Third Quarter 2023 Highlights and Key Items:
- Achieved production of 18,844 net revenue interest (“NRI”)(1) barrels of oil equivalent per day (“BOEPD”), at the higher end of guidance, driven by operational uptime in
Gabon and continued drilling success inEgypt ;- Working interest (“WI”)(2) production of 24,430 BOEPD also at higher end of guidance range;
- Increased NRI sales to 1,812,000 barrels of oil equivalent (“BOE”), or 19,700 BOEPD above the midpoint of guidance;
- Reported lifting of 600,000 gross barrels of oil in
Gabon occurred in first week ofOctober 2023 ;
- Reported lifting of 600,000 gross barrels of oil in
- Grew unrestricted cash by 124% to
$103.4 million after paying out$6.7 million in dividends in the quarter and completing$6 .0 million in share buybacks;- Since inception of the $30 million share buyback program, VAALCO has purchased over $20 million in shares;
- Continued to collect Egyptian receivables and have reduced accounts receivable by
$17.7 million in the third quarter, decreasing the outstanding current Egyptian accounts receivable to$18.8 million ; - Reported Q3 2023 net income of
$6 .1 million ($0 .06 per diluted share) and Adjusted Net Income(3) of$7.5 million ($0 .07 per diluted share); both were reduced by a non-cash tax adjustment inGabon of$5.3 million ($0.05 per diluted share) due to increased oil price quarter over quarter related to untaken, in-kind tax barrels;
- Grew Adjusted EBITDAX(3) by 9% to
$71.4 million compared to Q2 2023 and funded$22 .5 million in capital expenditures from cash on hand and cash from operations during the third quarter of 2023;
- Delivering meaningful cash returns to shareholders with $36 million returned year to date, representing about 41% of Free Cash Flow(3) available to shareholders; and
- Announced quarterly cash dividend of
$0.0625 per share of common stock to be paid onDecember 21, 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,
“Our strategic vision has proven highly successful, but it’s our employees’ commitment to operational excellence and execution that has helped VAALCO achieve record production and Adjusted EBITDAX while growing cash flow and returning significant value to shareholders. VAALCO is financially stronger, with more reserves and production, than at any other time in our history and poised to continue to grow in 2024 and beyond. We continue to have no bank debt and a growing cash position that will allow us to fund 2024 capex projects across our portfolio. We remain committed to accretively growing VAALCO both organically and through additional inorganic opportunities. The diversity and strength of our assets provide a solid foundation for sustainable growth and supports our commitment to returning and growing value for our shareholders.”
Operational Update
In
A summary of the Egyptian drilling campaign's impact during the third quarter is presented below:
VAALCO Egypt Q3 Wells | ||||||
Well | Spud date | Pay | Zones | Completion | Interval | IP-30 Rate BOPD |
K-80 | 141.4 feet | Asl-A, B, D and E | Asl-E | 16.4 feet | 144 | |
K-84 | 98.8 feet | Asl- D, E, F and G | Asl-G | 19.7 feet | 158 | |
K-85 | 63.3 feet | Asl- D, E, F and G | Asl-E | 9.8 feet | 164 | |
M-24 | 70.2 feet | Asl-A, B and D | Asl-D | 9.8 feet | 120 | |
Arta-91 | 40 feet | Red-bed/Nukhl | Red-bed | 20.0 feet | 94 | |
EA-54 | none | Red-bed/Nukhl | Abandoned | none | none | |
The East Arta 54 appraisal well in
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. Both wells' production rates 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
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 nine months ended
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
Financial Update –Third Quarter of 2023
Reported net income of
Adjusted EBITDAX totaled
Quarterly Summary - Sales and Net Revenue | ||||||||||||||||||||||||||||||||
