VAALCO Energy, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Segment Information

Segment Information

3 Months Ended

Mar. 31, 2020

4. SEGMENT INFORMATION

The Company’s operations are based in Gabon and the Company has an undeveloped block in Equatorial Guinea. Each of the Company’s two 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 months ended March 31, 2020 and 2019 as well as long-lived assets and segment assets at March 31, 2020 and December 31, 2019 are as follows:


	Three Months Ended March 31, 2020
(in thousands)	Gabon		Equatorial Guinea		Corporate and Other		Total
Revenues-crude oil and natural gas sales	$	18,389	$	—	$	—	$	18,389
Depreciation, depletion and amortization		3,072		—		31		3,103
Impairment of proved crude oil and natural gas properties		30,625		—		—		30,625
Bad debt recovery and other		810		—		—		810
Operating income (loss)		(26,283)		(125)		(275)		(26,683)
Derivative instruments gain (loss), net		—		—		7,339		7,339
Income tax expense		22,039		—		11,439		33,478
Additions to crude oil and natural gas properties and equipment – accrual		9,421		—		—		9,421


	Three Months Ended March 31, 2019
(in thousands)	Gabon		Equatorial Guinea		Corporate and Other		Total
Revenues-crude oil and natural gas sales	$	19,765	$	—	$	—	$	19,765
Depreciation, depletion and amortization		1,479		—		74		1,553
Impairment of proved crude oil and natural gas properties		—		—		—		—
Bad debt recovery and other		(29)		—		—		(29)
Operating income (loss)		9,530		(186)		(3,798)		5,546
Derivative instruments gain (loss), net		—		—		(1,912)		(1,912)
Income tax expense		2,491		10		252		2,753
Additions to crude oil and natural gas properties and equipment – accrual		681		(187)		191		685


(in thousands)	Gabon		Equatorial Guinea		Corporate and Other		Total
Long-lived assets from continuing operations:
As of March 31, 2020	$	33,202	$	10,000	$	298	$	43,500
As of December 31, 2019	$	57,930	$	10,000	$	328	$	68,258


(in thousands)	Gabon		Equatorial Guinea		Corporate and Other		Total
Total assets from continuing operations:
As of March 31, 2020	$	117,173	$	10,112	$	41,407	$	168,692
As of December 31, 2019	$	151,686	$	10,087	$	49,764	$	211,537

Information about the Company’s most significant customers

The Company sells crude oil production from Gabon under term contracts with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. From August 2015 through January 2019, the Company sold its crude oil to Glencore Energy UK Ltd. (“Glencore”) and Mercuria Energy Trading SA (“Mercuria”) that covered sales from February 2019 through January 2020. Sales of crude oil to Glencore and Mercuria were approximately 100% of total revenues for the period during the terms of their contracts. The Company signed a new contract with ExxonMobil Corporation (“Exxon”) that covers sales from February 2020 through January 2021 with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. During the three months ended March 31, 2020, revenues from sales of crude oil to Mercuria and Exxon were approximately 52% and 48%, respectively, of total revenues from customers.