May 12, 2021 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

Form: 10-Q

Documents

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 March 31, 2021

¨ 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

Non-accelerated filer

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 April 30, 2021, there were outstanding 57,930,563 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
March 31, 2021 and December 31, 2020	2
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2021 and 2020	3
Condensed Consolidated Statements of Shareholders’ Equity
Three Months Ended March 31, 2021 and 2020	4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2021 and 2020	5
Notes to Condensed Consolidated Financial Statements	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	27
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	34
ITEM 4. CONTROLS AND PROCEDURES	35
PART II. OTHER INFORMATION	35
ITEM 1. LEGAL PROCEEDINGS	35
ITEM 1A. RISK FACTORS	35
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES	36
ITEM 6. EXHIBITS	36

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)



	As of March 31, 2021		As of December 31, 2020
ASSETS	(in thousands)
Current assets:
Cash and cash equivalents	$	19,251	$	47,853
Restricted cash		82		86
Receivables:
Trade		23,803		—
Accounts with joint venture owners, net of allowance of $0.0 million in both periods presented		152		3,587
Other		29		4,331
Crude oil inventory		820		3,906
Prepayments and other		5,175		4,215
Total current assets		49,312		63,978

Crude oil and natural gas properties, equipment and other - successful efforts method, net		78,192		37,036
Other noncurrent assets:
Restricted cash		1,752		925
Value added tax and other receivables, net of allowance of $5.1 million and $2.3 million, respectively		5,565		4,271
Right of use operating lease assets		19,454		22,569
Abandonment funding		22,862		12,453
Total assets	$	177,137	$	141,232
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	10,121	$	16,690
Accounts with joint venture owners		1,721		4,945
Accrued liabilities and other		33,777		17,184
Operating lease liabilities - current portion		13,088		12,890
Foreign income taxes payable		6,384		860
Current liabilities - discontinued operations		13		7
Total current liabilities		65,104		52,576
Asset retirement obligations		32,196		17,334
Operating lease liabilities - net of current portion		6,361		9,671
Deferred tax liabilities		1,809		—
Other long-term liabilities		73		193
Total liabilities		105,543		79,774
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, 68,328,224 and 67,897,530 shares issued, 57,806,504 and 57,531,154 shares outstanding, respectively		6,833		6,790
Additional paid-in capital		75,064		74,437
Less treasury stock, 10,521,720 and 10,366,376 shares, respectively, at cost		(42,824)		(42,421)
Retained earnings		32,521		22,652
Total shareholders' equity		71,594		61,458
Total liabilities and shareholders' equity	$	177,137	$	141,232

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 March 31,
	2021		2020
	(in thousands, except per share amounts)
Revenues:
Crude oil and natural gas sales	$	39,774	$	18,389
Operating costs and expenses:
Production expense		16,133		9,749
Exploration expense		142		—
Depreciation, depletion and amortization		4,148		3,103
Impairment of proved crude oil and natural gas properties		—		30,625
General and administrative expense		4,547		754
Bad debt expense and other		101		810
Total operating costs and expenses		25,071		45,041
Other operating expense, net		(360)		(31)
Operating income (loss)		14,343		(26,683)
Other income (expense):
Derivative instruments gain (loss), net		(5,954)		7,339
Interest income, net		5		116
Other, net		4,580		(31)
Total other income (expense), net		(1,369)		7,424
Income (loss) from continuing operations before income taxes		12,974		(19,259)
Income tax expense		3,086		33,478
Income (loss) from continuing operations		9,888		(52,737)
Loss from discontinued operations, net of tax		(19)		(63)
Net income (loss)	$	9,869	$	(52,800)

Basic net income (loss) per share:
Income (loss) from continuing operations	$	0.17	$	(0.91)
Loss from discontinued operations, net of tax		0.00		0.00
Net income (loss) per share	$	0.17	$	(0.91)
Basic weighted average shares outstanding		57,636		57,975
Diluted net income (loss) per share:
Income (loss) from continuing operations	$	0.17	$	(0.91)
Loss from discontinued operations, net of tax		0.00		0.00
Net income (loss) per share	$	0.17	$	(0.91)
Diluted weighted average shares outstanding		58,461		57,975

See notes to condensed consolidated financial statements.
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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, 2021	67,897	(10,366)	$	6,790	$	74,437	$	(42,421)	$	22,652	$	61,458
Shares issued - stock-based compensation	431	(155)		43		304		—		—		347
Stock-based compensation expense	—	—		—		323		—		—		323
Treasury stock	—	—		—		—		(403)		—		(403)
Net income	—	—		—		—		—		9,869		9,869
Balance at March 31, 2021	68,328	(10,521)	$	6,833	$	75,064	$	(42,824)	$	32,521	$	71,594


	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

See notes to condensed consolidated financial statements.
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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)


	Three Months Ended March 31,
	2021		2020
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	9,869	$	(52,800)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss from discontinued operations		19		63
Depreciation, depletion and amortization		4,148		3,103
Bargain purchase gain		(7,651)		—
Impairment of proved crude oil and natural gas properties		—		30,625
Other amortization		—		60
Deferred taxes		1,809		35,638
Unrealized foreign exchange gain		(400)		(22)
Stock-based compensation		1,559		(2,569)
Cash settlements paid on exercised stock appreciation rights		(852)		—
Derivative instruments (gain) loss, net		5,954		(7,339)
Cash settlements received (paid) on matured derivative contracts, net		(1,710)		718
Bad debt expense and other		101		810
Other operating loss, net		360		31
Operational expenses associated with equipment and other		247		578
Change in operating assets and liabilities:
Trade receivables		(12,647)		14,335
Accounts with joint venture owners		275		13,812
Other receivables		(53)		(755)
Crude oil inventory		5,795		(2,793)
Prepayments and other		(3,240)		(993)
Value added tax and other receivables		(149)		(370)
Accounts payable		(6,627)		(1,130)
Foreign income taxes receivable/payable		5,524		(1,284)
Accrued liabilities and other		(576)		(2,073)
Net cash provided by continuing operating activities		1,755		27,645
Net cash used in discontinued operating activities		(13)		(18)
Net cash provided by operating activities		1,742		27,627
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures		(1,198)		(11,980)
Acquisition of crude oil and natural gas properties		(17,858)		—
Net cash used in continuing investing activities		(19,056)		(11,980)
Net cash used in discontinued investing activities		—		—
Net cash used in investing activities		(19,056)		(11,980)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock		347		—
Treasury shares		(403)		(652)
Net cash used in continuing financing activities		(56)		(652)
Net cash used in discontinued financing activities		—		—
Net cash used in financing activities		(56)		(652)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(17,370)		14,995
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		61,317		59,124
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	43,947	$	74,119

See notes to condensed consolidated financial statements.
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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES (Unaudited)

Three Months Ended March 31,

(in thousands)

Supplemental disclosure of non-cash investing and financing activities:

Property and equipment additions incurred but not paid at end of period