Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Segment Information

v3.22.2.2
Note 4 - Segment Information
 9 Months Ended
Sep. 30, 2022
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

4. SEGMENT INFORMATION 

 

The Company’s operations are based in Gabon and the Company has an undeveloped block in Equatorial Guinea. Each of the Company’s two reportable operating segments is organized and managed based upon geographic location. The Company’s Chief Executive Officer, who is the chief operating decision maker, and management review and evaluate the operation of each geographic segment separately, primarily based on operating income (loss). The operations of all segments include exploration for and production of hydrocarbons where commercial reserves have been found and developed. Revenues are based on the location of hydrocarbon production. Corporate and other is primarily corporate and operations support costs that are not allocated to the reportable operating segments.

 

Segment activity of continuing operations for the three and nine months ended September 30, 2022 and 2021 as well as long-lived assets and segment assets at September 30, 2022 and December 31, 2021 are as follows:

 

   

Three Months Ended September 30, 2022

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 78,097     $ —     $ —     $ 78,097  

Operating costs and expenses:

                                

Production expense

     22,828       484       —       23,312  

FPSO demobilization

     8,867       —       —       8,867  

Exploration expense

     56       —       —       56  

Depreciation, depletion and amortization

     8,940       —       23       8,963  

General and administrative expense

     915       120       944       1,979  

Bad debt expense and other

     681       339       —       1,020  

Total operating costs and expenses

     42,287       943       967       44,197  

Other operating expense, net

     —       —       —       —  

Operating income

     35,810       (943 )     (967 )     33,900  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       3,778       3,778  

Interest (expense) income, net

     (351 )     —       117       (234 )

Other (expense) income, net

     (1,305 )     1       (6,403 )     (7,707 )

Total other expense, net

     (1,656 )     1       (2,508 )     (4,163 )

Income from continuing operations before income taxes

     34,154       (942 )     (3,475 )     29,737  

Income tax (benefit) expense

     25,415       —       (2,572 )     22,843  

Income from continuing operations

     8,739       (942 )     (903 )     6,894  

Loss from discontinued operations, net of tax

     —       —       (26 )     (26 )

Net income

   $ 8,739     $ (942 )   $ (929 )   $ 6,868  

Consolidated capital expenditures

   $ 51,610     $ —     $ 53     $ 51,663  

 

 

 

   

Nine Months Ended September 30, 2022

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 257,738     $ —     $ —     $ 257,738  

Operating costs and expenses:

                                

Production expense

     66,269       878       —       67,147  

FPSO demobilization

     8,867       —       —       8,867  

Exploration expense

     250       —       —       250  

Depreciation, depletion and amortization

     21,766       —       61       21,827  

General and administrative expense

     2,073       329       8,105       10,507  

Bad debt expense and other

     1,744       339       —       2,083  

Total operating costs and expenses

     100,969       1,546       8,166       110,681  

Other operating expense, net

     (5 )     —       —       (5 )

Operating income

     156,764       (1,546 )     (8,166 )     147,052  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (37,522 )     (37,522 )

Interest (expense) income, net

     (515 )     —       160       (355 )

Other (expense) income, net

     (2,799 )     (1 )     (7,714 )     (10,514 )

Total other expense, net

     (3,314 )     (1 )     (45,076 )     (48,391 )

Income from continuing operations before income taxes

     153,450       (1,547 )     (53,242 )     98,661  

Income tax (benefit) expense

     74,671       1       (10,205 )     64,467  

Income from continuing operations

     78,779       (1,548 )     (43,037 )     34,194  

Loss from discontinued operations, net of tax

     —       —       (58 )     (58 )

Net income

   $ 78,779     $ (1,548 )   $ (43,095 )   $ 34,136  

Consolidated capital expenditures

   $ 121,492     $ —     $ 120     $ 121,612  

 

 

   

Three Months Ended September 30, 2021

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 55,899     $ —     $ —     $ 55,899  

Operating costs and expenses:

                                

Production expense

     24,967       229       12       25,208  

Exploration expense

     479       —       —       479  

Depreciation, depletion and amortization

     6,953       —       17       6,970  

General and administrative expense

     394       42       2,504       2,940  

Bad debt expense and other

     318       —       —       318  

Total operating costs and expenses

     33,111       271       2,533       35,915  

Other operating expense, net

     46       —       —       46  

Operating income

     22,834       (271 )     (2,533 )     20,030  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (5,147 )     (5,147 )

