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

May 10, 2010 | About:
10qk

10qk

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VAALCO Energy Inc. (EGY) filed Quarterly Report for the period ended 2010-03-31.

Vaalco Energy Inc. has a market cap of $257.87 million; its shares were traded at around $4.57 with and P/S ratio of 2.24. EGY is in the portfolios of Jim Simons of Renaissance Technologies LLC, George Soros of Soros Fund Management LLC, Paul Tudor Jones of The Tudor Group, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Net cash provided by operating activities for the three months ended March 31, 2010 was $14.4 million, as compared to $2.8 million for the three months ended March 31, 2009 The increase in cash provided by operations for the three months ended March 31, 2010 compared to the three months ended March 31, 2009 was comprised of net income of $6.9 million for the three months ended March 31, 2010 compared to a net loss of $12.0 million for the three months ended March 31, 2009, an increase in working capital other than cash of $2.7 million for the three months ended March 31, 2010, compared to a decrease in working capital other than cash of $11.2 million for the three months ended March 31, 2009, and the impact of dry hole costs of $0.3 million in the three months ended March 31, 2010 compared to $19.8 million from the same period in 2009.

Net cash used in investing activities for the three months ended March 31, 2010 was $3.5 million, compared to net cash used in investing activities for the three months ended March 31, 2009 of $38.7 million. For the three months ended March 31, 2010 the Company invested $3.4 million primarily on drilling activity of one well in the Ebouri field and equipment purchases for a well expected to be drilled in the second quarter of 2010 in the Etame field. 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.

The Company uses the successful efforts method of accounting for its oil and gas exploration and development costs. All expenditures related to exploration, with the exception of costs of drilling exploratory wells are charged as an expense when incurred. The costs of exploratory wells are capitalized pending determination of whether commercially producible oil and gas reserves have been discovered. If the determination is made that a well did not encounter potentially economic oil and gas quantities, the well costs are charged as an expense. For the three months ended March 31, 2010, exploration expense was $1.0 million primarily comprised of seismic reprocessing costs in Angola of $0.4 million and $0.4 million in exploration costs incurred onshore Gabon. For the three months ended March 31, 2009, exploration expense included dry hole costs associated with four unsuccessful exploration wells. The dry hole costs were comprised of $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 was $1.0 million for the three months ended March 31, 2010 compared to $20.5 million in the comparable period in 2009. For the three months ended March 31, 2010, exploration expense consisted primarily of seismic reprocessing costs in Angola of $0.4 million and onshore Gabon exploration expense of $0.4 million, which included $0.2 million of dry hole costs associated with the two 2009 unsuccessful exploration wells. Exploration expense for the three months ended March 31, 2009 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.

General and administrative expenses for the three months ended March 31, 2010 and 2009 were $2.3 million and $(0.1) million for each period, respectively. During the three months ended March 31, 2010 and March 31, 2009, the Company incurred stock based compensation expense of $1.1 million and $0.7 million, respectively. Additional employee related expenses of $0.3 million were

Net income for the three months ended March 31, 2010 was $6.9 million, compared to net loss of $12.0 million for the same period in 2009. The significantly higher net income for the three month period in 2010 versus 2009 is attributable to higher sales revenues plus lower exploration (dry hole) costs partially offset by higher Gabon income taxes. Net income allocated to noncontrolling interest was $1.0 million and $0.6 million in the three months ended March 31, 2010 and 2009, respectively. The noncontrolling interest is associated with VAALCO Energy (International), Inc., a subsidiary that is 90.01% owned by the Company.

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