VAALCO Energy, Inc. Announces Third Quarter 2024 Results
HOUSTON, Nov. 11, 2024 (GLOBE NEWSWIRE) -- VAALCO Energy, Inc. (NYSE:EGY, LSE: EGY)) ("Vaalco" or the "Company") today reported operational and financial results for the third quarter of 2024.
Third Quarter 2024 Highlights and Recent Key Items:
Grew net revenue interest ("NRI")(2) sales to 2,134,000 barrels of oil equivalent ("BOE"), or 23,198 barrels of oil equivalent per day ("BOEPD"), toward the upper end of guidance; and 20% above the second quarter of 2024 due to additional Côte d'Ivoire liftings;
Reported Q3 2024 net income of $11.0 million ($0.10 per diluted share) and Adjusted Net Income(1) of $7.9 million ( $0.08 per diluted share);
Increased Adjusted EBITDAX(1) by 28% to $92.8 million compared to Q2 2024, driven by sales increase associated with Côte d'Ivoire liftings;
Achieved production of 21,770 NRI(2) BOEPD and working interest ("WI")(3) production of 26,709 BOEPD; both were higher than Q2 2024 by 5%;
Posted unrestricted cash of $89.1 million which is after $6.6 million paid for quarterly dividend and $12.4 million in cash capital spending for the quarter;
Decreased production expense per BOE by 33% quarter-over-quarter to $19.80 per BOE, at the low end of the Q3 2024 guidance range ;
Completed Production Sharing Contracts ("PSCs") with the Government of Gabon for the offshore Niosi Marin and Guduma Marin exploration blocks; and
Announced quarterly cash dividend of $0.0625 per share of common stock to be paid on December 20, 2024.
(1)
Adjusted EBITDAX, Adjusted Net Income, Adjusted Working Capital and Free Cash Flow2 are Non-GAAP financial measures and are described and reconciled to the closest GAAP measure in the attached table under "Non-GAAP Financial Measures."
(2)
All NRI sales and production rates are Vaalco's working interest volumes less royalty volumes, where applicable.
(3)
All WI production rates and volumes are Vaalco's working interest volumes, where applicable.
George Maxwell, Vaalco's Chief Executive Officer commented, "We continue to deliver strong quarterly results, both operationally and financially, that are generating significant Adjusted EBITDAX and building cash on hand to fund organic growth. In addition, we remain committed to shareholder returns through our quarterly dividend policy. Our production, sales and Adjusted EBITDAX all improved compared to Q2 2024 as we realize the positive impacts from the highly accretive Côte d'Ivoire acquisition, the solid results from our Canadian drilling program, and the focus on optimizing production in Gabon and Egypt."
"In the third quarter, we announced that the results of our independent, third-party reserve engineer's calculation of proved reserves associated with the Côte d'Ivoire acquisition as of December 31, 2023 was approximately 30% greater than our initial disclosure. This strategically complementary and highly cost-effective acquisition expands our West African focus area through the addition of a sizeable producing asset that has significant upside potential and considerable future development opportunities in Côte d'Ivoire, a well-established and investment-friendly country. Additionally, the documentation has been completed on the production sharing contracts for two offshore Gabon exploration blocks where Vaalco holds a 37.5% working interest."
"We are excited about the major projects planned for 2025 that are expected to deliver a step-change in organic growth across the portfolio in the coming years. As we work to finalize the timing of our projects, we will provide more details in early 2025. We have delivered on our focused strategy over the past three years and believe we will continue to do so with the organic growth programs across our diversified portfolio over the next few years. We remain focused on maximizing value and generating strong operational cash flow to fund our numerous organic opportunities moving forward, all while continuing to return capital to our shareholders through the quarterly dividend policy."
Operational Update
Egypt
Vaalco focused on enhancing production in the first nine months of 2024 through a series of planned workovers, as well as through interventions using the OGS-10 rig. Vaalco finalized the K-81 recompletion at the start of the first quarter which was a carry-over from its 2023 drilling activity. The EA-55 well, drilled in October 2023, was fracked and put online in January 2024. Three additional workover recompletions were completed in the third quarter of 2024 with one more in progress. With the low cost of workovers, the well economics are strongly positive.
