 235
Arta-82 5/25/2023 42 Redbed Redbed 28 150
Arta-84 6/6/2023 34 Nukhul Nukhul Hydraulic Frac 68
NWG-5C1 6/16/2023 none Nukhul Temporarily Abandoned none none
K-80 6/30/2023 141.4 Asl-A, B, D and E Asl-E 16.4 144
K-84 7/16/2023 98.8 Asl-D, E, F and G Asl-G2 19.7 125
K-85 7/31/2023 63.3 Asl-D, E, F and G Asl-E 9.8 82
M-24 8/14/2023 70.2 Asl-A, B and D Asl-D 9.8 134
Arta-91 9/1/2023 40 Nukhul and Redbed Redbed 20 150
EA-54 9/12/2023 none Nukhul, Thebes and Redbed Plugged & Abandoned none none
EA-55 10/4/2023 42 Redbed Redbed Hydraulic Frac Pending Frac
Canada
VAALCO drilled and completed two wells in the first quarter of 2023,
consisting of a 1.5-mile lateral and a 3-mile lateral, which were also
required for land retention purposes. Both wells were drilled and completed
safely and cost effectively without incident. The wells were tied in and
equipped in April and early May with overall cycle times that were
significantly less than historical cycle times. The wells began flowing in
May and naturally flowed through June. In early July, the pump and rods were
run on both wells. The production rates from both wells exceeded
expectations, and the Company is monitoring their long-term performance while
evaluating future drilling campaigns, with the intent of moving exclusively to
2.5 mile and 3-mile laterals to improve economics. This resulted in record
production levels reported for Canada in 2023.
A summary of the Canada drilling campaign's impact during 2023 is presented
below:
VAALCO Canada 2023 Wells
Well Spud date Net Pay (ft) Penetrated Pay Zones Completion Zone Perforation Interval (ft) IP-30 Rate (BOPD)
100/12-12 1/28/2023 14,430 Upper Bioturbated Cardium 118 Stg x 15T Hydraulic Fracture Treatment n/a 444 BOPD ; 500 BOEPD
102/16-30 2/22/2023 7,870 Upper Bioturbated Cardium 55 Stg x 15T Hydraulic Fracture Treatment n/a 374 BOPD ; 426 BOEPD
Gabon
VAALCO completed its 2021/2022 drilling campaign in the fourth quarter of
2022. The Company is currently evaluating locations and planning for its next
drilling campaign. Gabon production performance in the year ended December
31, 2023 has been strong and ahead of plan driven by improved operational
uptime at Etame. The cost savings from the new Floating, Storage and
Offloading vessel ("FSO") have been captured, as planned, but are being
offset by increased marine costs as a consequence of inflationary (marine
vessel supply rates, transportation, and contractors) and industry supply
chain pressures as well as higher diesel costs due to the feed gas line being
suspended due to a leak. The gas line was successfully fixed in October 2023
and the FSO is now utilizing gas rather than diesel.
Year-End 2023 Reserves
VAALCO's SEC proved reserves at December 31, 2023 increased by 3% to
28.6 MMBOE from 27.9 MMBOE at year-end 2022. Year-end 2023 reserves
included 22.5 MMBOE in proved developed reserves and 6.2 MMBOE in proved
undeveloped reserves. The Company's SEC reserves were engineered by its
third-party independent reserve consultant, Netherland, Sewell &
Associates, Inc., ("NSAI") who has provided annual independent estimates of
VAALCO's year-end SEC reserves for over 15 years and evaluates VAALCO's
Gabonese and Egyptian reserves, and GLJ Ltd. ("GLJ"), who evaluates VAALCO's
Canadian reserves. In 2023, the Company added 5.6 MMBOE due to positive
revisions and 1.9 MMBOE of SEC proved reserves through extensions and
additions, primarily in Canada with additional PUD locations. These additions
were partially offset by 6.8 MMBOE of full year 2023 production. VAALCO had
a reserve replacement ratio of 110% compared to the 6.8 MMBOE of production
in 2023.
The standardized measure of VAALCO's SEC proved reserves, utilizing SEC
pricing decreased to $341.9 million at December 31, 2023 from
$624.5 million at December 31, 2022. This was primarily driven by a
decrease in year over year SEC prices which was utilized for the
calculation and can be found in the Company's Annual Report on Form 10-K
disclosure, which is expected to be filed with the SEC by March 15, 2024.
MMBoe
Proved SEC Reserves at December 31, 2022 27.9
2023 Production (6.8 )
Revisions of Previous Estimates 5.6
Extensions and Additions 1.9
Proved SEC Reserves at December 31, 2023 28.6
At year-end 2023, NSAI provided the 2P WI CPR estimates of proven and probable
reserves which 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 as of December 31, 2023 using
VAALCO's management assumptions for future commodity pricing and costs shown
below under "Supplemental Non-GAAP Financial Measures - 2P WI CPR Reserves".
The 2P WI CPR reserves attributable to VAALCO's ownership are reported on a WI
basis prior to deductions for government royalties. Management's year-end
2023 2P WI CPR estimate of reserves is 77.3 MMBOE to VAALCO's WI, an increase
of 1% from 76.4 MMBO at December 31, 2022. The present value discounted at
10% ("PV-10") of VAALCO's 2P WI CPR reserves at year-end 2023, utilizing
management timing assumptions and escalated pricing and cost assumptions, is
$630.9 million, down 34% from $814.8 million at December 31, 2022. The
PV-10 decrease is driven primarily by pricing and cost inflation.
See "Supplemental Non-GAAP Financial Measures" below concerning 2P WI CPR
reserves and 2P PV-10.
