Annual report pursuant to Section 13 and 15(d)

Note 5 - Segment Information

v3.23.1
Note 5 - Segment Information
 12 Months Ended
Dec. 31, 2022
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

5. SEGMENT INFORMATION

 

The Company’s operations are based in Gabon, Egypt, Canada and Equatorial Guinea. Each of the reportable operating segments are organized and managed based upon geographic location. The Company’s Chief Executive Officer, who is the chief operating decision maker evaluates 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. No transactions occurred between segments. 

 

Segment activity of continuing operations for the years ended December 31, 2022, 2021 and 2020 and long-lived assets and segment assets at December 31, 2022 and 2021 are as follows:

 

   

Year ended December 31, 2022

  

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                                

Crude oil, natural gas and natural gas liquids sales

   $ 306,775     $ 37,710     $ 9,841     $ —     $ —     $ 354,326  

Operating costs and expenses:

                                                

Production expense

     96,854       11,936       1,972       1,899       —       112,661  

FPSO demobilization

     8,867       —       —       —       —       8,867  

Exploration expense

     258       —       —       —       —       258  

Depreciation, depletion and amortization

     34,651       10,444       2,921       —       127       48,143  

General and administrative expense

     3,101       —       —       538       6,438       10,077  

Bad debt expense and other

     2,743       —       —       339       —       3,082  

Total operating costs and expenses

     146,474       22,380       4,893       2,776       6,565       183,088  

Other operating income, net

     38       —       —       —       —       38  

Operating income (loss)

     160,339       15,330       4,948       (2,776 )     (6,565 )     171,276  

Other income (expense):

                                                

Derivative instruments gain (loss), net

     —       —       13       —       (37,825 )     (37,812 )

Interest (expense) income, net

     (1,446 )     (596 )     —       —       8       (2,034 )

Other expense, net

     (1,484 )     —       —       —       (6,564 )     (8,048 )

Total other Income (expense), net

     (2,930 )     (596 )     13       —       (44,381 )     (47,894 )

Income (loss) from continuing operations before income taxes

     157,409       14,734       4,961       (2,776 )     (50,946 )     123,382  

Income tax (benefit) expense

     68,509       6,254       —       1       (3,344 )     71,420  

Income (loss) from continuing operations

     88,900       8,480       4,961       (2,777 )     (47,602 )     51,962  

Loss from discontinued operations, net of tax

     —       —       —       —       (72 )     (72 )

Net income (loss)

   $ 88,900     $ 8,480     $ 4,961     $ (2,777 )   $ (47,674 )   $ 51,890  

Consolidated capital expenditures (1)

   $ 162,375     $ 168,012     $ 103,263     $ —     $ 710     $ 434,360  

(1) - Includes assets acquired in the TransGlobe acquisition

 

   

Year Ended December 31, 2021

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 199,075     $ —     $ —     $ 199,075  

Operating costs and expenses:

                                

Production expense

     80,717       532       6       81,255  

Exploration expense

     1,579       —       —       1,579  

Depreciation, depletion and amortization

     20,972       —       88       21,060  

General and administrative expense

     1,301       321       13,144       14,766  

Bad debt expense and other

     875       -       —       875  

Total operating costs and expenses

     105,444       853       13,238       119,535  

Other operating expense, net

     (440 )     —       —       (440 )

Operating income

     93,191       (853 )     (13,238 )     79,100  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (22,826 )     (22,826 )

Interest income, net

     —       —       10       10  

Other (expense) income, net

     6,925       (3 )     (3,428 )     3,494  

Total other income (expense), net

     6,925       (3 )     (26,244 )     (19,322 )

Income (loss) from continuing operations before income taxes

     100,116       (856 )     (39,482 )     59,778  

Income tax (benefit) expense

     12,392       1       (34,549 )     (22,156 )

Income (loss) from continuing operations

     87,724       (857 )     (4,933 )     81,934  

Loss from discontinued operations, net of tax

     —       —       (98 )     (98 )

Net income (loss)

   $ 87,724     $ (857 )   $ (5,031 )   $ 81,836  

Consolidated capital expenditures (1)

   $ 79,169     $ —     $ 52     $ 79,221  

(1) Includes assets acquired in the Sasol acquisition.

 

    Year Ended December 31, 2020  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 67,176     $ —     $ —     $ 67,176  

Operating costs and expenses:

                                

Production expense

     37,298       1       16       37,315  

Exploration expense

     3,588       —       —       3,588  

Depreciation, depletion and amortization

     9,028       —       354       9,382  

Impairment of proved crude oil and natural gas properties

     30,625       —       —       30,625  

General and administrative expense

     1,064       430       9,201       10,695  

Bad debt expense and other

     1,165       —       —       1,165  

Total operating costs and expenses

     82,768       431       9,571       92,770  

Other operating expense, net

     (1,669 )     —       —       (1,669 )

Operating loss

     (17,261 )     (431 )     (9,571 )     (27,263 )

Other income (expense):

                                

Derivative instruments gain, net

     —       —       6,577       6,577  

Interest income, net

     —       —       155       155  

Other (expense) income, net

     194       3       (68 )     129  

Total other expense, net

     194       3       6,664       6,861  

Loss from continuing operations before income taxes

     (17,067 )     (428 )     (2,907 )     (20,402 )

Income tax expense

     16,204       1       11,476       27,681  

Loss from continuing operations

     (33,271 )     (429 )     (14,383 )     (48,083 )

Loss from discontinued operations, net of tax

     —       —       (98 )     (98 )

Net loss

   $ (33,271 )   $ (429 )   $ (14,481 )   $ (48,181 )

Consolidated capital expenditures

   $ 10,503     $ —     $ (9 )   $ 10,494  

 

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Long-lived assets from continuing operations:

                                                

As of December 31, 2022 (1)

   $ 213,204     $ 168,012     $ 103,263     $ 10,000     $ 793     $ 495,272  

As of December 31, 2021 (2)

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

(1) - Includes assets acquired in the TransGlobe acquisition

(2) - Includes assets acquired in the Sasol acquisition

 

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Total assets from continuing operations:

                                                

As of December 31, 2022 (1)

   $ 395,393     $ 293,640     $ 110,071     $ 10,861     $ 45,676     $ 855,641  

As of December 31, 2021 (2)

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

(1) - Includes assets acquired in the TransGlobe acquisition

(2) - Includes assets acquired in the Sasol acquisition

 

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. 

 

As discussed further in Note 13, 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) which is May 15, 2027 unless early terminated. 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.

 

From February 2019 through  January 2020, crude oil sales were to Mercuria Energy Trading SA (“Mercuria”). The Company entered an COSPA and amendments with ExxonMobil 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. 

 

For the year ended December 31, 2022, Etame revenues from the sales of crude oil to Exxon made up 68% of revenues and sales of crude oil to Glencore made up 32% of revenues. For the period of October 14, 2022 through December 31, 2022, EGPC covered 100% of the Company’s crude oil sales in Egypt. For the period of October 14, 2022 through December 31, 2022, revenues in Canada were concentrated in three separate customers that constituted approximately 54%, 32% and 14% of revenues. Concentrations of accounts receivable are similar to the revenue percentages.