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VAALCO Energy Inc. Reports Operating Results (10-K)

March 14, 2011 | About:
10qk

10qk

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VAALCO Energy Inc. (EGY) filed Annual Report for the period ended 2010-12-31.

Vaalco Energy Inc. has a market cap of $435.39 million; its shares were traded at around $7.71 with a P/E ratio of 14.02 and P/S ratio of 3.78.

Highlight of Business Operations:

Net cash used in investing activities in 2010 was $39.9 million, compared to net cash used in investing activities for 2009 of $49.0 million and net cash used in investing activities in 2008 of $42.4 million. In 2010, the Company invested $37.3 million on four wells in the Etame Marin block offshore Gabon. The Company also invested in a Granite Wash formation lease in Texas ($2.2 million) and a second extension of the Mutamba Iroru block onshore Gabon ($1.2 million). In 2009, the Company invested $22.3 million primarily for the Ebouri platform and three wells. Also in 2009, the Company incurred $33.4 million in dry hole costs and reduced the amount in escrow attributable to a well drilled in the British North Sea by $6.6 million. In 2008, the Company invested $25.7 million primarily for the development of the Ebouri field, FPSO upgrades and onshore Gabon drilling activities. Also in 2008, the Company incurred $9.2 million in dry hole costs, and placed $7.4 million in escrow for a well to be drilled in the British North Sea.

In 2010, cash used in financing activities was $5.5 million consisting of distributions to a noncontrolling interest owner of $6.0 million partially offset by proceeds from the issuance of common stock upon the exercise of options of $0.5 million. In 2009, cash used in financing activities was $19.4 million, consisting primarily of purchase of treasury shares of $10.1 million, debt repayment of $5.0 million and distributions to a noncontrolling interest owner of $6.0 million partially offset by proceeds from the issuance of common stock of $1.8 million. In 2008, cash used in financing activities was $15.2 million, primarily consisting of distributions to a noncontrolling interest owner of $6.5 million and purchase of treasury shares of $8.9 million.

During 2010, the Company invested $40.0 million in property and equipment additions (including amounts carried in accounts payable and excluding exploration dry hole costs), primarily associated with the drilling of three development wells in the Etame Marin block offshore Gabon totaling $29.3 million. In addition, one successful exploration well was drilled in the Southeast Etame area of the Etame Marin block at a cost of $8.0 million, and the Company invested in a Granite Wash formation lease in Texas ($2.2 million) and a second extension of the Mutamba Iroru block onshore Gabon ($1.2 million). During 2009, the Company invested $22.3 million in property and equipment additions primarily associated with the drilling of the three wells in the Ebouri field (the appraisal well plus the two development wells drilled from the Ebouri platform) totaling $16.7 million. Additionally, the Companys share of the leasehold bonus associated with the Etame Marin block exploration period extension totaled $1.4 million. Partially offsetting these additions was a realignment agreement with a joint venture partner that originally did not participate in an appraisal well and one of the development wells in the Ebouri field. Pursuant to the realignment agreement, the joint venture partner paid its proportionate share of capital expenditures for the wells, which reduced the Companys property and equipment by $5.7 million. During 2008, the Company spent approximately $25.7 million consisting primarily of Ebouri field development costs of $18.2 million, and drilling inventory ($1.4 million). Other expenditures during 2008 were for FPSO upgrades ($2.0 million), onshore Gabon ($2.2 million) and drilling a well in the British North Sea ($0.8 million).

Index to Financial Statements In 2010, the Company incurred $6.8 million in exploration expense including $2.6 million on the Omangou unsuccessful exploration well offshore Gabon, $1.4 million for seismic costs in the Etame Marin block offshore Gabon, onshore Gabon exploration expense of $0.7 million, and $0.9 million in Angola primarily for geotechnical studies. In 2009, the Company incurred $36.5 million in exploration expense including $33.4 million of dry hole costs (British North Sea$9.6 million, the Etame Marin block offshore Gabon$3.0 million and the Mutamba Iroru block onshore Gabon$20.8 million). The Company spent the remaining $3.1 million primarily on seismic processing costs in the Etame Marin block ($0.6 million), Mutamba Iroru block ($0.9 million) and in Angola ($1.4 million). In 2008, the Company spent $14.9 million in exploration expense including $9.2 million of unsuccessful well costs (British North Sea$6.4 million, offshore Gabon$0.3 million and onshore Gabon$2.5 million), $3.5 million to acquire and process seismic in Angola, $1.1 million for aeromagnetic gravity data acquired over the Mutamba Iroru block onshore Gabon and seismic acquisition and processing costs associated with the Etame Marin block of $0.7 million.

Exploration expense for 2010 was $6.8 million as compared to $36.5 million and $14.9 million for 2009 and 2008, respectively. In 2010, exploration expense is primarily comprised of $2.6 million for the Omangou unsuccessful exploration well offshore Gabon, $1.4 million for seismic costs in the Etame Marin block offshore Gabon, onshore Gabon exploration expense of $0.7 million, and $0.9 million in Angola primarily for geotechnical studies. In 2009, the Company spent $33.4 million on four unsuccessful exploration wells including the North Etame prospect offshore Gabon ($3.0 million), two wells on the Mutamba Iroru block onshore Gabon ($20.8 million) and a well on Block 48/25c in the British North Sea ($9.6 million). Additionally, in 2009 the Company also spent $3.1 million primarily associated with seismic processing costs in Block 5 in Angola and the Mutamba Iroru block in Gabon.

Depreciation, depletion and amortization expense was $20.0 million for 2010, and was $20.8 million and $18.9 million for 2009 and 2008, respectively. Depletion, depreciation and amortization expense decreased slightly in 2010 versus 2009 due to lower sales volumes partially offset by overall higher depletion rates. The 2010 depletion rates for the Ebouri field averaged $19.95 per bbl, Avouma and South Tchibala fields averaged $7.76 per bbl, and the Etame field averaged $5.26 per bbl. In comparison, the 2009 depletion rates for the Ebouri field averaged $19.73 per bbl, Avouma and South Tchibala fields averaged $7.32 per bbl, and the Etame field averaged $4.30 per bbl. The increase in 2009 versus 2008 was primarily due to higher production volumes.

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