Financial Update -Fourth Quarter of 2023
Reported net income of $44.0 million ($0.41 per diluted share) for
the fourth quarter of 2023 which was up significantly compared with net
income of $6.1 million ($0.06 per diluted share) in the third quarter of
2023 and $17.8 million ($0.17 per diluted share) in the fourth quarter of
2022. The increase in earnings compared to the third quarter of 2023 is
mainly due to increased sales revenue due to increased volumes and improved
realized pricing due to geographic sales mix, lower credit losses due to
reversal of credit loss allowances on the settlement of debts in Gabon and
decreased depreciation, depletion and amortization ("DD&A") expense
partially offset by higher income tax expense on the increased operating
profit. Similarly, the increase in earnings compared to the fourth quarter
of 2022 is primarily due to higher sales revenue due to increased
volumes, lower credit losses due to reversal of credit loss allowances and
decreased DD&A expense partially offset by higher income tax expense.
Adjusted EBITDAX totaled $95.9 million in the fourth quarter of 2023, a 34%
increase from $71.4 million in the third quarter of 2023, primarily due
to higher revenues driven by higher sales and improved realized commodity
pricing. The increase in fourth quarter 2023 Adjusted EBITDAX to $95.9
million compared with $49.8 million generated in the same period in 2022, is
primarily due to increased revenue as a result of the TransGlobe transaction
and lower credit losses due to reversal of a credit loss allowance.
Quarterly Summary - Sales and Net Revenue
$ in thousands Three Months Ended December 31, 2023 Three Months Ended September 31, 2023
Gabon Egypt Canada Total Gabon Egypt Canada Total
Oil Sales $ 100,398 $ 79,043 $ 5,476 $ 184,917 $ 64,100 $ 88,748 $ 7,832 $ 160,680
NGL Sales - - $ 2,019 $ 2,019 - - $ 2,073 $ 2,073
Gas Sales - - $ 818 $ 818 - - $ 988 $ 988
Gross Sales $ 100,398 $ 79,043 $ 8,313 $ 187,754 $ 64,100 $ 88,748 $ 10,893 $ 163,741
Selling Costs & carried interest $ 1,711 $ 0 - $ 1,711 $ 1,378 $ (497 ) - $ 881
Royalties & taxes $ (13,699 ) $ (24,393 ) $ (1,517 ) $ (39,609 ) $ (8,203 ) $ (37,944 ) $ (2,206 ) $ (48,353 )
Net Revenue $ 88,410 $ 54,650 $ 6,796 $ 149,856 $ 57,275 $ 50,307 $ 8,687 $ 116,269
Oil Sales MMB (working interest) 1,165 1,023 77 2,265 764 1,282 101 2,146
Average Oil Price Received $ 86.18 $ 77.24 $ 71.57 $ 81.65 $ 83.92 $ 69.24 $ 77.89 $ 74.87
% Change Q4 2023 vs. Q3 2023 9 %
Average Brent Price - - - $ 84.01 - - - $ 86.65
% Change Q4 2023 vs. Q3 2023 -3 %
Gas Sales MMCF (working interest) - - 471 471 - - 470 470
Average Gas Price Received - - 1.74 $ 1.74 - - $ 2.10 $ 2.10
% Change Q4 2023 vs. Q3 2023 -17 %
Average Aeco Price ($USD) - - 2 $ 1.86 - - 2 $ 1.89
% Change Q4 2023 vs. Q3 2023 -2 %
NGL Sales MMB (working interest) - - 80 80 - - 82 82
Average Liquids Price Received - - $ 25.09 $ 25.09 - - $ 25.27 $ 25.27
% Change Q4 2023 vs. Q3 2023 -1 %
Revenue and Sales Q4 2023 Q4 2022 % Change Q4 2023 vs. Q4 2022 Q3 2023 % Change Q4 2023 vs. Q3 2023
Production (NRI BOEPD) 18,065 14,390 26 % 18,844 (4 )%
Sales (NRI BOE) 1,994,000 1,371,000 45 % 1,812,000 10 %
Realized commodity price ($/BOE) $ 73.96 $ 70.43 5 % $ 63.41 17 %
Commodity (Per BOE including realized commodity derivatives) $ 73.89 $ 70.24 5 % $ 63.38 17 %
Total commodity sales ($MM) $ 149.2 $ 96.6 54 % $ 116.3 28 %
VAALCO had a net revenue increase of $32.9 million or 28% as the total NRI
sales volumes of 1,994,000 BOE was higher than Q3 2023 and rose 45%
compared to 1,371,000 BOE for Q4 2022. Q4 2023 sales were at the top end
of VAALCO's guidance.
Q4 2023 realized pricing (net of royalties) was up 17% compared to Q3 2023
and up 5% compared to Q4 2022.
