REG - Vaalco Energy Inc - SECOND QUARTER 2023 RESULTS
10/08/2023 07:00
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RNS Number : 8632I Vaalco Energy Inc 10 August 2023
VAALCO ENERGY, INC. ANNOUNCES
SECOND QUARTER 2023 RESULTS
~Strong Production in All Operating Areas Leads to 7% Increase in Full Year
Production Guidance and Increased Drilling Efficiencies in Egypt and Canada
Contribute to $10 million Reduction in 2023 Capital Expenditure Guidance~
HOUSTON - August 10, 2023 - VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY)
("VAALCO" or the "Company") today reported operational and financial results
for the second quarter of 2023.
Second Quarter 2023 Highlights and Key Items:
● Paid second quarter 2023 cash dividend of $0.0625 per share of common stock
and announced quarterly cash dividend of $0.0625 per share of common stock
($0.25 annualized) to be paid on September 22, 2023, an increase of 92%
compared to 2022;
● Returned $14.9 million to shareholders by purchasing 3.8 million shares
since inception of share buy back in November 2022 through August 4, 2023;
● Increased average daily production by 7% to 19,676 net revenue interest
("NRI")(1) barrels of oil equivalent per day ("BOEPD"), or 24,863 working
interest ("WI")(2) BOEPD compared to the first quarter of 2023;
● Record production levels achieved in Egypt and Canada drove
production above the high-end of guidance;
● Sold 1,803,000 barrels of oil equivalent ("BOE") in Q2, an increase of 47%
and above the high end of guidance due to increased production and sales in
Gabon, Egypt and Canada;
● Expect Q3 2023 NRI sales to be between 1,700,000 and
1,900,000 BOE;
● Reported Q2 2023 net income of $6.8 million ($0.06 per diluted share) and
Adjusted Net Income(3) of $11.9 million ($0.11 per diluted share);
● Grew Adjusted EBITDAX(3) by 37% to $65.3 million compared to Q1 2023 and
funded $27.1 million in capital expenditures from cash on hand and cash from
operations during the second quarter of 2023;
● Raised full year 2023 production guidance and reduced full year capital
expenditure guidance;
● Increased the full year production guidance midpoint for
every operating area;
● Total Company production guidance midpoint is up 7% with an
updated range of 17,300 to 19,000 NRI
BOEPD, or 22,400 to 24,800 WI BOEPD;
● Announced a $10 million reduction in estimated full year
2023 capital expenditures, now expected to
be in the range of $65 to $75 million;
● Decreased production expense per BOE, excluding workover costs and stock
compensation, by 19% compared to the first quarter of 2023; and
● Reported cash and cash equivalents of $46.2 million, generated $77.6 million
in cash flow from operating activities and reported Adjusted Working
Capital(3) of $55.7 million at June 30, 2023.
(1) All NRI production rates are VAALCO's working interest volumes less royalty
volumes, where applicable
(2) All WI production rates and volumes are VAALCO's working interest volumes
(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."
1
George Maxwell, VAALCO's Chief Executive Officer commented, "Since the
combination with TransGlobe, we have focused on returning cash to
shareholders, generating meaningful cash flow, maintaining and growing our
strong production base, evaluating a larger portfolio of opportunities across
multiple countries and continuing to drill our prospects. We have delivered on
all of these accounts and continue to build size and scale for the future."
"Thus far in 2023, we have paid two increased quarterly dividends, returning
$0.125 per share to shareholders or $13.5 million. Additionally, we have
repurchased $14.9 million in share buybacks through August 4, 2023. Our
production grew by 7% to nearly 20,000 net BOEPD or nearly 25,000 WI BOEPD. We
are very pleased with the results of our 2023 drilling program in both Egypt
and Canada that led to us exceeding our second quarter 2023 production
guidance. Both Canada and Egypt have reached record production levels in 2023
and our production and sales in Gabon have remained very strong. This solid
production growth has allowed us to generate $113 million in Adjusted EBITDAX
thus far in 2023, an increase of 20% over the same period last year, despite
significantly lower realized commodity pricing. The strong performance of our
2023 capital program in Egypt and Canada, coupled with the strong operational
uptime in Gabon has driven production much higher than our original forecasts.
As a result, we are raising our full year production guidance across all three
operating areas and for the total Company by 7% at the midpoint. We are also
lowering our full year capex guidance. When paired with increased production,
this should lead to meaningful cash flow generation in the second half of
2023."
"Our commitment to operational excellence has made VAALCO financially
stronger, with more reserves and production, than at any other point in our
history. We continue to have no bank debt and a substantial cash flow position
that will allow us to fund future capex across our portfolio, while also
evaluating additional opportunities. We will continue to focus on capturing
synergies, operating efficiently and maximizing our operational cash flow. We
are excited about the future, our development project in Equatorial Guinea,
our next drilling campaign in Gabon and the numerous opportunities in Egypt
and Canada. The diversity and strength of our assets provides meaningful
optionality in the future and supports our ability to continue to return value
to shareholders."
Operational Update
Egypt
In December 2022, VAALCO spudded the Arta77 HC well targeting the Nukhul
reservoir. The lateral was successfully drilled through reservoir encountering
laterally 1,363 meters of good oil and gas shows. Historically, the wells
drilled in Egypt were vertical wells. The Arta77 HC was the first horizontal
well drilled under the new merged concession agreement and the Company plans
to study the results, drilling technique and completions methods to enhance
potential productivity of the next horizontal well. In addition to drilling
capital, VAALCO has also spent capital and expense dollars on upgrading
facilities, to improve well performance as well as to meet its environmental
social and governance ("ESG") standards.
After completing the Arta77 HC well in January 2023, VAALCO has drilled twelve
vertical wells in the first half of 2023, including an injector well and one
exploration well. Through operational and drilling efficiencies, VAALCO has
drilled wells faster and cheaper than previously forecasted. To date, this has
resulted in all drilling targets for 2023 being drilled and record production
levels in 2023 in the merged concession. In the third quarter of 2023, the
Company has drilled two vertical wells and plans to frac four wells. VAALCO is
evaluating the results of the wells drilled over the past year to better
understand the potential for additional future drilling.