A summary of the Egyptian workover campaign's impact in the first nine months of 2024 is presented below:
Vaalco Egypt 2024 Workover Wells
Well
Workover date
Type
Completion Zone
Perforation Interval (ft)
IP-30 Rate (BOPD)(a)
K-81
1-Jan-24
Recompletion
Asl-D
13.1
154
EA-55
10-Jan-24
Frac & Complete
Redbed
Hydraulic Frac
143
H-22
7-Feb-24
Recompletion
Yusr-A
9.8
82
K-65_ST1
14-Feb-24
Recompletion
Asl-D
13.1
43*
K-85
16-Mar-24
Recompletion
Asl-D
13.1
420
K-84
27-Mar-24
Recompletion
Asl-G
16.4
58*
K-74
3-Apr-24
Water Shut-off Recompletion
Asl-A
8.2
108
K-77
7-Apr-24
Recompletion
Asl-A
26.2
100
K-84
13-Jun-24
Recompletion
Asl-D
19.7
430
K-80
19-Jun-24
Recompletion
Asl-D
13.1
188
K-72A
24-Jul-24
Recompletion
Asl-A
9.8
150
HE-04
27-Jul-24
ALS Change to SRP
Asl-B2
0.0
170
K-65ST1
31-Aug-24
Recompletion
Asl-B
6.6
100
a) Initial Production; 30 day duration* Production - impacted by sand production - Possible workover with sand screen required
Canada
The 2024 drilling campaign commenced in January 2024 with the drilling of 9-12-30-4W5, which was spud on January 17, 2024. The first well was drilled to a total depth of 22,732 feet. The second well of the program, 10-12-30-4W5, was spud on February 9, 2024, and drilled to a total depth of 21,736 feet. The third well in the program, 11-12-30-4W5 was spud on February 23, 2024, and drilled to a total depth of 21,624 feet. The fourth well on the program 1-18-30-3W5 was spud on March 9, 2024, and drilled to a total depth of 20,669 feet. The drilling rig was released on March 24, 2024.
Completion of the wells began in late March and was completed in April. By early May all wells were on production with strong initial rates as noted below:
Vaalco Canada 2024 Wells
Well
Spud date
Net Pay (ft)
Penetrated Pay Zones
Completion Zone
Perforation Interval (ft)
IP-30 Rate (BOEPD)
09-12-30-4W5
1/17/2024
2.75-Mile Hz (4,400m, 14,430ft)
Upper Bioturbated Cardium
Cardium
115 Stg x 15T Hydraulic Fracture Treatment
479
10-12-30-4W5
2/9/2024
2.75-Mile Hz (4,400m, 14,430ft)
Upper Bioturbated Cardium
Cardium
100 Stg x 15T Hydraulic Fracture Treatment
469
11-12-30-4W5
2/23/2024
2.75-Mile Hz (4,400m, 14,430ft)
Upper Bioturbated Cardium
Cardium
108 Stg x 15T Hydraulic Fracture Treatment
444
1-18-30-3W5
3/9/2024
2.75-Mile Hz (4,400m, 14,430ft)
Upper Bioturbated Cardium
Cardium
106 Stg x 15T Hydraulic Fracture Treatment
182
Gabon
Vaalco is currently finalizing locations and planning for the next drilling campaign at Etame that is expected to occur in mid-2025. In October 2022, Vaalco successfully completed its transition to a Floating Storage and Offloading vessel ("FSO") and related field reconfiguration processes. This project provides a low cost FSO solution that increases the storage capacity for the Etame block and improved operational performance. The Company continues to demonstrate operational excellence, production uptime and enhancement in 2024 to optimize production until the next drilling campaign.