Costs and Expenses Q4 2023 Q4 2022 % Change Q4 2023 vs. Q4 2022 Q3 2023 % Change Q4 2023 vs. Q3 2023
Production expense, excluding offshore workovers and stock comp ($MM) $ 46.3 $ 40.8 14 % $ 39.9 16 %
Production expense, excluding offshore workovers ($/BOE) $ 23.27 $ 29.80 (22 )% $ 22.07 5 %
Offshore workover expense ($MM) $ 0.0 $ 4.7 (100.0 )% $ (0.0 ) - %
Depreciation, depletion and amortization ($MM) $ 20.3 $ 26.3 (23 )% $ 32.5 (38 )%
Depreciation, depletion and amortization ($/BOE) $ 10.2 $ 19.20 (47 )% $ 17.96 (43 )%
General and administrative expense, excluding stock-based compensation ($MM) $ 6.1 $ (0.3 ) (2,119 )% $ 5.2 17 %
General and administrative expense, excluding stock-based compensation ($/BOE) $ 3.0 $ (0.20 ) (1,619 )% $ 2.86 6 %
Stock-based compensation expense ($MM) $ 0.9 $ (0.1 ) (1,000.0 )% $ 1.0 (10 )%
Current income tax expense (benefit) ($MM) $ 14.3 $ 1.7 741 % $ 2.1 581 %
Deferred income tax expense (benefit) ($MM) $ (2.6 ) $ 5.3 (149 )% $ (2.6 ) - %
Total production expense (excluding offshore workovers and stock compensation)
of $46.3 million in Q4 2023 was higher compared to Q3 2023 and the same
period in 2022. The increase in Q4 2023 expense compared to Q3 2023 was
driven primarily by higher costs related to higher sales volumes. The
increase in Q4 2023 compared to the Q4 2022 was primarily driven by
increased expense associated with higher sales and costs associated with the
TransGlobe combination as well as higher costs associated with boats, diesel
and other direct operating costs. VAALCO has seen inflationary and industry
supply chain pressure on personnel and contractor costs.
There was no offshore workover expense in Q4 2023 or Q3 2023. There was a
100% decrease in offshore workover expense in Q4 2023 compared to Q4 2022.
Q4 2023 production expense per BOE, excluding offshore workover costs,
remained low at $23.27 per BOE which was 5% higher than Q3 2023 and down 22%
compared to Q4 2022 due to higher sales, lower costs in Etame associated
with the FSO conversion and lower per BOE costs from the Egyptian and Canadian
assets.
DD&A expense for the Q4 2023, was $20.3 million which was lower than
$32.5 million in Q3 2023 and lower than $26.3 million in Q4 2022. The
decrease in Q4 2023 DD&A expense, compared to Q3 2023 and to Q4 2022 is
due to year-end depletion adjustments, primarily in Egypt, that were made in
Q4 upon the completion of the 2023 competent persons report.
Q4 2023 included a $0.7 million expense related to an appraisal well in
Egypt that was abandoned during Q4 2023 and subsequently expensed to
Exploration Expense.
General and administrative ("G&A") expense, excluding stock-based
compensation, increased to $6.1 million in Q4 2023 from $5.2 million in
Q3 2023 and a negative $0.3 million in Q4 2022. The increase in general and
administrative expenses is primarily due to higher professional service fees,
salaries and wages, and accounting and legal fees. The Company incurred
one-time reorganization costs in 2023 as it integrated the TransGlobe assets
and eliminated duplicate administrative costs. Q4 2023 G&A was within
the Company's guidance. The Company has made meaningful reductions to absolute
G&A costs when compared with the combined TransGlobe and VAALCO combined
G&A costs for 2022.
Non-cash stock-based compensation expense was $0.9 million for
Q4 2023 compared to Q3 2023 of $1.0 million and Q4 2022 of negative $0.1
million.
Other income (expense), net, was an expense of $0.8 million for Q4 2023,
compared to an income of $2.5 million during Q4 2022 and an income of $0.2
million for Q3 2023. Other income (expense), net, normally consists of
foreign currency gains and losses. For Q4 2022, included in other (expense)
income was a $10.8 million bargain purchase gain on the
TransGlobe acquisition offset by $7.0 million of transaction costs associated
with the business combination with TransGlobe. For the full year ended
December 31, 2022, acquisition transaction costs were $14.6 million.
Q4 2023 income tax expense was an expense of $37.6 million and is comprised
of current tax expense of $41.1 million and deferred tax benefit of
$3.5 million. Q3 2023 income tax expense was an expense of $25.8 million.
This was comprised of $26.8 million of current tax expense and a deferred
tax benefit of $0.9 million. Q4 2022 income tax expense was an expense of
$7.0 million. This was comprised of $5.3 million of deferred tax expense and
a current tax expense of $1.7 million. For all periods, VAALCO's overall
effective tax rate was impacted by non-deductible items associated with
derivative losses and corporate expenses. Foreign income taxes for Gabon are
settled by the government taking their oil in-kind.
Financial Update - Full Year 2023
The Company reported net income for the twelve months ended December 31, 2023
of $60.4 million, which compares to $51.9 million for the same period of
2022. The increase in net income for the twelve months ended December 31,
2023 compared to the same period in 2022 was primarily due to increased sales
volumes partially offset by higher production costs, higher DD&A and
lower oil prices.
Both production and sales volumes for full year 2023 were up 83% to 6.8
MMBOE compared to 3.7 MMBOE production for the prior year. The
increase was driven by production from the TransGlobe assets, as well as new
wells from the 2021/2022 drilling campaign in Gabon. Crude oil sales are a
function of the number and size of crude oil liftings in each quarter and do
not always coincide with volumes produced in any given period.
The average realized crude oil price for the twelve months of 2023 was
$65.83 per barrel, representing a decrease of 30% from $94.77 realized in
the twelve months of 2022. This decrease in crude oil price reflects the
softening in commodity pricing over the past year, as well as the
incorporation of the TransGlobe assets which include Canadian and Egyptian
crude, natural gas, and NGLs that have lower realized pricing than Gabon.