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 in early July the pump and rods were run on both wells. Both wells
production rates are exceeding expectations, and the Company is currently
evaluating future drilling campaigns, with the intent of moving exclusively to
2.5 mile and 3-mile laterals to improve economics. As seen in Egypt, this has
resulted in record production levels. Additionally, VAALCO is conducting a
review of completions intensity for potential future well completions and
facility and pad optimization which should improve production cycle times in
the future.
2
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. More details will be made available in the second half of
2023. In October 2022, VAALCO successfully completed its transition to a
Floating Storage and Offloading vessel ("FSO") and related field
reconfiguration processes. This project provides a lower cost FSO solution
that increases the storage capacity for VAALCO to continue to economically
produce from the Etame field and led to an extension of the economic field
life. In 2023, the Company will continue to focus on operational excellence,
including production uptime and enhancement, to minimize decline until the
next drilling campaign. Gabon production performance in the first half of
2023 has been strong and slightly ahead of plan which was driven by improved
operational uptime at Etame. The cost savings from the new FSO have
crystalized as planned but are being offset by increased diesel costs and
inflationary (marine vessel supply rates, transportation, and contractors) and
industry supply chain pressures. VAALCO is powering the FSO with diesel
because the SEENT gas line that normally would have supplied feed gas has been
temporarily shut-in.
Equatorial Guinea
VAALCO owns a working interest in Block P offshore Equatorial Guinea, where
there are previously-discovered but undeveloped resources as well as
additional exploration potential. In March 2023, VAALCO held productive
meetings with the Ministry of Mines and Hydrocarbons ("MMH") and its partners
in Houston. During these meetings, VAALCO finalized multiple substantive
documents, for Block P which includes the Venus development relating to the
PSC. The Joint Operating Agreement has outstanding signatures and VAALCO will
be able to accelerate the project forward following approval by all
stakeholders. The Company has an approved Plan of Development with Equatorial
Guinea, and will continue working with all stakeholders to move it toward
Final Investment Decision ("FID").
Environmental, Social and Governance
As part of the Company's commitment to environmental stewardship, social
awareness and good corporate governance, VAALCO published its annual ESG
report in April 2023. The report covers VAALCO's ESG initiatives and related
key performance indicators and is available on VAALCO's web site,
www.vaalco.com, under the "Sustainability" tab. During 2022, the Company
completed a materiality study, led by its ESG Engineer with input from key
personnel across the organization with responsibility for engaging with its
key stakeholder groups. Working with an external consultancy, VAALCO created
an ESG materiality framework against which it plotted material topics informed
by the Global Reporting Initiative and Sustainability Accounting Standards
Board. Each of these were assessed based upon the perceived level of risk to
the business and the level of management control in place.
Financial Update -Second Quarter of 2023
Reported net income of $6.8 million ($0.06 per diluted share) for the
second quarter of 2023 which was up compared with net income of $3.5
million ($0.03 per diluted share) in the first quarter of 2023 and down
compared to $15.1 million ($0.25 per diluted share) in the second quarter
of 2022. The increase in earnings compared to the first quarter of 2023 is
mainly due to higher sales volumes partially offset by higher production
expenses and higher DD&A expense. The decrease in earnings compared to
the second quarter of 2022 is due to higher production expense and higher
DD&A expense partially offset by lower income taxes and lower realized
losses on derivatives.
3
Adjusted EBITDAX totaled $65.3 million in the second quarter of 2023, a 37%
increase from $47.8 million in the first quarter of 2023, primarily due to
higher sales volumes, partially offset by higher production expense and
DD&A costs and lower commodity prices. The 7% increase in second
quarter 2023 Adjusted EBITDAX compared with $60.9 million generated in the
same period in 2022, is primarily due to higher revenue resulting from the
TransGlobe transaction and lower realized losses on derivatives.
Quarterly Summary - Sales and Net Revenue
$ in thousands Three Months Ended March 31, 2023 Three Months Ended June 30, 2023
Gabon Egypt Canada Total Gabon Egypt Canada Total
Oil Sales $ 42,601 $ 54,621 $ 6,654 $ 103,876 $ 87,478 $ 50,201 $ 8,325 $ 146,004
NGL Sales - - $ 2,463 $ 2,463 - - $ 1,885 $ 1,885
Gas Sales - - $ 958 $ 958 - - $ 703 $ 703
Gross Sales $ 42,601 $ 54,621 $ 10,075 $ 107,297 $ 87,478 $ 50,201 $ 10,913 $ 148,592
Selling Costs & carried interest - $ (497 ) - $ (497 ) $ 2,212 $ (1 ) - $ 2,211
Royalties & taxes $ (5,864 ) $ (19,340 ) $ (1,193 ) $ (26,397 ) $ (11,766 ) $ (28,892 ) $ (905 ) $ (41,563 )
Net Revenue $ 36,737 $ 34,784 $ 8,882 $ 80,403 $ 77,924 $ 21,308 $ 10,008 $ 109,240
Oil Sales MMB (working interest) 528 840 93 1,461 1,113 910 123 2,146
Average Oil Price Received $ 80.70 $ 65.03 $ 71.27 $ 71.09 $ 78.62 $ 55.15 $ 67.76 $ 68.04
% Change Q2 2023 vs. Q1 2023 -4 %
Average Brent Price - - - $ 81.07 - - - $ 77.92
% Change Q2 2023 vs. Q1 2023 -4 %
Gas Sales MMCF (working interest) - - 415 415 - - 442 442
Average Gas Price Received - - $ 2.31 $ 2.31 - - $ 1.59 $ 1.59
% Change Q2 2023 vs. Q1 2023 -31 %
Average Aeco Price ($USD) - - - $ 2.77 - - - $ 1.68
% Change Q2 2023 vs. Q1 2023 -39 %
NGL Sales MMB (working interest) - - 76 76 - - 78 78
Average Liquids Price Received - - $ 32.23 $ 32.23 - - $ 24.04 $ 24.04
% Change Q2 2023 vs. Q1 2023 -25 %
Revenue and Sales Q2 2023 Q2 2022 % Change Q2 2023 vs. Q2 2022 Q1 2023 % Change Q2 2023 vs. Q1 2023
Production (NRI BOEPD) 19,676 9,211 114 % 18,306 7 %
Sales (NRI BOE) 1,803,000 958,000 88 % 1,224,000 47 %
Realized commodity price ($/BOE) $ 59.37 $ 113.38 (48 )% $ 65.68 (10 )%
Commodity (Per BOE including realized commodity derivatives) $ 59.34 $ 91.39 (35 )% $ 65.63 (10 )%
Total commodity sales ($MM) $ 109.2 $ 111.0 (2 )% $ 80.4 36 %
VAALCO had net revenue increase by $28.8 million or 36% as total NRI sales
volumes of 1,803,000 BOE increased by 47% compared to 1,224,000 BOE in the
first quarter of 2023 and 88% compared to 958,000 BOE for the same period
in 2022. Second quarter 2023 sales were higher than VAALCO's guidance
primarily due to stronger production and sales volumes in Gabon, Egypt and
Canada. The Company expects third quarter NRI sales to be between 18,400 and
20,600 BOEPD.
