10QSB: Optional form for quarterly and transition reports of small business issuers
Published on November 14, 1996
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ______ to ______
COMMISSION FILE NUMBER 0-20928
-----------------------
VAALCO ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 76-0274813
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4600 POST OAK PLACE
SUITE 309
HOUSTON, TEXAS 77027
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 623-0801
Check whether the issuer (1) 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 [ ]
As of November 13, 1996, there were outstanding 8,865,469 shares of
Common Stock, $.10 par value per share, of the registrant.
VAALCO ENERGY, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets
September 30, 1996 (unaudited) and December 31, 1995.......................3
Statements of Consolidated Operations (unaudited)
Three and Nine months ended September 30, 1996 and 1995.....................4
Statements of Consolidated Cash Flows (unaudited)
Nine months ended September 30, 1996 and 1995...............................5
Notes to Consolidated Financial Statements.....................................6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.........................................8
PART II. OTHER INFORMATION...................................................14
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VAALCO ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS, EXCEPT PAR VALUE AMOUNTS)
SEPT. 30 DEC. 31,
1996 1995
-------- --------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents ................................. $ 506 $ 701
Receivables:
Trade .............................................. 65 --
Accounts with partners ............................. 308 1,998
Other .............................................. 988 950
Crude oil inventory .................................. -- 1,511
Materials and supplies ............................... 401 802
Prepaid expenses and other ........................... 163 210
-------- --------
Total current assets ............................... 2,431 6,172
-------- --------
PROPERTY AND EQUIPMENT-SUCCESSFUL EFFORTS METHOD
Wells, platforms and other production facilities ..... 46,130 46,122
Wells in progress .................................... -- --
Undeveloped acreage .................................. 806 647
Equipment and other .................................. 616 644
-------- --------
47,552 47,413
Accumulated depreciation, depletion and amortization . (46,665) (46,615)
-------- --------
Net property and equipment ......................... 887 798
-------- --------
OTHER ASSETS:
Marketable securities ................................ 343 901
Other long-term assets ............................... 202 230
Advances-related party ............................... 1,917 1,921
Marketable securities-related party .................. 565 565
-------- --------
TOTAL .................................................. $ 6,345 $ 10,587
======== ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable ..................................... $ 2,285 $ 6,067
Accrued liabilities .................................. 1,101 1,224
Current portion of debt obligations .................. 3,300 4,000
-------- --------
Total current liabilities .......................... 6,686 11,291
-------- --------
PREPAID DRILLING COSTS ................................. 1,000 --
FUTURE ABANDONMENT COSTS ............................... 4,172 4,172
-------- --------
Total liabilities .................................... 11,858 15,463
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT:
Preferred stock, $25 par value, 10% cumulative
dividend. 500,000 authorized shares; 90,000
shares issued and outstanding ...................... 2,250 2,250
Common stock, $.10 par value, 15,000,000
authorized shares; 8,870,864 shares issued
of which 5,395 are in the treasury in 1996
and 1995 ............................................ 887 887
Additional paid-in capital ........................... 11,401 11,401
Accumulated deficit .................................. (20,001) (19,123)
Net unrealized loss on noncurrent marketable
securities .......................................... (37) (278)
Less treasury stock, at cost ......................... (13) (13)
-------- --------
Total stockholders' deficit ........................ (5,513) (4,876)
-------- --------
TOTAL .................................................. $ 6,345 $ 10,587
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
VAALCO ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
VAALCO ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS OF DOLLARS)
Nine Months Ended
Sept. 30,
-------------------
1996 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................. $ (709) $(2,099)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization .............. 622 1,104
Seismic and exploration costs ......................... 197 378
Gain on sale of assets ................................ (1,081) (510)
Change in assets and liabilities that provided (used) cash:
Funds in escrow ....................................... -- 67
Accounts with partners ................................ (1,275) 963
Trade receivables ..................................... (65) 1,507
Other receivables ..................................... (39) 34
Crude oil inventory ................................... 970 (349)
Materials and supplies ................................ 173 246
Prepaid expenses and other ............................ 47 63
Accounts payable ...................................... (216) (158)
Accrued liabilities ................................... (266) 447
------- -------
Net cash (used in) provided by operating activities . (1,642) 1,693
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Seismic and exploration costs ............................. (197) (378)
Additions to property and equipment ....................... (488) (2,027)
Proceeds from sale of assets .............................. 1,825 1,000
Decrease in notes receivable .............................. -- 85
Other (net) ............................................... 3 (174)
------- -------
Net cash provided by (used in) investing activities . 1,143 (1,494)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings .................................. 1,000 --
Repayments of debt obligations ............................ (700) (200)
Advances from related parties (net) ....................... 4 (232)
------- -------
Net cash provided by (used in) financing activities . 304 (432)
------- -------
NET CHANGE IN CASH AND EQUIVALENTS ........................ (195) (233)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD ............... 701 1,974
------- -------
CASH AND EQUIVALENTS AT END OF PERIOD ..................... $ 506 $ 1,741
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Net cash paid for interest ............................ $ 158 $ 191
======= =======
Depletion costs capitalized in crude oil inventory .... $ 541 $ --
======= =======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
VAALCO ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of VAALCO Energy, Inc. and
Subsidiaries (collectively, "VAALCO" or the "Company"), included herein
are unaudited, but include all adjustments which the Company deems
necessary for a fair presentation of its financial position and results
of operations for the interim period. Such results are not necessarily
indicative of results to be expected for the full year. The Balance
Sheet at December 31, 1995 has been taken from the audited financial
statements at that date. These financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Company's Form 10-KSB for the year ended December 31, 1995.
