HOUSTON, Aug. 06, 2024 (GLOBE NEWSWIRE) -- VAALCO Energy, Inc. (NYSE:EGY, LSE: EGY)) ("VAALCO" or the "Company") today reported operational and financial results for the second quarter of 2024.  Second Quarter 2024 Highlights and Recent Key Items: Closed the accretive all cash acquisition of Svenska Petroleum Exploration AB ("Svenska") for a net purchase price of $40.2 million; Updated third-party reserve engineer's calculation of proved reserves as of December 31, 2023 for Svenska that shows significant increase of SEC proved reserves to 16.9 million barrels of oil equivalent ("MMBOE") (93% oil); Realized a $19.9 million bargain purchase gain on the transaction; Reported strong Q2 2024 net income of $28.2 million ($0.27 per diluted share) and, Adjusted Net Income(1) of $22.6 million ($0.22 per diluted share); Increased Adjusted EBITDAX(1) by 17% to $72.5 million compared to Q1 2024, driven by sales increase associated with Côte d'Ivoire lifting in May following the closing of the Svenska acquisition; Achieved production of 20,588 net revenue interest ("NRI")(2) barrels of oil equivalent per day ("BOEPD") and working interest ("WI")(3) production of 25,411 BOEPD; second quarter 2024 included new production of 3,329 NRI BOEPD (3,329 WI BOEPD) from Côte d'Ivoire; Delivered better than expected results from the Canadian drilling program with three wells averaging 30 day initial production ("IP")1 rates of 464 barrels of oil per day ("BOPD"), significantly increasing the liquid ratio in Canada; Reported NRI sales of 1,764,000 barrels of oil equivalent ("BOE"), or 19,386 BOEPD, above the midpoint of guidance; and 18% above the first quarter of 2024 due to the Côte d'Ivoire lifting; Posted unrestricted cash of $62.9 million which is after $40.2 million paid for the Svenska acquisition, $6.5 million paid for quarterly dividend and $32.5 million in cash capital spending for the quarter; Received $8 million payment post quarter-end of back dated accounts receivables ("AR") in Egypt from EGPC. And, in July, written confirmation that the invoice was recognized in their June Accounts Payable as owed to us for our Merged Concession effective date adjustment;  Settled $30.2 million in foreign income taxes for Gabon through the government taking its oil in-kind during a Q2 2024 lifting; and Announced quarterly cash dividend of $0.0625 per share of common stock to be paid on September 20, 2024.   (1)   Adjusted EBITDAX, Adjusted Net Income, Adjusted Working Capital and Free Cash Flow2 are Non-GAAP financial measures and are described and reconciled to the closest GAAP measure in the attached table under "Non-GAAP Financial Measures."   (2)   All NRI production rates are VAALCO's working interest volumes less royalty volumes, where applicable.   (3)   All WI production rates and volumes are VAALCO's working interest volumes, where applicable.         George Maxwell, VAALCO's Chief Executive Officer commented, "We had another strong quarter operationally and financially, closed on a highly accretive acquisition and continue to focus on profitably generating cash flow to fund future projects, while maintaining our commitment to meaningful shareholder returns through our quarterly dividend policy. We are very pleased with the solid results from our Canadian drilling program, which improved our liquid mix considerably in the second quarter as we had three of the four wells come in with higher-than-expected IP30 rates. We closed the Côte d‘Ivoire transaction on April 30, had a lifting there in May and collected payment in June." "Looking at our highly accretive Côte d'Ivoire acquisition, we recognized a $19.9 million non-cash bargain purchase gain, which benefited our second quarter earnings, but it's the strategic opportunities that provide VAALCO another strong asset to support future growth that we are most excited about. We are very pleased with the results of our third-party reserve engineer's calculation of proved reserves as of December 31, 2023 that shows even greater reserves than we initially disclosed, up approximately 30% from our initial disclosure. This strategic and highly cost-effective acquisition strategically expands our West African focus area with a sizeable producing asset that has significant upside potential and considerable future development opportunities in Côte d'Ivoire, a well-established and investment-friendly country." "The focus for the second half