The Company recently completed the documentation with the Government of Gabon for the offshore Niosi Marin and Guduma Marin exploration blocks. This follows the technical provisional award announced in October 2021 granting Vaalco a 37.5% non-operating working interest in the Niosi Marin Block (previously G12-13) and the Guduma Marin Block (previously H12-13) located in shallow waters offshore Gabon, with BW Energy as operator (also holding a 37.5% working interest) and Panoro Energy as a non-operating joint owner with a 25% working interest. The Niosi and Guduma blocks cover areas of 2,974 square kilometers ("km²) and 1,927 km², respectively. The Niosi Block is located adjacent to the Etame Marin Permit, where Vaalco operates a successful ongoing exploration and production campaign. To date, the Etame Marin partners have produced and discovered over 150 million barrels of oil, with multiple fields brought online. The area benefits from significant infrastructure investments, including processing facilities and a new FSO vessel installed by Vaalco in 2022 which is located adjacent to the Niosi Marin blocks. The blocks are also adjacent to BW Energy and Panoro Energy's Dussafu PSC offshore Southern Gabon, which is another area of significant successful exploration and development.
Côte d'Ivoire
During the third quarter, three liftings took place. In July, 612,773 gross barrels were lifted or 197,457 net barrels to Vaalco. In August, 681,584 gross barrels were lifted or 219,630 net barrels to Vaalco. And in September, 667,871 gross barrels were lifted or 215,211 net barrels to Vaalco.
Work with Modec, the operator of the Baobab Floating Production and Offloading Vessel ("FPSO"), on the dry docking project for the FPSO, projected to be offline in 2025, continued in the third quarter of 2024. The operator is currently preparing detailed project timetable and costings for the partners and regulator; however preliminary work including the execution of a letter of intent with Modec on April 4, 2024 which covers the key contracts to be executed, including vessel purchase, EPC, and O&M amendments, as well as selection of the disconnect and reconnect contractor, and support for the revised yard bid from Dubai dry docks among other activities.
Financial Update, Third Quarter of 2024
Vaalco reported net income of $11.0 million ($0.10 per diluted share) for the third quarter of 2024 which was down compared with net income of $28.2 million ($0.27 per diluted share) in the second quarter of 2024 and up compared to $6.1 million ($0.06 per diluted share) in the third quarter of 2023. The decrease in earnings compared with the second quarter of 2024 is driven primarily by the non-cash bargain purchase gain on the Svenska acquisition in the second quarter.
Adjusted EBITDAX totaled $92.8 million in the third quarter of 2024, a 28% increase from $72.5 million in the second quarter of 2024 and up 30% from $71.4 million generated in the same period in 2023. The increase was primarily due to additional sales volumes from Côte d'Ivoire.
Quarterly Summary - Sales and Net Revenue
$ in thousands
Three Months Ended September 30, 2024
Three Months Ended June 30, 2024
Gabon
Egypt
Canada
Côte d'Ivoire
Total
Gabon
Egypt
Canada
Côte d'Ivoire
Total
Oil Sales
$
54,934
$
63,431
$
8,038
$
49,795
$
176,198
$
62,327
$
65,314
$
9,547
$
17,240
$
154,428
NGL Sales
—
—
2,007
—
2,007
—
—
1,922
—
1,922
Gas Sales
—
—
225
—
225
—
—
384
—
384
Gross Sales
54,934
63,431
10,270
49,795
178,429
62,327
65,314
11,853
17,240
156,734
Selling Costs & carried interest
651