2. CURRENT DEVELOPMENTS
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The
continued decline in oil production from the West Linapacan "A" field,
resultant from severe water encroachment, materially and adversely
affected the Company's financial condition and operating cash flows and
led to management's decision to suspend operations from the field in
early 1996. In an effort to increase cash flows, management reactivated
production from a previously suspended field, the Matinloc field.
Through a diversification program, undertaken by management, the Company
acquired an interest in five blocks outside of the Philippines. Three of
these blocks, the Cauvery Block, the Gulf of Cambay block and the
CY-OS/2 block, are located in India. Two blocks, the Equata block and
the Etame block, are located in Gabon. Four of the five blocks contain
existing undeveloped discoveries. The Company also holds a working
interest in approximately 1,603 acres in Goliad County, Texas.
On April 2, 1996, the Company completed the sale of all of the
outstanding capital stock of VAALCO Energy (India), Inc., the Company's
wholly owned subsidiary, to Hardy Oil and Gas (UK) Limited ("Hardy").
Such sale includes the Company's interest in the Cauvery Block. A gain
resulting from the sale of $1.1 million was recognized, with a $0.13
effect on earnings per common share. There was no other material impact
on the Company's results of operations as the subsidiary had no income
and the majority of the expenses recorded by the subsidiary were
overhead expenses allocated by the parent. Therefore, management
believes that the financial statements presented herein would not be
materially different had the transaction occurred at the beginning of
the year. With the completion of the sale, the Company sold
substantially all of its proved undeveloped reserves.
In conjunction with the sale, Hardy loaned the Company $1 million on a
non recourse basis. Such loan is repayable only upon the payment by
Hardy, for the account of VAALCO, of certain drilling costs associated
with one of the oil and gas concessions in India that VAALCO is seeking
to obtain.
6
VAALCO ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
4. DEBT OBLIGATIONS
The Company entered into a credit agreement (the "Credit Agreement") on
June 23, 1993 to borrow $6 million, at an interest rate of LIBOR plus
2%, from a European institutional lender. In August 1995, the Company
and the noteholder reached an agreement to defer the entire balance of
the note, at an interest rate of 7.6875% per annum, until January 31,
1997, in return for the pledge of marketable securities held by the
Company. In April 1996, the Company sold a portion of its marketable
securities and reduced the balance of its note payable by $0.7 million.
The Company also prepaid the interest on the note through January 1997.
As of September 30, 1996, the principal balance of the note was $3.3
million. The note contains certain covenants, including a positive
working capital requirement and the debtor's right to call the note in
the event the debtor concludes that a material adverse event has
occurred to the Company which will affect the Company's ability to repay
the note. At September 30, 1996, the Company was in violation of the
positive working capital covenant. The note holder has given no
indication that they will accelerate the note; however there can be no
assurance that the note holder will not do so. As the Company is unable
to eliminate this violation, the debt remains callable. If the note is
called, the Company would be unable to pay amounts owed. The loan is
guaranteed by the Company and is secured by marketable securities owned
by the Company and Chattel Mortgages on the interest of Alcorn
(Production) Philippines, Inc. and Alcorn (Philippines), Inc. on certain
production equipment.