$ in thousands | Three Months Ended | Three Months Ended | ||||||||||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||||||||||
Oil Sales | $ | 64,100 | $ | 88,748 | $ | 7,832 | $ | 160,680 | $ | 87,478 | $ | 50,201 | $ | 8,325 | $ | 146,004 | ||||||||||||||||
NGL Sales | — | — | $ | 2,073 | $ | 2,073 | — | — | $ | 1,885 | $ | 1,885 | ||||||||||||||||||||
Gas Sales | — | — | $ | 988 | $ | 988 | — | — | $ | 703 | $ | 703 | ||||||||||||||||||||
Gross Sales | $ | 64,100 | $ | 88,748 | $ | 10,893 | $ | 163,741 | $ | 87,478 | $ | 50,201 | $ | 10,913 | $ | 148,592 | ||||||||||||||||
Selling Costs & carried interest | $ | 1,378 | $ | (497 | ) | — | $ | 881 | $ | 2,212 | $ | (1 | ) | — | $ | 2,211 | ||||||||||||||||
Royalties & taxes | $ | (8,203 | ) | $ | (37,944 | ) | $ | (2,206 | ) | $ | (48,353 | ) | $ | (11,766 | ) | $ | (28,892 | ) | $ | (905 | ) | $ | (41,563 | ) | ||||||||
Net Revenue | $ | 57,275 | $ | 50,307 | $ | 8,687 | $ | 116,269 | $ | 77,924 | $ | 21,308 | $ | 10,008 | $ | 109,240 | ||||||||||||||||
Oil Sales MMB (working interest) | 764 | 1,282 | 101 | 2,146 | 1,113 | 910 | 123 | 2,146 | ||||||||||||||||||||||||
Average Oil Price Received | $ | 83.92 | $ | 69.24 | $ | 77.89 | $ | 74.87 | $ | 78.62 | $ | 55.15 | $ | 67.76 | $ | 68.04 | ||||||||||||||||
% Change Q3 2023 vs. Q2 2023 | 10 | % | ||||||||||||||||||||||||||||||
Average | — | — | — | $ | 86.65 | — | — | — | $ | 77.92 | ||||||||||||||||||||||
% Change Q3 2023 vs. Q2 2023 | 11 | % | ||||||||||||||||||||||||||||||
Gas Sales MMCF (working interest) | — | — | 470 | 470 | — | — | 442 | 442 | ||||||||||||||||||||||||
Average Gas Price Received | — | — | $ | 2.10 | $ | 2.10 | — | — | $ | 1.59 | $ | 1.59 | ||||||||||||||||||||
% Change Q3 2023 vs. Q2 2023 | 32 | % | ||||||||||||||||||||||||||||||
Average Aeco Price ($USD) | — | — | — | $ | 1.89 | — | — | — | $ | 1.68 | ||||||||||||||||||||||
% Change Q3 2023 vs. Q2 2023 | 13 | % | ||||||||||||||||||||||||||||||
NGL Sales MMB (working interest) | — | — | 82 | 82 | — | — | 78 | 78 | ||||||||||||||||||||||||
Average Liquids Price Received | — | — | $ | 25.27 | $ | 25.27 | — | — | $ | 24.04 | $ | 24.04 | ||||||||||||||||||||
% Change Q3 2023 vs. Q2 2023 | 5 | % |
Revenue and Sales | Q3 2023 | Q3 2022 | % Change Q3 2023 vs. Q3 2022 | Q2 2023 | % Change Q3 2023 vs. Q2 2023 | |||||||||||||||
Production (NRI BOEPD) | 18,844 | 9,157 | 106 | % | 19,676 | (4 | )% | |||||||||||||
Sales ( | 1,812,000 | 731,000 | 148 | % | 1,803,000 | 0 | % | |||||||||||||
Realized commodity price ($/BOE) | $ | 63.41 | $ | 103.61 | (39 | )% | $ | 59.37 | 7 | % | ||||||||||
Commodity (Per BOE including realized commodity derivatives) | $ | 63.38 | $ | 91.13 | (30 | )% | $ | 59.34 | 7 | % | ||||||||||
Total commodity sales ($MM) | $ | 116.3 | $ | 78.1 | 49 | % | $ | 109.2 | 6 | % | ||||||||||
VAALCO had net revenue increase by
Q3 2023 realized pricing (net of royalties) was up 7% compared to Q2 2023 but decreased 39% compared to Q3 2022.
Costs and Expenses | Q3 2023 | Q3 2022 | % Change Q3 2023 vs. Q3 2022 | Q2 2023 | % Change Q3 2023 vs. Q2 2023 | |||||||||||||||
Production expense, excluding offshore workovers and stock comp ($MM) | $ | 39.9 | $ | 23.2 | 72 | % | $ | 38.8 | 3 | % | ||||||||||
Production expense, excluding offshore workovers ($/BOE) | $ | 22.07 | $ | 31.79 | (31 | )% | $ | 21.51 | 3 | % | ||||||||||
Offshore workover expense ($MM) | $ | (0.0 | ) | $ | — | — | % | $ | (0.2 | ) | (88 | )% | ||||||||
Depreciation, depletion and amortization ($MM) | $ | 32.5 | $ | 9.0 | 262 | % | $ | 38.0 | (14 | )% | ||||||||||
Depreciation, depletion and amortization ($/BOE) | $ | 18.0 | $ | 12.26 | 46 | % | $ | 21.10 | (15 | )% | ||||||||||
General and administrative expense, excluding stock-based compensation ($MM) | $ | 5.2 | $ | 2.0 | 159 | % | $ | 4.8 | 8 | % | ||||||||||
