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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________________

FORM 10-Q

________________________________

(Mark One)

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

¨  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission file number 1-32167

________________________________

VAALCO Energy, Inc.

(Exact name of registrant as specified in its charter)

________________________________

Delaware

 

76-0274813

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

9800 Richmond Avenue

Suite 700

Houston, Texas

 

77042

(Address of principal executive offices)

 

(Zip code)

(713) 623-0801

(Registrant’s telephone number, including area code)

________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Common Stock

EGY

New York Stock Exchange

Common Stock

EGY

London Stock Exchange

Indicate by check mark whether the registrant (1) has 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   ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

x

Smaller reporting company

Emerging growth company

x

¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨

Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2).        Yes  ¨    No   x

As of July 31, 2021, there were outstanding 58,585,062 shares of common stock, $0.10 par value per share, of the registrant.  

 


Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Condensed Consolidated Balance Sheets

June 30, 2021 and December 31, 2020

2

Condensed Consolidated Statements of Operations

Three and Six Months Ended June 30, 2021 and 2020

3

Condensed Consolidated Statements of Shareholders’ Equity

Three and Six Months Ended June 30, 2021 and 2020

4

Condensed Consolidated Statements of Cash Flows

Six Months Ended June 30, 2021 and 2020

5

Notes to Condensed Consolidated Financial Statements

7

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

29

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

38

ITEM 4. CONTROLS AND PROCEDURES

38

PART II. OTHER INFORMATION

39

ITEM 1. LEGAL PROCEEDINGS

39

ITEM 1A. RISK FACTORS

39

ITEM 6. EXHIBITS

39

Unless the context otherwise indicates, references to “VAALCO,” “the Company”, “we,” “our,” or “us” in this Quarterly Report on Form 10-Q are references to VAALCO Energy, Inc., including its wholly-owned subsidiaries.


1


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

As of June 30, 2021

As of December 31, 2020

ASSETS

(in thousands)

Current assets:

Cash and cash equivalents

$

22,884

$

47,853

Restricted cash

83

86

Receivables:

Trade

28,801

Accounts with joint venture owners, net of allowance of $0.0 million in both periods presented

77

3,587

Other

24

4,331

Crude oil inventory

3,107

3,906

Prepayments and other

4,348

4,215

Total current assets

59,324

63,978

Crude oil and natural gas properties, equipment and other - successful efforts method, net

74,202

37,036

Other noncurrent assets:

Restricted cash

1,752

925

Value added tax and other receivables, net of allowance of $5.6 million and $2.3 million, respectively

5,618

4,271

Right of use operating lease assets

16,259

22,569

Deferred tax assets

1,511

Abandonment funding

22,837

12,453

Total assets

$

181,503

$

141,232

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable

$

5,545

$

16,690

Accounts with joint venture owners

2,013

4,945

Accrued liabilities and other

34,980

17,184

Operating lease liabilities - current portion

13,288

12,890

Foreign income taxes payable

12,533

860

Current liabilities - discontinued operations

7

7

Total current liabilities

68,366

52,576

Asset retirement obligations

32,633

17,334

Operating lease liabilities - net of current portion

2,968

9,671

Other long-term liabilities

193

Total liabilities

103,967

79,774

Commitments and contingencies (Note 10)

 

 

Shareholders’ equity:

Preferred stock, $25 par value; 500,000 shares authorized, none issued

Common stock, $0.10 par value; 100,000,000 shares authorized, 69,420,003 and 67,897,530 shares issued, 58,585,062 and 57,531,154 shares outstanding, respectively

6,942

6,790

Additional paid-in capital

75,778

74,437

Less treasury stock, 10,834,941 and 10,366,376 shares, respectively, at cost

(43,589)

(42,421)

Retained earnings

38,405

22,652

Total shareholders' equity

77,536

61,458

Total liabilities and shareholders' equity

$

181,503

$

141,232

See notes to condensed consolidated financial statements.

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Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

Three Months Ended June 30,

Six Months Ended June 30,

2021

2020

2021

2020

(in thousands, except per share amounts)

Revenues:

Crude oil and natural gas sales

$

47,023

$

17,974

$

86,797

$

36,363

Operating costs and expenses:

Production expense

16,419

12,126

32,552

21,875

Exploration expense

665

807

Depreciation, depletion and amortization

5,810

2,801

9,958

5,904

Impairment of proved crude oil and natural gas properties

30,625

General and administrative expense

4,734

3,019

9,281

3,773

Bad debt expense and other

395

179

496

989

Total operating costs and expenses

28,023

18,125

53,094

63,166

Other operating expense, net

(126)

(815)

(486)

(846)

Operating income (loss)

18,874

(966)

33,217

(27,649)

Other income (expense):

Derivative instruments gain (loss), net

(9,969)

(756)

(15,923)

6,583

Interest income, net

1

11

6

127

Other, net

(164)

47

4,416

16

Total other income (expense), net

(10,132)

(698)

(11,501)

6,726

Income (loss) from continuing operations before income taxes

8,742

(1,664)

21,716

(20,923)

Income tax expense (benefit)

2,825

(2,249)

5,911

31,229

Income (loss) from continuing operations

5,917

585

15,805

(52,152)

Income (loss) from discontinued operations, net of tax

(33)

11

(52)

(52)

Net income (loss)

$

5,884

$

596

$

15,753

$

(52,204)

Basic net income (loss) per share:

Income (loss) from continuing operations

$

0.10

$

0.01

$

0.27

$

(0.90)

Loss from discontinued operations, net of tax

0.00

0.00

0.00

0.00

Net income (loss) per share

$

0.10

$

0.01

$

0.27

$

(0.90)

Basic weighted average shares outstanding

58,072

57,456

57,855

57,716

Diluted net income (loss) per share:

Income (loss) from continuing operations

$

0.10

$

0.01

$

0.27

$

(0.90)

Loss from discontinued operations, net of tax

0.00

0.00

0.00

0.00

Net income (loss) per share

$

0.10

$

0.01

$

0.27

$

(0.90)

Diluted weighted average shares outstanding

58,574

57,594

58,527

57,716

See notes to condensed consolidated financial statements.

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Table of Contents

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

Common Shares Issued

Treasury Shares

Common Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Total

(in thousands)

Balance at January 1, 2021

67,897

(10,366)

$

6,790

$

74,437

$

(42,421)

$

22,652

61,458

Shares issued - stock-based compensation

431

(155)

43

304

347

Stock-based compensation expense

323

323

Treasury stock

(403)

(403)

Net income

9,869

9,869

Balance at March 31, 2021

68,328

(10,521)

6,833

75,064

(42,824)

32,521

71,594

Shares issued - stock-based compensation

1,092

(314)

109

597

706

Stock-based compensation expense

117

117

Treasury stock

(765)

(765)

Net income

5,884

5,884

Balance at June 30, 2021

69,420

(10,835)

$

6,942

$

75,778

$

(43,589)

$

38,405

$

77,536

Common Shares Issued

Treasury Shares

Common Stock

Additional Paid-In Capital

Treasury Stock

Retained Earnings

Total

(in thousands)

Balance at January 1, 2020

67,674

(9,649)

$

6,767

$

73,549

$

(41,429)

$

70,833

$

109,720

Shares issued - stock-based compensation

125

13

(13)

Stock-based compensation expense

145

145

Treasury stock

(517)

(652)

(652)

Net loss

(52,800)

(52,800)

Balance at March 31, 2020

67,799

(10,166)

6,780

73,681

(42,081)

$

18,033

56,413

Shares issued - stock-based compensation

20

2

(2)

Stock-based compensation expense