May 3, 2022 - 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 March 31, 2022

¨ 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, 2022, there were outstanding 58,902,069 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
March 31, 2022 and December 31, 2021	2
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 2022 and 2021	3
Condensed Consolidated Statements of Shareholders’ Equity
Three Months Ended March 31, 2022 and 2021	4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 2022 and 2021	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	37
ITEM 4. CONTROLS AND PROCEDURES	38
PART II. OTHER INFORMATION	38
ITEM 1. LEGAL PROCEEDINGS	38
ITEM 1A. RISK FACTORS	38
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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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)



	As of March 31, 2022		As of December 31, 2021
ASSETS	(in thousands)
Current assets:
Cash and cash equivalents	$	18,939	$	48,675
Restricted cash		4,230		79
Receivables:
Trade, net		44,616		22,464
Accounts with joint venture owners, net of allowance of $0.0 million in both periods presented		3,764		345
Other, net		11,612		9,977
Crude oil inventory		4,634		1,593
Prepayments and other		8,408		5,156
Total current assets		96,203		88,289

Crude oil and natural gas properties, equipment and other - successful efforts method, net		121,935		94,324
Other noncurrent assets:
Restricted cash		1,752		1,752
Value added tax and other receivables, net of allowance of $6.1 million and $5.7 million, respectively		5,692		5,536
Right of use operating lease assets		6,872		10,227
Right of use finance lease assets		1,795		—
Deferred tax assets		50,296		39,978
Abandonment funding		21,369		21,808
Other long-term assets		2,596		1,176
Total assets	$	308,510	$	263,090
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	10,509	$	18,797
Accounts with joint venture owners		—		3,233
Accrued liabilities and other		91,409		49,444
Operating lease liabilities - current portion		6,429		9,642
Finance lease liabilities - current portion		341		—
Foreign income taxes payable		8,819		3,128
Current liabilities - discontinued operations		7		13
Total current liabilities		117,514		84,257
Asset retirement obligations		34,377		33,949
Operating lease liabilities - net of current portion		461		587
Finance lease liabilities - net of current portion		1,411		-
Total liabilities		153,763		118,793
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, 69,862,217 and 69,562,774 shares issued, 58,858,901 and 58,623,451 shares outstanding, respectively		6,986		6,956
Additional paid-in capital		77,272		76,700
Less treasury stock, 11,003,316 and 10,939,323 shares, respectively, at cost		(44,234)		(43,847)
Retained earnings		114,723		104,488
Total shareholders' equity		154,747		144,297
Total liabilities and shareholders' equity	$	308,510	$	263,090

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,
	2022		2021
	(in thousands, except per share amounts)
Revenues:
Crude oil and natural gas sales	$	68,656	$	39,774
Operating costs and expenses:
Production expense		18,360		16,133
Exploration expense		127		142
Depreciation, depletion and amortization		4,673		4,148
General and administrative expense		4,994		4,547
Bad debt expense and other		492		101
Total operating costs and expenses		28,646		25,071
Other operating expense, net		(5)		(360)
Operating income		40,005		14,343
Other income (expense):
Derivative instruments loss, net		(31,758)		(5,954)
Interest (expense) income, net		(3)		5
Other (expense) income, net		(696)		4,580
Total other expense, net		(32,457)		(1,369)
Income from continuing operations before income taxes		7,548		12,974
Income tax (benefit) expense		(4,628)		3,086
Income from continuing operations		12,176		9,888
Income loss from discontinued operations, net of tax		(12)		(19)
Net income	$	12,164	$	9,869

Basic net income per share:
Income from continuing operations	$	0.21	$	0.17
Loss from discontinued operations, net of tax		—		—
Net income per share	$	0.21	$	0.17
Basic weighted average shares outstanding		58,702		57,636
Diluted net income per share:
Income from continuing operations	$	0.20	$	0.17
Loss from discontinued operations, net of tax		—		—
Net income per share	$	0.20	$	0.17
Diluted weighted average shares outstanding		59,179		58,461

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, 2022	69,562	(10,939)	$	6,956	$	76,700	$	(43,847)	$	104,488	$	144,297
Shares issued - stock-based compensation	300	(64)		30		168		—		—		198
Stock-based compensation expense	—	—		—		404		—		—		404
Treasury stock	—	—		—		—		(387)		—		(387)
Dividend Distribution	—	—		—		—		—		(1,929)		(1,929)
Net income	—	—		—		—		—		12,164		12,164
Balance at March 31, 2022	69,862	(11,003)	$	6,986	$	77,272	$	(44,234)	$	114,723	$	154,747


	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

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,
	2022		2021
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	12,164	$	9,869
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Loss from discontinued operations, net of tax		12		19
Depreciation, depletion and amortization		4,673		4,148
Bargain purchase gain		—		(7,651)
Deferred taxes		(10,318)		1,809
Unrealized foreign exchange loss (gain)		116		(400)
Stock-based compensation		1,422		1,559
Cash settlements paid on exercised stock appreciation rights		(205)		(852)
Derivative instruments loss, net		31,758		5,954
Cash settlements paid on matured derivative contracts, net		(12,500)		(1,710)
Bad debt expense and other		492		101
Other operating expense, net		5		360
Operational expenses associated with equipment and other		240		247
Cash advance for other long-term assets		(1,452)		—
Change in operating assets and liabilities:
Trade receivables		(22,152)		(12,647)
Accounts with joint venture owners		(6,652)		275
Other receivables		(1,723)		(53)
Crude oil inventory		(3,041)		5,795
Prepayments and other		(876)		(3,240)
Value added tax and other receivables		(1,076)		(149)
Accounts payable		(10,132)		(6,627)
Foreign income taxes receivable/payable		5,691		5,524
Accrued liabilities and other		12,814		(576)
Net cash (used in) provided by continuing operating activities		(740)		1,755
Net cash used in discontinued operating activities		(18)		(13)
Net cash (used in) provided by operating activities		(758)		1,742
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures		(23,148)		(1,198)
Acquisition of crude oil and natural gas properties		—		(17,858)
Net cash used in continuing investing activities		(23,148)		(19,056)
Net cash used in discontinued investing activities		—		—
Net cash used in investing activities		(23,148)		(19,056)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock		198		347
Dividend distribution		(1,929)		—
Treasury shares		(387)		(403)
Net cash used in continuing financing activities		(2,118)		(56)
Net cash used in discontinued financing activities		—		—
Net cash used in financing activities		(2,118)		(56)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(26,024)		(17,370)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		72,314		61,317
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	46,290	$	43,947

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

Form: 10-Q

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