VAALCO Energy, Inc. Announces Third Quarter 2020 Results

REPORTS NET INCOME OF $7.6 MILLION, OR $0.13 PER DILUTED SHARE

HOUSTON, Nov. 05, 2020 (GLOBE NEWSWIRE) -- VAALCO Energy, Inc. (NYSE: EGY, LSE: EGY) today reported operational and financial results for the third quarter of 2020.

Highlights and Recent Key Items:

• Achieved strong production performance of 4,405 net revenue interest (“NRI”)⁽¹⁾ barrels of crude oil per day (“BOPD”), or 5,064 working interest (“WI”)⁽²⁾ BOPD in Q3 2020, despite planned full field maintenance shutdown in September and production curtailment due to an OPEC+ mandate for Gabon;
• Successfully resumed production following completion of the planned full field annual maintenance shutdown at Etame in September on schedule and on budget;
• Sold 412,000 barrels of oil in Q3 2020, compared to 279,000 barrels in Q3 2019, due to the continued strong production performance from the successful 2019/2020 drilling campaign;
• Decreased per-unit production expense, excluding workovers, by 35% in Q3 2020 vs Q3 2019 as a result of higher sales volumes and lower operating costs due to proactive cost reductions;
• Reported Q3 net income of $7.6 million ($0.13 per diluted share), Adjusted Net Income⁽³⁾ of $2.3 million ($0.04 per diluted share) and generated Adjusted EBITDAX⁽³⁾ of $7.0 million;
• Maintained strong balance sheet with no debt, a cash balance of $42.0 million, including $6.0 million in joint venture owner advances, working capital of $16.6 million and Adjusted Working Capital⁽³⁾ of $29.3 million as of September 30, 2020; and
• Announced acquisition of new proprietary three-dimensional (“3-D”) seismic data over the entire Etame Marin block which will be used to optimize and de-risk future drilling locations as well as identify new potential locations.
  

(1) All NRI production rates and volumes are VAALCO’s 31.1% WI less 13% royalty volumes.
(2) All WI production rates and volumes are VAALCO’s 31.1% WI.
(3) Adjusted EBITDAX, Adjusted Net Income and Adjusted Working Capital are Non-GAAP financial measures and are described and reconciled to the closest GAAP measure in the attached table under “Non-GAAP Financial Measures.”

Cary Bounds, VAALCO’s Chief Executive Officer commented: “We continued to perform well operationally in the third quarter with net production of 4,405 BOPD, despite our annual planned full field maintenance shutdown at Etame and production curtailment due to an OPEC+ mandate for Gabon. From a financial perspective, we reported net income of $7.6 million in the quarter, even with the impact of those production curtailments and low oil prices, and generated $7.0 million of Adjusted EBITDAX, highlighting the economic robustness of the Etame field. Our cash balance remained strong at $42.0 million, which includes $6.0 million in joint venture owner advances. Additionally, given that the vast majority of our operating expenses are fixed, our higher sales volumes and proactive measures to manage costs have helped to drive down our unit production costs and enhanced our profit margins year-over-year.”

“We have maintained our focus on operational excellence and execution, which continues to allow us to maintain a healthy cash position, and cost discipline remains a core priority for the Company as we seek to maximize our profitability. We completed a highly successful drilling program earlier this year that demonstrated the quality of the Etame asset that we have been operating and growing since 1995. Our recent announcement that we are acquiring new proprietary 3-D seismic data over the entire Etame Marin block underscores the confidence we have in the long-term potential at Etame. We believe that we are well positioned to deliver both near-term and long-term profitable growth, as we continue to execute on our strategic objectives.”

Operational Update        

Gabon

In connection with planning for future drilling programs at the Etame Marin block offshore Gabon, VAALCO recently agreed to acquire new 3-D seismic data. VAALCO expects the seismic survey to begin and conclude in the fourth quarter of 2020, with processing to be fully completed by the fourth quarter of 2021. The Company expects that the full field 3-D survey will optimize future drilling locations, provide better imaging of existing satellite and infill locations, as well as identify additional upside opportunities. VAALCO projects the gross cost of both the acquisition and processing of the seismic survey to be between $12 million and $15 million, or $4 million to $5 million net to VAALCO. The Company plans to fund the costs with cash on hand and through cash from operations.

Equatorial Guinea

VAALCO has a 43% WI in Block P offshore Equatorial Guinea. VAALCO is continuing commercial discussions with Levene HydroCarbon Limited (“Levene”) regarding VAALCO’s potential assignment of a portion of the Block P interest to Levene in exchange for Levene covering all or substantially all of VAALCO’s cost to drill an exploratory well on Block P. Levene and VAALCO have not executed any binding agreements, and there can be no certainty a transaction will be completed or that the EG MMH will approve the assignment. As of September 30, 2020, the Company had $10.0 million recorded for the book value of the undeveloped leasehold costs associated with the Block P license.

Financial Update – Third Quarter of 2020

Net income of $7.6 million ($0.13 per diluted share) for the third quarter