General and administrative expense, excluding stock-based compensation ($/BOE) | $ | 2.9 | $ | 2.74 | 4 | % | $ | 2.7 | 6 | % | ||||||||||
Stock-based compensation expense ($MM) | $ | 1.0 | $ | — | — | % | $ | 0.6 | 67 | % | ||||||||||
Current income tax expense (benefit) ($MM) | $ | 2.1 | $ | (1.2 | ) | (275 | )% | $ | 12.4 | (83 | )% | |||||||||
Deferred income tax expense (benefit) ($MM) | $ | (2.6 | ) | $ | 24.0 | (111 | )% | $ | (0.8 | ) | 225 | % | ||||||||
Total production expense (excluding offshore workovers and stock compensation) of
Q3 2023 had no offshore workover expense. The negative
Q3 2023 production expense per BOE, excluding offshore workover costs remained low at
DD&A expense for the Q3 2023, was
Q3 2023 included a
General and administrative (“G&A”) expense, excluding stock-based compensation, increased to
Non-cash stock-based compensation expense was
Other income (expense), net, was an income of
Foreign income taxes for
Financial Update – First Nine Months of 2023
Production for the first nine months of 2023 more than doubled to 6,594 MBOE compared to 2,765 MBOE production in the first nine months of 2022. The increase was driven by production from the TransGlobe assets, as well as new wells from the 2021/2022 drilling campaign in
The average realized crude oil price for the first nine months of 2023 was
The Company reported net income for the nine months ended September 30, 2023 of
Year to Date Summary - Sales and Net Revenue | ||||||||||||||||||||||||||||||||
$ in thousands | Nine Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
Total | Total | |||||||||||||||||||||||||||||||
Oil Sales | 194,179 | 193,570 | 22,811 | 410,560 | 289,290 | — | — | 289,290 | ||||||||||||||||||||||||
NGL Sales | — | — | 6,421 | 6,421 | — | — | — | - | ||||||||||||||||||||||||
Gas Sales | — | — | 2,649 | 2,649 | — | — | — | - | ||||||||||||||||||||||||
Gross Sales | 194,179 | 193,570 | 31,881 | 419,630 | 289,290 | — | — | 289,290 | ||||||||||||||||||||||||
Selling Costs & carried interest | 3,590 | (995 | ) | — | 2,595 | 5,843 | — | — | 5,843 | |||||||||||||||||||||||
Royalties & taxes | (25,833 | ) | (86,176 | ) | (4,304 | ) | (116,313 | ) | (37,395 | ) | — | — | (37,395 | ) | ||||||||||||||||||
Net Revenue | 171,936 | 106,399 | 27,577 | 305,912 | 257,738 | — | — | 257,738 | ||||||||||||||||||||||||
Oil Sales MMB (working interest) | 2,404 | 3,032 | 317 | 5,753 | 2,650 | — | — | 2,650 | ||||||||||||||||||||||||
Average Oil Price Received | $ | 80.76 | $ | 63.85 | $ | 72.01 | $ | 71.36 | $ | 109.17 | — | — | $ | 109.17 | ||||||||||||||||||
% Change 2023 vs. 2022 | -35 | % | ||||||||||||||||||||||||||||||
Average | $ | 81.99 | $ | 105.00 | ||||||||||||||||||||||||||||
% Change 2023 vs. 2022 | -22 | % | ||||||||||||||||||||||||||||||
Gas Sales MMCF (working interest) | — | — | 1,327 | 1,327 | — | — | — | — | ||||||||||||||||||||||||
Average Gas Price Received | — | — | $ | 2.00 | $ | 2.00 | — | — | — | — | ||||||||||||||||||||||
% Change Q2 2023 vs. Q1 2023 | ||||||||||||||||||||||||||||||||
NGL Sales MMB (working interest) | — | — | 237 | 237 | — | — | — | — | ||||||||||||||||||||||||
Average Liquids Price Received | — | — | $ | 27.10 | $ | 27.10 | — | — | — | — | ||||||||||||||||||||||
Capital Investments/Balance Sheet
For the first nine months of 2023, net capital expenditures totaled
At the end of the third quarter of 2023, VAALCO had an unrestricted cash balance of
In mid-2022, VAALCO announced entry into a new credit agreement, effective
Cash Dividend Policy and Share Buyback Authorization
VAALCO paid a quarterly cash dividend of
On
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
Since inception of the buyback program in
Hedging
The Company continued to opportunistically hedge a portion of its expected future production to lock in strong cash flow generation to assist in funding its capital and shareholder returns programs.