Year to Date Summary - Sales and Net Revenue
$ in thousands Twelve Months Ended December 31, 2023 Twelve Months Ended December 31, 2022
Gabon Egypt Canada Total Gabon Egypt Canada Total
Oil Sales 294,577 272,613 28,287 595,477 346,780 56,452 7,362 410,594
NGL Sales - - 8,440 8,440 - - 2,276 2,276
Gas Sales - - 3,467 3,467 - - 1,340 1,340
Gross Sales 294,577 272,613 40,194 607,384 346,780 56,452 10,978 414,210
Selling Costs & carried interest 5,301 (995 ) - 4,306 5,843 - - 5,843
Royalties & taxes (39,532 ) (110,569 ) (5,821 ) (155,922 ) (45,848 ) (18,742 ) (1,137 ) (65,727 )
Net Revenue 260,346 161,049 34,373 455,768 306,775 37,710 9,841 354,326
Oil Sales MMB (working interest) 3,569 4,055 394 8,018 3,355 818 93 4,266
Average Oil Price Received $ 82.54 $ 67.22 $ 71.88 $ 74.27 $ 103.36 $ 69.00 $ 79.59 $ 96.25
% Change 2023 vs. 2022 -23 %
Average Brent Price $ 82.49 $ 100.93
% Change 2023 vs. 2022 -18 %
Gas Sales MMCF (working interest) - - 1,798 1,798 - - 335 335
Average Gas Price Received - - $ 1.93 $ 1.93 - - $ 4.00 $ 4.00
% Change 2023 vs. 2022 -52 %
NGL Sales MMB (working interest) - - 317 317 - - 63 63
Average Liquids Price Received - - $ 26.58 $ 26.58 - - $ 36.13 $ 36.13
Capital Investments/Balance Sheet
For the twelve months of 2023, net capital expenditures totaled $97.2 million
on a cash basis and $72.6 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 fourth quarter of 2023, VAALCO had an unrestricted cash
balance of $121.0 million. VAALCO also has an undrawn reserve based lending
("RBL") facility with $43.75 million of availability to further enhance the
Company's liquidity position. The RBL facility is in its amortization phase.
Working capital at December 31, 2023 was $100.7 million compared with $38.0
million at December 31, 2022, while Adjusted Working Capital((3)) at December
31, 2023 totaled $113.8 million. VAALCO continues to work with the Egyptian
General Petroleum Corporation on both collections and offsets. In addition,
with the completion of drilling in Canada and Egypt, VAALCO expects to see a
reduction in its outstanding Accounts Payable and Accruals.
Cash Dividend Policy and Share Buyback Authorization
VAALCO paid a quarterly cash dividend of $0.0625 per share of common stock for
the fourth quarter of 2023 on December 21, 2023. VAALCO increased its
quarterly per share dividend amount in 2023 and paid out a total $0.25 per
share or approximately $27 million in dividends to its shareholders in 2023.
On February 26, 2024, the Company announced its next quarterly cash dividend
of $0.0625 per share of common stock for the first quarter of 2024 ($0.25
annualized), to be paid on March 28, 2024 to stockholders of record at the
close of business on March 8, 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 Company's share buyback program provides for an aggregate purchase of
currently outstanding common stock up to $30 million. Payment for shares
repurchased under the program will be funded using the Company's cash on hand
and cash flow from operations.
The actual timing, number and value of shares repurchased under the share
buyback program will depend on a number of factors, including constraints
specified in any Rule 10b5-1 trading plans, price, general business and market
conditions, and alternative investment opportunities. Under such a trading
plan, the Company's third-party broker, subject to SEC regulations regarding
certain price, market, volume and timing constraints, has authority to
purchase the Company's common stock in accordance with the terms of the
plan. 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.
In 2023, VAALCO repurchased $23.6 million in shares.
Svenska Acquisition
VAALCO expects to acquire 100% of the share capital of Svenska from Petroswede
AB ("Petroswede" or the "Seller") in the acquisition with an effective date of
October 1, 2023. Gross consideration for the Acquisition is $66.5 million,
subject to customary closing adjustments, with the net cash payment to be made
by VAALCO on closing expected to be approximately $30 to $40 million depending
on a number of factors including the timing of closing. The Acquisition is
subject to a number of customary closing conditions, including regulatory and
government approvals.
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 Canadian Natural Resources Limited, 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 4,500 WI BOEPD, with 1P WI CPR reserves at the Effective Date
of 13.0 MMBOE (99% oil), and 2P WI CPR reserves of 21.7 MMBOE (97% oil). 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 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 proactively 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 at March 13,2024:
Settlement Period Type of Contract Index Average Monthly Volumes Weighted Average Put Price Weighted Average Call Price
(Bbls) (per Bbl) (per Bbl)
January 2024 - March 2024 Collars Dated Brent 85,000 $ 65.00 $ 97.00
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 first quarter and full year 2024 guidance. As a
reminder, this guidance does not include the recently announced Svenska
acquisition and will be updated once the acquisition is finalized. All of the
quarterly and annual guidance is detailed in the tables below.
