================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- FORM 10-KSBA (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2002 OR [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-20928 VAALCO Energy, Inc. (Name of small business issuer in its charter) Delaware (State or other jurisdiction of 76-0274813 incorporation or (I.R.S. Employer organization) Identification No.) 4600 Post Oak Place Suite 309 Houston, Texas (Address of principal 77027 executive offices) (Zip Code) Issuer's telephone number: (713) 623-0801 Securities registered under Section 12(b) of the Exchange Act: Title of each class on which registered Name of each exchange ---------------------- --------------------- None Securities registered under Section 12(g) of the Exchange Act: Common Stock, $.10 par value (Title of class) Check whether the issuer (1) 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 [_]. Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB [X]. The registrant's revenues for the fiscal year ended December 31, 2002 were $9,991,992.15. The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates, as of March 26, 2002 was $13,595,868. As of March 26, 2003, there were outstanding 21,216,649 shares of Common Stock, $.10 par value per share, of the registrant. In addition, as of such date there were outstanding 10,000 shares of Preferred Stock convertible into 27,500,000 shares of Common Stock. Documents incorporated by reference: Definitive proxy statement of VAALCO Energy, Inc. relating to the Annual Meeting of Stockholders to be filed within 120 days after the end of the fiscal year covered by this Form, which is incorporated into Part III of this 10-KSB. Transitional Small Business Disclosure Format: Yes [_] No [X]. ================================================================================ Results of Operations Year Ended December 31, 2002 Compared to Year Ended December 31, 2001 Amounts stated hereunder have been rounded to the nearest $100,000. Cash Flows Net cash provided by operating activities for 2002 was $0.8 million, as compared to net cash provided by operating activities of $3.0 million in 2001. Net funds provided by operations in 2002 included accounts with partners of $4.0 million primarily in Gabon. It also included $1.5 million of development and operating costs advanced on behalf of the Government of Gabon for their 7.5% carried working interest share of the Etame field. This amount is carried as an Other Receivable. Offsetting these cash uses was an increase of $5.1 million in trade accounts payable net of trade accounts receivable. Net cash provided by operations in 2001 included $0.7 million from funds in escrow and $2.3 million in advances from partners in the Philippines and Gabon. Net cash used in investing activities for 2002 was $15.9 million, as compared to net cash used in investing activities of $5.6 million in 2001. In 2002, the Company invested $15.6 million to fund its share of the development of the Etame Block. In 2001, the Company participated in two exploration wells in Gabon at a cost of approximately $3.2 million and expended an additional $0.7 million for the development of the Etame Block in 2001. The Company also participated in four wells in Texas at a cost of approximately $1.2 million in 2001. Exploration expenses of $0.3 million were incurred in 2002 versus $0.4 million in 2001. Net cash provided by financing activities was $13.0 million consisting of borrowings of $20.0 million from the IFC and the 1818 Fund and $3.3 million from the sale of stock of VAALCO's subsidiary VAALCO International, Inc. This was offset by $10.0 million placed in escrow to guarantee the IFC loan. No net cash was provided by or used in financing activities for 2001. Revenues Total oil and gas sales for 2002 was $10.0 million as compared to $1.7 million for 2001. During 2002, the Etame field was placed on production, and the Company sold approximately 302,000 net barrels of oil, generating $8.9 million in revenues. The balance of the revenues was from Texas and the Philippines. The 2001 revenues were about equally split between Texas and the Philippines. The Company realized a $0.2 million gain on the resale of a portion of the Etame interest in 2001. Operating Costs and Expenses Production expenses for 2002 were $2.8 million as compared to $0.7 million for 2001. In 2002, $2.3 million of production expenses occurred in Gabon associated with the Etame field production. Exploration costs for 2002 were $0.3 million as compared to $0.4 million for 2001. 2002 exploration costs were primarily costs of seismic reprocessing in Gabon. 2001 exploration expenses were primarily associated with undeveloped acreage expirations. Depreciation, depletion and amortization of properties for 2002 and 2001 were $2.1 million and $1.2 million respectively. Depletion in 2002 included $1.8 million associated with Etame production. The balance was associated with the Texas wells. Depletion in 2001 was associated with the Texas wells and included an impairment of $0.6 million. General and administrative expenses for 2002 were $2.0 million as compared to $1.8 million for 2001. Increased activity associated with the Etame field development was the primary reason for the increase in 2002. 20 VAALCO ENERGY, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 (in thousands of dollars, unless otherwise indicated) 4. INVESTMENT IN UNCONSOLIDATED ENTITIES Investment in VAALCO Exploration LLC represented a 50/50 membership interest shared by VAALCO Energy, Inc. and Paramount Petroleum in VAALCO Exploration LLC. The Company elected to terminate its joint venture with Paramount Petroleum, Inc., effective June 1, 2001. The joint venture focused on domestic onshore prospects in Mississippi, Alabama and Louisiana. In connection with the wind up of the joint venture, the Company received $216,000 in cash and $259,000 of undeveloped acreage representing its proportionate 93.75% working interest in kind in all remaining prospects within the joint venture. The following summarizes the aggregated financial information for all investments owned by VAALCO, which were accounted for under the equity method as of December 31, 2001. No amounts associated with the former joint venture are carried in the 2002 books.