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Note 4 - Segment Information
 6 Months Ended
Jun. 30, 2022
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

4. SEGMENT INFORMATION 

 

The Company’s operations are based in Gabon and the Company has an undeveloped block in Equatorial Guinea. Each of the Company’s two reportable operating segments is organized and managed based upon geographic location. The Company’s Chief Executive Officer, who is the chief operating decision maker, and management review and evaluate the operation of each geographic segment separately, primarily based on operating income (loss). The operations of all segments include exploration for and production of hydrocarbons where commercial reserves have been found and developed. Revenues are based on the location of hydrocarbon production. Corporate and other is primarily corporate and operations support costs that are not allocated to the reportable operating segments.

 

Segment activity of continuing operations for the three and six months ended June 30, 2022 and 2021 as well as long-lived assets and segment assets at June 30, 2022 and December 31, 2021 are as follows:

 

  

Three Months Ended June 30, 2022

 

(in thousands)

 

Gabon

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Revenues:

                

Crude oil and natural gas sales

 $110,985  $—  $—  $110,985 

Operating costs and expenses:

                

Production expense

  25,360   175   (60)  25,475 

Exploration expense

  67   —   —   67 

Depreciation, depletion and amortization

  8,173   —   18   8,191 

General and administrative expense

  565   110   2,859   3,534 

Bad debt expense and other

  571   —   —   571 

Total operating costs and expenses

  34,736   285   2,817   37,838 

Other operating expense, net

  —   —   —   — 

Operating income

  76,249   (285)  (2,817)  73,147 

Other income (expense):

                

Derivative instruments loss, net

  —   —   (9,542)  (9,542)

Interest (expense) income, net

  (158)  —   40   (118)

Other (expense) income, net

  (856)  (1)  (1,254)  (2,111)

Total other expense, net

  (1,014)  (1)  (10,756)  (11,771)

Income from continuing operations before income taxes

  75,235   (286)  (13,573)  61,376 

Income tax (benefit) expense

  36,423   1   9,828   46,252 

Income from continuing operations

  38,812   (287)  (23,401)  15,124 

Loss from discontinued operations, net of tax

  —   —   (20)  (20)

Net income

 $38,812  $(287) $(23,421) $15,104 

Consolidated capital expenditures

 $38,102  $—  $67  $38,169 

 

 

 

  

Six Months Ended June 30, 2022

 

(in thousands)

 

Gabon

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Revenues:

                

Crude oil and natural gas sales

 $179,641  $—  $—  $179,641 

Operating costs and expenses:

                

Production expense

  43,441   394   —   43,835 

Exploration expense

  194   —   —   194 

Depreciation, depletion and amortization

  12,826   —   38   12,864 

General and administrative expense

  1,158   209   7,161   8,528 

Bad debt expense and other

  1,063   —   —   1,063 

Total operating costs and expenses

  58,682   603   7,199   66,484 

Other operating expense, net

  (5)  —   —   (5)

Operating income

  120,954   (603)  (7,199)  113,152 

Other income (expense):

                

Derivative instruments loss, net

  —   —   (41,300)  (41,300)

Interest (expense) income, net

  (164)  —   43   (121)

Other (expense) income, net

  (1,494)  (2)  (1,311)  (2,807)

Total other expense, net

  (1,658)  (2)  (42,568)  (44,228)

Income from continuing operations before income taxes

  119,296   (605)  (49,767)  68,924 

Income tax (benefit) expense

  49,256   1   (7,633)  41,624 

Income from continuing operations

  70,040   (606)  (42,134)  27,300 

Loss from discontinued operations, net of tax

  —   —   (32)  (32)

Net income

 $70,040  $(606) $(42,166) $27,268 

Consolidated capital expenditures

 $69,882  $—  $67  $69,949 

 

 

  

Three Months Ended June 30, 2021

 

(in thousands)

 

Gabon

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Revenues:

                

Crude oil and natural gas sales

 $47,023  $—  $—  $47,023 

Operating costs and expenses:

                

Production expense

  16,378   32   9   16,419 

Exploration expense

  665   —   —   665 

Depreciation, depletion and amortization

  5,786   —   24   5,810 

General and administrative expense

  254   70   4,410   4,734 

Bad debt expense and other

  395   —   —   395 

Total operating costs and expenses

  23,478   102   4,443   28,023 

Other operating expense, net

  (126)  —   —   (126)

Operating income

  23,419   (102)  (4,443)  18,874 

Other income (expense):

