Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Segment Information

v3.22.2
Note 4 - Segment Information
 6 Months Ended
Jun. 30, 2022
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 and six months ended June 30, 2022 and 2021 as well as long-lived assets and segment assets at June 30, 2022 and December 31, 2021 are as follows:

 

   

Three Months Ended June 30, 2022

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 110,985     $ —     $ —     $ 110,985  

Operating costs and expenses:

                                

Production expense

     25,360       175       (60 )     25,475  

Exploration expense

     67       —       —       67  

Depreciation, depletion and amortization

     8,173       —       18       8,191  

General and administrative expense

     565       110       2,859       3,534  

Bad debt expense and other

     571       —       —       571  

Total operating costs and expenses

     34,736       285       2,817       37,838  

Other operating expense, net

     —       —       —       —  

Operating income

     76,249       (285 )     (2,817 )     73,147  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (9,542 )     (9,542 )

Interest (expense) income, net

     (158 )     —       40       (118 )

Other (expense) income, net

     (856 )     (1 )     (1,254 )     (2,111 )

Total other expense, net

     (1,014 )     (1 )     (10,756 )     (11,771 )

Income from continuing operations before income taxes

     75,235       (286 )     (13,573 )     61,376  

Income tax (benefit) expense

     36,423       1       9,828       46,252  

Income from continuing operations

     38,812       (287 )     (23,401 )     15,124  

Loss from discontinued operations, net of tax

     —       —       (20 )     (20 )

Net income

   $ 38,812     $ (287 )   $ (23,421 )   $ 15,104  

Consolidated capital expenditures

   $ 38,102     $ —     $ 67     $ 38,169  

 

 

 

   

Six Months Ended June 30, 2022

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 179,641     $ —     $ —     $ 179,641  

Operating costs and expenses:

                                

Production expense

     43,441       394       —       43,835  

Exploration expense

     194       —       —       194  

Depreciation, depletion and amortization

     12,826       —       38       12,864  

General and administrative expense

     1,158       209       7,161       8,528  

Bad debt expense and other

     1,063       —       —       1,063  

Total operating costs and expenses

     58,682       603       7,199       66,484  

Other operating expense, net

     (5 )     —       —       (5 )

Operating income

     120,954       (603 )     (7,199 )     113,152  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (41,300 )     (41,300 )

Interest (expense) income, net

     (164 )     —       43       (121 )

Other (expense) income, net

     (1,494 )     (2 )     (1,311 )     (2,807 )

Total other expense, net

     (1,658 )     (2 )     (42,568 )     (44,228 )

Income from continuing operations before income taxes

     119,296       (605 )     (49,767 )     68,924  

Income tax (benefit) expense

     49,256       1       (7,633 )     41,624  

Income from continuing operations

     70,040       (606 )     (42,134 )     27,300  

Loss from discontinued operations, net of tax

     —       —       (32 )     (32 )

Net income

   $ 70,040     $ (606 )   $ (42,166 )   $ 27,268  

Consolidated capital expenditures

   $ 69,882     $ —     $ 67     $ 69,949  

 

 

   

Three Months Ended June 30, 2021

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 47,023     $ —     $ —     $ 47,023  

Operating costs and expenses:

                                

Production expense

     16,378       32       9       16,419  

Exploration expense

     665       —       —       665  

Depreciation, depletion and amortization

     5,786       —       24       5,810  

General and administrative expense

     254       70       4,410       4,734  

Bad debt expense and other

     395       —       —       395  

Total operating costs and expenses

     23,478       102       4,443       28,023  

Other operating expense, net

     (126 )     —       —       (126 )

Operating income

     23,419       (102 )     (4,443 )     18,874  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (9,969 )     (9,969 )

Interest (expense) income, net

     —       —       1       1  

Other (expense) income, net

     (156 )     1       (9 )     (164 )

Total other expense, net

     (156 )     1       (9,977 )     (10,132 )

Income from continuing operations before income taxes

     23,263       (101 )     (14,420 )     8,742  

Income tax (benefit) expense

     6,045       —       (3,220 )     2,825  

Income from continuing operations

     17,218       (101 )     (11,200 )     5,917  

Loss from discontinued operations, net of tax

     —       —       (33 )     (33 )

Net income

   $ 17,218     $ (101 )   $ (11,233 )   $ 5,884  

Consolidated capital expenditures (1)

   $ 1,782     $ —     $ —     $ 1,782  

(1)    Excludes assets acquired in the Sasol acquisition.

   

Six Months Ended June 30, 2021

  

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Revenues:

                                

Crude oil and natural gas sales

   $ 86,797     $ —     $ —     $ 86,797  

Operating costs and expenses:

                                

Production expense

     32,511       32       9       32,552  

Exploration expense

     807       —       —       807  

Depreciation, depletion and amortization

     9,907       —       51       9,958  

General and administrative expense

     491       202       8,588       9,281  

Bad debt expense and other

     496       —       —       496  

Total operating costs and expenses

     44,212       234       8,648       53,094  

Other operating expense, net

     (133 )     —       (353 )     (486 )

Operating income

     42,452       (234 )     (9,001 )     33,217  

Other income (expense):

                                

Derivative instruments loss, net

     —       —       (15,923 )     (15,923 )

Interest (expense) income, net

     —       —       6       6  

Other (expense) income, net

     7,172       (1 )     (2,755 )     4,416  

Total other expense, net

     7,172       (1 )     (18,672 )     (11,501 )

Income from continuing operations before income taxes

     49,624       (235 )     (27,673 )     21,716  

Income tax (benefit) expense

     9,479       1       (3,569 )     5,911  

Income from continuing operations

     40,145       (236 )     (24,104 )     15,805  

Loss from discontinued operations, net of tax

     —       —       (52 )     (52 )

Net income

   $ 40,145     $ (236 )   $ (24,156 )   $ 15,753  

Consolidated capital expenditures (1)

   $ 4,297     $ —     $ —     $ 4,297  

(1)    Excludes assets acquired in the Sasol acquisition.

 

 

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Long-lived assets from continuing operations:

                                

As of June 30, 2022

   $ 141,522     $ 10,000     $ 196     $ 151,718  

As of December 31, 2021

   $ 84,156     $ 10,000     $ 168     $ 94,324  

 

 

(in thousands)

  

Gabon

    

Equatorial Guinea

    

Corporate and Other

    

Total

  

Total assets from continuing operations:

                                

As of June 30, 2022

   $ 291,730     $ 10,927     $ 66,907     $ 369,564  

As of December 31, 2021

   $ 201,748     $ 10,548     $ 50,794     $ 263,090  

 

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 signed a COSPA with ExxonMobil Sales and Supply LLC (“Exxon”) that covered sales from February 2020 through January 2022 with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. The COSPA with Exxon was amended and extended several times, most recently in January 2022, extending the date of the COSPA through the end of July 2022. 

 

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.

 

During the three and six months ended June 30, 2022 and 2021, revenues from sales of crude oil to Exxon were 100% of the Company’s total revenues from customers.