Achieves Record Daily Average Production Announces New Drilling
Opportunities Planned for Fourth Quarter 2009 HOUSTON, Aug. 10
/PRNewswire-FirstCall/ -- VAALCO Energy, Inc. (NYSE:EGY) today
reported a net loss attributable to VAALCO of $1.7 million or
($0.03) per diluted share for the second quarter of 2009 compared
to net income of $13.0 million or $0.22 per diluted share for the
comparable period in 2008. Second quarter 2009 revenues were $32.1
million compared to $55.4 million in the second quarter of 2008.
Second quarter 2009 results reflect the overall decline in crude
oil prices, which resulted in average selling prices for the
Company's product that were approximately half of what they were in
the second quarter of last year. In addition, during the quarter,
the Company incurred the remaining $12 million of costs associated
with the previously announced unsuccessful exploration wells. "We
are pleased to have achieved record daily average production during
the second quarter of 24,000 gross barrels of oil per day. This
milestone is a testament to the operating expertise of our team,
and we applaud their efforts," said Robert Gerry, Chairman and CEO.
"As we look ahead, we are optimistic about VAALCO's continued
success. The dry hole costs that impacted our first half results
have been fully incurred, and we expect improved performance over
the remainder of the year, despite the lower commodity prices.
"Further, in addition to our previously announced plans for two
exploratory wells offshore Angola and an exploration well in
Southeast Etame, we are today announcing plans for new wells
beginning later this year," Mr. Gerry continued. "We believe that
these prospects, together with the leads in our existing onshore
Gabon concession and the opportunities afforded by VAALCO's strong
capital position, provide a solid foundation for reserve growth and
value creation." Exploration and Development Update During the
second quarter of 2009, VAALCO announced the successful completion
of its second horizontal development well in the Ebouri field, the
EEBOM-3H well, in the Etame Marin block offshore Gabon. First oil
production occurred on April 8, 2009, and a new production record
of 24,993 barrels of oil per day (bopd) from the Etame Marin block
was set two days later. With this well, VAALCO currently has eight
producing wells offshore Gabon -- four in the Etame field, two in
the Ebouri field, and one each in the Avouma and South Tchibala
fields. The Company today announced an update to its exploration
and development program: Gabon: -- The Company previously announced
plans for an exploration well in Southeast Etame (ETSEM-1 well),
and today announced plans to drill this well in the fourth quarter
of 2009. -- VAALCO also announced plans for two new development
wells -- one to be drilled from a well slot on the Ebouri platform
(EEBOM-4H well) and a sub-surface completion well (ET-7H well) in
the Etame field. Drilling is expected to begin as early as the
fourth quarter of 2009 dependent on whether one or two jack-up
drilling rigs will be contracted for in the overall drilling
program. -- The Company expects to workover its EEBOM-3H
development well to replace non-working electric submersible pumps.
-- The Company is budgeting for a second exploration well in the
Etame Marin concession, which will be drilled in 2010. VAALCO
expects that the combination of the two new development wells and
the workover of the Ebouri well will provide for more than adequate
production capacity to fully utilize the processing capacities of
the floating production, storage and offloading ("FPSO") facility.