FY 2024 Gabon Egypt Canada
Production (BOEPD) WI 20800 - 23400 8300 - 9600 9800 - 10600 2700 - 3200
Production (BOEPD) NRI 16100 - 18300 7200 - 8300 6700 - 7400 2200 - 2600
Sales Volume (BOEPD) WI 20800 - 23300 8300 - 9500 9800 - 10600 2700 - 3200
Sales Volume (BOEPD) NRI 16100 - 18300 7200 - 8300 6700 - 7400 2200 - 2600
Production Expense (millions) WI & NRI $155.0 - $165.5 MM
Production Expense per BOE WI $18.00 - $22.00
Production Expense per BOE NRI $25.50 - $31.00
Offshore Workovers (millions) WI & NRI $1 - $10 MM
Cash G&A (millions) WI & NRI $20.0 - $28.0 MM
CAPEX (millions) WI & NRI $70 - $90 MM
DD&A ($/BO) NRI $20.00 - $22.00
Q1 2024 Gabon Egypt Canada
Production (BOEPD) WI 21700 - 22400 9100 - 9300 10200 - 10600 2400 - 2500
Production (BOEPD) NRI 16800 - 17300 7900 - 8100 7000 - 7200 1900 - 2000
Sales Volume (BOEPD) WI 16800 - 21800 4200 - 8700 10200 - 10600 2400 - 2500
Sales Volume (BOEPD) NRI 12600 - 16800 3700 - 7600 7000 - 7200 1900 - 2000
Production Expense (millions) WI & NRI $35.5 - $42.5 MM
Production Expense per BOE WI $17.00 - $22.50
Production Expense per BOE NRI $22.00 - $29.50
Offshore Workovers (millions) WI & NRI $0 - $0 MM
Cash G&A (millions) WI & NRI $4.0 - $6.5 MM
CAPEX (millions) WI & NRI $22 - $28 MM
DD&A ($/BO) NRI $20.00 - $22.00
Conference Call
As previously announced, the Company will hold a conference call to discuss
its fourth quarter 2023 financial and operating results tomorrow, Thursday,
March 14, 2024, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time and 3:00
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 Fourth Quarter
2023 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 "Q4 2023 Supplemental Information" investor deck will be posted to VAALCO's
web site prior to its conference call on March 14, 2024 that includes
additional financial and operational information.
About VAALCO
VAALCO, founded in 1985 and incorporated under the laws of Delaware, is a
Houston, USA based, independent energy company with production, development
and exploration assets in Africa and Canada.
VAALCO owns a diverse portfolio of operated production, development and
exploration assets across Gabon, Egypt, 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
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) the proposed acquisition of Svenska
and its terms, timing and closing, including receipt of required regulatory
approvals and satisfaction of other closing conditions; (iii) the amount and
timing of stock buybacks, if any, under VAALCO's stock buyback program and
VAALCO's ability to enhance stockholder value through such plan;
(iv) 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; (v) expectations
regarding future acquisitions, investments or divestitures; (vi) expectations
of future dividends, buybacks and other potential returns to stockholders;
(vii) expectations of future balance sheet strength; (viii) expectations
regarding VAALCO's ability to effectively integrate assets and properties it
may acquire as a result of the acquisition of Svenska into its operations and
the benefits of acquiring Svenska.
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: the ability to
obtain regulatory approvals in connection with the proposed acquisition of
Svenska; the amount of any pre-closing dividends permitted by the law
applicable to Svenska; the ability to complete the proposed acquisition on the
anticipated terms and timetable; the possibility that various closing
conditions for the acquisition of Svenska may not be satisfied or waived;
risks relating to any unforeseen liabilities of the Svenska; the outcome of
any cost audits undertaken by the Cote d'Ivoire government; timing and amounts
of any decommissioning or other wind up costs relating to any acquired
Nigerian assets; declines in oil or natural gas prices; the level of success
in exploration, development and production activities; actions of
joint-venture partners 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; the impact and costs
of compliance with laws and regulations governing oil and gas operations; the
risks described under the caption "Risk Factors" in VAALCO's filings with the
Securities and Exchange Commission, including its most recent Annual Report on
Form 10-K and subsequent Quarterly Reports on Form 10-Q.
2022 Annual Report on Form 10-K filed with the SEC on April 6, 2023.
Dividends beyond the first quarter of 2024 have not yet been approved or
declared by the Board. The declaration and payment of future dividends and the
terms of share buybacks 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 and the terms of
share buybacks. Consequently, in determining the dividend to be declared and
paid on VAALCO common stock or the terms of share buybacks, the Board may
revise or terminate the payment level or buyback terms at any time without
prior notice.
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
As of December 31, 2023 As of December 31, 2022
ASSETS (in thousands)
Current assets:
Cash and cash equivalents $ 121,001 $ 37,205
Restricted cash 114 222
Receivables:
Trade, net of allowance for credit losses of $0.5 and $0.0 million, 42,150 52,147
respectively
Accounts with joint venture owners, net of allowance for credit losses of $0.8 1,814 15,830
and $0.3 million, respectively
Foreign income taxes receivable - 2,769
Egypt receivables and other, net of allowance for credit losses of $4.6 and 48,680 68,519
$0.0 million, respectively
Crude oil inventory 1,948 3,335
Prepayments and other 12,434 20,070
Total current assets 228,141 200,097