3. DIVIDENDS
The Preferred Stock accrues a cumulative dividend of 10% per annum (an
aggregate of $225,000 per year), payable prior to any dividends on the
Common Stock. No dividends have been paid in 1996. The Company declared
and paid dividends of $71,837 on the Preferred Stock for 1995, which
were used to pay down related party receivables. Dividends on the
Preferred Stock are payable quarterly on the first day of February, May,
August and November and are payable in cash, or, at the Company's
option, in shares of Common Stock equal to the market price of the
Common Stock on the dividend payment date. The holders of preferred
stock deferred their right to receive dividend payments for 1995 and
1996. As of September 30, 1996 $378,163 of preferred stock dividends
have been accrued.
7
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The consolidated financial statements included in this Quarterly Report
have been prepared assuming that the Company will continue as a going concern.
Throughout 1994 and 1995 the Company experienced significant declines in oil
production from its primary source of revenue, the West Linapacan "A" field. As
a result of this decline, the financial condition and operating cash flows of
the Company were materially and adversely affected. Despite three sidetrack
wells, two major workovers and the unsuccessful drilling of an additional
development well, the production from the three producing wells declined to
approximately 1,900 barrels of oil per day ("BOPD") by December 1995. In January
1996, the Company suspended operations in the field. The Company continues to
produce the Nido and Matinloc fields at approximately 659 BOPD. No planned
capital expenditures are anticipated in 1996 for the Philippines operations.
In September 1996, the Company and other members of the consortium
signed a farmout agreement between the Service Contract No. 14 consortium and
SOCDET Production PYT. LTD. ("SOCDET") of Sydney, Australia. SOCDET will earn a
35% interest in Service Contract No. 14, which includes the Nido, Matinloc and
West Linapacan "A" fields, after completing a $6 million 3-D seismic acquisition
program over the area. The seismic survey is scheduled to begin in late 1996.
SOCDET can earn an additional 25% interest if they drill a well in the area
following interpretation of the new seismic data.
The Company is actively seeking projects to replace its West Linapacan
operations. Through a diversification program, undertaken by management, the
Company acquired an interest in five international blocks outside of the
Philippines, three in India and two in Gabon. Four of the five blocks contain
existing undeveloped discoveries. Domestically, the Company has accumulated
approximately 1,603 acres over prospects in Goliad County, Texas.
On April 2, 1996, the Company completed the sale of all of the
outstanding capital stock of VAALCO Energy (India), Inc., the Company's wholly
owned subsidiary, to Hardy Oil and Gas (UK) Limited ("Hardy"). Such sale
includes the Company's interest in the Cauvery Block. A gain resulting from the
sale of $1.1 million was recognized, with a $0.13 effect on earnings per common
share. There was no other material impact on the Company's results of operations
as the subsidiary had no income and the majority of the expenses recorded by the
subsidiary were overhead expenses allocated by the parent. With the completion
of the sale, the Company sold substantially all of its proved undeveloped
reserves.
In conjunction with the sale, Hardy loaned the Company $1 million on a
non-recourse basis. Such loan is repayable only upon the payment by Hardy, for
the account of VAALCO, of certain drilling costs associated with one of the oil
and gas concessions in India that VAALCO is seeking to obtain.
In 1995, the Company was informed by the Ministry of Oil and Gas of
India of the award of the exploration block covering the Gulf of Cambay, on the
West Coast of India, to a
8
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
consortium operated by the Company. The Company and its partners, TATA Petrodyne
Ltd., Hindustan Oil Exploration Company Ltd. and Oil and Natural Gas Corporation
of India, have interests of 45%, 31.5%, 13.5% and 10%, respectively, in the
block. The award of the block is subject to the signing of a production sharing
contract by the consortium with the government, which is under negotiation.
There can be no assurance that the consortium will successfully complete such
negotiation or that the Company will undertake any drilling efforts with respect
to this property. If a production sharing contract is signed, the Company will
assign 25% of its interest in the block to Hardy.
In July 1995, the Company acquired two blocks offshore Gabon. Both
blocks contain previous discoveries which the Company is currently evaluating to
determine their commerciality. If deemed commercial, the Company expects to
present a development plan for one or both blocks during 1996. In addition, the
Company and its partner have an obligation to obtain 1,500 kilometers of seismic
and drill one well on the Etame block during the three year term of the License.
The Company has incurred expenditures of $0.2 million during 1996 and
anticipates incurring another $0.1 million on this project during the fourth
quarter. Further capital expenditures are contingent upon the Company's ability
to raise funds.