Second quarter of 2023 realized pricing (net of royalties) was down 10%
compared to the first quarter of 2023 and decreased 35% compared to the
second quarter of 2022. This was driven by lower commodity pricing, higher
royalty costs, as well as Egyptian sales in the second quarter that were sold
domestically resulting in a $10 per BOE reduction in price achieved
quarter-on-quarter. In the third quarter, the Company expects to sell an
Egyptian export cargo offshore which should improve the pricing.
4
Costs and Expenses Q2 2023 Q2 2022 % Change Q2 2023 vs. Q2 2022 Q1 2023 % Change Q2 2023 vs. Q1 2023
Production expense, excluding offshore workovers and stock comp ($MM) $ 38.8 $ 25.5 52 % $ 29.3 32 %
Production expense, excluding offshore workovers ($/BOE) $ 21.51 $ 26.58 (19 )% $ 23.90 (10 )%
Offshore workover expense ($MM) $ (0.2 ) $ - - % $ (1.1 ) (84 )%
Depreciation, depletion and amortization ($MM) $ 38.0 $ 8.2 363 % $ 24.4 56 %
Depreciation, depletion and amortization ($/BOE) $ 21.1 $ 8.55 147 % $ 19.90 6 %
General and administrative expense, excluding stock-based compensation ($MM) $ 4.8 $ 2.7 78 % $ 4.6 4 %
General and administrative expense, excluding stock-based compensation ($/BOE) $ 2.7 $ 2.81 (5 )% $ 3.7 (28 )%
Stock-based compensation expense ($MM) $ 0.6 $ 0.8 (25 )% $ 0.6 - %
Current income tax expense (benefit) ($MM) $ 12.4 $ 20.4 (39 )% $ 12.3 1 %
Deferred income tax expense (benefit) ($MM) $ (0.8 ) $ 25.9 (103 )% $ 2.5 (132 )%
Total production expense (excluding offshore workovers and stock compensation)
of $38.8 million in the second quarter of 2023 was higher compared to the
first quarter of 2023 and the same period in 2022. The increase in second
quarter 2023 expense compared to the first quarter of 2023 was driven
primarily by higher costs related to higher sales volumes. The increase in
the second quarter of 2023 compared to the second quarter of 2022 was
primarily driven by increased sales and costs associated with the TransGlobe
combination as well as higher costs associated with boats, diesel and
operating costs, and higher expense associated with higher sales volumes.
VAALCO has seen inflationary and industry supply chain pressure on personnel
and contractor costs.
The second quarter of 2023 had no workovers, and the negative $0.2 million
in offshore workover expenses was the result of a reversal of accruals on
completion and tie out of the workover AFE's. While there were no offshore
workover expenses in the second quarter of 2022 or in the first quarter of
2023, the first quarter of 2023 incurred a negative $1.1 million in
offshore workover expenses due to accrual reversals.
Production expense per BOE, excluding offshore workover costs and stock
compensation, was down 19% compared to the first quarter of 2023 and down 10%
compared to the second quarter of 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.
In the second quarter of 2023, VAALCO incurred $5.7 million in one-time
costs for removing and disposal of Normally Occurring Radioactive Materials
("NORMs") related to finalizing the demobilization of the FPSO. These are
typical costs incurred when a floating storage facility is decommissioned and
are the responsibility of the lessee.
Depreciation, depletion and amortization ("DD&A") expense for the three
months ended June 30, 2023, was $38.0 million which was higher than the first
quarter of 2023 of $24.4 million and higher than the $8.2 million in the
second quarter of 2022 driven by increased production. Additionally, the
increase in DD&A expense, compared to the second quarter of 2022, is due
to higher depletable costs associated with the FSO, the field reconfiguration
capital costs at Etame and the step-up in fair value of the TransGlobe
assets. The increase in DD&A expense, compared to the first quarter of
2023, is due to increased capital costs associated primarily with the capital
programs in Egypt and Canada which have been highly successful and completed
in record time.
General and administrative ("G&A") expense, excluding stock-based
compensation, increased for the three months ended June 30, 2023 to
$4.8 million from $4.6 million in the first quarter of 2023 and
$2.7 million for the same period in the prior year. The Company has
incurred one-time reorganization costs in 2023 as it integrates the
TransGlobe assets and eliminates duplicate administrative costs. Second
quarter 2023 G&A was within the Company's guidance. The Company has made
meaningful progress toward reducing absolute G&A costs when compared
against the combined TransGlobe and VAALCO second quarter of 2022 costs.
Non-cash stock-based compensation expense was $0.6 million for the
three months ended June 30, 2023 compared to $0.8 million during the same
period in 2022. There was no change in non-cash stock-based compensation
expense compared to the three months ended March 31, 2023.
