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VAALCO Energy(EGY) - 2025 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The company reported stable net income of $7.7 million in Q1 2025, with decreased assets and a new RBL facility Condensed Consolidated Balance Sheets Total assets decreased to $927.1 million due to a significant drop in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $40,914 | $82,650 | | Total current assets | $200,838 | $237,927 | | Total assets | $927,103 | $954,950 | | Liabilities & Equity | | | | Total current liabilities | $177,675 | $181,728 | | Total liabilities | $423,009 | $453,367 | | Total shareholders' equity | $504,094 | $501,583 | | Total liabilities and shareholders' equity | $927,103 | $954,950 | Condensed Consolidated Statements of Operations and Comprehensive Income Revenues grew 10.2% to $110.3 million, but higher expenses led to lower operating income Statement of Operations Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues | $110,329 | $100,155 | | Production expense | $44,806 | $32,089 | | Operating income | $26,194 | $32,193 | | Net income | $7,730 | $7,686 | | Diluted net income per share | $0.07 | $0.07 | Condensed Consolidated Statements of Cash Flows Operating cash flow increased to $32.7 million, offset by a sharp rise in investing activities Cash Flow Summary (in thousands) | Activity | 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) | Notes to Condensed Consolidated Financial Statements Notes detail recent acquisitions, a new $190 million RBL facility, and segment revenue contributions - In March 2025, the Company farmed into the CI-705 block offshore Côte d’Ivoire as operator with a 70% working interest for approximately $3.0 million31 - In February 2025, the company acquired the Baobab FPSO in Côte d'Ivoire for a total price of $20.0 million ($5.5 million net to Vaalco)32 - On March 4, 2025, the company entered into a new senior secured reserve-based revolving credit facility (2025 RBL Facility) with aggregate commitments of $190.0 million and an initial borrowing base of $182.0 million6675 - In April 2025, subsequent to the quarter's end, the company drew down $60.0 million under the new 2025 RBL Facility83 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 10% revenue increase driven by new assets, offset by higher production expenses and capital expenditures Recent Developments and Operational Updates The company maintained its dividend, advanced drilling programs, and progressed the Baobab FPSO refurbishment - Paid a Q1 2025 dividend of $0.0625 per share and declared the same for Q2 202591 - Secured a new $190.0 million RBL facility and terminated the prior Glencore facility9294 - The Baobab FPSO in Côte d'Ivoire ceased production on January 31, 2025, for a planned dry dock refurbishment102 - Targeting a Final Investment Decision for the Venus field development (Block P, Equatorial Guinea) by the end of Q2 2025103 Capital Resources and Liquidity Liquidity is supported by operating cash flow, $40.9 million in cash, and $182.0 million in available credit Capital Expenditures (Accrual Basis, in millions) | Period | Capital Expenditures | | :--- | :--- | | Q1 2025 | $51.3 | | Q1 2024 | $24.0 | - At March 31, 2025, the company had $40.9 million in unrestricted cash and $182.0 million of available borrowing capacity under its 2025 RBL Facility93111 - Material cash requirements include FPSO refurbishment, capital projects (drilling in Gabon and Egypt), lease payments, and commitments under the Egyptian Merged Concession Agreement116117118119120 Results of Operations Revenue increased 10% to $110.3 million due to volume, while production expenses rose 40% from new operations and settlements Q1 2025 vs Q1 2024 Operations Summary | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net Sales (MBoe) | 1,599 | 1,533 | | Average Realized Price ($/Boe) | $64.27 | $66.43 | - Gabon revenue decreased by $5.3 million due to lower realized prices ($79.25/Bbl vs $84.14/Bbl)138 - Côte d'Ivoire, acquired in April 2024, contributed $18.0 million in revenue in Q1 2025141 - Production expenses increased by $12.7 million (40%), primarily due to a $4.7 million government audit settlement in Gabon, chemical costs, and the inclusion of Côte d'Ivoire142 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from commodity prices, foreign exchange rates, and interest rates - The company's primary market risk is the price of crude oil, natural gas, and NGLs156 Sensitivity to a $5/Bbl Decrease in Crude Oil Price (In Millions) | Country | Decrease in Revenues | Decrease in Operating Income | | :--- | :--- | :--- | | Gabon | $3.3 | $3.0 | | Egypt | $3.2 | $1.9 | | Côte d'Ivoire | $1.2 | $0.6 | | Canada | $0.9 | $0.7 | - As of March 31, 2025, the company had derivative collars to hedge oil production through September 2025158 - The company has foreign exchange risk exposure to the Central African CFA Franc (XAF), Canadian Dollar (CAD), Egyptian Pound (EGP), and Swedish Krona (SEK)150151152153 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective due to material weaknesses in IT controls - Disclosure controls and procedures were concluded to be not effective as of March 31, 2025166 - The ineffectiveness is due to material weaknesses identified as of December 31, 2024, related to ineffective IT controls over the procure-to-pay system and ineffective process-level controls in the same area167168 - A remediation plan is being implemented, but the material weaknesses will not be considered remediated until the new controls operate effectively for a sufficient period169 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not subject to any material legal proceedings - Management opines that none of the current claims and litigation are material to the company's business173 Item 1A. Risk Factors A new risk factor was added concerning contract provisions that could deter a potential acquisition - A new risk factor was added concerning provisions in agreements (e.g., PSCs, JOAs) that could discourage a third-party acquisition of the company176 - These provisions include restrictions on asset assignments, consent requirements, and preemption rights, which could deter potential acquirers and deprive shareholders of a potential sale premium176177 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered equity securities were sold during the first quarter of 2025 - No sales of unregistered securities occurred during the quarter ended March 31, 2025178 Item 5. Other Information No directors or officers adopted or modified Rule 10b5-1 trading arrangements in Q1 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement in Q1 2025179 Item 6. Exhibits This section lists exhibits filed, including the new credit facility agreement and officer certifications - The exhibits include the new Borrowing Base Facility Agreement dated March 4, 2025, and Sarbanes-Oxley certifications181