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

August 10, 2009 | About:

VAALCO Energy Inc. (EGY) filed Quarterly Report for the period ended 2009-06-30.

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 $291.3 million; its shares were traded at around $5 with a P/E ratio of 20 and P/S ratio of 1.7. VAALCO Energy Inc. had an annual average earning growth of 6.5% over the past 5 years.

Highlight of Business Operations:

For the six months ended June 30, 2009, cash used in financing activities was $3.6 million, consisting of distributions to a noncontrolling interest owner of $3.0 million and repurchase of shares of $0.6 million. For the six months ended June 30, 2008, cash used by financing activities of $11.8 million consisted primarily of $3.0 million used for distributions to noncontrolling interest holders and repurchase of shares of $8.9 million. In addition, the Company received $0.1 million in proceeds from the issuance of common stock upon the exercise of stock options.

During the six months ended June 30, 2009, the Company incurred $9.3 million of net property and equipment additions (including amounts carried in accounts payable at June 30, 2009), 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 $18.4 million. Partially offsetting these equipment 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 capital expenditures by $5.7 million. Also partially offsetting the net property and equipment additions were capitalized exploration well costs charged to expense totaling $3.0 million and an equipment reduction of $0.4 million. During the remainder of 2009 in the Etame Marin block, the Company anticipates drilling one exploration well at a cost of $4.5 million and expending an additional $2.0 million for equipment for the 2010 drilling program.

Exploration expense was $13.5 million for the three months ended June 30, 2009 compared to $1.3 million in the comparable period in 2008. For the three months ended June 30, 2009, exploration expense consisted primarily of dry hole costs totaling $12.1 million. The dry hole costs included $6.7 million for a well in the British North Sea, $5.0 million for two wells in onshore Gabon and $0.3 million for a well in offshore Gabon. Exploration expense for the three months ended June 30, 2008 consisted of aeromagnetic gravity data acquired over the Mutamba Iroru block, onshore Gabon, seismic acquisition and processing costs associated with the Companys Etame Marin block and seismic processing costs in Angola.

Other income for the three months ended June 30, 2009 and June 30, 2008 were $0.7 million and $0.8 million for each period, respectively. Included in other income for the three months ended June 30, 2009 was a foreign exchange gain of $0.6 million. Interest income received on amounts on deposit was $0.3 million in the three months ended June 30, 2009 compared to $0.8 million in the three months ended June 30, 2008. The decrease in interest income received on amounts on deposit reflects lower interest rates and amounts invested in 2009. Interest expense and financing charges for the IFC loan was $0.1 million for the three months ended June 30, 2009 compared to $0.1 million for the three months ended June 30, 2008, reflecting interest on amounts borrowed on the IFC loan, net of capitalized interest expense.

Exploration expense was $34.0 million for the six months ended June 30, 2009 compared to $8.0 million in the comparable period in 2008. Exploration expense for the six months ended June 30, 2009 included $32.0 million of dry hole costs. The dry hole costs included $9.1 million for a well in the British North Sea, $20.2 million for two wells in onshore Gabon and $2.7 million for a well in offshore Gabon. Exploration expense for the six months ended June 30, 2008 included $6.4 million of dry hole costs associated with a well drilled by the Company in the British North Sea. Also included in exploration expense were aeromagnetic gravity data acquired over the Mutamba Iroru block, onshore Gabon, and seismic costs associated with the Companys Etame Marin block and Angola.

Other income for the six months ended June 30, 2009 and June 30, 2008 were $1.5 million and $0.9 million for each period, respectively. The higher other income recorded in the six months ended June 30, 2009 compared to the same period in 2008 was primarily due to a foreign exchange gain of $1.0 million. Interest income received on amounts on deposit was $0.6 million in the six months ended June 30, 2009 compared to $1.4 million in the six months ended June 30, 2008. The decrease in interest income received on amounts on deposit reflects lower interest rates and amounts invested in 2009. Interest expense and financing charges was $0.1 million for the six months ended June 30, 2009 compared to $0.4 million for the six months ended June 30, 2008 all associated with the Companys IFC loan, net of capitalized interest expense.

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