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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q

________________________________

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-32167

________________________________

VAALCO Energy, Inc.

(Exact name of registrant as specified in its charter)

________________________________

Delaware

 

76-0274813

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

9800 Richmond Avenue

Suite 700

Houston, Texas

 

77042

(Address of principal executive offices)

 

(Zip code)

(713) 623-0801

(Registrant’s telephone number, including area code)

________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock

EGY

New York Stock Exchange

Common Stock

EGY

London Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

x

Non-accelerated filer

¨

(Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

x

¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).        Yes  ¨    No   x

As of October 30, 2020, there were outstanding 57,456,139 shares of common stock, $0.10 par value per share, of the registrant.  

 


Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Condensed Consolidated Balance Sheets

September 30, 2020 and December 31, 2019

3

Condensed Consolidated Statements of Operations

Three and Nine Months Ended September 30, 2020 and 2019

4

Condensed Consolidated Statements of Shareholders’ Equity

Three and Nine Months Ended September 30, 2020 and 2019

5

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2020 and 2019

6

Notes to Condensed Consolidated Financial Statements

8

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

28

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

38

ITEM 4. CONTROLS AND PROCEDURES

38

PART II. OTHER INFORMATION

39

ITEM 1. LEGAL PROCEEDINGS

39

ITEM 1A. RISK FACTORS

39

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES

41

ITEM 6. EXHIBITS

42

Unless the context otherwise indicates, references to “VAALCO,” “the Company”, “we,” “our,” or “us” in this Quarterly Report on Form 10-Q are references to VAALCO Energy, Inc., including its wholly-owned subsidiaries.


2


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

September 30, 2020

December 31, 2019

ASSETS

(in thousands)

Current assets:

Cash and cash equivalents

$

41,986

$

45,917

Restricted cash

82

911

Receivables:

Trade

6,080

14,335

Accounts with joint venture owners, net of allowance of $0.0 million and $0.5 million, respectively

2,714

Foreign income taxes receivable

1,124

Other

81

1,517

Crude oil inventory

781

1,072

Prepayments and other

4,264

3,292

Total current assets

54,398

69,758

Crude oil and natural gas properties, equipment and other - successful efforts method, net

38,845

68,258

Other noncurrent assets:

Restricted cash

925

925

Value added tax and other receivables, net of allowance of $2.1 million and $1.0 million, respectively

3,684

3,683

Right of use operating lease assets

25,700

33,383

Deferred tax assets

24,159

Abandonment funding

11,885

11,371

Total assets

$

135,437

$

211,537

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

4,702

$

15,897

Accounts with joint venture owners

5,984

Accrued liabilities and other

14,426

29,773

Operating lease liabilities - current portion

12,696

11,990

Foreign income taxes payable

5,740

Current liabilities - discontinued operations

15

350

Total current liabilities

37,823

63,750

Asset retirement obligations

17,105

15,844

Operating lease liabilities - net of current portion

12,993

21,371

Deferred tax liabilities

2,802

Other long term liabilities

43

852

Total liabilities

70,766

101,817

Commitments and contingencies (Note 10)

 

 

Shareholders’ equity:

Preferred stock, $25 par value; 500,000 shares authorized, none issued

Common stock, $0.10 par value; 100,000,000 shares authorized, 67,819,242 and 67,673,787 shares issued, 57,456,139 and 58,024,571 shares outstanding, respectively

6,782

6,767

Additional paid-in capital

74,061

73,549

Less treasury stock, 10,363,103 and 9,649,216 shares, respectively, at cost

(42,419)

(41,429)

Retained earnings

26,247

70,833

Total shareholders' equity

64,671

109,720

Total liabilities and shareholders' equity

$

135,437

$

211,537

See notes to condensed consolidated financial statements.

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Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

(in thousands, except per share amounts)

Revenues:

Crude oil and natural gas sales

$

18,256

$

17,603

$

54,619

$

62,598

Operating costs and expenses:

Production expense

8,984

9,836

30,859

27,874

Exploration expense

16

16

Depreciation, depletion and amortization

2,212

1,509

8,116

4,971

Impairment of proved crude oil and natural gas properties

30,625

General and administrative expense

2,178

4,738

5,951

11,905

Bad debt expense and other

151

54

1,140

30

Total operating costs and expenses

13,541

16,137

76,707

44,780

Other operating income (expense), net

(37)

35

(883)

(4,401)

Operating income (loss)

4,678

1,501

(22,971)

13,417

Other income (expense):

Derivative instruments gain, net

2,267

6,583

2,266

Interest income, net

23

193

150

581

Other, net

147

(138)

163

(521)

Total other income, net

170

2,322

6,896

2,326

Income (loss) from continuing operations before income taxes

4,848

3,823

(16,075)

15,743

Income tax expense (benefit)

(2,759)

7,681

28,470

19,642

Income (loss) from continuing operations

7,607

(3,858)

(44,545)

(3,899)

Income (loss) from discontinued operations, net of tax

11

(61)

(41)

5,448

Net income (loss)

$

7,618

$

(3,919)

$

(44,586)

$

1,549

Basic net income (loss) per share:

Income (loss) from continuing operations

$

0.13

$

(0.07)

$

(0.77)

$

(0.07)

Income (loss) from discontinued operations, net of tax

0.00

0.00

0.00

0.09

Net income (loss) per share

$

0.13

$

(0.07)

$

(0.77)

$

0.02

Basic weighted average shares outstanding

57,456

58,953

57,628

59,457

Diluted net income (loss) per share:

Income (loss) from continuing operations

$

0.13

$

(0.07)

$

(0.77)

$

(0.07)

Income (loss) from discontinued operations, net of tax

0.00

0.00

0.00

0.09

Net income (loss) per share

$

0.13

$

(0.07)

$

(0.77)

$

0.02

Diluted weighted average shares outstanding

57,741

58,953

57,628

59,457

See notes to condensed consolidated financial statements.

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Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

Common Shares Issued

Treasury Shares

Common Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Total

(in thousands)

Balance at January 1, 2020

67,674

(9,649)

$

6,767

$

73,549

$

(41,429)

$

70,833

$

109,720

Shares issued - stock-based compensation

125

13

(13)

Stock-based compensation expense

145

145

Treasury stock

(517)

(652)

(652)

Net loss

(52,800)

(52,800)

Balance at March 31, 2020

67,799

(10,166)

6,780

73,681

(42,081)

18,033

56,413

Shares issued - stock-based compensation

20

2

(2)

Stock-based compensation expense

60

60

Treasury stock

(197)

(338)

(338)

Net income

596

596

Balance at June 30, 2020

67,819

(10,363)

6,782

73,739

(42,419)

18,629

56,731

Shares issued - stock-based compensation

Stock-based compensation expense

322

322

Treasury stock

Net income

7,618

7,618

Balance at September 30, 2020

67,819

(10,363)

$

6,782

$

74,061

$

(42,419)

$

26,247

$

64,671

Common Shares Issued

Treasury Shares

Common Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Total

(in thousands)

Balance at January 1, 2019

67,168

(7,572)

$

6,717

$

72,358

$

(37,827)

$

68,579

$

109,827

Shares issued - stock-based compensation

160

16

31

47

Stock-based compensation expense