Other income (expense), net, was an expense of $0.5 million for the three
months ended June 30, 2023, compared to an expense of $2.1 million during the
same period in 2022 and was an expense of $1.1 million for the three months
ended March 31, 2023. Other income (expense), net, normally consists of
foreign currency losses. For the three months ended June 30, 2022, also
included in other (expense) income, net is $1.2 million of transaction costs
associated with the TransGlobe transaction.
5
Foreign income taxes for Gabon and Egypt are settled by the government taking
their oil in-kind. Income tax expense for the three months ended June 30, 2023
was an expense of $11.6 million and is comprised of current tax expense of
$12.4 million and deferred tax provision of negative $0.8 million. Income
tax expense for the three months ended March 31, 2023 was an expense of
$14.8 million. This was comprised of $12.3 million of current tax
expense and a deferred tax provision of $2.5 million. The income tax expense
for the three months ended June 30, 2022 was an expense of $46.3
million. This was comprised of $25.9 million of deferred tax expense and a
current tax provision of $20.4 million. For all periods, VAALCO's overall
effective tax rate was impacted by non-deductible items associated with
derivative losses and corporate expenses.
Financial Update - First Six Months of 2023
Production for the first six months of 2023 was higher by 120% at
3,438 MBbls net crude oil compared to 1,563 MBbls net crude oil production
in the first six months of 2022. The increase was driven by production from
the TransGlobe assets, as well as new wells from the 2022/2023 drilling
campaign in Gabon. The first half of 2023 saw sales volume increase 92% to
3,027 MBbls net crude oil compared to 1,574 MBbls for the first half of
2022. Crude oil sales are a function of the number and size of crude oil
liftings in each quarter and do not always coincide with volumes produced in
any given period.
The average realized crude oil price for the first six months of 2023 was
$61.92 per barrel, representing a decrease of 45% from $111.92 realized in
the first six 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 that has lower realized pricing than Gabon.
The Company reported net income for the six months ended June 30, 2023 of
$10.2 million, which compares to $27.3 million for the same period of 2022.
The decrease in net income for the six months ended June 30, 2023 compared to
the same period in 2022 was primarily due to higher production costs, higher
DD&A and lower oil prices in the first half of 2023 partially offset by
increased sales volumes.
Year to Date Summary - Sales and Net Revenue
$ in thousands Six Months Ended June 30, 2023
Gabon Egypt Canada Total
Oil Sales $ 130,079 $ 104,822 $ 14,979 $ 249,880
NGL Sales - - $ 4,348 $ 4,348
Gas Sales - - $ 1,661 $ 1,661
Gross Sales $ 130,079 $ 104,822 $ 20,988 $ 255,889
Selling Costs & carried interest $ 2,212 $ (498 ) - $ 1,714
Royalties & taxes $ (17,630 ) $ (48,232 ) $ (2,098 ) $ (67,960 )
Net Revenue $ 114,661 $ 56,092 $ 18,890 $ 189,643
Oil Sales MMB (working interest) 1,641 1,750 216 3,607
Average Oil Price Received $ 79.29 $ 59.89 $ 69.27 $ 69.28
Average Brent Price - - - $ 79.47
Gas Sales MMCF (working interest) - - 857 857
Average Gas Price Received - - $ 1.94 $ 1.94
NGL Sales MMB (working interest) - - 155 155
Average Liquids Price Received - - $ 28.08 $ 28.08
6
Capital Investments/Balance Sheet
For the first half of 2023, net capital expenditures totaled $54.8 million
on a cash basis and $41.9 million on an accrual basis. These expenditures
were primarily related to costs associated with the development drilling
programs in Egypt and Canada. VAALCO has reduced its planned capital budget
for full year 2023 from a range of $70 to $90 million to $65 to $75 million,
or approximately $10 million at the mid-point of guidance. The increased
efficiencies achieved in drilling wells in Egypt and Canada contributed to
VAALCO's reducing its planned spending for 2023.
At the end of the second quarter of 2023, VAALCO had an unrestricted cash
balance of $46.2 million. Working capital at June 30, 2023 was $45.7
million compared with $30.5 million at March 31, 2023, while Adjusted
Working Capital at June 30, 2023 totaled $55.7 million. VAALCO continues
to work with the Egyptian General Petroleum Corporation on both collections
and offsets and expects to have a third quarter 2023 export cargo offshore of
around 500,000 barrels. In addition, with the completion of drilling in Canada
and near completion in Egypt, VAALCO expects to see a reduction in its
outstanding Accounts Payable and Accruals.
In mid-2022, VAALCO announced entry into a new credit agreement, effective May
16, 2022, for a new five-year Reserve Based Lending ("RBL") facility with
Glencore Energy UK Ltd. ("Glencore") that includes an initial commitment of
$50 million and is expandable up to $100 million. The facility is currently
secured by the Company's assets in Gabon and matures in 2027. Key terms and
covenants under the new facility include Consolidated Total Net Debt to
EBITDAX (each term as defined in the RBL facility) for the trailing twelve
months of less than three times and requires VAALCO to maintain a minimum
consolidated cash and cash equivalents balance of $10 million. While VAALCO
intends to fund its capital and shareholder returns programs with internally
generated funds, the facility enhances future financial flexibility.
Cash Dividend Policy and Share Buyback Authorization
VAALCO paid a quarterly cash dividend of $0.0625 per share of common stock for
the second quarter of 2023 on June 23, 2023. On August 9, 2023, the Company
announced its next quarterly cash dividend of $0.0625 per share of common
stock for the third quarter of 2023 ($0.25 annualized), to be paid
on September 22, 2023 to stockholders of record at the close of business on
August 25, 2023. VAALCO increased its dividend 92% beginning with the
second quarter of 2023 compared to the quarterly dividends paid in 2022.
Future declarations of quarterly dividends and the establishment of future
record and payment dates are subject to approval by the VAALCO Board of
Directors (the "Board").
On November 1, 2022, VAALCO announced that its newly expanded Board formally
ratified and approved the share buyback program that was announced on August
8, 2022 in conjunction with the pending business combination with
TransGlobe. The Board also directed management to implement a Rule 10b5-1
trading plan to facilitate share purchases through open market purchases,
privately negotiated transactions, or otherwise in compliance with Rule 10b-18
under the Securities Exchange Act of 1934. The plan 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 Securities and Exchange
Commission 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.
