Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Segment Information

v3.23.2
Note 4 - Segment Information
 6 Months Ended
Jun. 30, 2023
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

4. SEGMENT INFORMATION 

 

The Company’s operations are based in Gabon, Egypt, and Canada, and the Company has an undeveloped block in Equatorial Guinea. Each of the Company’s 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 six months ended June 30, 2023 and 2022 as well as long-lived assets and segment assets at June 30, 2023 and December 31, 2022 are as follows:

 

   

Three Months Ended June 30, 2023

  

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                                

Crude oil, natural gas and natural gas liquids sales

   $ 77,924     $ 21,308     $ 10,008     $ —     $ —     $ 109,240  

Operating costs and expenses:

                                                

Production expense

     23,931       11,089       3,255       386       (57 )     38,604  

FPSO Demobilization - Norms Waste Disposal

     5,647       —       —       —       —       5,647  

Exploration expense

     43       14       —       —       —       57  

Depreciation, depletion and amortization

     19,457       13,757       4,747       —       42       38,003  

General and administrative expense

     318       202       —       87       4,788       5,395  

Credit losses and other

     518       —       —       162       —       680  

Total operating costs and expenses

     49,914       25,062       8,002       635       4,773       88,386  

Other operating income (expense), net

     (62 )     (241 )     —       —       —       (303 )

Operating income

     27,948       (3,995 )     2,006       (635 )     (4,773 )     20,551  

Other income (expense):

                                                

Derivative instruments loss, net

     —       —       —       —       31       31  

Interest (expense) income, net

     (1,376 )     (503 )     —       —       176       (1,703 )

Other (expense) income, net

     (619 )     —       1       —       81       (537 )

Total other expense, net

     (1,995 )     (503 )     1       —       288       (2,209 )

Income (loss) from continuing operations before income taxes

     25,953       (4,498 )     2,007       (635 )     (4,485 )     18,342  

Income tax (benefit) expense

     16,251       4,261       —       —       (8,924 )     11,588  

Income (loss) from continuing operations

     9,702       (8,759 )     2,007       (635 )     4,439       6,754  

Loss from discontinued operations, net of tax

     —       —       —       —       (2 )     (2 )

Net income (loss)

   $ 9,702     $ (8,759 )   $ 2,007     $ (635 )   $ 4,437     $ 6,752  

Consolidated capital expenditures

   $ 1,375     $ 8,526     $ 6,491     $ —     $ 36     $ 16,427  

 

   

Six Months Ended June 30, 2023

  

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                                

Crude oil, natural gas and natural gas liquids sales

   $ 114,661     $ 56,092     $ 18,890     $ —     $ —     $ 189,643  

Operating costs and expenses:

                                                

Production expense

     38,346       22,199       5,509       748       2       66,804  

FPSO Demobilization - Norms Waste Disposal

     5,647       —       —       —       —       5,647  

Exploration expense

     51       14       —       —       —       65  

Depreciation, depletion and amortization

     29,302       24,552       8,458       —       108       62,420  

General and administrative expense

     936       381       —       216       9,086       10,619  

Credit losses and other

     1,453       —       —       162       —       1,615  

Total operating costs and expenses

     75,735       47,146       13,967       1,126       9,196       147,170  

Other operating income, net

     (62 )     (241 )     —       —       —       (303 )

Operating income (loss)

     38,864       8,705       4,923       (1,126 )     (9,196 )     42,170  

Other income (expense):

                                                

Derivative instruments gain, net

     —       —       —       —       52       52  

Interest (expense) income, net

     (2,883 )     (1,311 )     (4 )     —       249       (3,949 )

Other income (expense), net

     (102 )     —       1       (1 )     (1,575 )     (1,677 )

Total other expense, net

     (2,985 )     (1,311 )     (3 )     (1 )     (1,274 )     (5,574 )

Income (loss) from continuing operations before income taxes

     35,879       7,394       4,920       (1,127 )     (10,470 )     36,596  

Income tax expense (benefit)

     22,829       9,253       —       —       (5,723 )     26,359  

Income (loss) from continuing operations

     13,050       (1,859 )     4,920       (1,127 )     (4,747 )     10,237  

Loss from discontinued operations, net of tax

     —       —       —       —       (15 )     (15 )

Net income (loss)