Crude oil, natural gas and NGLs properties and equipment, net 459,786 495,272
Other noncurrent assets:
Restricted cash 1,795 1,763
Value added tax and other receivables, net of allowance of $0.0 million and 4,214 7,150
$8.4 million, respectively
Right of use operating lease assets 2,378 2,777
Right of use finance lease assets 89,962 90,698
Deferred tax assets 29,242 35,432
Abandonment funding 6,268 20,586
Other long-term assets 1,430 1,866
Total assets $ 823,216 $ 855,641
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 22,152 $ 59,886
Accounts with joint venture owners 5,990 -
Accrued liabilities and other 66,924 91,392
Operating lease liabilities - current portion 2,396 2,314
Finance lease liabilities - current portion 10,079 7,811
Foreign income taxes payable 19,261 -
Current liabilities - discontinued operations 673 687
Total current liabilities 127,475 162,090
Asset retirement obligations 47,343 41,695
Operating lease liabilities - net of current portion 33 686
Finance lease liabilities - net of current portion 78,293 78,248
Deferred tax liabilities 73,581 81,223
Other long-term liabilities 17,709 25,594
Total liabilities 344,434 389,536
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, 121,397,553 and 12,140 11,948
119,482,680 shares issued, 104,346,233 and 107,852,857 shares outstanding,
respectively
Additional paid-in capital 357,498 353,606
Accumulated other comprehensive income 2,880 1,179
Less treasury stock, 17,051,320 and 11,629,823 shares, respectively, at cost (71,222 ) (47,652 )
Retained earnings 177,486 147,024
Total shareholders' equity 478,782 466,105
Total liabilities and shareholders' equity $ 823,216 $ 855,641
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended Twelve Months Ended
December 31, 2023 December 31, 2022 September 30, 2023 December 31, 2023 December 31, 2022
(in thousands except per share amounts)
Revenues:
Crude oil, natural gas and natural gas liquids sales $ 149,154 $ 96,588 $ 116,269 $ 455,066 $ 354,326
Operating costs and expenses:
Production expense 46,397 45,514 39,956 153,157 112,661
FPSO demobilization and other costs 1,837 - - 7,484 8,867
Exploration expense 706 8 1,194 1,965 258
Depreciation, depletion and amortization 20,344 26,316 32,538 115,302 48,143
General and administrative expense 7,005 (430 ) 6,216 23,840 10,077
Credit (recovery) losses and other (7,343 ) 999 822 (4,906 ) 3,082
Total operating costs and expenses 68,946 72,407 80,726 296,842 183,088
Other operating income (expense), net 731 43 5 433 38
Operating income 80,939 24,224 35,548 158,657 171,276
Other income (expense):
Derivative instruments gain (loss), net 2,500 (290 ) (2,320 ) 232 (37,812 )
Interest income (expense), net (1,077 ) (1,679 ) (1,426 ) (6,452 ) (2,034 )
Other income (expense), net (797 ) 2,466 183 (2,291 ) (8,048 )
Total other income (expense), net 626 497 (3,563 ) (8,511 ) (47,894 )
Income from continuing operations before income taxes 81,565 24,721 31,985 150,146 123,382
Income tax expense (benefit) 37,574 6,953 25,844 89,777 71,420
Income from continuing operations 43,991 17,768 6,141 60,369 51,962
Loss from discontinued operations, net of tax - (14 ) - (15 ) (72 )
Net income $ 43,991 $ 17,754 $ 6,141 $ 60,354 $ 51,890
Other comprehensive income (loss)
Currency translation adjustments 2,036 - (2,216 ) 1,701 1,179
Comprehensive income $ 46,027 $ 17,754 $ 3,925 $ 62,055 $ 53,069
Basic net income (loss) per share:
Income (loss) from continuing operations $ 0.41 $ 0.17 $ 0.06 $ 0.56 $ 0.74
Loss from discontinued operations, net of tax - - - - -
Net income (loss) per share $ 0.41 $ 0.17 $ 0.06 $ 0.56 $ 0.74
Basic weighted average shares outstanding 104,893 101,227 106,289 106,376 69,568
Diluted net income (loss) per share:
Income (loss) from continuing operations $ 0.41 $ 0.17 $ 0.06 $ 0.56 $ 0.73
Loss from discontinued operations, net of tax - - - - -
Net income (loss) per share $ 0.41 $ 0.17 $ 0.06 $ 0.56 $ 0.73
Diluted weighted average shares outstanding 105,020 101,578 106,433 106,555 69,982
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Twelve Months Ended December 31,
2023 2022
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 60,354 $ 51,890
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss from discontinued operations, net of tax 15 72
Depreciation, depletion and amortization 115,302 48,143
Bargain purchase gain 1,412 (10,819 )
Exploration Expense 1,841 -
Deferred taxes (2,864 ) 44,805
Unrealized foreign exchange loss 52 (1,043 )
Stock-based compensation 3,323 2,200
Cash settlements paid on exercised stock appreciation rights (378 ) (827 )
Derivative instruments (gain) loss, net (232 ) 37,812
Cash settlements paid on matured derivative contracts, net (127 ) (42,935 )
Cash settlements paid on asset retirement obligations (6,747 ) (6,577 )
Credit loss recovery, net of expense 7,543 3,082
Other operating loss, net 55 (38 )
Operational expenses associated with equipment and other 3,196 2,052
Change in operating assets and liabilities:
Trade receivables 9,461 18,385
Accounts with joint venture owners 19,571 (18,929 )
Other receivables 12,064 (9,290 )
Crude oil inventory 1,387 (1,742 )
Prepayments and other 4,743 (4,387 )
Value added tax and other receivables 2,427 (5,193 )
Other long-term assets 3,830 (2,730 )
Accounts payable (28,102 ) 23,920
Foreign income taxes receivable/(payable) 22,030 (5,897 )
Accrued liabilities and other (6,544 ) 6,964
Net cash provided by (used in) continuing operating activities 223,612 128,918
Net cash used in discontinued operating activities (15 ) (72 )