of 2024 will be the preparation for major projects expected to deliver a step-change in organic growth across the portfolio in 2025. We expect to see an increase in capex investment through the second half of the year associated with these numerous projects including the drilling campaign in Gabon and the FPSO upgrade in Cote d'Ivoire. We are excited about the future and plan to continue to generate strong operational cash flow to fund our impressive organic opportunities moving forward, while continuing to return capital to our shareholders through the quarterly dividend." Operational Update  Egypt VAALCO focused on enhancing production in the first half of 2024 through a series of planned workovers, as well as through interventions using the OGS-10 rig. VAALCO finalized the K-81 recompletion at the start of the first quarter which was a carry-over from its 2023 drilling activity. The EA-55 well, drilled in October 2023, was fracked and put online in January 2024. Three additional workover recompletions were completed in the second quarter with one more in progress. With the low cost of workovers, the well economics are strongly positive. A summary of the Egyptian workover campaign's impact in the first half of 2024 is presented below: VAALCO Egypt 2024 Workover Wells   Well Workover date Type Completion Zone   Perforation Interval (ft)     IP-30 Rate (BOPD)   K-81 1-Jan-24 Recompletion Asl-D     13.1       154   EA-55 10-Jan-24 Frac & Complete Redbed   Hydraulic Frac       143   H-22 7-Feb-24 Recompletion Yusr-A     9.8       82   K-65_ST1 14-Feb-24 Recompletion Asl-D     13.1       43*   K-85 16-Mar-24 Recompletion Asl-D     13.1       420   K-84 27-Mar-24 Recompletion Asl-G     16.4       58*   K-74 3-Apr-24 Water Shut-off Recompletion Asl-A     8.2       108   K-77 7-Apr-24 Recompletion Asl-A     26.2       100   K-84 13-Jun-24 Recompletion Asl-D     19.7       430   K-80 19-Jun-24 Recompletion Asl-D     13.1       188    *Production as of June 30, 2024 – Sand production – Possible Sand Screen Required Canada The 2024 drilling campaign commenced in January 2024 with the drilling of 9-12-30-4W5, which was spud on January 17, 2024. The first well was drilled to a total depth of 22,732 feet. The second well of the program, 10-12-30-4W5, was spud on February 9, 2024, and drilled to a total depth of 21,736 feet. The third well on the program, 11-12-30-4W5 was spud on February 23, 2024, and drilled to a total depth of 21,624 feet. The fourth well on the program 1-18-30-3W5 was spud on March 9, 2024, and drilled to a total depth of 20,669 feet. The drilling rig was released on March 24, 2024. Completion of the wells began in late March and was completed in April. By early May all wells were on production with strong initial rates as noted below: VAALCO Canada 2024 Wells Well Spud date Net Pay (ft) Penetrated Pay Zones Completion Zone   Perforation Interval (ft)   IP-30 Rate (BOEPD) 09-12-30-4W5 1/17/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium     115 Stg x 15T Hydraulic Fracture Treatment   479 10-12-30-4W5 2/22/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium     100 Stg x 15T Hydraulic Fracture Treatment   469 11-12-30-4W5 2/23/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium     108 Stg x 15T Hydraulic Fracture Treatment   444 1-18-30-3W5 9/3/2024 2.75-Mile Hz (4,400m, 14,430ft) Upper Bioturbated Cardium Cardium     106 Stg x 15T Hydraulic Fracture Treatment   182   Gabon VAALCO is currently finalizing locations and planning for the next drilling campaign at Etame that is expected to occur early in 2025. In October 2022, VAALCO successfully completed its transition to a Floating Storage and Offloading vessel ("FSO") and related field reconfiguration processes. This project provides a low cost FSO solution that increases the storage capacity for the Etame block and improved operational performance. The Company continues to emphasize operational excellence, production uptime and enhancement in 2024 to minimize decline until the next drilling campaign. The focus is on the continued production optimization of the new flow line configurations through the Etame Facility, for final processing before being pumped to the FSO. This continued optimization and understanding of the post-reconfiguration process dynamics of the Etame platform, have resulted in a very high uptime of the Etame Facility. Côte d'Ivoire  Prior to closing of the acquisition, at the beginning of Q2 2024, production was shut in due to the planned field maintenance shutdown. The Baobab production shutdown took place successfully and as per plan between March 21, 2024 and April 13, 2024. All nine operational production wells were successfully restarted in mid-April with flush production rates of just over 21,000 BOEPD, which has since stabilized to around 18,000 BOEPD.  