The following includes hedges remaining in place for the fourth quarter of 2023 and new hedges that were entered into for 2024:
Settlement Period | Type of Contract | Index | Average Monthly Volumes | Weighted Average Put Price | Weighted Average Call Price | |||||||||
(Bbls) | (per Bbl) | (per Bbl) | ||||||||||||
Collars | Dated Brent | 85,000 | $ | 65.00 | $ | 90.00 | ||||||||
Collars | Dated Brent | 85,000 | $ | 65.00 | $ | 97.00 | ||||||||
Collars | Dated Brent | 65,000 | $ | 65.00 | $ | 100.00 |
2023 Guidance:
The Company has provided fourth quarter 2023 guidance and updated its full year 2023 guidance. Driven by continued strong performance from the 2023 drilling program, production guidance for both
FY 2023 | |||||
Production (BOEPD) | WI | 23,450 – 24,400 | 9,950 – 10,200 | 10,900 – 11,400 | 2,600 – 2,800 |
Production (BOEPD) | NRI | 18,300 – 18,900 | 8,600 – 8,800 | 7,500 – 7,700 | 2,200 – 2,400 |
Sales Volume (BOEPD) | WI | 23,050 – 24,000 | 9,550 – 9,800 | 10,900 – 11,400 | 2,600 – 2,800 |
Sales Volume (BOEPD) | NRI | 17,900 – 18,500 | 8,200 – 8,400 | 7,500 – 7,700 | 2,200 – 2,400 |
Production Expense (millions) | WI & NRI | ||||
Production Expense per BOE | WI | ||||
Production Expense per BOE | NRI | ||||
Offshore Workovers (millions) | WI & NRI | ||||
Cash G&A (millions) | WI & NRI | ||||
CAPEX (millions) | WI & NRI | ||||
DD&A ($/BO) | NRI | ||||
Q4 2023 | |||||
Production (BOEPD) | WI | 22,900 – 24,600 | 9,400 – 10,100 | 11,100 – 11,800 | 2,400 – 2,700 |
Production (BOEPD) | NRI | 17,600 – 19,400 | 8,100 – 8,800 | 7,600 – 8,300 | 1,900 – 2,300 |
Sales Volume (BOEPD) | WI | 25,300 – 27,600 | 11,800 – 13,100 | 11,100 – 11,800 | 2,400 – 2,700 |
Sales Volume (BOEPD) | NRI | 19,800 – 22,000 | 10,300 – 11,400 | 7,600 – 8,300 | 1,900 – 2,300 |
Production Expense (millions) | WI & NRI | ||||
Production Expense per BOE | WI | ||||
Production Expense per BOE | NRI | ||||
Offshore Workovers (millions) | WI & NRI | ||||
Cash G&A (millions) | WI & NRI | ||||
CAPEX (millions) | WI & NRI | ||||
DD&A ($/BO) | NRI | ||||
Conference Call
As previously announced, the Company will hold a conference call to discuss its third quarter 2023 financial and operating results tomorrow,
A “Q3 2023 Supplemental Information” investor deck will be posted to VAALCO’s web site prior to its conference call on
About VAALCO
VAALCO, founded in 1985 and incorporated under the laws of
Following its business combination with TransGlobe in
For Further Information
+00 1 713 623 0801 | |
Website: | www.vaalco.com |
Al | +00 1 713 543 3422 |
Buchanan ( | +44 (0) 207 466 5000 |
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 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; (iii) expectations regarding future exploration and the development, growth and potential of VAALCO’s operations, project pipeline and investments, and schedule and anticipated benefits to be derived therefrom; (iv) expectations regarding future acquisitions, investments or divestitures; (v) expectations of future dividends, buybacks and other potential returns to stockholders; (vi) expectations of future balance sheet strength; (vii) expectations of future equity and enterprise value; and (viii) VAALCO’s ability to finalize documents and effectively execute the POD for the Venus development in Block P.
Such forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to: risks relating to any unforeseen liabilities of VAALCO or TransGlobe; 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 2022 Annual Report on Form 10-K filed with the
Dividends beyond the fourth 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
Consolidated Balance Sheets (Unaudited)
As of | As of | |||||||
ASSETS | (in thousands) | |||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 103,353 | $ | 37,205 | ||||
Restricted cash | 111 | 222 | ||||||
Receivables: | ||||||||
Trade, net | 22,788 | 52,147 | ||||||
Accounts with joint venture owners, net of allowance for credit losses of | 1,635 | 15,830 | ||||||
Foreign income taxes receivable | — | 2,769 | ||||||
Other, net of allowance for credit losses of | 64,826 | 68,519 | ||||||
Crude oil inventory | 9,287 | 3,335 | ||||||
Prepayments and other | 16,115 | 20,070 | ||||||
Total current assets | 218,115 | 200,097 | ||||||
Crude oil and natural gas properties, equipment and other - successful efforts method, net | 467,877 | 495,272 | ||||||
Other noncurrent assets: | ||||||||
Restricted cash | 1,787 | 1,763 | ||||||
Value added tax and other receivables, net of allowance of | 9,462 | 7,150 | ||||||
Right of use operating lease assets | 3,510 | 2,777 | ||||||
Right of use finance lease assets | 87,971 | 90,698 | ||||||
