VAALCO Energy(EGY) - 2025 Q1 - Quarterly Results

Q1 2025 Performance Overview Key Highlights In Q1 2025, Vaalco exceeded production guidance and met sales targets, resulting in a net income of $7.7 million ($0.07 per share) and Adjusted EBITDAX of $57.0 million Q1 2025 Key Financial and Operational Metrics | Metric | Value | | :--- | :--- | | Net Income | $7.7 million ($0.07 per diluted share) | | Adjusted Net Income | $6.3 million ($0.06 per diluted share) | | Adjusted EBITDAX | $57.0 million | | NRI Production | 17,764 BOEPD (above high end of guidance) | | WI Production | 22,402 BOEPD (toward high end of guidance) | | NRI Sales | 19,074 BOEPD (toward high end of guidance) | | Quarterly Dividend | $0.0625 per share | - Entered into a new reserves-based revolving credit facility with an initial commitment of $190 million, with the potential to increase to $300 million[3] - Reduced full-year 2025 capital expenditure guidance by approximately 10% without impacting production or sales forecasts for the year[3] - Acquired a 70% working interest in the CI-705 block offshore Côte D'Ivoire, where it will serve as the operator[3] CEO Commentary The CEO highlighted another successful quarter, meeting or exceeding guidance, which led to solid financial results and strategic achievements including a new credit facility and project advancements - The company delivered strong Q1 results with sales at the high end of guidance and NRI production above the high end, leading to solid net income and Adjusted EBITDAX[2] - Strategic execution in Q1 included initiating a new credit facility, commencing the FPSO refurbishment for Côte D'Ivoire, and preparing for the 2025/2026 drilling program in Gabon[2] - Decided to reduce the 2025 capital expenditure budget by about 10% by delaying discretionary spending and deferring the capital program in Canada, which does not affect 2025 production or sales forecasts due to strong asset performance elsewhere[2] Operational Update Egypt In Q1 2025, Vaalco completed five wells, with four brought online demonstrating an average initial 30-day production rate of approximately 135 BOPD, and discovered a new production zone in the Bakr formation - Completed five wells in Q1 2025; four were brought online with an average initial production rate of ~135 BOPD over the first 30 days[4] - A new production zone was discovered in the Bakr formation, which contains heavier oil; the company is reviewing options to improve flow[4] Canada The company has decided to defer its 2025 drilling program in Canada as part of a strategy to reduce overall capital expenditures, while the four wells drilled in H1 2024 continue to perform as expected - Vaalco has deferred the drilling of additional wells in Canada for 2025 to lower the company's overall capital spending[6] Gabon A drilling rig was secured for the 2025/2026 drilling program, set to begin in Q3 2025, and a successful extended flow test on the Ebouri 4-H well confirmed the effectiveness of chemical treatment for H2S - Secured a drilling rig for the 2025/2026 drilling program, scheduled to start in Q3 2025, targeting development, appraisal, and workover wells[7] - A successful four-month flow test on the Ebouri 4-H well demonstrated the ability to treat H2S-affected oil, adding to Q1 production[7] Côte d'Ivoire The Baobab FPSO ceased production in January 2025 for refurbishment, with significant development drilling expected to start in 2026, and Vaalco expanded its presence by acquiring a 70% working interest in the offshore CI-705 block - The Baobab FPSO ceased production on January 31, 2025, for a planned dry dock refurbishment; development drilling is expected to begin in 2026 after the FPSO returns[8] - Acquired a 70% working interest and operatorship of the CI-705 block for a $3 million investment, partnering with Ivory Coast Exploration Oil & Gas SAS and