Net cash provided by (used in) operating activities 223,597 128,846
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (97,223 ) (159,897 )
Cash acquired from TransGlobe acquisition - 36,686
Net cash provided by (used in) continuing investing activities (97,223 ) (123,211 )
Net cash used in discontinued investing activities - -
Net cash provided by (used in) investing activities (97,223 ) (123,211 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock 673 312
Dividend distribution (26,772 ) (9,354 )
Treasury shares (23,570 ) (3,805 )
Deferred financing costs - (2,069 )
Payments of finance lease (7,150 ) (3,039 )
Net cash provided by (used in) in continuing financing activities (56,819 ) (17,955 )
Net cash used in discontinued financing activities - -
Net cash provided by (used in) in financing activities (56,819 ) (17,955 )
Effects of exchange rate changes on cash (153 ) (218 )
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 69,402 (12,538 )
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 59,776 72,314
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 129,178 $ 59,776
VAALCO ENERGY, INC AND SUBSIDIARIES
Selected Financial and Operating Statistics
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, 2023 December 31, 2022 September 30, 2023 December 31, 2023 December 31, 2022
NRI SALES DATA
Crude oil, natural gas and natural gas liquids sales (MBOE) 1,994 1,371 1,812 6,832 3,677
WI PRODUCTION DATA
Etame Crude oil (MBbl) 887 650 911 3,674 3,415
Egypt Crude oil (MBbl) 1,024 818 1,076 4,055 818
Canada Crude Oil (MBbl) 77 93 101 394 93
Canada Natural Gas (Mcf) 471 335 470 1,798 335
Canada Natural Gas Liquid (Mbbl) 81 63 82 317 63
Canada Crude oil, natural gas and natural gas liquids (MBOE) 236 211 261 1,011 211
Total Crude oil, natural gas and natural gas liquids production (MBOE) 2,146 1,680 2,248 8,740 4,445
Gabon Average daily production volumes (BOEPD) 9,641 7,065 9,901 10,066 9,356
Egypt Average daily production volumes (BOEPD) 11,126 8,893 11,691 11,111 2,241
Canada Average daily production volumes (BOEPD) 2,563 2,293 2,835 2,769 578
Average daily production volumes (BOEPD) 23,330 18,262 24,430 23,946 12,177
NRI PRODUCTION DATA
Etame Crude oil (MBbl) 772 566 792 3,196 2,971
Egypt Crude oil (MBbl) 697 547 732 2,771 547
Canada Crude Oil (MBbl) 63 93 81 335.51 93
Canada Natural Gas (Mcf) 384 335 376 1,532.74 335
Canada Natural Gas Liquid (Mbbl) 66 63 66 270.69 63
Canada Crude oil, natural gas and natural gas liquids (MBOE) 193 211 210 862 211
Total Crude oil, natural gas and natural gas liquids production (MBOE) 1,662 1,324 1,734 6,829 3,729
Gabon Average daily production volumes (BOEPD) 8,391 6,152 8,609 8,756 8,140
Egypt Average daily production volumes (BOEPD) 7,576 5,946 7,957 7,593 1,499
Canada Average daily production volumes (BOEPD) 2,098 2,293 2,279 2,361 578
Average daily production volumes (BOEPD) 18,065 14,390 18,844 18,710 10,217
AVERAGE SALES PRICES:
Crude oil, natural gas and natural gas liquids sales (per BOE) - WI basis $ 73.98 $ 72.01 $ 70.78 $ 69.30 $ 94.47
Crude oil, natural gas and natural gas liquids sales (per BOE) - NRI basis $ 73.96 $ 70.43 $ 63.41 $ 65.83 $ 94.77
Crude oil, natural gas and natural gas liquids sales (Per BOE including $ 73.89 $ 70.24 $ 63.38 $ 65.81 $ 83.10
realized commodity derivatives)
COSTS AND EXPENSES (Per BOE of sales):
Production expense $ 23.27 $ 33.19 $ 22.05 $ 22.42 $ 30.64
Production expense, excluding offshore workovers and stock compensation* 23.25 29.73 22.04 22.59 29.33
Depreciation, depletion and amortization 10.20 19.19 17.96 16.88 13.09
General and administrative expense** 3.51 (0.31 ) 3.43 3.49 2.74
Property and equipment expenditures, cash basis (in thousands) $ 42,391 $ 56,044 $ 22,533 $ 97,223 $ 159,897
*Offshore workover costs excluded from the three months ended December 31,
2023 and 2022 and September 30, 2023 are $0.0 million, $4.7 million and
$0.0 million, respectively.
*Stock compensation associated with production expense excluded from the three
months ended December 31, 2023 and 2022 and September 30,
2023 are $0.9 million, $(0.1) million and $1.0 million, respectively.
**General and administrative expenses include $0.50, $0.57 and $0.57 per
barrel of oil related to stock-based compensation expense in the three
months ended December 31, 2023 and 2022 and September 30,
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.
PV-10 Value and Probable Reserves
PV-10 is a non-GAAP financial measure and represents the period-end present
value of estimated future cash inflows from VAALCO's reserves, less future
development and production costs, discounted at 10% per annum to reflect
timing of future cash flows. PV-10 values for 2P WI CPR reserves have been
calculated using VAALCO's management assumptions for timing, escalated crude
oil price and cost in the case of 2P WI CPR reserves. PV-10 generally differs
from standardized measure, the most directly comparable GAAP financial
measure, because it generally does not include the effects of income taxes;
however, VAALCO's PV-10 does include the effect of income taxes. PV-10 is a
widely used measure within the industry and is commonly used by securities
analysts, banks and credit rating agencies to evaluate the estimated future
net cash flows from proved reserves on a comparative basis across companies or
specific properties. VAALCO's PV-10 includes the effect of income taxes.
Neither PV-10 nor the standardized measure purports to represent the fair
value of the Company's crude oil and natural gas reserves.