The approximate oil processing capacity of the FPSO is
approximately 25,000 bopd. Angola: -- As previously announced,
VAALCO has a production sharing contract for a 40% working interest
in Block 5 offshore Angola. The Company is currently analyzing
approximately 1,700 square kilometers of seismic data. Two well
locations have been approved by the government of Angola, and the
Company now expects the first of two planned exploration wells to
be drilled in the first half of 2010. Financial Results Discussion
During the second quarter of 2009, the Company sold approximately
544,000 net barrels of oil equivalent at an average price of $59.10
per barrel, compared to 464,000 net barrels of oil equivalent at an
average price of $119.18 in the second quarter of 2008. The Company
reported operating income of $6.6 million in the second quarter of
2009 compared to operating income of $40.7 million in the second
quarter of 2008. In June 2009, a realignment agreement was signed
with a joint venture partner that originally did not participate in
an appraisal well and one of the development wells in the Ebouri
field, offshore Gabon. Pursuant to the agreement, the partner paid
for its proportional share of the capital expenditures for the
wells, thereby reducing the Company's capital expenditures in the
second quarter of 2009 by $5.7 million. In addition, the Company
benefits from its share of a risk premium being paid by the
partner. In the second quarter of 2009, the Company received a $2.0
million risk premium payment, and this was recorded as other
operating income. The remaining $4.5 million of proceeds that are
owed to the Company are expected to be received and recognized as
income in the third quarter of 2009. Capital expenditures
(excluding dry holes) of $2.4 million during the second quarter of
2009, primarily for a development well in the Ebouri field, were
more than offset by the aforementioned payment by the joint venture
partner. Total production expenses of $4.5 million for the 2009
second quarter were flat over the prior year quarter, despite the
increase in sales volumes. The Company matches production expenses
with crude oil sales. Any production expenses associated with
unsold crude oil inventory are capitalized. Exploration expense was
$13.5 million in the 2009 second quarter reflecting the four
unsuccessful exploration wells and compares to $1.3 million of
costs in the comparable period in 2008. Income tax expenses for the
second quarter of 2009 were $7.3 million compared to $26.5 million
in the 2008 second quarter. The decline in income taxes reflects
the lower oil revenues, as commodity prices declined, as well as a
higher percentage of oil production allocated as cost oil versus
profit oil. Share Repurchase Activity On June 24, 2009, the Company
announced that its Board of Directors had authorized the repurchase
of up to $10 million of the Company's common stock. During the
quarter ended June 30, 2009, the Company repurchased 146,354 shares
at an average price of $4.15 per share. To date, the Company has
repurchased 1.5 million shares at an average price of $4.14 per
share for a total of approximately $6.2 million under this program.
Discretionary Cash Flow Discretionary cash flow (a non-GAAP
financial measure) shows the amount of cash generated by the
Company that can be used as working capital, to reduce debt, or for
future investment activities. Discretionary cash flow is presented
because management believes it is a useful adjunct to net cash flow
provided by operating activities under accounting principles
generally accepted in the United States (GAAP). The measure is
widely used by investors and professional research analysts in the
valuation, comparison, rating and investment recommendations of
companies within the oil and gas exploration and production
industry. Discretionary cash flow can be reconciled to net cash
provided by operating activities in the Statement of Consolidated
Cash Flows filed with the SEC as follows: Unaudited - (thousands of
dollars) Six Months Ended Six Months Ended June 30, 2009 June 30,
2008 Discretionary Cash Flow $31,995 $35,004 Working Capital
Changes, net of non-cash (11,388) 20,249 Net cash provided by
operating activities $20,607 $55,253 Conference Call The Company
will hold a conference call to discuss its second quarter 2009
results on Tuesday, August 11, 2009 at 12:00 p.m. Eastern Time
(11:00 a.m. Central Time). Interested parties may participate by
dialing 1 (800) 288-8960. International parties may dial 1 (612)
234-9959. The confirmation code is 109261. This call will also be
webcast on VAALCO's web site at http://www.vaalco.com/. An audio
replay will be available beginning approximately one hour after the
end of the conference call through September 10, 2009 on the
Company's website and by dialing 1 (800) 475-6701. International
parties may dial 1 (320) 365-3844. The confirmation code is 109261.
Summary financial results for the quarter are tabulated below.
