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Commitments and Contingencies | 6 Months Ended
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Jun. 30, 2020
Commitments and Contingencies [Abstract] |
Commitments and Contingencies | 10. COMMITMENTS AND CONTINGENCIES Abandonment funding Under the terms of the Etame Marin block PSC, the Company has a cash funding arrangement for the eventual abandonment of all offshore wells, platforms and facilities on the Etame Marin block. As a result of the PSC Extension, annual funding payments are spread over the periods from 2018 through 2028. The amounts paid will be reimbursed through the Cost Account and are non-refundable. The abandonment estimate used for this purpose is approximately $61.8 million ($19.2 million net to VAALCO) on an undiscounted basis. Through June 30, 2020, $36.7 million ($11.4 million net to VAALCO) on an undiscounted basis has been funded. This cash funding is reflected under “Other noncurrent assets” in the “Abandonment funding” line item of the condensed consolidated balance sheet. Future changes to the anticipated abandonment cost estimate could change the asset retirement obligation and the amount of future abandonment funding payments. On March 5, 2019, in accordance with certain foreign currency regulatory requirements, the Gabonese branch of an international commercial bank holding the abandonment funds in a U.S. dollar denominated account transferred the funds to the Central Bank for CEMAC, of which Gabon is one of the six member states. The U.S. dollars were con verted to local currency with a credit back to the Gabonese branch. Amendment No. 5 to the Etame Marin block PSC provides that in the event that the Gabonese bank fails for any reasons to reimburse all of the principal and interest due, the Company and the other joint venture owners shall no longer be held liable for the resulting shortfall in funding the obligation to remediate the sites. FPSO charter In connection with the charter of the FPSO, the Company, as operator of the Etame Marin block, guaranteed all of the charter payments under the charter through its contract term. At the Company’s election, the charter may be extended for two one-year periods beyond September 2020. These elections have been made, and the charter has been extended through September 2022. T he Company obtained guarantees from each of the Company’s joint venture owners for their respective shares of the payments. T he Company’s net share of the charter payment is 31.1%, or approximately $9.7 million per year. Although the Company believes the need for performance under the charter guarantee is remote, the Company recorded a liability of $0.3 million as of June 30, 2020 and $0.4 million as of December 31, 2019 representing the guarantee’s estimated fair value. The guarantee of the offshore Gabon FPSO charter has $39.5 million in remaining gross minimum obligations as of June 30, 2020. Regulatory and Joint Interest Audits and Related Matters The Company is subject to periodic routine audits by various government agencies in Gabon, including audits of the Company’s petroleum cost account, customs, taxes and other operational matters, as well as audits by other members of the contractor group under the Company’s joint operating agreements. In 2016, the government of Gabon conducted an audit of the Company’s operations in Gabon, covering the years 2013 through 2014. T he Company received the findings from this audit and responded to the audit findings in January 2017. Since providing the Company’s response, there have been changes in the Gabonese officials responsible for the audit. T he Company is working with the newly appointed representatives to resolve the audit findings. T he Company does not anticipate that the ultimate outcome of this audit will have a material effect on the Company’s financial condition, results of operations or liquidity. In July 2019, the Company reached an agreement in principle to resolve a legacy issue related to findings from the Etame Marin block joint venture owners’ audits for the periods from 2007 through 2016 for $4.4 million net to VAALCO. The agreement in principle also provides for procedures to minimize the chances of future audit claims. Accordingly, the Company has accrued $4.4 million that is reflected in the “Accrued liabilities and other” line item of the Company’s condensed consolidated balance sheet and is recorded as a second quarter 2019 expense in the condensed consolidated statements of operations in the line item “Other operating expense, net”. The final settlement agreements were executed by all the joint venture owners effective September 9, 2019. In October 2019, the Company paid $1.1 million of the $4.4 million. The remaining balance of the amount due was paid in February 2020. In 2019, the Etame joint venture owners conducted audits for the years 2017 and 2018. In June 2020, the Company agreed to a $0.8 million payment to resolve claims made by one of the Etame Marin block joint venture owners, Addax Petroleum Gabon S.A. There are now no unresolved matters related to the joint venture owner audits. Drilling Rig The Company contracted a drilling rig to be used to drill two wells, including two appraisal wellbores, for the Etame Marin block joint operations. The agreement included options to drill four additional wells at the Etame Marin block, and the Company elected to exercise these options to drill a third development well and perform three workovers. The drilling rig contract stipulates a day rate of approximately $75,000. The term associated with the drilling rig commitment was less than one year, and the rig was released on April 9, 2020 with no material remaining obligations. For discussion of other contractual commitments, see Note 11 – Leases.

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- Definition The entire disclosure for commitments and contingencies. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 450 -URI http://asc.fasb.org/topic&trid=2127136 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 440 -URI http://asc.fasb.org/topic&trid=2144648 + Details
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