Deferred tax assets | 31,222 | 35,432 | ||||||
Abandonment funding | 6,268 | 20,586 | ||||||
Other long-term assets | 1,616 | 1,866 | ||||||
Total assets | $ | 827,828 | $ | 855,641 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 43,924 | $ | 59,886 | ||||
Accounts with joint venture owners | 1,151 | — | ||||||
Accrued liabilities and other | 76,470 | 91,392 | ||||||
Operating lease liabilities - current portion | 3,539 | 2,314 | ||||||
Finance lease liabilities - current portion | 7,810 | 7,811 | ||||||
Foreign income taxes payable | 33,256 | — | ||||||
Current liabilities - discontinued operations | 673 | 687 | ||||||
Total current liabilities | 166,823 | 162,090 | ||||||
Asset retirement obligations | 45,201 | 41,695 | ||||||
Operating lease liabilities - net of current portion | 82 | 686 | ||||||
Finance lease liabilities - net of current portion | 77,862 | 78,248 | ||||||
Deferred tax liabilities | 76,120 | 81,223 | ||||||
Other long-term liabilities | 17,369 | 25,594 | ||||||
Total liabilities | 383,457 | 389,536 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ equity: | ||||||||
Preferred stock, | — | — | ||||||
Common stock, | 12,134 | 11,948 | ||||||
Additional paid-in capital | 356,424 | 353,606 | ||||||
Accumulated other comprehensive income | 844 | 1,179 | ||||||
Less treasury stock, 15,626,752 and 11,629,823 shares, respectively, at cost | (65,145 | ) | (47,652 | ) | ||||
Retained earnings | 140,114 | 147,024 | ||||||
Total shareholders' equity | 444,371 | 466,105 | ||||||
Total liabilities and shareholders' equity | $ | 827,828 | $ | 855,641 | ||||
Consolidated Statements of Operations (Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
(in thousands except per share amounts) | ||||||||||||||||||||
Revenues: | ||||||||||||||||||||
Crude oil, natural gas and natural gas liquids sales | $ | 116,269 | $ | 78,097 | $ | 109,240 | $ | 305,912 | $ | 257,738 | ||||||||||
Operating costs and expenses: | ||||||||||||||||||||
Production expense | 39,956 | 23,312 | 38,604 | 106,760 | 67,147 | |||||||||||||||
FPSO Demobilization | — | 8,867 | 5,647 | 5,647 | 8,867 | |||||||||||||||
Exploration expense | 1,194 | 56 | 57 | 1,259 | 250 | |||||||||||||||
Depreciation, depletion and amortization | 32,538 | 8,963 | 38,003 | 94,958 | 21,827 | |||||||||||||||
General and administrative expense | 6,216 | 1,979 | 5,395 | 16,835 | 10,507 | |||||||||||||||
Credit losses and other | 822 | 1,020 | 680 | 2,437 | 2,083 | |||||||||||||||
Total operating costs and expenses | 80,726 | 44,197 | 88,386 | 227,896 | 110,681 | |||||||||||||||
Other operating income (expense), net | 5 | — | (303 | ) | (298 | ) | (5 | ) | ||||||||||||
Operating income | 35,548 | 33,900 | 20,551 | 77,718 | 147,052 | |||||||||||||||
Other income (expense): | ||||||||||||||||||||
Derivative instruments gain (loss), net | (2,320 | ) | 3,778 | 31 | (2,268 | ) | (37,522 | ) | ||||||||||||
Interest expense, net | (1,426 | ) | (234 | ) | (1,703 | ) | (5,375 | ) | (355 | ) | ||||||||||
Other income (expense), net | 183 | (7,707 | ) | (537 | ) | (1,494 | ) | (10,514 | ) | |||||||||||
Total other income (expense), net | (3,563 | ) | (4,163 | ) | (2,209 | ) | (9,137 | ) | (48,391 | ) | ||||||||||
Income from continuing operations before income taxes | 31,985 | 29,737 | 18,342 | 68,581 | 98,661 | |||||||||||||||
Income tax expense (benefit) | 25,844 | 22,843 | 11,588 | 52,203 | 64,467 | |||||||||||||||
Income from continuing operations | 6,141 | 6,894 | 6,754 | 16,378 | 34,194 | |||||||||||||||
Loss from discontinued operations, net of tax | — | (26 | ) | (2 | ) | (15 | ) | (58 | ) | |||||||||||
Net income | $ | 6,141 | $ | 6,868 | $ | 6,752 | $ | 16,363 | $ | 34,136 | ||||||||||
Other comprehensive income (loss) | ||||||||||||||||||||
Currency translation adjustments | (2,216 | ) | — | 2,006 | (335 | ) | — | |||||||||||||
Comprehensive income | $ | 3,925 | $ | 6,868 | $ | 8,758 | $ | 16,028 | $ | 34,136 | ||||||||||
Basic net income (loss) per share: | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.06 | $ | 0.12 | $ | 0.06 | $ | 0.15 | $ | 0.57 | ||||||||||
Loss from discontinued operations, net of tax | — | — | — | — | — | |||||||||||||||
Net income (loss) per share | $ | 0.06 | $ | 0.12 | $ | 0.06 | $ | 0.15 | $ | 0.57 | ||||||||||
Basic weighted average shares outstanding | 106,289 | 59,068 | 106,965 | 106,876 | 58,900 | |||||||||||||||
Diluted net income (loss) per share: | ||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.06 | $ | 0.11 | $ | 0.06 | $ | 0.15 | $ | 0.57 | ||||||||||
Loss from discontinued operations, net of tax | — | — | — | — | — | |||||||||||||||