Since inception of the buyback program in November 2022 through August 4,
2023, VAALCO has repurchased $14.9 million in shares.
7
Hedging
The Company continued to opportunistically hedge a portion of its expected
production in 2023 to lock in strong cash flow generation to assist in funding
its capital program and dividend.
The following additional hedges were entered into in 2023 for periods after
the second quarter:
Settlement Period Type of Contract Index Average Monthly Volumes Weighted Average Put Price Weighted Average Call Price
(Bbls) (per Bbl) (per Bbl)
July 2023 - September 2023 Collars Dated Brent 95,000 $ 65.00 $ 96.00
Settlement Period Type of Contract Index Average Monthly Volumes Weighted Average Put Price Weighted Average Call Price
(Bbls) (per Bbl) (per Bbl)
October 2023 - December 2023 Collars Dated Brent 85,000 $ 65.00 $ 90.00
2023 Guidance:
The Company has provided third quarter 2023 guidance and updated its full year
2023 guidance. Driven by continued strong performance from the 2023 drilling
program, production guidance for both Egypt and Canada have been raised.
Additionally, due to operational excellence and continued focus on maintaining
strong uptime in the field, VAALCO has raised its Gabon full year production
guidance. The drilling, completions and facility improvements seen in Egypt
and Canada has also driven capital costs lower and VAALCO has updated and
lowered its full year capital expenditure budget. All of the quarterly and
annual guidance is detailed in the table below.
FY 2023 Gabon Egypt Canada
Production (BOEPD) WI 22,400 - 24,800 9,700 - 10,100 10,200 - 11,900 2,500 - 2,800
Production (BOEPD) NRI 17,300 - 19,000 8,400 - 8,800 6,700 - 7,700 2,200 - 2,500
Sales Volume (BOEPD) WI 22,400 - 24,800 9,700 - 10,100 10,200 - 11,900 2,500 - 2,800
Sales Volume (BOEPD) NRI 17,300 - 19,000 8,400 - 8,800 6,700 - 7,700 2,200 - 2,500
Production Expense (millions) WI & NRI $151.0 - $161.5
Production Expense per BOE WI $17.00 - $20.00
Production Expense per BOE NRI $22.00 - $25.00
Offshore Workovers (millions) WI & NRI $2 - $5
Cash G&A (millions) WI & NRI $18.0 - $21.0
CAPEX (millions) WI & NRI $65 - $75
DD&A ($/BO) NRI $20.0 - $22.00
Q3 2023 Gabon Egypt Canada
Production (BOEPD) WI 23,050 - 24,800 9,400 - 10,100 10,900 - 11,800 2,750 - 2,900
Production (BOEPD) NRI 17,500 - 19,200 8,100 - 8,800 7,300 - 8,100 2,100 - 2,300
Sales Volume (BOEPD) WI 25,650 - 27,500 11,800 - 12,100 11.100 - 12.500 2,750 - 2,900
Sales Volume (BOEPD) NRI 18,400 - 20,600 9,400 - 10,500 6,900 - 7,800 2,100 - 2,300
Production Expense (millions) WI & NRI $42.5 - $48.5
Production Expense per BOE WI $17.00 - $21.00
Production Expense per BOE NRI $22.00 - $29.00
Offshore Workovers (millions) WI & NRI $0 - $0
Cash G&A (millions) WI & NRI $4.0 - $6.0
CAPEX (millions) WI & NRI $14 - $18
DD&A ($/BO) NRI $20.0 - $22.0
8
Conference Call
As previously announced, the Company will hold a conference call to discuss
its second quarter 2023 financial and operating results tomorrow, Thursday,
August 10, 2023, at 10:00 a.m. Central Time (11:00 a.m. Eastern Time and 4:00
p.m. London Time). Interested parties may participate by dialing (833)
685-0907. Parties in the United Kingdom may participate toll-free by dialing
08082389064 and other international parties may dial (412) 317-5741.
Participants should request to be joined to the "VAALCO Energy Second Quarter
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 "Q2 2023 Supplemental Information" investor deck will be posted to VAALCO's
web site prior to its conference call on August 10, 2023 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.
Following its business combination with TransGlobe in October 2022, 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
9
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) VAALCO's
ability to realize the anticipated benefits and synergies expected from the
acquisition of TransGlobe; (ii) estimates of future drilling, production,
sales and costs of acquiring crude oil, natural gas and natural gas liquids;
(iii) estimates of future cost reductions, synergies, including pre-tax
synergies, savings and efficiencies; (iv) expectations regarding VAALCO's
ability to effectively integrate assets and properties it acquired as a result
of the acquisition of TransGlobe into its operations; (v) 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; (vi)
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; (vii) expectations
regarding future acquisitions, investments or divestitures; (viii)
expectations of future dividends, buybacks and other potential returns to
stockholders; (ix) expectations of future balance sheet strength; (x)
expectations of future equity and enterprise value; (xi) expectations of the
continued listing of VAALCO's common stock on the NYSE and LSE and (xii)
VAALCO's ability to finalize documents and effectively execute the POD for the
Venus development in Block P.
Such forward-looking statements are subject to risks, uncertainties and other
factors, which could cause actual results to differ materially from future
results expressed, projected or implied by the forward-looking statements.