During the second quarter, one lifting took place in May of 655,715 gross barrels or 211,294 net barrels to VAALCO, achieving a price of $81.70 per barrel. Work with Modec, the operator of the Baobab Floating Production and Offloading Vessel ("FPSO"), on the drydocking project for the FPSO, projected to be offline in 2025, continued in the second quarter of 2024. The operator is currently preparing detailed project timetable and costings for the partners and regulator; however preliminary work including the execution of a letter of intent with Modec on April 4, 2024 which covers the key contracts to be executed, including vessel purchase, EPC, and O&M amendments, as well as selection of the disconnect and reconnect contractor, and support for the revised yard bid from Dubai dry docks among other activities. Additionally, in the second quarter of 2024, the outstanding tank inspections continued in preparation for the dry dock. Financial Update – Second Quarter of 2024 VAALCO reported net income of $28.2 million ($0.27 per diluted share) for the second quarter of 2024 which was up significantly compared with net income of $7.7 million ($0.07 per diluted share) in the first quarter of 2024 and up compared to $6.8 million ($0.06 per diluted share) in the second quarter of 2023. The increase in earnings is driven by the non-cash bargain purchase gain on the acquisition, increased sales associated with Côte d'Ivoire and was partially offset by increased production expense.  Adjusted EBITDAX totaled $72.5 million in the second quarter of 2024, an increase from $61.7 million in the first quarter of 2024 and from $65.3 million generated in the same period in 2023. The increase was primarily due to additional sales volumes from Côte d'Ivoire. Quarterly Summary - Sales and Net Revenue                                                                                 $ in thousands   Three Months Ended June 30, 2024     Three Months Ended March 31, 2024       Gabon     Egypt     Canada     Côte d'Ivoire     Total     Gabon     Egypt     Canada     Côte d'Ivoire     Total   Oil Sales     62,327       65,314       9,547       17,240       154,428       64,788       63,192       4,153       —       132,133   NGL Sales     —       —       1,922       —       1,922       —       —       1,977       —       1,977   Gas Sales     —       —       384       -       384       -       -       820       —       820   Gross Sales     62,327       65,314       11,854       17,240       156,734       64,788       63,192       6,951       —       134,931                                                                                     Selling Costs & carried interest     -       (117 )     (318 )     -       (435 )     1,174       (111 )     (143 )     —       920   Royalties & taxes     (8,653 )     (29,716 )     (1,152 )     -       (39,521 )     (8,458 )     (26,120 )     (1,118 )     —       (35,696 )                                                                                                                                                                     Net Revenue     53,674       35,481       10,384       17,240       116,778       57,504       36,961       5,690       —       100,155                                                                                     Oil Sales MMB (working interest)     759       953       130       211       2,053       770       950       61       —       1,781   Average Oil Price Received   $ 82.13     $ 68.52     $ 73.52     $ 81.70     $ 75.22     $ 84.19     $ 66.52     $ 67.83       —     $ 74.21   Change                                     1 %                                         Average Brent Price     —       —       —             $ 84.65       —       —       —             $ 83.00   Change                                     2 %                                                                                                                           Gas Sales MMCF (working interest)     —       —       423               