Net income (loss) per share | $ | 0.06 | $ | 0.11 | $ | 0.06 | $ | 0.15 | $ | 0.57 | ||||||||||
Diluted weighted average shares outstanding | 106,433 | 59,450 | 107,613 | 107,072 | 59,335 | |||||||||||||||
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended | ||||||||
2023 | 2022 | |||||||
(in thousands) | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net income | $ | 16,363 | $ | 34,136 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Loss from discontinued operations, net of tax | 15 | 58 | ||||||
Depreciation, depletion and amortization | 94,958 | 21,827 | ||||||
Bargain purchase gain | 1,412 | — | ||||||
Exploration Expense | 1,194 | — | ||||||
Deferred taxes | (2,305 | ) | 39,540 | |||||
Unrealized foreign exchange loss | 932 | 914 | ||||||
Stock-based compensation | 2,332 | 2,300 | ||||||
Cash settlements paid on exercised stock appreciation rights | (282 | ) | (805 | ) | ||||
Derivative instruments (gain) loss, net | 2,268 | 37,522 | ||||||
Cash settlements paid on matured derivative contracts, net | (62 | ) | (42,683 | ) | ||||
Cash settlements paid on asset retirement obligations | (4,796 | ) | — | |||||
Credit losses and other | 2,437 | 2,083 | ||||||
Other operating loss, net | 317 | 5 | ||||||
Operational expenses associated with equipment and other | 2,560 | 953 | ||||||
Change in operating assets and liabilities: | ||||||||
Trade receivables | 29,364 | 5,683 | ||||||
Accounts with joint venture owners | 15,090 | (11,118 | ) | |||||
Other receivables | 694 | (2,904 | ) | |||||
Crude oil inventory | (5,952 | ) | (2,661 | ) | ||||
Prepayments and other | 1,198 | (1,120 | ) | |||||
Value added tax and other receivables | (3,719 | ) | (5,371 | ) | ||||
Other long-term assets | 2,942 | (2,842 | ) | |||||
Accounts payable | (10,083 | ) | 4,129 | |||||
Foreign income taxes receivable/payable | 36,025 | 24,928 | ||||||
Accrued liabilities and other | (11,076 | ) | 25,182 | |||||
Net cash provided by (used in) continuing operating activities | 171,826 | 129,756 | ||||||
Net cash used in discontinued operating activities | (15 | ) | (57 | ) | ||||
Net cash provided by (used in) operating activities | 171,811 | 129,699 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Property and equipment expenditures | (77,365 | ) | (103,853 | ) | ||||
Net cash provided by (used in) continuing investing activities | (77,365 | ) | (103,853 | ) | ||||
Net cash used in discontinued investing activities | — | — | ||||||
Net cash provided by (used in) investing activities | (77,365 | ) | (103,853 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from the issuances of common stock | 593 | 257 | ||||||
Dividend distribution | (20,153 | ) | (5,816 | ) | ||||
(17,493 | ) | (788 | ) | |||||
Deferred financing costs | (83 | ) | (1,535 | ) | ||||
Payments of finance lease | (5,246 | ) | (193 | ) | ||||
Net cash provided by (used in) in continuing financing activities | (42,382 | ) | (8,075 | ) | ||||
Net cash used in discontinued financing activities | — | — | ||||||
Net cash provided by (used in) in financing activities | (42,382 | ) | (8,075 | ) | ||||
Effects of exchange rate changes on cash | (321 | ) | — | |||||
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | 51,743 | 17,771 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD | 59,776 | 72,314 | ||||||
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD | $ | 111,519 | $ | 90,085 | ||||
Selected Financial and Operating Statistics
(Unaudited)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
NRI SALES DATA | ||||||||||||||||||||
Crude oil, natural gas and natural gas liquids sales (MBOE) | 1,812 | 731 | 1,803 | 4,839 | 2,305 | |||||||||||||||
WI PRODUCTION DATA | ||||||||||||||||||||
Etame Crude oil (MBbl) | 911 | 968 | 934 | 2,787 | 2,765 | |||||||||||||||
Egypt Crude oil (MBbl) | 1,076 | — | 1,054 | 3,032 | — | |||||||||||||||
Canada Crude Oil (MBbl) | 101 | — | 123 | 317 | — | |||||||||||||||
470 | — | 442 | 1,327 | — | ||||||||||||||||
Canada Natural Gas Liquid (Mbbl) | 82 | — | 78 | 237 | — | |||||||||||||||
Canada Crude oil, natural gas and natural gas liquids (MBOE) | 261 | — | 275 | 775 | — | |||||||||||||||
Total Crude oil, natural gas and natural gas liquids production (MBOE) | 2,248 | 968 | 2,263 | 6,594 | 2,765 | |||||||||||||||
Gabon Average daily production volumes (BOEPD) | 9,901 | 10,525 | 10,262 | 10,209 | 10,127 | |||||||||||||||
Egypt Average daily production volumes (BOEPD) | 11,691 | — | 11,579 | 11,106 | — | |||||||||||||||
Canada Average daily production volumes (BOEPD) | 2,835 | — | 3,021 | 2,838 | — | |||||||||||||||
Average daily production volumes (BOEPD) | 24,430 | 10,525 | 24,863 | 24,153 | 10,127 | |||||||||||||||
