VAALCO Posts Full-Year Results, Anticipates Continued Growth in '09
VAALCO reported results for the full-year and fourth quarter of 2008. 2008 operating and financial highlights include:
- Replaced 166% of production;
- Increased proved reserves by 19% to 7.4 million barrels oil equivalent;
- Increased discretionary cash flow by 27% to $66.6 million;
- Increased net income by 56%;
- Maintained strong balance sheet with $125.4 million of cash and $5 million of debt as of December 31, 2008.
The Company anticipates continuing its growth in 2009. Highlights include:
- Commenced drilling a second horizontal development well in North Ebouri (EEBOM-3H), with completion and first oil production expected in March 2009;
- Commenced drilling on a gas prospect in the British North Sea in which VAALCO has a 25% working interest;
- Commenced moving the Nabors 864 rig for an exploratory well (N'Gongui-1) onshore Gabon in the Mutamba concession, with drilling expected to commence in late March or early April 2009;
- Plan to drill Southeast Etame prospect offshore Gabon during the 2nd or 3rd quarter of 2009.
For the twelve months ended December 31, 2008, VAALCO reported net income of $29.7 million or $0.50 per diluted share compared to net income of $19.1 million or $0.32 per diluted share in the twelve months ended December 31, 2007. Full year 2008 revenues were $169.5 million compared to $125.0 million in 2007. Discretionary cash flow (a non-GAAP financial measure) for full year 2008 was up 27% to $66.6 million compared to $41.4 million in 2007.
"We are pleased with our 2008 performance as we successfully increased production, proved up further reserves and generated strong cash flow," said Robert Gerry, Chairman and CEO of VAALCO. "We replaced 166% of our production and increased our reserve base by 19%. With our new development wells in Ebouri coming on line, we will increase production year over year and expect a continued positive performance in 2009. VAALCO's strong balance sheet and multiple drilling prospects position us well to further grow our reserves and drive enhanced value for VAALCO shareholders in the coming year and beyond."
As previously announced, VAALCO has expanded its development program with two new development wells (EEBOM-2H and EEBOM-3H) in North Ebouri. With these two new wells, the Company expects total production from the Etame block to be approximately 25,000 barrels of oil per day (bopd), which would maximize the current throughput oil capacity of the Floating Production, Storage and Offloading (FPSO) facility serving the Etame, Avouma / Tchibala and Ebouri fields. In addition, VAALCO plans to drill exploratory wells onshore Gabon in the Mutamba concession and offshore Southeast Etame and Angola. The Company also has a 25% interest in a gas prospect in the British North Sea on which it is currently drilling.
2008 Financial Results Discussion
For the year ended December 31, 2008, VAALCO sold 1,827,000 net barrels of crude oil equivalent at an average price of $92.81 per barrel compared to 1,759,000 net barrels of crude oil equivalent at an average of $71.10 per barrel for the twelve months ended December 31, 2007. 2008 operating income was $106.5 million compared to $68.7 million for 2007.
Capital expenditures for the year ended December 31, 2008 were $25.7 million consisting primarily of costs to install the Ebouri platform, drill the appraisal and development well in Ebouri, perform FPSO facility upgrades, and for onshore drilling activities.
Production expenses for 2008 were $18.5 million as compared to $15.1 million for 2007. Production expenses were higher in 2008 due to increased volumes sold (17 liftings in 2008 versus 14 liftings in 2007) as well as higher costs for boat rentals, FPSO tariffs, helicopter charges and fuel costs.
Exploration costs for 2008 were $14.9 million as compared to $15.3 million for 2007. In 2008, the Company incurred $9.2 million of expenses for unsuccessful exploration wells, including $6.4 million in remaining costs for a well in the British North Sea in the first quarter of 2008. In early 2009, the Company drilled two unsuccessful wells, one in the Mutamba Iroru block, onshore Gabon and one offshore in the North Etame area of the Etame Marin block. Costs incurred and charged to expense in the 2008 fourth quarter were $2.5 million for the onshore Gabon well and $0.3 million for the North Etame well. The Company's share of the additional estimated costs to be charged to expense in the first quarter of 2009 are $5.5 million and $3.8 million for the Gabon and North Etame wells, respectively. 2008 exploration costs also include $3.0 million in the fourth quarter to acquire and process seismic data in Angola, $1.1 million for aeromagnetic gravity data acquired over the Mutamba Iroru block onshore Gabon and seismic acquisition and processing costs associated with the Etame Marin block of $0.7 million.
In 2008, the Company incurred $73.0 million of income taxes compared to $48.1 million paid in 2007, which were paid in Gabon. The increased tax in Gabon 2008 versus 2007 was due to higher production rates and oil prices.
On December 31, 2008, the Company had cash balances of $125.4 million and funds in escrow of $23.1 million. The Company believes that these cash balances combined with cash flow from operations will be sufficient to fund the Company's 2009 non-discretionary capital expenditure budget of approximately $56.7 million to further develop the Ebouri field, for exploration programs in Gabon, Angola and the British North Sea and for additional investments in working capital resulting from potential growth.
Fourth Quarter 2008 Results
VAALCO reported a net loss of $7.5 million or $0.13 per diluted share for the fourth quarter of 2008 compared to net income of $2.0 million or $0.03 per diluted share for the comparable period in 2007. Fourth quarter 2008 revenues were $16.5 million compared to $37.0 million in the fourth quarter of 2007. The 2008 fourth quarter results reflect the overall decline in crude oil prices from the year-ago quarter, which resulted in lower average selling prices for the Company's product, as well as an increase in production and exploration costs as VAALCO ramped up its drilling program.
During the fourth quarter of 2008, VAALCO sold 399,000 net barrels of crude oil equivalent at an average price of $41.29 per barrel compared to 425,000 net barrels of crude oil equivalent at an average price of $86.92 per barrel in the fourth quarter of 2007. Operating loss was $0.1 million in the fourth quarter of 2008 compared to operating income of $17.4 million in the fourth quarter of 2007.
- VAALCO Agrees to Acquire Sojitz's Stake in Etame Marin Permit Off Gabon (Aug 02)
- VAALCO Updates on Operations at Etame Marin Block Offshore Gabon (Oct 13)
- First Oil Flows from the North Tchibala Field Offshore Gabon (Sep 17)