   $ 13,050     $ (1,859 )   $ 4,920     $ (1,127 )   $ (4,762 )   $ 10,222  

Consolidated capital expenditures

   $ 5,064     $ 20,097     $ 16,656     $ —     $ 36     $ 41,852  

 

 

   

Three Months Ended June 30, 2022

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 110,985     $ —     $ —     $ 110,985  

Operating costs and expenses:

                                

Production expense

     25,360       175       (60 )     25,475  

Exploration expense

     67       —       —       67  

Depreciation, depletion and amortization

     8,173       —       18       8,191  

General and administrative expense

     565       110       2,859       3,534  

Bad debt expense and other

     571       —       —       571  

Total operating costs and expenses

     34,736       285       2,817       37,838  

Other operating income (expense), net

     —       —       —       —  

Operating income

     76,249       (285 )     (2,817 )     73,147  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (9,542 )     (9,542 )

Interest (expense) income, net

     (158 )     —       40       (118 )

Other (expense) income, net

     (856 )     (1 )     (1,254 )     (2,111 )

Total other expense, net

     (1,014 )     (1 )     (10,756 )     (11,771 )

Income from continuing operations before income taxes

     75,235       (286 )     (13,573 )     61,376  

Income tax (benefit) expense

     36,423       1       9,828       46,252  

Income from continuing operations

     38,812       (287 )     (23,401 )     15,124  

Loss from discontinued operations, net of tax

     —       —       (20 )     (20 )

Net income

   $ 38,812     $ (287 )   $ (23,421 )   $ 15,104  

Consolidated capital expenditures (1)

   $ 38,102     $ —     $ 67     $ 38,169  

 

   

Six Months Ended June 30, 2022

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 179,641     $ —     $ —     $ 179,641  

Operating costs and expenses:

                                

Production expense

     43,441       394       —       43,835  

Exploration expense

     194       —       —       194  

Depreciation, depletion and amortization

     12,826       —       38       12,864  

General and administrative expense

     1,158       209       7,161       8,528  

Credit losses and other

     1,063       —       —       1,063  

Total operating costs and expenses

     58,682       603       7,199       66,484  

Other operating income (expense), net

     (5 )     —       —       (5 )

Operating income

     120,954       (603 )     (7,199 )     113,152  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (41,300 )     (41,300 )

Interest (expense) income, net

     (164 )     —       43       (121 )

Other (expense) income, net

     (1,494 )     (2 )     (1,311 )     (2,807 )

Total other expense, net

     (1,658 )     (2 )     (42,568 )     (44,228 )

Income from continuing operations before income taxes

     119,296       (605 )     (49,767 )     68,924  

Income tax (benefit) expense

     49,256       1       (7,633 )     41,624  

Income from continuing operations

     70,040       (606 )     (42,134 )     27,300  

Loss from discontinued operations, net of tax

     —       —       (32 )     (32 )

Net income

   $ 70,040     $ (606 )   $ (42,166 )   $ 27,268  

Consolidated capital expenditures (1)

   $ 69,882     $ —     $ 67     $ 69,949  

 

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Long-lived assets from continuing operations:

                                                

As of June 30, 2023

   $ 193,501     $ 165,813     $ 111,677     $ 10,000     $ 749     $ 481,740  

As of December 31, 2022 (1)

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

(1) - Includes assets acquired in the TransGlobe acquisition

 

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Total assets from continuing operations:

                                                

As of June 30, 2023

   $ 384,554     $ 270,653     $ 118,604     $ 11,144     $ 44,058     $ 829,013  

As of December 31, 2022 (1)

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

(1) - Includes assets acquired in the TransGlobe 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. 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.

 

For the three and six months ended June 30, 2023 sales of crude oil to Glencore made up 100% of Etame revenues. For the three and six months ended June 30, 2022, sales of crude oil to ExxonMobil Sales and Supply LLC made up 100% of Etame revenues. For the three months ended June 30, 2023, the EGPC covered 100% of the Company's crude oil sales in Egypt. For the six months ended June 30, 2023, Mercuria covered 100% of the Company’s crude oil sales in Egypt in the first quarter, while the EGPC covered 100% of sales in the second quarter. For the three and six months ended June 30, 2023, revenues in Canada were concentrated in three separate customers. These customers were Plains Midstream (50.9%), AltaGas (19.1%), and PetroGas Energy (18.60%). Concentrations of accounts receivable are similar to the revenue percentages.