NRI PRODUCTION DATA | ||||||||||||||||||||
Etame Crude oil (MBbl) | 792 | 842 | 812 | 2,425 | 2,405 | |||||||||||||||
Egypt Crude oil (MBbl) | 732 | — | 726 | 2,074 | — | |||||||||||||||
Canada Crude Oil (MBbl) | 81 | — | 113 | 274.82 | — | |||||||||||||||
376 | — | 406 | 1,150.85 | — | ||||||||||||||||
Canada Natural Gas Liquid (Mbbl) | 66 | — | 72 | 205.52 | — | |||||||||||||||
Canada Crude oil, natural gas and natural gas liquids (MBOE) | 210 | — | 253 | 672 | — | |||||||||||||||
Total Crude oil, natural gas and natural gas liquids production (MBOE) | 1,734 | 842 | 1,791 | 5,172 | 2,405 | |||||||||||||||
Gabon Average daily production volumes (BOEPD) | 8,609 | 9,157 | 8,923 | 8,883 | 8,810 | |||||||||||||||
Egypt Average daily production volumes (BOEPD) | 7,957 | — | 7,978 | 7,598 | — | |||||||||||||||
Canada Average daily production volumes (BOEPD) | 2,279 | — | 2,776 | 2,462 | — | |||||||||||||||
Average daily production volumes (BOEPD) | 18,844 | 9,157 | 19,676 | 18,943 | 8,810 | |||||||||||||||
AVERAGE SALES PRICES: | ||||||||||||||||||||
Crude oil, natural gas and natural gas liquids sales (per BOE) - WI basis | $ | 70.78 | $ | 104.25 | $ | 64.67 | $ | 67.40 | $ | 109.17 | ||||||||||
Crude oil, natural gas and natural gas liquids sales (per BOE) - NRI basis | $ | 63.41 | $ | 103.61 | $ | 59.37 | $ | 62.48 | $ | 109.28 | ||||||||||
Crude oil, natural gas and natural gas liquids sales (Per BOE including realized commodity derivatives) | $ | 63.38 | $ | 91.13 | $ | 59.34 | $ | 62.47 | $ | 90.76 | ||||||||||
COSTS AND EXPENSES (Per BOE of sales): | ||||||||||||||||||||
Production expense | $ | 22.05 | $ | 31.89 | $ | 21.41 | $ | 22.06 | $ | 29.13 | ||||||||||
Production expense, excluding offshore workovers and stock compensation* | 22.04 | 31.79 | 21.51 | 22.32 | 29.10 | |||||||||||||||
Depreciation, depletion and amortization | 17.96 | 12.26 | 21.08 | 19.62 | 9.47 | |||||||||||||||
General and administrative expense** | 3.43 | 2.71 | 2.99 | 3.48 | 4.56 | |||||||||||||||
Property and equipment expenditures, cash basis (in thousands) | $ | 22,533 | $ | 43,575 | $ | 27,132 | $ | 77,365 | $ | 103,853 | ||||||||||
*Offshore workover costs excluded from the three months ended September 30, 2023 and 2022 and June 30, 2023 are
*Stock compensation associated with production expense excluded from the three months ended September 30, 2023 and 2022 and June 30, 2023 are not material.
**General and administrative expenses include
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
Management uses Free Cash Flow to evaluate financial performance and to determine the total amount of cash over a specified period available to be used in connection with returning cash to shareholders, and believes the measure is useful to investors because it provides the total amount of net cash available for returning cash to shareholders by adding cash generated from operating activities, subtracting amounts used in financing and investing activities, and adding back amounts used for dividend payments and stock repurchases. Free Cash Flow is a non-GAAP financial measure and as used herein represents net change in cash, cash equivalents and restricted cash and adds the amounts paid under dividend distributions and share repurchases over a specified period.
Free Cash Flow has significant limitations, including that it does not represent residual cash flows available for discretionary purposes and should not be used as a substitute for cash flow measures prepared in accordance with GAAP. Free Cash Flow should not be considered as a substitute for cashflows from operating activities before discontinued operations or any other liquidity measure presented in accordance with GAAP. Free Cash Flow may vary among other companies. Therefore, the Company’s Free Cash Flow may not be comparable to similarly titled measures used by other companies.
Adjusted EBITDAX and Adjusted Net Income have significant limitations, including that they do not reflect the Company’s cash requirements for capital expenditures, contractual commitments, working capital or debt service. Adjusted EBITDAX, Adjusted Net Income, Adjusted Working Capital and Free Cash Flow should not be considered as substitutes for net income (loss), operating income (loss), cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDAX and Adjusted Net Income exclude some, but not all, items that affect net income (loss) and operating income (loss) and these measures may vary among other companies. Therefore, the Company’s Adjusted EBITDAX, Adjusted Net Income, Adjusted Working Capital and Free Cash Flow may not be comparable to similarly titled measures used by other companies.
