Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Segment Information

v3.23.1
Note 4 - Segment Information
 3 Months Ended
Mar. 31, 2023
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

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, 2023 and 2022 as well as long-lived assets and segment assets at March 31, 2023 and December 31, 2022 are as follows:

 

   

Three Months Ended March 31, 2023

  

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                                

Crude oil, natural gas and natural gas liquids sales

   $ 36,737     $ 34,784     $ 8,882     $ —     $ —     $ 80,403  

Operating costs and expenses:

                                                

Production expense

     14,415       11,110       2,254       362       59       28,200  

Exploration expense

     8       —       —       —       —       8  

Depreciation, depletion and amortization

     9,845       10,795       3,711       —       66       24,417  

General and administrative expense

     618       179       —       129       4,298       5,224  

Credit losses and other

     935       —       —       —       —       935  

Total operating costs and expenses

     25,821       22,084       5,965       491       4,423       58,784  

Operating income (loss)

     10,916       12,700       2,917       (491 )     (4,423 )     21,619  

Other income (expense):

                                                

Derivative instruments gain, net

     —       —       —       —       21       21  

Interest (expense) income, net

     (1,507 )     (808 )     (4 )     —       73       (2,246 )

Other income (expense), net

     517       —       —       (1 )     (1,656 )     (1,140 )

Total other expense, net

     (990 )     (808 )     (4 )     (1 )     (1,562 )     (3,365 )

Income (loss) from continuing operations before income taxes

     9,926       11,892       2,913       (492 )     (5,985 )     18,254  

Income tax expense

     6,578       4,992       —       —       3,201       14,771  

Income (loss) from continuing operations

     3,348       6,900       2,913       (492 )     (9,186 )     3,483  

Loss from discontinued operations, net of tax

     —       —       —       —       (13 )     (13 )

Net income (loss)

   $ 3,348     $ 6,900     $ 2,913     $ (492 )   $ (9,199 )   $ 3,470  

Consolidated capital expenditures

   $ 3,689     $ 11,571     $ 10,165     $ —     $ —     $ 25,425  

 

   

Three Months Ended March 31, 2022

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 68,656     $ —     $ —     $ 68,656  

Operating costs and expenses:

                                

Production expense

     18,081       219       60       18,360  

Exploration expense

     127       —       —       127  

Depreciation, depletion and amortization

     4,653       —       20       4,673  

General and administrative expense

     593       99       4,302       4,994  

Credit losses and other

     492       —       —       492  

Total operating costs and expenses

     23,946       318       4,382       28,646  

Other operating expense, net

     (5 )     —       —       (5 )

Operating income

     44,705       (318 )     (4,382 )     40,005  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (31,758 )     (31,758 )

Interest (expense) income, net

     (6 )     —       3       (3 )

Other expense, net

     (638 )     (1 )     (57 )     (696 )

Total other expense, net

     (644 )     (1 )     (31,812 )     (32,457 )

Income from continuing operations before income taxes

     44,061       (319 )     (36,194 )     7,548  

Income tax (benefit) expense

     7,858       —       (12,486 )     (4,628 )

Income (loss) from continuing operations

     36,203       (319 )     (23,708 )     12,176  

Loss from discontinued operations, net of tax

     —       —       (12 )     (12 )

Net income (loss)

   $ 36,203     $ (319 )   $ (23,720 )   $ 12,164  

Consolidated capital expenditures

   $ 31,780     $ —     $ —     $ 31,780  

 

 

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Long-lived assets from continuing operations:

                                                

As of March 31, 2023

   $ 209,127     $ 170,249     $ 109,824     $ 10,000     $ 753     $ 499,953  

As of December 31, 2022 (1)

     213,204     $ 168,012     $ 103,263     $ 10,000     $ 793     $ 495,272  

(1) - Includes assets acquired in the TransGlobe acquisition

 

 

(in thousands)

  

Gabon

    

Egypt

    

Canada

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Total assets from continuing operations:

                                                

As of March 31, 2023

   $ 381,009     $ 270,629     $ 116,554     $ 11,013     $ 44,778     $ 823,983  

As of December 31, 2022 (1)

     395,393     $ 293,640     $ 110,071     $ 10,861     $ 45,676     $ 855,641  

(1) - Includes assets acquired in the TransGlobe acquisition

 

Information about the Company’s most significant customers

 

The Company currently sells crude oil production from Gabon under term crude oil sales and purchase agreements (“COSPAs”) or crude oil sales and marketing agreements ("COSMA or COSMAs") with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. The Company was previously party to a COSPA with ExxonMobil Sales and Supply LLC (“Exxon”) that covered sales from February 2020 through July 2022 with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. This COSPA has been terminated.

 

As discussed further in Note 11, on May 16, 2022, VAALCO Gabon (Etame), Inc. (the “Borrower”) entered into a facility agreement (the “Facility Agreement”) by and among the Company, VAALCO Gabon, SA (“VAALCO Gabon”), Glencore Energy UK Ltd., as mandated lead arranger, technical bank and facility agent (“Glencore”), the Law Debenture Trust Corporation P.L.C., as security agent, and the other financial institutions named therein (the “Lenders”), providing for a senior secured reserve-based revolving credit facility (the “Facility”) in an initial aggregate maximum principal amount available of up to $50.0 million. In connection with the entry into the Facility Agreement, the Company entered into a COSMA with Glencore pursuant to which the Company agreed to make Glencore the exclusive offtaker and marketer of all of the crude oil produced from the Etame G4-160 Block, offshore Gabon during the period from August 1, 2022 until the Final Maturity Date of the Facility (as defined in the Facility Agreement). Pursuant to the COSMA, Glencore agreed to buy and market the Company’s crude oil with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors.

 

For the three months ended March 31, 2023 sales of crude oil to Glencore made up 100% of Etame revenues. For the three months ended March 31, 2022 sales of crude oil to ExxonMobil Sales and Supply LLC made up 100% of Etame revenues. For the three months ended March 31, 2023, Mercuria covered 100% of the Company’s crude oil sales in Egypt. For the three months ended March 31, 2023, revenues in Canada were concentrated in two separate customers that constituted approximately 59% and 21% of revenues. Concentrations of accounts receivable are similar to the revenue percentages.