The increase in income stems from higher crude oil sales. VAALCO sold approximately 1,638,000 barrels of oil equivalent in the year ended December 31, 2005, compared to 1,473,000 barrels of oil equivalent in the year ended December 31, 2004. Crude oil prices were also higher. They averaged $52.02 per barrel of oil equivalent in 2005, compared to $38.36 the previous year.
For the fourth quarter of 2005 oil and gas sales were $18.9 million as compared to $18.5 million in 2004. Operating income was $13.8 million for the quarter, compared to $13.2 million in 2004. Net income was $5.0 million, or $0.09 per diluted share in the quarter; that figure in 2004 was $4.6 million, or $0.08 per diluted share. The company sold 327,000 net barrels at an average price of $57.88 per barrel during the fourth quarter of 2005, or approximately 95,000 fewer barrels when compared to 422,000 barrels sold in the fourth quarter of 2004 at an average price of $43.84 per barrel. With production averaging approximately 18,000 barrels per day (approximately 4,300 barrels per day net to VAALCO), unsold crude oil remaining in the FPSO at year end was approximately 600,000 barrels (approximately 150,000 barrels net to VAALCO).
Discretionary cash flow--a non-GAAP financial measure of the amount of cash generated that can be used for working capital, debt service, or future investments--was $38.4 million in the year ended December 31, 2005, compared to $30.9 million for the year ended December 31, 2004.
VAALCO finished the year with proved developed producing reserves of 5.3 million barrels oil equivalent at year end 2005, compared to 4.7 million barrels oil equivalent at year end 2004. Total proved reserves at year end 2005 were 7.8 million barrels compared to 8.7 million barrels oil equivalent at year end 2004. The company recorded positive revisions to reserves at the Etame field of 0.7 million barrels, partially offsetting the 1.6 million barrels of production. It carried proved undeveloped reserves at the Avouma field, which is under development, of approximately 1.4 million barrels. No reserves were booked for the Ebouri field in 2005 as delays in the processing of new seismic over the field have pushed the submission of the development plan to the government into 2006. The company anticipates booking reserves for Ebouri in 2006.
"While 2005 was a very good year for VAALCO our challenge is for the years ahead," said Robert L. Gerry, III, VAALCO's Chairman and CEO. "We must grow our reserves and production to remain competitive in the market place. I believe we have the ingredients in place to meet this challenge starting at year-end 2006 when the Avouma field comes online adding between 10,000 - 12,000 barrels per day (2,400-2,800 net barrels per day to VAALCO) to the consortium's production. Our new concession onshore Gabon and our recently announced North Sea affiliations are exciting building blocks for our future growth. We intend to pursue additional projects to further add shareholder value."
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