August 11, 2021 - 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 June 30, 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

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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

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 July 31, 2021, there were outstanding 58,585,062 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
June 30, 2021 and December 31, 2020	2
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2021 and 2020	3
Condensed Consolidated Statements of Shareholders’ Equity
Three and Six Months Ended June 30, 2021 and 2020	4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 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	29
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 6. EXHIBITS	39

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 June 30, 2021		As of December 31, 2020
ASSETS	(in thousands)
Current assets:
Cash and cash equivalents	$	22,884	$	47,853
Restricted cash		83		86
Receivables:
Trade		28,801		—
Accounts with joint venture owners, net of allowance of $0.0 million in both periods presented		77		3,587
Other		24		4,331
Crude oil inventory		3,107		3,906
Prepayments and other		4,348		4,215
Total current assets		59,324		63,978

Crude oil and natural gas properties, equipment and other - successful efforts method, net		74,202		37,036
Other noncurrent assets:
Restricted cash		1,752		925
Value added tax and other receivables, net of allowance of $5.6 million and $2.3 million, respectively		5,618		4,271
Right of use operating lease assets		16,259		22,569
Deferred tax assets		1,511		—
Abandonment funding		22,837		12,453
Total assets	$	181,503	$	141,232
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	5,545	$	16,690
Accounts with joint venture owners		2,013		4,945
Accrued liabilities and other		34,980		17,184
Operating lease liabilities - current portion		13,288		12,890
Foreign income taxes payable		12,533		860
Current liabilities - discontinued operations		7		7
Total current liabilities		68,366		52,576
Asset retirement obligations		32,633		17,334
Operating lease liabilities - net of current portion		2,968		9,671
Other long-term liabilities		—		193
Total liabilities		103,967		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, 69,420,003 and 67,897,530 shares issued, 58,585,062 and 57,531,154 shares outstanding, respectively		6,942		6,790
Additional paid-in capital		75,778		74,437
Less treasury stock, 10,834,941 and 10,366,376 shares, respectively, at cost		(43,589)		(42,421)
Retained earnings		38,405		22,652
Total shareholders' equity		77,536		61,458
Total liabilities and shareholders' equity	$	181,503	$	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 June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
	(in thousands, except per share amounts)
Revenues:
Crude oil and natural gas sales	$	47,023	$	17,974	$	86,797	$	36,363
Operating costs and expenses:
Production expense		16,419		12,126		32,552		21,875
Exploration expense		665		—		807		—
Depreciation, depletion and amortization		5,810		2,801		9,958		5,904
Impairment of proved crude oil and natural gas properties		—		—		—		30,625
General and administrative expense		4,734		3,019		9,281		3,773
Bad debt expense and other		395		179		496		989
Total operating costs and expenses		28,023		18,125		53,094		63,166
Other operating expense, net		(126)		(815)		(486)		(846)
Operating income (loss)		18,874		(966)		33,217		(27,649)
Other income (expense):
Derivative instruments gain (loss), net		(9,969)		(756)		(15,923)		6,583
Interest income, net		1		11		6		127
Other, net		(164)		47		4,416		16
Total other income (expense), net		(10,132)		(698)		(11,501)		6,726
Income (loss) from continuing operations before income taxes		8,742		(1,664)		21,716		(20,923)
Income tax expense (benefit)		2,825		(2,249)		5,911		31,229
Income (loss) from continuing operations		5,917		585		15,805		(52,152)
Income (loss) from discontinued operations, net of tax		(33)		11		(52)		(52)
Net income (loss)	$	5,884	$	596	$	15,753	$	(52,204)

Basic net income (loss) per share:
Income (loss) from continuing operations	$	0.10	$	0.01	$	0.27	$	(0.90)
Loss from discontinued operations, net of tax		0.00		0.00		0.00		0.00
Net income (loss) per share	$	0.10	$	0.01	$	0.27	$	(0.90)
Basic weighted average shares outstanding		58,072		57,456		57,855		57,716
Diluted net income (loss) per share:
Income (loss) from continuing operations	$	0.10	$	0.01	$	0.27	$	(0.90)
Loss from discontinued operations, net of tax		0.00		0.00		0.00		0.00
Net income (loss) per share	$	0.10	$	0.01	$	0.27	$	(0.90)
Diluted weighted average shares outstanding		58,574		57,594		58,527		57,716

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
Shares issued - stock-based compensation	1,092	(314)		109		597		—		—		706
Stock-based compensation expense	—	—		—		117		—		—		117
Treasury stock	—	—		—		—		(765)		—		(765)
Net income	—	—		—		—		—		5,884		5,884
Balance at June 30, 2021	69,420	(10,835)	$	6,942	$	75,778	$	(43,589)	$	38,405	$	77,536


	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	—

Form: 10-Q

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