These risks and uncertainties include, but are not limited to: risks relating
to any unforeseen liabilities of VAALCO or TransGlobe; the tax treatment of
the business combination with TransGlobe in the United States and Canada;
declines in oil or natural gas prices; the level of success in exploration,
development and production activities; adverse weather conditions that may
negatively impact development or production activities; the right of host
governments in countries where we operate to expropriate property and
terminate contracts (including the Etame production sharing contract and the
Block P PSC) for reasons of public interest, subject to reasonable
compensation, determinable by the respective government in its discretion; the
final terms of the agreements pertaining to Block P in Equatorial Guinea,
which remain under negotiation; the timing and costs of exploration and
development expenditures; inaccuracies of reserve estimates or assumptions
underlying them; revisions to reserve estimates as a result of changes in
commodity prices; impacts to financial statements as a result of impairment
write-downs; the ability to generate cash flows that, along with cash on hand,
will be sufficient to support operations and cash requirements; the ability to
attract capital or obtain debt financing arrangements; currency exchange rates
and regulations; actions by joint venture co-owners; hedging decisions,
including whether or not to enter into derivative financial instruments;
international, federal and state initiatives relating to the regulation of
hydraulic fracturing; failure of assets to yield oil or gas in commercially
viable quantities; uninsured or underinsured losses resulting from oil and gas
operations; inability to access oil and gas markets due to market conditions
or operational impediments; the impact and costs of compliance with laws and
regulations governing oil and gas operations; the ability to replace oil and
natural gas reserves; any loss of senior management or technical personnel;
competition in the oil and gas industry; the risk that the business
combination with TransGlobe may not increase VAALCO's relevance to investors
in the international E&P industry, increase capital market access through
scale and diversification or provide liquidity benefits for stockholders; and
other risks described under the caption "Risk Factors" in VAALCO's 2022 Annual
Report on Form 10-K filed with the SEC on April 6, 2023.
Dividends beyond the third quarter of 2023 have not yet been approved or
declared by the Board of Directors for VAALCO. 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.
10
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Balance Sheets (Unaudited)
As of June 30, 2023 As of December 31, 2022
ASSETS (in thousands)
Current assets:
Cash and cash equivalents $ 46,186 $ 37,205
Restricted cash 113 222
Receivables:
Trade, net 57,360 52,147
Accounts with joint venture owners, net of allowance for credit losses of $0.5 216 15,830
and $0.3 million, respectively
Foreign income taxes receivable - 2,769
Other, net of allowance for credit losses of $3.5 and $0.0 million, 66,615 68,519
respectively
Crude oil inventory 10,800 3,335
Prepayments and other 18,077 20,070
Total current assets 199,367 200,097
Crude oil and natural gas properties, equipment and other - successful efforts 481,740 495,272
method, net
Other noncurrent assets:
Restricted cash 1,779 1,763
Value added tax and other receivables, net of allowance of $9.5 million and 8,807 7,150
$8.4 million, respectively
Right of use operating lease assets 1,639 2,777
Right of use finance lease assets 90,584 90,698
Deferred tax assets 37,155 35,432
Abandonment funding 6,268 20,586
Other long-term assets 1,674 1,866
Total assets $ 829,013 $ 855,641
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 40,716 $ 59,886
Accounts with joint venture owners 6,284 -
Accrued liabilities and other 84,104 91,392
Operating lease liabilities - current portion 1,667 2,314
Finance lease liabilities - current portion 7,684 7,811
Foreign income taxes payable 12,575 -
Current liabilities - discontinued operations 673 687
Total current liabilities 153,703 162,090
Asset retirement obligations 42,958 41,695
Operating lease liabilities - net of current portion 130 686
Finance lease liabilities - net of current portion 79,856 78,248
Deferred tax liabilities 82,895 81,223
Other long-term liabilities 17,465 25,594
Total liabilities 377,007 389,536
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, 121,205,919 and 12,121 11,948
119,482,680 shares issued, 106,997,933 and 107,852,857 shares outstanding,
respectively
Additional paid-in capital 355,206 353,606
Accumulated other comprehensive income 3,060 1,179
Less treasury stock, 14,207,986 and 11,629,823 shares, respectively, at cost (59,055 ) (47,652 )
Retained earnings 140,674 147,024
Total shareholders' equity 452,006 466,105
Total liabilities and shareholders' equity $ 829,013 $ 855,641
11
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Operations (Unaudited)
Three Months Ended Six Months Ended
June 30, 2023 June 30, 2022 March 31, 2023 June 30, 2023 June 30, 2022
(in thousands except per share amounts)
Revenues:
Crude oil, natural gas and natural gas liquids sales $ 109,240 $ 110,985 $ 80,403 $ 189,643 $ 179,641
Operating costs and expenses:
Production expense 38,604 25,475 28,200 66,804 43,835
FPSO Demobilization - Norms Waste Disposal 5,647 - - 5,647 -
Exploration expense 57 67 8 65 194
Depreciation, depletion and amortization 38,003 8,191 24,417 62,420 12,864
General and administrative expense 5,395 3,534 5,224 10,619 8,528
Credit losses and other 680 571 935 1,615 1,063
Total operating costs and expenses 88,386 37,838 58,784 147,170 66,484
Other operating expense, net (303 ) - - (303 ) (5 )
Operating income 20,551 73,147 21,619 42,170 113,152
Other income (expense):
Derivative instruments gain (loss), net 31 (9,542 ) 21 52 (41,300 )
Interest expense, net (1,703 ) (118 ) (2,246 ) (3,949 ) (121 )
Other income (expense), net (537 ) (2,111 ) (1,140 ) (1,677 ) (2,807 )
Total other income (expense), net (2,209 ) (11,771 ) (3,365 ) (5,574 ) (44,228 )
Income from continuing operations before income taxes 18,342 61,376 18,254 36,596 68,924
Income tax expense (benefit) 11,588 46,252 14,771 26,359 41,624