VAALCO has provided summations of its PV-10 for its proved and probable
reserves on a 2P WI CPR basis in this press release. The SEC strictly
prohibits companies from aggregating proved, probable and possible reserves in
filings with the SEC due to the different levels of certainty associated with
each reserve category. GAAP does not provide a measure of estimated future net
cash flows for reserves other than proved reserves and accordingly it is not
practicable to reconcile the PV-10 value of 2P WI CPR reserves to a GAAP
measure, such as the standardized measure. Investors should be cautioned that
estimates of PV-10 of probable reserves, as well as the underlying volumetric
estimates, are inherently more uncertain of being recovered and realized than
comparable measures for proved reserves. Further, because estimates of
probable reserve volumes have not been adjusted for risk due to this
uncertainty of recovery, their summation may be of limited use. Nonetheless,
VAALCO believes that PV-10 estimates for probable reserves present useful
information for investors about the future net cash flows of its reserves in
the absence of a comparable GAAP measure such as standardized measure.
2P WI CPR Reserves
2P WI CPR reserves represent proved plus probable estimates as reported by
NSAI and GLJ 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 as of December 31, 2021 using escalated crude
oil price and cost assumptions made by VAALCO's management. 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 of December 31, 2021. As a result, 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.
2P WI CPR reserves and the PV-10 value for 2P WI CPR reserves, as calculated
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 2P WI CPR pricing is based on management pricing assumptions
for future Brent oil pricing for 2023 of $80.00 and $70.00 in 2024, escalated
2% per year thereafter and for Equatorial Guinea, given the expectation of
first oil beginning in 2026, Brent oil pricing of $74.27 was assumed for 2026,
escalated 2% per year thereafter;
● Lease operating expenses are not escalated in the SEC case,
while for the 2P WI CPR reserves case they are escalated at 2% annually
beginning on January 1, 2023.
For the 2P WI CPR reserves for Svenska, such reserves 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.
Additionally, (i) the reserves estimates for Svenska were prepared 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 and (ii) are
as of October 1, 2023.
Management uses 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 the Company to other
companies. Management believes that the presentation of 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 the
Company's reserve information to other London Stock Exchange-traded companies
that report similar measures. VAALCO also believes that this information
enhances its investors' and securities analysts' understanding of its
business. However, 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 the
Company's SEC proved reserves and consider 2P WI CPR reserves only
supplementally.
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 Twelve Months Ended
Reconciliation of Net Income to Adjusted Net Income December 31, 2023 December 31, 2022 September 30, 2023 December 31, 2023 December 31, 2022
Net income $ 43,991 $ 17,754 $ 6,141 $ 60,354 $ 51,890
Adjustment for discrete items:
Discontinued operations, net of tax - 14 - 15 72
Dry Hole Costs - - - - -
Unrealized derivative instruments loss (gain) (2,565 ) 38 2,321 (359 ) (5,123 )
(Gain) /adjustment of acquisition price, net - (10,817 ) - 1,412 (10,817 )
Arrangement Costs - 7,006 - - 14,630
FPSO demobilization 1,837 - - 7,484 8,867
Deferred income tax expense (benefit) (3,538 ) 5,266 (985 ) (2,865 ) 44,805
Other operating (income) expense, net (731 ) (43 ) (5 ) (433 ) (38 )
Adjusted Net Income $ 38,994 $ 19,218 $ 7,472 $ 65,608 $ 104,286
Diluted Adjusted Net Income per Share $ 0.37 $ 0.19 $ 0.07 $ 0.62 $ 1.49
Diluted weighted average shares outstanding (1) 105,020 101,578 106,433 106,555 69,982
(1) No adjustments to weighted average shares outstanding
Three Months Ended Twelve Months Ended
Reconciliation of Net Income to Adjusted EBITDAX December 31, 2023 December 31, 2022 September 30, 2023 December 31, 2023 December 31, 2022
Net income $ 43,991 $ 17,754 $ 6,141 $ 60,354 $ 51,890
Add back:
Impact of discontinued operations - 14 - 15 72
Interest expense (income), net 1,077 1,679 1,426 6,452 2,034
Income tax expense (benefit) 37,574 6,953 25,844 89,777 71,420
Depreciation, depletion and amortization 20,344 26,316 32,538 115,302 48,143
Exploration expense 706 8 1,194 1,965 258
FPSO demobilization 1,837 - - 7,484 8,867
Non-cash or unusual items:
Stock-based compensation 991 (100 ) 1,078 3,323 2,200
Unrealized derivative instruments loss (gain) (2,565 ) 38 2,321 (359 ) (5,123 )
(Gain) /adjustment of acquisition price, net - (10,817 ) - 1,412 (10,817 )
Arrangement Costs - 7,006 - - 14,630
Other operating (income) expense, net (731 ) (43 ) (5 ) (433 ) (38 )
Credit losses and other (7,343 ) 999 822 (4,906 ) 3,082
Adjusted EBITDAX $ 95,881 $ 49,807 $ 71,359 $ 280,386 $ 186,618
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Reconciliation of Working Capital to Adjusted Working Capital As of December 31, 2023 As of December 31, 2022 Change
Current assets $ 228,141 $ 200,097 $ 28,044
Current liabilities (127,475 ) (162,090 ) 34,615
Working capital 100,666 38,007 62,659
Add: lease liabilities - current portion 12,475 10,125 2,350
Add: current liabilities - discontinued operations 673 687 (14 )
Adjusted Working Capital $ 113,814 $ 48,819 $ 64,995
Twelve Months Ended December 31, 2023
Reconciliation of Free Cash Flow
Net cash provided by Operating activities $ 223,597
Net cash used in Investing activities (97,223 )
Net cash used in Financing activities (56,819 )
Effects of exchange rate changes on cash (153 )
Total net cash change 69,402
Add back shareholder cash out:
Dividends paid 26,772
Stock buyback 23,570
Total cash returned to shareholders 50,342
Free Cash Flow $ 119,744
Percent of Free Cash Flow returned to shareholders 42 %
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