                

Derivative instruments loss, net

  —   —   (9,969)  (9,969)

Interest (expense) income, net

  —   —   1   1 

Other (expense) income, net

  (156)  1   (9)  (164)

Total other expense, net

  (156)  1   (9,977)  (10,132)

Income from continuing operations before income taxes

  23,263   (101)  (14,420)  8,742 

Income tax (benefit) expense

  6,045   —   (3,220)  2,825 

Income from continuing operations

  17,218   (101)  (11,200)  5,917 

Loss from discontinued operations, net of tax

  —   —   (33)  (33)

Net income

 $17,218  $(101) $(11,233) $5,884 

Consolidated capital expenditures (1)

 $1,782  $—  $—  $1,782 

(1)    Excludes assets acquired in the Sasol acquisition.

  

Six Months Ended June 30, 2021

 

(in thousands)

 

Gabon

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Revenues:

                

Crude oil and natural gas sales

 $86,797  $—  $—  $86,797 

Operating costs and expenses:

                

Production expense

  32,511   32   9   32,552 

Exploration expense

  807   —   —   807 

Depreciation, depletion and amortization

  9,907   —   51   9,958 

General and administrative expense

  491   202   8,588   9,281 

Bad debt expense and other

  496   —   —   496 

Total operating costs and expenses

  44,212   234   8,648   53,094 

Other operating expense, net

  (133)  —   (353)  (486)

Operating income

  42,452   (234)  (9,001)  33,217 

Other income (expense):

                

Derivative instruments loss, net

  —   —   (15,923)  (15,923)

Interest (expense) income, net

  —   —   6   6 

Other (expense) income, net

  7,172   (1)  (2,755)  4,416 

Total other expense, net

  7,172   (1)  (18,672)  (11,501)

Income from continuing operations before income taxes

  49,624   (235)  (27,673)  21,716 

Income tax (benefit) expense

  9,479   1   (3,569)  5,911 

Income from continuing operations

  40,145   (236)  (24,104)  15,805 

Loss from discontinued operations, net of tax

  —   —   (52)  (52)

Net income

 $40,145  $(236) $(24,156) $15,753 

Consolidated capital expenditures (1)

 $4,297  $—  $—  $4,297 

(1)    Excludes assets acquired in the Sasol acquisition.

 

 

(in thousands)

 

Gabon

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Long-lived assets from continuing operations:

                

As of June 30, 2022

 $141,522  $10,000  $196  $151,718 

As of December 31, 2021

 $84,156  $10,000  $168  $94,324 

 

 

(in thousands)

 

Gabon

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Total assets from continuing operations:

                

As of June 30, 2022

 $291,730  $10,927  $66,907  $369,564 

As of December 31, 2021

 $201,748  $10,548  $50,794  $263,090 

 

Information about the Company’s most significant customers

 

The Company currently sells crude oil production from Gabon under term crude oil sales and purchase agreements (“COSPAs”) or crude oil sales and marketing agreements ("COSMA or COSMAs") with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. The Company signed a COSPA with ExxonMobil Sales and Supply LLC (“Exxon”) that covered sales from February 2020 through January 2022 with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. The COSPA with Exxon was amended and extended several times, most recently in January 2022, extending the date of the COSPA through the end of July 2022. 

 

As discussed further in Note 11, on May 16, 2022, VAALCO Gabon (Etame), Inc. (the “Borrower”) entered into a facility agreement (the “Facility Agreement”) by and among the Company, VAALCO Gabon, SA (“VAALCO Gabon”), Glencore Energy UK Ltd., as mandated lead arranger, technical bank and facility agent (“Glencore”), the Law Debenture Trust Corporation P.L.C., as security agent, and the other financial institutions named therein (the “Lenders”), providing for a senior secured reserve-based revolving credit facility (the “Facility”) in an initial aggregate maximum principal amount available of up to $50.0 million. In connection with the entry into the Facility Agreement, the Company entered into a COSMA with Glencore pursuant to which the Company agreed to make Glencore the exclusive offtaker and marketer of all of the crude oil produced from the Etame G4-160 Block, offshore Gabon during the period from August 1, 2022 until the Final Maturity Date of the Facility (as defined in the Facility Agreement). Pursuant to the COSMA, Glencore agreed to buy and market the Company’s crude oil with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors.

 

During the three and six months ended June 30, 2022 and 2021, revenues from sales of crude oil to Exxon were 100% of the Company’s total revenues from customers.