Income from continuing operations 6,754 15,124 3,483 10,237 27,300
Loss from discontinued operations, net of tax (2 ) (20 ) (13 ) (15 ) (32 )
Net income $ 6,752 $ 15,104 $ 3,470 $ 10,222 $ 27,268
Other comprehensive income (loss)
Currency translation adjustments 2,006 - (125 ) 1,881 -
Comprehensive income $ 8,758 $ 15,104 $ 3,345 $ 12,103 $ 27,268
Basic net income (loss) per share:
Income (loss) from continuing operations $ 0.06 $ 0.25 $ 0.03 $ 0.10 $ 0.46
Loss from discontinued operations, net of tax - - - - -
Net income (loss) per share $ 0.06 $ 0.25 $ 0.03 $ 0.10 $ 0.46
Basic weighted average shares outstanding 106,965 58,925 107,387 107,175 58,814
Diluted net income (loss) per share:
Income (loss) from continuing operations $ 0.06 $ 0.25 $ 0.03 $ 0.09 $ 0.45
Loss from discontinued operations, net of tax - - - - -
Net income (loss) per share $ 0.06 $ 0.25 $ 0.03 $ 0.09 $ 0.45
Diluted weighted average shares outstanding 107,613 59,361 108,752 108,050 59,278
12
VAALCO ENERGY, INC AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30,
2023 2022
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,222 $ 27,268
Adjustments to reconcile net income to net cash provided by operating
activities:
Loss from discontinued operations, net of tax 15 32
Depreciation, depletion and amortization 62,420 12,864
Bargain purchase gain 1,412 -
Deferred taxes 1,618 15,531
Unrealized foreign exchange loss 313 360
Stock-based compensation 1,254 2,264
Cash settlements paid on exercised stock appreciation rights (233 ) (805 )
Derivative instruments (gain) loss, net (52 ) 41,300
Cash settlements paid on matured derivative contracts, net (63 ) (33,559 )
Cash settlements paid on asset retirement obligations (374 ) -
Credit losses and other 1,615 1,063
Other operating loss, net 62 5
Operational expenses associated with equipment and other (1,196 ) 718
Change in operating assets and liabilities:
Trade receivables (5,208 ) (47,810 )
Accounts with joint venture owners 21,746 10,283
Other receivables (1,868 ) (943 )
Crude oil inventory (7,465 ) (12,274 )
Prepayments and other (69 ) 1,570
Value added tax and other receivables (2,302 ) (2,249 )
Other long-term assets 1,508 (1,072 )
Accounts payable (10,897 ) (857 )
Foreign income taxes receivable/payable 15,344 26,093
Deferred tax liability (3,081 ) -
Accrued liabilities and other (7,137 ) 29,263
Net cash provided by (used in) continuing operating activities 77,584 69,045
Net cash used in discontinued operating activities (15 ) (38 )
Net cash provided by (used in) operating activities 77,569 69,007
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (54,832 ) (60,278 )
Net cash provided by (used in) continuing investing activities (54,832 ) (60,278 )
Net cash used in discontinued investing activities - -
Net cash provided by (used in) investing activities (54,832 ) (60,278 )
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock 382 257
Dividend distribution (13,452 ) (3,872 )
Treasury shares (11,403 ) (788 )
Deferred financing costs (30 ) (1,451 )
Payments of finance lease (3,379 ) (68 )
Net cash provided by (used in) in continuing financing activities (27,882 ) (5,922 )
Net cash used in discontinued financing activities - -
Net cash provided by (used in) in financing activities (27,882 ) (5,922 )
Effects of exchange rate changes on cash (285 ) -
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (5,430 ) 2,807
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD 59,776 72,314
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD $ 54,346 $ 75,121
13
VAALCO ENERGY, INC AND SUBSIDIARIES
Selected Financial and Operating Statistics
(Unaudited)
Three Months Ended Six Months Ended
June 30, 2023 June 30, 2022 March 31, 2023 June 30, 2023 June 30, 2022
NRI SALES DATA
Crude oil, natural gas and natural gas liquids sales (MBOE) 1,803 958 1,224 3,027 1,574
WI PRODUCTION DATA
Etame Crude oil (MBbl) 934 963 942 1,876 1,796
Egypt Crude oil (MBbl) 1,054 - 903 1,957 -
Canada Crude Oil (MBbl) 123 - 93 216 -
Canada Natural Gas (Mcf) 442 - 415 857 -
Canada Natural Gas Liquid Sales (Mbbl) 78 - 77 155 -
Canada Crude oil, natural gas and natural gas liquids sales (MBOE) 275 - 239 514 -
Total Crude oil, natural gas and natural gas liquids sales (MBOE) 2,263 963 2,084 4,347 1,796
Gabon Average daily production volumes (BOEPD) 10,262 10,587 10,463 10,364 9,924
Egypt Average daily production volumes (BOEPD) 11,579 - 10,033 10,810 -
Canada Average daily production volumes (BOEPD) 3,021 - 2,656 2,839 -
Average daily production volumes (BOEPD) 24,863 10,587 23,152 24,013 9,924
NRI PRODUCTION DATA
Etame Crude oil (MBbl) 812 838 820 1,632 1,563
Egypt Crude oil (MBbl) 726 - 616 1,342 -
Canada Crude Oil (MBbl) 113 - 82 195 -
Canada Natural Gas (Mcf) 406 - 367 773 -
Canada Natural Gas Liquid Sales (Mbbl) 72 - 68 140 -
Canada Crude oil, natural gas and natural gas liquids sales (MBOE) 253 - 211 464 -
Total Crude oil, natural gas and natural gas liquids sales (MBOE) 1,791 838 1,647 3,438 1,563
Gabon Average daily production volumes (BOEPD) 8,923 9,211 9,115 9,017 8,634
Egypt Average daily production volumes (BOEPD) 7,978 - 6,844 7,414 -
Canada Average daily production volumes (BOEPD) 2,776 - 2,347 2,563 -
Average daily production volumes (BOEPD) 19,676 9,211 18,306 18,994 8,634
AVERAGE SALES PRICES:
Crude oil, natural gas and natural gas liquids sales (per BOE) - WI basis $ 64.67 $ 113.71 $ 66.42 $ 65.41 $ 111.46
Crude oil, natural gas and natural gas liquids sales (per BOE) - NRI basis $ 59.37 $ 113.38 $ 65.68 $ 61.92 $ 111.92
Crude oil, natural gas and natural gas liquids sales (Per BOE including $ 59.34 $ 91.39 $ 65.63 $ 61.90 $ 90.60
realized commodity derivatives)
COSTS AND EXPENSES (Per BOE of sales):
Production expense $ 21.41 $ 26.59 $ 23.04 $ 22.07 $ 27.85
Production expense, excluding offshore workovers and stock compensation* 21.51 26.58 23.91 22.48 27.85
Depreciation, depletion and amortization 21.08 8.55 19.95 20.62 8.17
General and administrative expense** 2.99 3.69 4.27 3.51 5.42
Property and equipment expenditures, cash basis (in thousands) $ 27,132 $ 37,130 $ 27,700 $ 54,832 $ 60,278
*Offshore workover costs excluded from the three months ended June 30, 2023
and 2022 and March 31, 2023 are $(0.2) million, no change and
$(1.1) million, respectively.
