November 5, 2020 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

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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

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VAALCO Energy, Inc.

(Exact name of registrant as specified in its charter)

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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

Non-accelerated filer

(Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

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.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

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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.

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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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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

Form: 10-Q

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