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Note 4 - Segment Information
 6 Months Ended
Jun. 30, 2023
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]

4. SEGMENT INFORMATION 

 

The Company’s operations are based in Gabon, Egypt, and Canada, and the Company has an undeveloped block in Equatorial Guinea. Each of the Company’s 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, 2023 and 2022 as well as long-lived assets and segment assets at June 30, 2023 and December 31, 2022 are as follows:

 

  

Three Months Ended June 30, 2023

 

(in thousands)

 

Gabon

  

Egypt

  

Canada

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Revenues:

                        

Crude oil, natural gas and natural gas liquids sales

 $77,924  $21,308  $10,008  $—  $—  $109,240 

Operating costs and expenses:

                        

Production expense

  23,931   11,089   3,255   386   (57)  38,604 

FPSO Demobilization - Norms Waste Disposal

  5,647   —   —   —   —   5,647 

Exploration expense

  43   14   —   —   —   57 

Depreciation, depletion and amortization

  19,457   13,757   4,747   —   42   38,003 

General and administrative expense

  318   202   —   87   4,788   5,395 

Credit losses and other

  518   —   —   162   —   680 

Total operating costs and expenses

  49,914   25,062   8,002   635   4,773   88,386 

Other operating income (expense), net

  (62)  (241)  —   —   —   (303)

Operating income

  27,948   (3,995)  2,006   (635)  (4,773)  20,551 

Other income (expense):

                        

Derivative instruments loss, net

  —   —   —   —   31   31 

Interest (expense) income, net

  (1,376)  (503)  —   —   176   (1,703)

Other (expense) income, net

  (619)  —   1   —   81   (537)

Total other expense, net

  (1,995)  (503)  1   —   288   (2,209)

Income (loss) from continuing operations before income taxes

  25,953   (4,498)  2,007   (635)  (4,485)  18,342 

Income tax (benefit) expense

  16,251   4,261   —   —   (8,924)  11,588 

Income (loss) from continuing operations

  9,702   (8,759)  2,007   (635)  4,439   6,754 

Loss from discontinued operations, net of tax

  —   —   —   —   (2)  (2)

Net income (loss)

 $9,702  $(8,759) $2,007  $(635) $4,437  $6,752 

Consolidated capital expenditures

 $1,375  $8,526  $6,491  $—  $36  $16,427 

 

  

Six Months Ended June 30, 2023

 

(in thousands)

 

Gabon

  

Egypt

  

Canada

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Revenues:

                        

Crude oil, natural gas and natural gas liquids sales

 $114,661  $56,092  $18,890  $—  $—  $189,643 

Operating costs and expenses:

                        

Production expense

  38,346   22,199   5,509   748   2   66,804 

FPSO Demobilization - Norms Waste Disposal

  5,647   —   —   —   —   5,647 

Exploration expense

  51   14   —   —   —   65 

Depreciation, depletion and amortization

  29,302   24,552   8,458   —   108   62,420 

General and administrative expense

  936   381   —   216   9,086   10,619 

Credit losses and other

  1,453   —   —   162   —   1,615 

Total operating costs and expenses

  75,735   47,146   13,967   1,126   9,196   147,170 

Other operating income, net

  (62)  (241)  —   —   —   (303)

Operating income (loss)

  38,864   8,705   4,923   (1,126)  (9,196)  42,170 

Other income (expense):

                        

Derivative instruments gain, net

  —   —   —   —   52   52 

Interest (expense) income, net

  (2,883)  (1,311)  (4)  —   249   (3,949)

Other income (expense), net

  (102)  —   1   (1)  (1,575)  (1,677)

Total other expense, net

  (2,985)  (1,311)  (3)  (1)  (1,274)  (5,574)

Income (loss) from continuing operations before income taxes

  35,879   7,394   4,920   (1,127)  (10,470)  36,596 

Income tax expense (benefit)

  22,829   9,253   —   —   (5,723)  26,359 

Income (loss) from continuing operations

  13,050   (1,859)  4,920   (1,127)  (4,747)  10,237 

Loss from discontinued operations, net of tax

  —   —   —   —   (15)  (15)

Net income (loss)

 $13,050  $(1,859) $4,920  $(1,127) $(4,762) $10,222 

Consolidated capital expenditures

 $5,064  $20,097  $16,656  $—  $36  $41,852 

 

 

  

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 income (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 (1)

 $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 

Credit losses and other

  1,063   —   —   1,063 

Total operating costs and expenses

  58,682   603   7,199   66,484 

Other operating income (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 (1)

 $69,882  $—  $67  $69,949 

 

(in thousands)

 

Gabon

  

Egypt

  

Canada

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Long-lived assets from continuing operations:

                        

As of June 30, 2023

 $193,501  $165,813  $111,677  $10,000  $749  $481,740 

As of December 31, 2022 (1)

  213,204  $168,012  $103,263  $10,000  $793  $495,272 

(1) - Includes assets acquired in the TransGlobe acquisition

 

(in thousands)

 

Gabon

  

Egypt

  

Canada

  

Equatorial Guinea

  

Corporate and Other

  

Total

 

Total assets from continuing operations:

                        

As of June 30, 2023

 $384,554  $270,653  $118,604  $11,144  $44,058  $829,013 

As of December 31, 2022 (1)

  395,393  $293,640  $110,071  $10,861  $45,676  $855,641 

(1) - Includes assets acquired in the TransGlobe acquisition

 

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 was previously party to a COSPA with ExxonMobil Sales and Supply LLC (“Exxon”) that covered sales from February 2020 through July 2022 with pricing based upon an average of Dated Brent in the month of lifting, adjusted for location and market factors. This COSPA has been terminated.

 

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.

 

For the three and six months ended June 30, 2023 sales of crude oil to Glencore made up 100% of Etame revenues. For the three and six months ended June 30, 2022, sales of crude oil to ExxonMobil Sales and Supply LLC made up 100% of Etame revenues. For the three months ended June 30, 2023, the EGPC covered 100% of the Company's crude oil sales in Egypt. For the six months ended June 30, 2023, Mercuria covered 100% of the Company’s crude oil sales in Egypt in the first quarter, while the EGPC covered 100% of sales in the second quarter. For the three and six months ended June 30, 2023, revenues in Canada were concentrated in three separate customers. These customers were Plains Midstream (50.9%), AltaGas (19.1%), and PetroGas Energy (18.60%). Concentrations of accounts receivable are similar to the revenue percentages.