(Unaudited - in Three Months Ended Six Months Ended thousands of
June 30, June 30, dollars) 2009 2008 2009 2008 Revenues $32,148
$55,354 $53,406 $97,512 Operating costs and expenses 25,573 14,679
57,293 32,706 Operating Income (Loss) 6,575 40,675 (3,887) 64,806
Other Income (Expense) 709 793 1,545 909 Income tax expense (7,323)
(26,488) (9,702) (47,870) Net Income (Loss) (39) 14,980 (12,044)
17,845 Less net income- noncontrolling interest 1,642 1,953 2,256
3,017 Net Income (Loss) - VAALCO Energy, Inc. $(1,681) $13,027
$(14,300) $14,828 Basic Income (Loss) per Common Share $(0.03)
$0.22 $(0.25) $0.25 Diluted Income (Loss) per Common Share $(0.03)
$0.22 $(0.25) $0.25 Other financial results: Three Months Ended Six
Months Ended June 30, June 30, (Unaudited) 2009 2008 2009 2008 Net
oil and gas sales (MBOE) 544 464 1,047 910 Average price ($/bbl)
$59.10 $119.18 $50.95 $107.06 Production costs ($/bbl) $8.25 $9.78
$9.72 $9.81 Depletion costs ($/bbl) $10.33 $11.29 $10.77 $11.18
General and administrative costs ($/bbl) $7.24 $7.69 $3.68 $6.10
Capital Expenditures ($thousands) ($3,300) $3,127 $9,300 $4,967
June 30, June 30, 2009 2008 Debt/Proved reserves ($/BOE) $0.78
$0.94 Debt/Capitalization ($/$) $0.03 $0.03 Cash and cash
equivalents ($thousands) 88,369 108,583 Working capital
($thousands) 76,705 93,246 Total long term debt ($thousands) 5,000
5,000 Basic and diluted share information: Three months ended Six
months ended June 30, June 30, June 30, June 30, 2009 2008 2009
2008 Item Basic weighted average common stock issued and
outstanding 58,260,074 58,878,846 58,260,741 59,107,639 Dilutive
options 0 746,802 0 592,152 Total diluted shares 58,260,074
59,625,648 58,260,741 59,699,791 Forward-Looking Statements This
document includes "forward-looking statements" as defined by the
U.S. securities laws. Forward-looking statements are those
concerning VAALCO's plans, expectations, and objectives for future
drilling, completion and other operations and activities. All
statements included in this document that address activities,
events or developments that VAALCO expects, believes or anticipates
will or may occur in the future are forward-looking statements.
These statements include future production rates, drilling,
completion and production timetables and costs to complete wells.
These statements are based on assumptions made by VAALCO based on
its experience perception of historical trends, current conditions,
expected future developments and other factors it believes are
appropriate in the circumstances. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are
beyond VAALCO's control. These risks include, but are not limited
to, volatility of oil and natural gas prices, future production
costs, future production quantities, the ability to replace
reserves, inflation, lack of availability of drilling and other
equipment, availability of services and capital, environmental
risks, drilling risks, general economic risks, foreign operational
risks and regulatory changes. Investors are cautioned that
forward-looking statements are not guarantees of future performance
and that actual results or developments may differ materially from
those projected in the forward-looking statements. These risks are
further described in VAALCO's annual report on Form 10-K for the
year ended December 31, 2008 and other reports filed with the SEC
which can be reviewed at http://www.sec.gov/, or which can be
received by contacting VAALCO at 4600 Post Oak Place, Suite 309,
Houston, Texas 77027, (713) 623-0801. About VAALCO VAALCO Energy,
Inc. is a Houston based independent energy company principally
engaged in the acquisition, exploration, development and production
of crude oil. VAALCO's strategy is to increase reserves and
production through the exploration and exploitation of oil and
natural gas properties with high emphasis on international
opportunities. The Company's properties and exploration acreage are
located primarily in Gabon and Angola, West Africa. Investor
Contact Media Contact Greg Hullinger Barrett Golden / Tim Lynch
Chief Financial Officer Joele Frank, Wilkinson Brimmer Katcher
713-623-0801 212-355-4449 DATASOURCE: VAALCO Energy, Inc. CONTACT:
Investors, Greg Hullinger, Chief Financial Officer,
+1-713-623-0801; or Media, Barrett Golden, or Tim Lynch, both of
Joele Frank, Wilkinson Brimmer Katcher, +1-212-355-4449 Web Site:
http://www.vaalco.com/
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