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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2020
Commitments and Contingencies [Abstract] |
Commitments and Contingencies | 12. COMMITMENTS AND CONTINGENCIES FPSO charter In connection with the FPSO charter, the Company, as operator of the Etame Marin block, guaranteed all of the lease payments under the FPSO 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. The Company obtained guarantees from each of the joint venture owners for their respective shares of the payments. Although the Company believes the need for performance under the charter guarantee is remote, the Company recorded a liability of $0.4 million as of both December 31, 2020 and 2019 representing the guarantee’s estimated fair value. Estimated future minimum obligations as of December 31, 2020 through the end of the FPSO charter are as follows:
(in thousands) |  | Full Charter Payment |  | VAALCO, Net
Year |  |  |  |  |  |
2021 |  | $ | 32,988 |  | $ | 10,245
2022 |  |  | 23,769 |  |  | 7,382
Total |  | $ | 56,757 |  | $ | 17,627
The FPSO charter payment includes a $0.93 per barrel charter fee for production up to 20,000 barrels of crude oil per day and a $2.50 per barrel charter fee for those barrels produced in excess of 20,000 barrels of crude oil per day. VAALCO’s net share of payments was $13.1 million, $12.1 million and $10.8 million for the years ended December 31, 2020, 2019 and 2018, respectively. Gabon domestic market obligation and other investment obligations Under the terms of the Etame PSC the Consortium is required to provide to the local government refinery a volume of crude oil at a 15% discount to market price (the “Gabon DMO”). The volume required to be furnished is the amount of the Etame Marin block production divided by total Gabon production times the volume of crude oil refined by the refinery per year. In 2020, the Company paid $0.9 million for the share of the 2019 obligation. In 2019, the Company paid $1.2 million for the share of the 2018 obligation. In 2018, the Company paid $1.1 million for the share of the 2017 obligation. The Company accrues an amount for the Gabon DMO based on management’s best estimate of the volume of crude oil required because the refinery does not publish throughput figures. The amount accrued at December 31, 2020, for the share of the 2020 obligation was $0.9 million. The amount accrued at December 31, 2019, for the share of the 2019 obligation was $1.1 million. These costs are cost recoverable under the terms of the Etame PSC. Also, the Consortium is required to pay an additional 1% of revenues for provisions for diversified investments (“PID”) and for investments in hydrocarbons (“PIH”). The amount accrued at December 31, 2020, for the share of the 2020 obligation was $3.1 million. The amount accrued at December 31, 2019, for the share of the 2019 obligation was $2.2 million. 75% of PID and PIH costs are cost recoverable under the terms of the Etame PSC. Abandonment funding Under the terms of the Etame 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 December 31, 2020, $40.2 million ($12.5 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 consolidated balance sheets. 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. During the year ended December 31, 2020, the Company has recorded a $1.1 million foreign currency gain associated with the abandonment funding account. 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. Regulatory and Joint Interest Audits The Company is subject to periodic routine audits by various government agencies in Gabon, including audits of the petroleum Cost Account, customs, taxes and other operational matters, as well as audits by other members of the contractor group under the joint operating agreements. In 2016, the government of Gabon conducted an audit of the operations in Gabon, covering the years 2013 through 2014. The Company received the findings from this audit and responded to the audit findings in January 2017. Since providing the response, there have been changes in the Gabonese officials responsible for the audit. The Company is working with the currently appointed representatives to resolve the audit findings. The Company does not anticipate that the ultimate outcome of this audit will have a material effect on the financial condition, results of operations or liquidity. Between 2019 and 2021, the government of Gabon conducted an audit of the operations in Gabon, covering the years 2015 and 2016. The Company has not yet received the findings from this audit. In July 2019, the Company reached an agreement in principle to resolve a legacy issue related to findings from Etame 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 recorded an expense in the consolidated statements of operations in the line item “Other operating income (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 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. Employment agreements The Company’s Chief Executive Officer has an employment agreement, which provides for payments of annual salary, incentive compensation and certain other benefits if their employment is terminated without cause.

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