423       —       —       469               469   Average Gas Price Received     —       —     $ 0.91             $ 0.91       —       —     $ 1.75             $ 1.75   Change                                     -48 %                                         Average Aeco Price ($USD)     —       —     $ 0.84             $ 0.84       —       —     $ 1.46             $ 1.46   Change                                     -42 %                                                                                                                           NGL Sales MMB (working interest)     —       —       76               76       —       —       76               76   Average Liquids Price Received     —       —     $ 25.16             $ 25.16       —       —     $ 25.98             $ 25.98   Change                                     -3 %                                         Revenue and Sales   Q2 2024     Q2 2023     % Change Q2 2024 vs. Q2 2023     Q1 2024     % Change Q2 2024 vs. Q1 2024   Production (NRI BOEPD)     20,588       19,676       5 %     16,848       22 % Sales (NRI BOE)     1,764,000       1,803,000       (2 )%     1,490,000       18 % Realized commodity price ($/BOE)   $ 66.05     $ 59.37       11 %   $ 66.43       (1 )% Commodity (Per BOE including realized commodity derivatives)   $ 66.03     $ 59.34       11 %   $ 66.41       (1 )% Total commodity sales ($MM)   $ 116.5     $ 109.2       7 %   $ 100.2       16 %                                           VAALCO had net revenues increase by $16.0 million or 16% as total NRI sales volumes of 1,764,000 BOE was higher than Q1 2024 and decreased 2% compared to 1,803,000 BOE for Q2 2023. Q2 2024 NRI sales were toward the upper end of VAALCO's guidance. The Company expects third quarter 2024 NRI sales to be between 21,700 and 24,000 BOEPD, reflecting the addition of the Côte d'Ivoire volume for an entire quarter. Q2 2024 realized pricing (net of royalties) was virtually flat compared to Q1 2024 and 11% higher compared to Q2 2023.  4 Costs and Expenses   Q2 2024     Q2 2023     % Change Q2 2024 vs. Q2 2023     Q1 2024     % Change Q2 2024 vs. Q1 2024   Production expense, excluding offshore workovers and stock comp ($MM)   $ 52.4     $ 38.8       35 %   $ 32.1       63 % Production expense, excluding offshore workovers ($/BOE)   $ 29.70     $ 21.51       38 %   $ 21.58       38 % Offshore workover expense ($MM)   $ 0.1     $ (0.2 )     134 %   $ (0.1 )     — % Depreciation, depletion and amortization ($MM)   $ 33.1     $ 38.0       (13 )%   $ 25.8       28 % Depreciation, depletion and amortization ($/BOE)   $ 18.78     $ 21.10       (11 )%   $ 17.33       8 % General and administrative expense, excluding stock-based compensation ($MM)   $ 6.6     $ 4.8       38 %   $ 5.9       14 % General and administrative expense, excluding stock-based compensation ($/BOE)   $ 3.8     $ 2.70       40 %   $ 3.9       (4 )% Stock-based compensation expense ($MM)   $ 0.9     $ 0.6       50 %   $ 0.9       - % Current income tax expense (benefit) ($MM)   $ 13.3     $ 12.4       7 %   $ 25.7       (48 )% Deferred income tax expense (benefit) ($MM)   $ (4.0 )   $ (0.8 )     405 %   $ (3.4 )     17 %                                           Total production expense (excluding offshore workovers and stock compensation) of $52.4 million in Q2 2024 was an increase compared to Q1 2024 and an increase compared to the same period in 2023. The increase in Q2 2024 was primarily driven by a non-cash purchase price adjustment for the Svenska acquisition flowing through production expense and increased operating expenditure associated with the addition of Côte d'Ivoire in the quarter. VAALCO has seen withholding tax, inflationary and industry supply chain pressure on personnel and contractor costs. Q2 2024 had minimal offshore workover expense and was equal to workover expense in Q1 2024. Q2 2024 production expense per BOE, excluding offshore workover expense, increased to $29.70 per BOE which was higher than Q2 2023 and Q1 2024 primarily due to the increased costs associated with the non-cash purchase price adjustment for the Svenska acquisition. DD&A expense for Q2 2024 was $33.1 million which was higher than $25.8 million in Q1 2024 and lower than $38.0 million in Q2 2023. The increase in Q2 2024 DD&A expense compared to Q1 2024 is due primarily to increased depletion associated with the addition of Côte d'Ivoire. The decrease in Q2 2024 DD&A expense compared to Q2 2023 is due to lower depletable costs in Gabon, Egypt, and Canada partially offset by higher depletable costs in Côte d'Ivoire.  