(173
)
(351
)
—
127
—
(117
)
(318
)
—
(435
)
Royalties & taxes
(7,977
)
(28,714
)
(1,532
)
—
(38,223
)
(8,653
)
(29,716
)
(1,152
)
—
(39,521
)
Net Revenue
47,608
34,544
8,387
49,795
140,334
53,674
35,481
10,383
17,240
116,778
Oil Sales MMB (working interest)
709
964
112
632
2,418
759
953
130
211
2,053
Average Oil Price Received
$
77.45
$
65.79
$
71.55
$
78.75
$
72.87
$
82.13
$
68.52
$
73.52
$
81.70
$
75.22
Change
-3
%
Average Brent Price
$
79.84
$
84.65
Change
-6
%
Gas Sales MMCF (working interest)
—
—
449
—
449
—
—
423
—
423
Average Gas Price Received
—
—
$
0.50
—
$
0.50
—
—
$
0.91
—
$
0.91
Change
-45
%
Average Aeco Price ($USD)
—
—
$
0.57
—
$
0.57
—
—
$
0.84
—
$
0.84
Change
-32
%
NGL Sales MMB (working interest)
—
—
82
—
82
—
—
76
—
76
Average Liquids Price Received
—
—
$
24.58
—
$
24.58
—
—
$
25.16
—
$
25.16
Change
-2
%
Revenue and Sales
Q3 2024
Q3 2023
% Change Q3 2024 vs. Q3 2023
Q2 2024
% Change Q3 2024 vs. Q2 2024
Production (NRI BOEPD)
21,770
18,845
16
%
20,588
6
%
Sales (NRI BOE)
2,134,000
1,812,000
18
%
1,764,000
21
%
Realized commodity price ($/BOE)
$
65.41
$
63.41
3
%
$
66.05
(1)%
Commodity (Per BOE including realized commodity derivatives)
$
65.42
$
63.38
3
%
$
66.03
(1)%
Total commodity sales ($MM)
$
140.3
$
116.3
21
%
$
116.5
20
%
Vaalco had net revenues increase by $24.1 million or 21% as total NRI sales volumes of 2,134,000 BOE was 21% higher than Q2 2024 and increased 18% compared to 1,812,000 BOE for Q3 2023. Q3 2024 NRI sales were toward the upper end of Vaalco's guidance. The Company expects fourth quarter 2024 NRI sales to be between 18,600 and 20,800 BOEPD.
Q3 2024 realized pricing (net of royalties) was slightly lower compared to Q2 2024 and 3% higher compared to Q3 2023.
Costs and Expenses
Q3 2024
Q3 2023
% Change Q3 2024 vs. Q3 2023
Q2 2024
% Change Q3 2024 vs. Q2 2024
Production expense, excluding offshore workovers and stock comp ($MM)
$
42.2
$
39.9
6
%
$
52.4
(19
%)
Production expense, excluding offshore workovers ($/BOE)
$
19.80
$
22.07
(10
%)
$
29.70
(33
%)
Offshore workover expense ($MM)
$
0.1
$
—
—
%
$
0.1
—
%
Depreciation, depletion and amortization ($MM)
$
47.0
$
32.5
44
%
$
33.1
42
%
Depreciation, depletion and amortization ($/BOE)
$
22.04
$
18.00
22
%
$
18.78
17
%
General and administrative expense, excluding stock-based compensation ($MM)
$
6.0
$
5.2
15
%
$
6.6
(9
%)
General and administrative expense, excluding stock-based compensation ($/BOE)
$
2.8
$
2.90
(3
%)
$
3.8
(26
%)
Stock-based compensation expense ($MM)
$
0.9
$
1.0
(10
%)
$
0.9
—
%
Current income tax expense (benefit) ($MM)
$
33.7
$
2.1
1505
%
$
13.3
153
%
Deferred income tax expense (benefit) ($MM)
$
(1.1
)
$
(2.6
)
(58
%)
$
(4.0
)
(73
%)
Total production expense (excluding offshore workovers and stock compensation) of $42.2 million in Q3 2024 was a 19% decrease compared to Q2 2024 and a 6% increase compared to the same period in 2023. The decrease in Q3 2024 was primarily driven by a non-cash purchase price adjustment for the Svenska acquisition flowing through production expense and decreased operating expenditure associated with the addition of Côte d'Ivoire in the quarter. Vaalco has seen withholding tax, inflationary and industry supply chain pressure on personnel and contractor costs.
Q3 2024 and Q2 2024 had minimal offshore workover expense, while Q3 2023 had no workover expense.
Q3 2024 production expense per BOE, excluding offshore workover expense, decreased to $19.80 per BOE which was lower than Q3 2023 and Q2 2024 primarily due to the increased sales associated with the purchase of the Côte d'Ivoire asset.