In October 1994, the Company acquired a working interest in
approximately 1,200 acres in Goliad County, Texas, in exchange for cash and
warrants to purchase shares of the Company's Common Stock, $.10 par value per
share (the "Common Stock"). The warrants have a term of three years and will
consist of the right to purchase 200,000 shares of Common Stock at an exercise
price of $2.50 per share and 200,000 shares of Common Stock at an exercise price
of $5.00 per share, subject to the terms and conditions of the acquisition
agreement. A working interest in an additional 403 acres have been acquired
during1996. The Company has an average 76% net revenue interest in the acreage
and plans to analyze this property in 1996 and 1997 for viability. The three
year lease has no drilling obligation requirements. No further capital
expenditures are anticipated in 1996 for this project. Capital expenditures for
1997 will depend upon the outcome of analysis currently being done on the area.
The Company is currently seeking funds to finance its U.S. and Gabon
projects. There can be no assurance that the Company will be successful in
obtaining such financing. No capital expenditures are anticipated in 1996 for
the U.S. projects. The Company has incurred expenditures of $0.2 million during
1996 and anticipates incurring another $0.1 million on this project during the
fourth quarter. Further capital expenditures are contingent upon the Company's
ability to raise funds.
The Company entered into a credit agreement (the "Credit Agreement") on
June 23, 1993 to borrow $6 million, at an interest rate of LIBOR plus 2%, from a
European institutional lender. The Company drew down $6 million against the
facility in the third quarter of 1993. Proceeds were utilized for further
development of the West Linapacan "A" field. The Company had repaid $2.0 million
of the note, plus interest, as of the second quarter of 1995. In August 1995,
the Company and the noteholder reached an agreement to defer the entire balance
of the note, at an interest rate of 7.6875% per annum, until January 31, 1997,
in return for the pledge of marketable securities held by the Company. The
Company sold a portion of these marketable securities and reduced the balance of
the note by $0.7 million in April 1996. Also in connection with the sale,
9
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the Company prepaid the interest on the note through January 1997. The note
contains certain covenants, including a positive working capital requirement and
the debtor's right to call the note in the event the debtor concludes that a
material adverse event has occurred to the Company which will affect the
Company's ability to repay the note. At September 30, 1996, the Company was in
violation of the positive working capital covenant. The note holder has given no
indication that they will accelerate the note; however there can be no assurance
that the note holder will not do so. As the Company is unable to eliminate this
violation, the debt remains callable. If the note is called, the Company would
be unable to pay amounts owed. The Company's ability to pay the note in
accordance with its terms will depend on the success of the Company's efforts to
generate new operations for which the Company is currently seeking financing.
However, there can be no assurance that the Company will be able to do so. The
loan is guaranteed by the Company and is secured by marketable securities owned
by the Company and Chattel Mortgages on the interest of Alcorn (Production)
Philippines, Inc. and Alcorn (Philippines), Inc. on certain production
equipment.
RESULTS OF OPERATIONS
Amounts stated hereunder have been rounded to the nearest $100,000,
however, percentage changes have been calculated using actual amounts.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
REVENUES
Total revenues for the three months ended September 30, 1996 were $0.2 million a
decrease of $1.6 million, or 88%, as compared to $1.8 million for the same
period in 1995. In January 1996, production operations from the West Linapacan
"A" field were suspended. The Company continues to produce from the Nido and
Matinloc fields in the Philippines at approximately 659 BOPD.
EXPENSES
Production expenses for the three months ended September 30, 1996 were $0.1
million, a decrease of $1.6 million, or 93%, as compared to $1.7 million for the
same period in 1995. The reduced expenses in 1996 are a direct result of the
suspension of production activities from the West Linapacan "A" field.
Exploration costs for the three months ended September 30, 1996 were $0.1
million, a decrease of $0.1 million, or 63%, as compared to $0.2 million for the
same period in 1995. The decrease is primarily due to exploration costs in 1995
associated with VAALCO Energy (India), Inc. This subsidiary was sold in early
1996.
Depreciation, depletion and amortization for the three months ended September
30, 1996 decreased $0.6 million as compared to $0.6 million for the same period
in 1995. No depletion
10
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
expense was recorded in the third quarter of 1996, as the Company's fields have
been fully depleted.
General and administrative expenses for the three months ended September 30,
1996 were $0.4 million, a decrease of $0.1 million, or 19%, as compared to $0.5
million for the same period in 1995. The Company downsized onshore personnel in
the Philippines, reduced office space and eliminated certain warehouse leases to
achieve the reduction.
OTHER INCOME (EXPENSES)
Total other expenses for the three months ended September 30, 1996 was $0.2
million compared to total other income of $0.6 million for the same period in
1995. The difference was primarily due to a $0.5 million gain, recognized by the
Company in the third quarter of 1995, from the sale of a 49% working interest in
its Gabon prospect.