PETROCI[9] Financial Performance Financial Summary Vaalco reported Q1 2025 net income of $7.7 million, a 34% decrease from Q4 2024, primarily due to lower sales volumes and higher production expenses, with Adjusted EBITDAX at $57.0 million Quarterly Financial Comparison (in millions USD) | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Net Income | $7.7 | $11.7 | $7.7 | | Adjusted EBITDAX | $57.0 | $76.2 | $61.7 | - The decrease in earnings compared to Q4 2024 was driven by lower sales volumes and higher production expense, partially offset by lower DD&A and income tax expense[10] Revenue and Sales Analysis Net revenue for Q1 2025 was $110.3 million, down 9% from Q4 2024 due to an 8% decrease in NRI sales volumes, but up 10% year-over-year with a 15% increase in sales volumes Q1 2025 vs. Q4 2024 Sales Performance | Metric | Q1 2025 | Q4 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Commodity Sales (Millions USD) | $110.3 | $121.7 | (9%) | | Sales (NRI MBOE) | 1,717 | 1,872 | (8%) | | Realized Price ($/BOE) | $64.27 | $64.77 | (1%) | Q1 2025 vs. Q1 2024 Sales Performance | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Total Commodity Sales (Millions USD) | $110.3 | $100.2 | 10% | | Sales (NRI MBOE) | 1,717 | 1,490 | 15% | Costs and Expenses Total production expense for Q1 2025 was $44.7 million, a 23% increase from Q4 2024 and a 39% increase from Q1 2024, mainly due to Gabon government audit settlements and higher chemical costs Quarterly Expense Comparison (in millions USD) | Expense Category | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | Production Expense | $44.7 | $36.5 | $32.1 | | DD&A | $30.3 | $37.0 | $25.8 | | G&A (ex. stock comp) | $7.8 | $7.1 | $5.9 | - The increase in production expense was primarily driven by higher costs in Gabon, including approximately $4.7 million (net) for government audit settlements and additional chemical costs for H2S treatment[13] Capital Investments and Balance Sheet Net capital expenditures for Q1 2025 totaled $58.5 million, mainly for projects in Gabon, Côte d'Ivoire, and Egypt, with the company ending the quarter with $40.9 million in unrestricted cash and securing a new $190 million credit facility - Net capital expenditures were $58.5 million on a cash basis and $51.3 million on an accrual basis for Q1 2025[19] - Ended Q1 with an unrestricted cash balance of $40.9 million and Adjusted Working Capital of $40.4 million[20] - In March 2025, entered into a new reserves-based revolving credit facility with an initial commitment of $190 million, replacing the previous undrawn facility[21] Shareholder Returns and Hedging Quarterly Cash Dividend Vaalco continues its commitment to shareholder returns, declaring a second-quarter 2025 cash dividend of $0.0625 per share ($0.25 annualized), payable on June 27, 2025 - Declared a Q2 2025 quarterly cash dividend of $0.0625 per share, to be paid on June 27, 2025[22] - This maintains the annualized dividend at $0.25 per share[22] Hedging Activities The company maintains a hedging program to secure cash flows, with Dated Brent collars in place for Q2 and Q3 2025, and additional AECO natural gas and Dated Brent swaps added post-quarter Hedges in Place as of March 31, 2025 | Settlement Period | Type | Avg. Volumes (Bbl) | Floor Price ($/Bbl) | Ceiling Price ($/Bbl) | | :--- | :--- | :--- | :--- | :--- | | Apr 2025 - Jun 2025 | Collar | 70,000 | $65.00 | $81.00 | | Jul 2025 - Sep 2025 | Collar | 60,000 | $65.00 | $80.00 | Hedges Added After March 31, 2025 | Settlement Period | Commodity | Type | Avg. Volumes | Hedge Price | | :--- | :--- | :--- | :--- | :--- | | May - Oct 2025 | Natural Gas | Swap | 114,000 (GJ) | $2.15 (CAD/GJ) | | July 2025 | Oil | Swap | 100,000 (Bbl) | $65.45 ($/Bbl) | Outlook and Guidance 2025 Full Year and Q2 Guidance Vaalco updated its full-year 2025 guidance, projecting NRI production at 