DD&A expense for Q3 2024 was $47.0 million which was higher than $33.1 million in Q2 2024 and higher than $32.5 million in Q3 2023. The increase in Q3 2024 DD&A expense compared to Q2 2024 is due primarily to increased depletion associated with the addition of Côte d'Ivoire. The increase in Q3 2024 DD&A expense compared to Q3 2023 is due to higher depletable costs in Côte d'Ivoire partially offset by lower depletable costs in Gabon, Egypt, and Canada.
General and administrative ("G&A") expense, excluding stock-based compensation, decreased to $6.0 million in Q3 2024 from $6.6 million in Q2 2024 and increased from $5.2 million in Q3 2023. The decrease in G&A expenses compared to Q2 2024 was primarily due to lower professional, accounting and legal fees. The increase in G&A expenses compared to Q3 2023 was primarily due to higher professional service fees, salaries and wages, and accounting and legal fees due to growth associated with the acquisition. Q3 2024 cash G&A was within the Company's guidance.
Non-cash stock-based compensation expense was $0.9 million for Q3 2024 compared to $1.0 million for Q3 2023. Non-cash stock-based compensation expense for Q2 2024 was $0.9 million.
Other income (expense), net, was an expense of $0.1 million for Q3 2024, compared to other income of $0.2 million during Q3 2023 and an expense of $2.0 million for Q2 2024. Other income (expense), net, normally consists of foreign currency losses. Also included in Q3 2024 amount are $0.3 million in transaction costs related to the Svenska acquisition.
Foreign income taxes for Gabon are settled by the government taking oil in-kind. Q3 2024 income tax expense was an expense of $32.6 million and is comprised of current tax expense of $33.7 million and deferred tax benefit of $1.1 million. Current quarter tax was impacted by non-deductible items (such as the Svenska transaction costs) and the change in market value of tax barrels due to Gabon State mark-to-market at quarter end. Q2 2024 income tax expense was an expense of $9.3 million and is comprised of current tax expense of $13.3 million and deferred tax benefit of $4.0 million. Q3 2023 income tax expense was an expense of $25.8 million, comprised of $26.8 million of current tax expense and a deferred tax benefit of $1.0 million. For all periods, Vaalco's overall effective tax rate was impacted by non-deductible items associated with tax rates in foreign jurisdictions higher than the US statutory rate and by non-deductible items associated with operations.
Taxes extinguished by jurisdiction are as follows:
(in thousands)
Gabon
Egypt
Canada
Equatorial Guinea
Cote d'Ivoire
Corporate and Other
Total
Cash/In Kind Taxes Paid:
Three months ended September 30, 2004
—
$
7,235
—
—
$
4,531
—
$
11,766
Financial Update, First Nine Months of 2024
WI Sales for the first nine months of 2024 increased to 6,709 MBOE compared to 6,594 MBOE in the first nine months of 2023. The increase was driven primarily by the Côte d'Ivoire acquisition. Crude oil sales are a function of the number and size of crude oil liftings in each quarter and do not always coincide with volumes produced in any given period.
The average realized crude oil price for the first nine months of 2024 was $65.99 per barrel, representing an increase of 6.0% from $62.48 realized in the first nine months of 2023. This increase in crude oil price reflects the increase in commodity pricing over the past year.
The Company reported net income for the nine months ended September 30, 2024 of $46.8 million, which compares to $16.4 million for the same period of 2023. The increase in net income for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to the bargain purchase gain related to the Svenska acquisition in April, as well as higher sales and realized pricing.
Year to Date Summary - Sales and Net Revenue
$ in thousands
Nine Months Ended September 30, 2024
Nine Months Ended September 30, 2023
Gabon
Egypt
Canada
Côte d'Ivoire
Total
Gabon
Egypt
Canada
Côte d'Ivoire
Total
Oil Sales
$
182,048
$
191,938
$
21,739
$
67,035
$
462,760
$
194,179
$
193,570
$
22,811
$
—
$
410,560
NGL Sales
—
—
5,905
—
5,905
—
—
6,421
—
6,421
Gas Sales
—
—
1,429
—
1,429
—
—
2,649
—
2,649
Gross Sales
182,048
191,938
29,073
67,035
470,094
194,179
193,570
31,881
—
419,630
Selling Costs & carried interest
1,825
(401
)
(812
)
—
612