NET LOSS
Net loss attributable to common stockholders for the three months ended
September 30, 1996 was $0.5 million as compared to $0.5 million for the same
period in 1995. The Company had an operating loss in both periods, resulting
from decreased revenues from crude oil sales. The 1996 loss was minimized due to
the absence of depletion expense, as the fields have been fully depleted. The
1995 loss was offset by the recognition of a gain on the sale of a 49% working
interest in the Gabon prospect.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
REVENUES
Total revenues for the nine months ended September 30, 1996 were $2.4 million, a
decrease of $1.2 million or 33% as compared to $3.6 million for the same period
in 1995. In January 1996, production operations from the West Linapacan "A"
field were suspended. The Company continues to produce from the Nido and
Matinloc fields in the Philippines at approximately 659 BOPD.
EXPENSES
Production expenses for the nine months ended September 30, 1996 were $1.5
million, a decrease of $1.7 million, or 52%, as compared to $3.2 million for the
same period in 1995. The decrease is primarily due to declining West Linapacan
"A" operating expenses.
Exploration costs for the nine months ended September 30, 1996 were $0.2
million, a decrease of $0.2 million, or 44%, as compared to $0.4 million for the
same period in 1995. This decline resulted from the sale of the Company's Indian
subsidiary in April 1996.
11
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Depreciation, depletion and amortization for the nine months ended September 30,
1996 was $0.6 million, a decrease of $0.5 million, or 44%, as compared to $1.1
million for the same period in 1995. The 1996 amount includes a depletion
adjustment for depletion costs that were capitalized in crude oil inventory at
December 31, 1995. Nominal depletion expense was recorded in the first nine
months of 1996, as the Company's fields have been fully depleted.
OTHER INCOME (EXPENSES)
In April 1996, the Company completed the sale of all of the outstanding capital
stock of VAALCO Energy (India), Inc., the Company's wholly owned subsidiary, to
Hardy Oil and Gas (UK) Limited ("Hardy"). Such sale includes the Company's
interest in the Cauvery Block. A gain resulting from the sale of $1.1 million
was recognized, with a $0.13 effect on earnings per common share. There was no
other material impact on the Company's results of operations as the subsidiary
had no income and the majority of the expenses recorded by the subsidiary were
overhead expenses allocated by the parent. With the completion of the sale, the
Company sold substantially all of its proved undeveloped reserves. A $0.5
million gain was recognized in 1995 resulting from the sale of a 49% working
interest in the Gabon prospect.
Other, net for the nine months ended September 30, 1996 includes a $0.7 million
loss on the sale of obsolete and non moving inventories, offset by income
arising from the sale of inventories acquired at a nominal value.
NET LOSS
Net loss attributable to common stockholders for the nine months ended September
30, 1996 was $0.7 million, a decrease of $1.4 million, or 66%, as compared to
$2.1 million for the same period in 1995. The decrease in net loss in 1996 is a
result of the recognition of a $1.1 million gain on the sale of VAALCO Energy
(India), Inc. in the current year. The Company had an operating loss in both
periods, resulting from decreased revenues from crude oil sales.
CASH FLOWS
Net cash used in operating activities for the nine months ended September 30,
1996 was $1.6 million, as compared to net cash provided by operating activities
of $1.7 million for the same period in 1995. The change was primarily due to
declining cash flows from production from the Company's Philippine operations.
Net cash provided by investing activities for the nine months ended September
30, 1996 was $1.1 million as compared to net cash used in investing activities
of $1.5 million for the same period in 1995. The 1996 amount reflects cash
received from the sale of marketable securities and VAALCO Energy (India), Inc.
in the second quarter of 1996. The 1995 amount reflects capital expenditures in
1995 for the West Linapacan "A" field, offset by proceeds from the sale of a 49%
working interest in the Gabon prospect.
12
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net cash provided by financing activities for the nine months ended September
30, 1996 was $0.3 million as compared to net cash used in financing activities
of $0.4 million for the same period in 1995. The 1996 amount reflects proceeds
from the non-recourse loan received in conjunction with the sale of VAALCO
Energy (India), Inc. The variance is offset by the payment of a portion of the
Company's debt obligations. The 1995 amount resulted primarily from advances to
related parties and payment of debt obligations.
13
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
None.
14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
VAALCO ENERGY, INC.
(Registrant)
By /s/W. RUSSELL SCHEIRMAN
W. RUSSELL SCHEIRMAN, PRESIDENT,
CHIEF FINANCIAL OFFICER AND DIRECTOR
Dated November 13, 1996
15