General and administrative ("G&A") expense, excluding stock-based compensation, increased to $6.6 million in Q2 2024 from $5.9 million in Q1 2024 and $4.8 million in Q2 2023. The increase in general and administrative expenses compared to Q2 2023 and Q1 2024 is primarily due to higher professional service fees, salaries and wages, and accounting and legal fees due to growth due to the acquisition. Q2 2024 cash G&A was within the Company's guidance and nearly flat compared to Q1 2024 on a per barrel basis. Non-cash stock-based compensation expense was $0.9 million for Q2 2024 compared to $0.6 million for Q2 2023. Non-cash stock-based compensation expense for Q1 2024 was $0.9 million. Other income (expense), net, was an expense of $2.0 million for Q2 2024, compared to an expense of $0.5 million during Q2 2023 and an expense of $1.8 million for Q1 2024. Other income (expense), net, normally consists of foreign currency losses. Also included in Q2 2024 amount are $1.8 million in transaction costs related to the Svenska acquisition. Foreign income taxes for Gabon are settled by the government taking oil in-kind. Q2 2024 income tax expense was an expense of $9.3 million and is comprised of current tax expense of $13.3 million and deferred tax benefit of $4.0 million. Current quarter tax was impacted by non-deductible items (such as the Svenska transaction costs) and the change in market value of tax barrels due to Gabon State mark-to-market at quarter end. Q1 2024 income tax expense was an expense of $22.2 million. This was comprised of $25.7 million of current tax expense and a deferred tax benefit of $3.4 million. Q2 2023 income tax expense was an expense of $11.6 million. This was comprised of $12.4 million of current tax expense and a deferred tax benefit of $0.8 million. For all periods, VAALCO's overall effective tax rate was impacted by non-deductible items associated with tax rates in foreign jurisdictions higher than the US statutory rate and by non-deductible items associated with operations. Financial Update – First Six Months of 2024 WI Sales for the first six months of 2024 increased to 4,134 MBOE compared to 3,438 MBOE in the first six months of 2023. The increase was driven primarily by the Côte d'Ivoire acquisition. Crude oil sales are a function of the number and size of crude oil liftings in each quarter and do not always coincide with volumes produced in any given period. The average realized crude oil price for the first six months of 2024 was $74.75 per barrel, representing an increase of 8.0% from $69.28 realized in the first six months of 2023. This increase in crude oil price reflects the increase in commodity pricing over the past year. The Company reported net income for the six months ended June 30, 2024 of $35.8 million, which compares to $10.2 million for the same period of 2023. The increase in net income for the six months ended June 30, 2024 compared to the same period in 2023 was primarily due to the bargain purchase gain related to the Svenska acquisition in April, as well as higher sales and realized pricing. Year to Date Summary - Sales and Net Revenue                                                                                 $ in thousands   Six Months Ended June 30, 2024     Six Months Ended June 30, 2023       Gabon     Egypt     Canada     Côte d'Ivoire     Total     Gabon     Egypt     Canada     Côte d'Ivoire     Total   Oil Sales     127,115       128,506       13,700       17,240       286,561       130,079       104,822       14,979       —       249,880   NGL Sales     —       —       3,898               3,898       —       —       4,348               4,348   Gas Sales     —       —       1,205               1,205       —       —       1,661               1,661   Gross Sales     127,115       128,506       18,802       17,240       291,663       130,079       104,822       20,988       —       255,889                                                                                     Selling Costs & carried interest     1,174       (228 )     (461 )             485       2,212       (498 )     —               1,714   Royalties & taxes     (17,111 )     (55,836 )     (2,269 )             (75,216 )     (17,630 )     (48,232 )     (2,098 )     —       (67,960 )