Interest (expense) income, net

     —       —       3       3  

Other (expense) income, net

     (318 )     (1 )     (9 )     (328 )

Total other expense, net

     (318 )     (1 )     (5,153 )     (5,472 )

Income from continuing operations before income taxes

     22,516       (272 )     (7,686 )     14,558  
       

Income tax (benefit) expense

     839       —       (18,022 )     (17,183 )

Income from continuing operations

     21,677       (272 )     10,336       31,741  

Loss from discontinued operations, net of tax

     —       —       (20 )     (20 )

Net income

   $ 21,677     $ (272 )   $ 10,316     $ 31,721  

Consolidated capital expenditures (1)

   $ 6,696     $ —     $ —     $ 6,696  

(1)    Excludes assets acquired in the Sasol acquisition.

   

Nine Months Ended September 30, 2021

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 142,696     $ —     $ —     $ 142,696  

Operating costs and expenses:

                                

Production expense

     57,478       261       21       57,760  

Exploration expense

     1,286       —       —       1,286  

Depreciation, depletion and amortization

     16,860       —       68       16,928  

General and administrative expense

     885       244       11,092       12,221  

Bad debt expense and other

     814       —       —       814  

Total operating costs and expenses

     77,323       505       11,181       89,009  

Other operating expense, net

     (87 )     —       (353 )     (440 )

Operating income

     65,286       (505 )     (11,534 )     53,247  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (21,070 )     (21,070 )

Interest (expense) income, net

     —       —       9       9  

Other (expense) income, net

     6,854       (2 )     (2,764 )     4,088  

Total other expense, net

     6,854       (2 )     (23,825 )     (16,973 )

Income from continuing operations before income taxes

     72,140       (507 )     (35,359 )     36,274  

Income tax (benefit) expense

     10,318       1       (21,591 )     (11,272 )

Income from continuing operations

     61,822       (508 )     (13,768 )     47,546  

Loss from discontinued operations, net of tax

     —       —       (72 )     (72 )

Net income

   $ 61,822     $ (508 )   $ (13,840 )   $ 47,474  

Consolidated capital expenditures (1)

   $ 10,993     $ —     $ —     $ 10,993  

(1)    Excludes assets acquired in the Sasol acquisition.

 

 

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Long-lived assets from continuing operations:

                                

As of September 30, 2022

   $ 184,484     $ 10,000     $ 227     $ 194,711  

As of December 31, 2021

   $ 84,156     $ 10,000     $ 168     $ 94,324  

 

 

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Total assets from continuing operations:

                                

As of September 30, 2022

   $ 313,746     $ 10,689     $ 70,338     $ 394,773  

As of December 31, 2021

   $ 201,748     $ 10,548     $ 50,794     $ 263,090  

 

Information about the Company’s most significant customers

 

The Company currently sells crude oil production from Gabon under term crude oil sales and purchase agreements (“COSPAs”) or crude oil sales and marketing agreements ("COSMA or COSMAs") with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. The Company was previously party to a COSPA with ExxonMobil Sales and Supply LLC (“Exxon”) that covered sales from February 2020 through July 2022 with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. This COSPA has been terminated.

 

As discussed further in Note 11, on May 16, 2022, VAALCO Gabon (Etame), Inc. (the “Borrower”) entered into a facility agreement (the “Facility Agreement”) by and among the Company, VAALCO Gabon, SA (“VAALCO Gabon”), Glencore Energy UK Ltd., as mandated lead arranger, technical bank and facility agent (“Glencore”), the Law Debenture Trust Corporation P.L.C., as security agent, and the other financial institutions named therein (the “Lenders”), providing for a senior secured reserve-based revolving credit facility (the “Facility”) in an initial aggregate maximum principal amount available of up to $50.0 million. In connection with the entry into the Facility Agreement, the Company entered into a COSMA with Glencore pursuant to which the Company agreed to make Glencore the exclusive offtaker and marketer of all of the crude oil produced from the Etame G4-160 Block, offshore Gabon during the period from August 1, 2022 until the Final Maturity Date of the Facility (as defined in the Facility Agreement). Pursuant to the COSMA, Glencore agreed to buy and market the Company’s crude oil with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors.

 

During the three and nine months ended September 30, 2022 and 2021, revenues from sales of crude oil to Exxon were 100% of the Company’s total revenues from customers for the period of January 2021 through  July 2022 and revenues from sales of crude oil to Glencore were 100% of the Company’s total revenues from customers for the period of August through September 2022.