14,500-16,710 BOEPD with capital expenditures of $250-$300 million, and provided Q2 2025 guidance for production and capital expenditures Full Year 2025 Guidance | Metric | Guidance | | :--- | :--- | | Production (NRI BOEPD) | 14,500 - 16,710 | | Sales Volume (NRI BOEPD) | 14,900 - 17,200 | | Production Expense | $148.5 - $161.5 MM | | CAPEX (ex. acquisitions) | $250 - $300 MM | Q2 2025 Guidance | Metric | Guidance | | :--- | :--- | | Production (NRI BOEPD) | 15,400 - 16,800 | | Sales Volume (NRI BOEPD) | 17,800 - 19,300 | | Production Expense | $39.5 - $48.0 MM | | CAPEX (ex. acquisitions) | $65 - $85 MM | Financial Statements (Appendix) Condensed Consolidated Balance Sheets As of March 31, 2025, Vaalco's total assets stood at $927.1 million, down from $955.0 million at year-end 2024, with total liabilities decreasing to $423.0 million and cash and cash equivalents at $40.9 million Balance Sheet Summary (in thousands USD) | Account | March 31, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $40,914 | $82,650 | | Total current assets | $200,838 | $237,927 | | Total assets | $927,103 | $954,950 | | Total current liabilities | $177,675 | $181,728 | | Total liabilities | $423,009 | $453,367 | | Total shareholders' equity | $504,094 | $501,583 | Consolidated Statements of Operations For the three months ended March 31, 2025, Vaalco reported total revenues of $110.3 million and operating income of $26.2 million, resulting in a net income of $7.7 million, or $0.07 per diluted share, consistent with Q1 2024 Statement of Operations Summary (in thousands USD, except per share data) | Account | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $110,329 | $100,155 | | Operating Income | $26,194 | $32,193 | | Income before income taxes | $23,813 | $29,924 | | Net Income | $7,730 | $7,686 | | Diluted Net Income per share | $0.07 | $0.07 | Condensed Consolidated Statements of Cash Flows In Q1 2025, net cash provided by operating activities was $32.7 million, while $58.8 million was used in investing activities and $14.8 million in financing activities, leading to a net decrease in cash of $40.8 million Cash Flow Summary (in thousands USD) | Category | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $32,706 | $21,832 | | Net cash used in investing activities | ($58,774) | ($16,618) | | Net cash used in financing activities | ($14,786) | ($14,455) | | Net change in cash | ($40,827) | ($9,449) | Selected Financial and Operating Statistics For Q1 2025, total average daily production on a working interest (WI) basis was 22,402 BOEPD, and on a net revenue interest (NRI) basis was 17,764 BOEPD, representing a 5% year-over-year increase in NRI production Quarterly Production Comparison (Average Daily BOEPD) | Basis | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | WI Production | 22,402 | 25,300 | 21,804 | | NRI Production | 17,764 | 20,775 | 16,850 | Quarterly Sales and Price Comparison | Metric | Q1 2025 | Q4 2024 | Q1 2024 | | :--- | :--- | :--- | :--- | | NRI Sales (MBOE) | 1,717 | 1,872 | 1,490 | | Avg. Sales Price (NRI, $/BOE) | $64.27 | $64.77 | $66.43 | Non-GAAP Financial Measures Reconciliation Vaalco uses non-GAAP measures like Adjusted Net Income and Adjusted EBITDAX to better reflect underlying performance, with Q1 2025 net income of $7.7 million reconciling to an Adjusted Net Income of $6.3 million and Adjusted EBITDAX of $57.0 million Reconciliation of Net Income to Adjusted Net Income (in thousands USD) | Line Item | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net income | $7,730 | $11,664 | | Adjustments | ($1,390) | ($4,821) | | Adjusted Net Income | $6,340 | $6,843 | Reconciliation of Net Income to Adjusted EBITDAX (in thousands USD) | Line Item | Q1 2025 | Q4 2024 | | :--- | :--- | :--- | | Net income | $7,730 | $11,664 | | Adjustments | $49,228 | $64,569 | | Adjusted EBITDAX | $56,958 | $76,233 |