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

May 11, 2009 | About:
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VAALCO Energy Inc. (EGY) filed Quarterly Report for the period ended 2009-03-31.

VAALCO ENERGY is an independent energy company principally engaged in the acquisition exploration development and production of crude oil and natural gas. VAALCO Energy Inc. has a market cap of $328.6 million; its shares were traded at around $5.64 with a P/E ratio of 11.28 and P/S ratio of 1.94. VAALCO Energy Inc. had an annual average earning growth of 6.5% over the past 5 years.

Highlight of Business Operations:

Net cash used in investing activities for the three months ended March 31, 2009 was $38.7 million, compared to net cash used in investing activities for the three months ended March 31, 2008 of $8.2 million. For the three months ended March 31, 2009, the Company invested $16.9 million associated with the development of the Ebouri field. In addition, four unsuccessful exploration wells were charged to exploration expense in the three months ended March 31, 2009 totaling $19.8 million. For the three months ended March 31, 2008, the Company invested $4.0 million in the Etame Marin block operations for the development of the Ebouri field and completed the drilling of a dry well in the North Sea at a cost of $6.4 million for the quarter.

For the three months ended March 31, 2009, cash used in financing activities was $1.5 million consisting primarily of distributions to a minority interest. For the three months ended March 31, 2008, cash used by financing activities of $2.8 million consisted primarily of distributions to a minority interest owner of $1.5 million and purchase of treasury shares of $1.3 million.

During the three months ended March 31, 2009, the Company incurred $12.6 million of net property and equipment additions, primarily associated with the platform and drilling of the three wells in the Ebouri field (the appraisal well plus the two development wells drilled from the Ebouri platform) totaling $16.9 million. Partially offsetting this addition were capitalized exploration well costs charged to expense during the quarter totaling $3.0 million and an equipment reduction of $1.4 million. During the remainder of 2009 in the Etame Marin block, the Company anticipates drilling one development well at a remaining cost of $9.2 million and a contingent exploration well at an estimated cost of $16.0 million. Additionally, the locations and timing for drilling the two commitment wells in Block 5 Angola remain under evaluation by the consortium. Late-2009 is the earliest projected date for the first well to be drilled. Estimated cost to the Company for the first well is projected to be $18.0 million.

Exploration expense was $20.5 million for the three months ended March 31, 2009 compared to $6.7 million in the comparable period in 2008. For the three months ended March 31, 2009, exploration expense consisted primarily of dry hole costs associated with four unsuccessful exploration wells. The dry hole costs included $2.3 million associated with the Companys participation in a well in block 48/25c in the British North Sea, $2.4 million for the North Etame well offshore Gabon and $15.1 million for the two wells drilled in the Mutamba Iroru block onshore Gabon. Exploration expense for the three months ended March 31, 2008 consisted primarily of $6.4 million of dry hole costs associated with an unsuccessful well in Block 9/28d in the British North Sea and $0.3 million of other exploration costs.

General and administrative expenses for the three months ended March 31, 2009 and 2008 were ($0.1) million and $2.0 million for each period, respectively. The credit reported for the three months ended March 31, 2009 was partially attributable to a retroactive compensation adjustment that benefited the Company by charging the adjustment to the Gabon partners. During the three months ended March 31, 2009, the Company incurred stock based compensation expense of $0.7 million. In each of the three month periods ended March 31, 2009 and 2008, the Company benefited from overhead reimbursement associated with production and development operations on the Etame Marin block. During the three months ended March 31, 2008, the Company incurred stock based compensation expense of $0.2 million.

Interest income received on amounts on deposit was $0.4 million in the three months ended March 31, 2009 compared to $0.5 million in the three months ended March 31, 2008. The decrease in interest income received on amounts on deposit reflects lower interest rates in 2009. Interest expense and financing charges for the IFC loan was $15,000 for the three months ended March 31, 2009 compared to $0.4 million for the three months ended March 31, 2008, reflecting interest on amounts drawn on the IFC revolver. The majority of the interest paid in 2009 was eligible for capitalization, which reduced the amount of interest expense for the three months ended March 31, 2009.

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