The tables below reconcile the most directly comparable GAAP financial measures to Adjusted Net Income, Adjusted EBITDAX, Adjusted Working Capital and Free Cash Flow.
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Three Months Ended | Nine Months Ended | |||||||||||||||||||
Reconciliation of Net Income to Adjusted Net Income | ||||||||||||||||||||
Net income | $ | 6,141 | $ | 6,868 | $ | 6,752 | $ | 16,363 | $ | 34,136 | ||||||||||
Adjustment for discrete items: | ||||||||||||||||||||
Discontinued operations, net of tax | — | 26 | 2 | 15 | 58 | |||||||||||||||
Unrealized derivative instruments loss (gain) | 2,321 | (12,902 | ) | (35 | ) | 2,206 | (5,161 | ) | ||||||||||||
Arrangement Costs | — | 6,424 | — | — | 7,624 | |||||||||||||||
FPSO demobilization | — | 8,867 | 5,647 | 5,647 | 8,867 | |||||||||||||||
Deferred income tax expense (benefit) | (985 | ) | 24,008 | (813 | ) | 673 | 39,539 | |||||||||||||
Other operating (income) expense, net | (5 | ) | — | 303 | 298 | 5 | ||||||||||||||
Adjusted Net Income | $ | 7,472 | $ | 33,291 | $ | 11,856 | $ | 25,202 | $ | 85,068 | ||||||||||
Diluted Adjusted Net Income per Share | $ | 0.07 | $ | 0.56 | $ | 0.11 | $ | 0.24 | $ | 1.43 | ||||||||||
Diluted weighted average shares outstanding (1) | 106,433 | 59,450 | 107,613 | 107,072 | 59,335 | |||||||||||||||
(1) No adjustments to weighted average shares outstanding
Three Months Ended | Nine Months Ended | |||||||||||||||||||
Reconciliation of Net Income to Adjusted EBITDAX | ||||||||||||||||||||
Net income | $ | 6,141 | $ | 6,868 | $ | 6,752 | $ | 16,363 | $ | 34,136 | ||||||||||
Add back: | ||||||||||||||||||||
Impact of discontinued operations | - | 26 | 2 | 15 | 58 | |||||||||||||||
Interest expense (income), net | 1,426 | 234 | 1,703 | 5,375 | 355 | |||||||||||||||
Income tax expense (benefit) | 25,844 | 22,843 | 11,588 | 52,203 | 64,467 | |||||||||||||||
Depreciation, depletion and amortization | 32,538 | 8,963 | 38,003 | 94,958 | 21,827 | |||||||||||||||
Exploration expense | 1,194 | 56 | 57 | 1,259 | 250 | |||||||||||||||
FPSO demobilization | — | 8,867 | 5,647 | 5,647 | 8,867 | |||||||||||||||
Non-cash or unusual items: | ||||||||||||||||||||
Stock-based compensation | 1,078 | 36 | 605 | 2,332 | 2,300 | |||||||||||||||
Unrealized derivative instruments loss (gain) | 2,321 | (12,902 | ) | (35 | ) | 2,206 | (5,161 | ) | ||||||||||||
Arrangement Costs | — | 6,424 | — | — | 7,624 | |||||||||||||||
Other operating (income) expense, net | (5 | ) | — | 303 | 298 | 5 | ||||||||||||||
Credit losses and other | 822 | 1,020 | 680 | 2,437 | 2,083 | |||||||||||||||
Adjusted EBITDAX | $ | 71,359 | $ | 42,435 | $ | 65,305 | $ | 183,093 | $ | 136,811 | ||||||||||
Reconciliations of Non-GAAP Financial Measures
(Unaudited)
(in thousands)
Reconciliation of Working Capital to | As of | As of | Change | |||||||||
Current assets | $ | 218,115 | $ | 200,097 | $ | 18,018 | ||||||
Current liabilities | (166,823 | ) | (162,090 | ) | (4,733 | ) | ||||||
Working capital | 51,292 | 38,007 | 13,285 | |||||||||
Add: lease liabilities - current portion | 11,349 | 10,125 | 1,224 | |||||||||
Add: current liabilities - discontinued operations | 673 | 687 | (14 | ) | ||||||||
$ | 63,314 | $ | 48,819 | $ | 14,495 | |||||||
Nine Months Ended | ||||
Reconciliation of Free Cash Flow | ||||
Net cash provided by Operating activities | $ | 171,811 | ||
Net cash used in Investing activities | (77,365 | ) | ||
Net cash used in Financing activities | (42,382 | ) | ||
Effects of exchange rate changes on cash | (321 | ) | ||
Total net cash change | 51,743 | |||
Add back shareholder cash out: | ||||
Dividends paid | 20,153 | |||
Stock buyback | 15,566 | |||
Total cash returned to shareholders | 35,719 | |||
Free Cash Flow | $ | 87,462 | ||
Percent of Free Cash Flow returned to shareholders | 41 | % | ||
Source:
2023 GlobeNewswire, Inc., source