*Stock compensation associated with production expense excluded from the three
months ended June 30, 2023 and 2022 and March 31, 2023 are not material.
**General and administrative expenses include $0.33, $0.88 and $0.52 per
barrel of oil related to stock-based compensation expense in the three
months ended June 30, 2023 and 2022 and March 31, 2023, respectively.
14
NON-GAAP FINANCIAL MEASURES
Management uses Adjusted Net Income to evaluate operating and financial
performance and believes the measure is useful to investors because it
eliminates the impact of certain non-cash and/or other items that management
does not consider to be indicative of the Company's performance from period to
period. Management also believes this non-GAAP measure is useful to investors
to evaluate and compare the Company's operating and financial performance
across periods, as well as facilitating comparisons to others in the Company's
industry. Adjusted Net Income is a non-GAAP financial measure and as used
herein represents net income before discontinued operations, impairment of
proved crude oil and natural gas properties, deferred income tax expense,
unrealized commodity derivative loss, gain on the Sasol Acquisition and
non-cash and other items.
Adjusted EBITDAX is a supplemental non-GAAP financial measure used by VAALCO's
management and by external users of the Company's financial statements, such
as industry analysts, lenders, rating agencies, investors and others who
follow the industry, as an indicator of the Company's ability to internally
fund exploration and development activities and to service or incur additional
debt. Adjusted EBITDAX is a non-GAAP financial measure and as used herein
represents net income before discontinued operations, interest income net,
income tax expense, depletion, depreciation and amortization, exploration
expense, impairment of proved crude oil and natural gas properties, non-cash
and other items including stock compensation expense, gain on the Sasol
Acquisition and unrealized commodity derivative loss.
Management uses Adjusted Working Capital as a transition tool to assess the
working capital position of the Company's continuing operations excluding
leasing obligations because it eliminates the impact of discontinued
operations as well as the impact of lease liabilities. Under the lease
accounting standards, lease liabilities related to assets used in joint
operations include both the Company's share of expenditures as well as the
share of lease expenditures which its non-operator joint venture owners' will
be obligated to pay under joint operating agreements. Adjusted Working Capital
is a non-GAAP financial measure and as used herein represents working capital
excluding working capital attributable to discontinued operations and current
liabilities associated with lease obligations.
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 and Adjusted Working Capital 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 and Adjusted Working Capital may not be comparable to similarly titled
measures used by other companies.
15
The tables below reconcile the most directly comparable GAAP financial
measures to Adjusted Net Income, Adjusted EBITDAX and Adjusted Working
Capital.
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
Reconciliation of Net Income to Adjusted Net Income June 30, 2023 June 30, 2022 March 31, 2023 June 30, 2023 June 30, 2022
Net income $ 6,752 $ 15,104 $ 3,470 $ 10,222 $ 27,268
Adjustment for discrete items:
Discontinued operations, net of tax 2 20 13 15 32
Unrealized derivative instruments loss (gain) (35 ) (11,517 ) (80 ) (115 ) 7,741
(Gain) /adjustment of acquisition price, net - - 1,412 1,412 -
Arrangement Costs - 1,199 - - 1,199
FPSO Demobilization - Norms Waste Disposal 5,647 - - 5,647 -
Deferred income tax expense (benefit) (813 ) 25,850 2,471 1,658 15,531
Other operating (income) expense, net 303 - - 303 5
Adjusted Net Income $ 11,856 $ 30,656 $ 7,286 $ 19,142 $ 51,776
Diluted Adjusted Net Income per Share $ 0.11 $ 0.52 $ 0.07 $ 0.18 $ 0.87
Diluted weighted average shares outstanding (1) 107,613 59,361 108,752 108,050 59,278
(1) No adjustments to weighted average shares outstanding
Three Months Ended Six Months Ended
Reconciliation of Net Income to Adjusted EBITDAX June 30, 2023 June 30, 2022 March 31, 2023 June 30, 2023 June 30, 2022
Net income $ 6,752 $ 15,104 $ 3,470 $ 10,222 $ 27,268
Add back:
Impact of discontinued operations 2 20 13 15 32
Interest expense (income), net 1,703 118 2,246 3,949 121
Income tax expense (benefit) 11,588 46,252 14,771 26,359 41,624
Depreciation, depletion and amortization 38,003 8,191 24,417 62,420 12,864
Exploration expense 57 67 8 65 194
FPSO Demobilization - Norms Waste Disposal 5,647 - - 5,647 -
Non-cash or unusual items:
Stock-based compensation 605 842 649 1,254 2,264
Unrealized derivative instruments loss (gain) (35 ) (11,517 ) (80 ) (115 ) 7,741
(Gain) /adjustment of acquisition price, net - - 1,412 1,412 -
Arrangement Costs - 1,199 - - 1,199
Other operating (income) expense, net 303 - - 303 5
Credit losses and other 680 571 935 1,615 1,063
Adjusted EBITDAX $ 65,305 $ 60,847 $ 47,841 $ 113,146 $ 94,375
16
VAALCO ENERGY, INC AND SUBSIDIARIES
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Reconciliation of Working Capital to Adjusted Working Capital As of June 30, 2023 As of December 31, 2022 Change
Current assets $ 199,367 $ 200,097 $ (730 )
Current liabilities (153,703 ) (162,090 ) 8,387
Working capital 45,664 38,007 7,657
Add: lease liabilities - current portion 9,351 10,125 (774 )
Add: current liabilities - discontinued operations 673 687 (14 )
Adjusted Working Capital $ 55,688 $ 48,819 $ 6,869
17
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