Quarterly report pursuant to Section 13 or 15(d)

Unaudited Condensed Consolidated Financial Statements And Accounting Policies

Unaudited Condensed Consolidated Financial Statements And Accounting Policies
6 Months Ended
Jun. 30, 2011
Unaudited Condensed Consolidated Financial Statements And Accounting Policies  
Unaudited Condensed Consolidated Financial Statements And Accounting Policies

The condensed consolidated financial statements of VAALCO Energy, Inc. and subsidiaries (collectively, "VAALCO" or the "Company"), included herein are unaudited, but include all adjustments consisting of normal recurring accruals which the Company deems necessary for a fair presentation of its financial position, results of operations and cash flows for the interim period. Such results are not necessarily indicative of results to be expected for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K for the year ended December 31, 2010, which also contains a summary of the significant accounting policies followed by the Company in the preparation of its consolidated financial statements. These policies were also followed in preparing the quarterly report included herein. The Company follows the successful efforts method of accounting for oil and gas exploration and development costs.

VAALCO is a Houston-based independent energy company, principally engaged in the acquisition, exploration, development and production of crude oil and natural gas. VAALCO owns producing properties and conducts exploration activities as operator of consortiums internationally in Gabon and Angola and as a non-operator in the British North Sea. In Gabon and Angola, VAALCO serves as the operator for a group of companies which own the working interests in the production sharing contract. Domestically, the Company has interests onshore in Texas and Alabama and in the offshore Texas and Louisiana Gulf Coast area. Additionally, the Company acquired a 70% working interest in approximately 5,200 acres in Montana during the second quarter of 2011.

VAALCO's subsidiaries include VAALCO Gabon (Etame), Inc., VAALCO Production (Gabon), Inc., VAALCO Angola (Kwanza), Inc., VAALCO UK (North Sea), Ltd., and VAALCO Energy (USA), Inc.

The Company has evaluated subsequent events through August 8, 2011, the date the financial statements were issued. In July 2011, the Company signed a letter of intent with Magellan Petroleum Corporation, to acquire a working interest in approximately 23,000 net acres covering the Bakken and deeper formations in the East Poplar Unit and the Northwest Poplar Field in Roosevelt County, Montana. Under the terms of the acquisition, VAALCO expects to acquire a 65% working interest in the Bakken and deeper rights of the Poplar Field. The Company expects to complete the transaction within sixty days from the date the letter of intent was signed.

Also in July 2011, the Company acquired a 364 acre lease in the Granite Wash formation in Hemphill County, Texas at a cost of $1.4 million.