________________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2001
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-20928
_____________________
VAALCO Energy, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 76-0274813
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4600 Post Oak Place
Suite 309
Houston, Texas 77027
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 623-0801
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes x No___
----
As of August 3, 2001 there were outstanding 20,744,569 shares of Common
Stock, $.10 par value per share, of the registrant.
________________________________________________________________________________
VAALCO ENERGY, INC. AND SUBSIDIARIES
Table of Contents
PART I. FINANCIAL INFORMATION
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (Unaudited)
June 30, 2001 and December 31, 2000....................... 3
Statements of Consolidated Operations (Unaudited)
Three months and six months ended June 30, 2001 and 2000.. 4
Statements of Consolidated Cash Flows (Unaudited)
Six months ended June 30, 2001 and 2000................... 5
Notes to Consolidated Financial Statements................... 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 9
PART II. OTHER INFORMATION.................................. 14
2
VAALCO ENERGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars, except par value amounts)
June 30, December 31,
2001 2000
---------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 11,819 $ 12,440
Funds in escrow 36 751
Receivables:
Trade 306 237
Other 134 153
Materials and supplies, net of allowance for inventory obsolescence of $5 331 329
Prepaid expenses and other 114 24
----------------- ------------------
Total current assets 12,740 13,934
----------------- ------------------
PROPERTY AND EQUIPMENT-SUCCESSFUL EFFORTS METHOD
Wells, platforms and other production facilities 1,860 1,154
Undeveloped acreage 633 555
Work in progress 5,732 2,268
Equipment and other 65 65
----------------- ------------------
8,290 4,042
Accumulated depreciation, depletion and amortization (902) (850)
----------------- ------------------
Net property and equipment 7,388 3,192
----------------- ------------------
OTHER ASSETS:
Investment in unconsolidated entities 834 1,448
Deferred tax asset 410 410
Other long-term assets 54 57
----------------- ------------------
TOTAL $ 21,426 $ 19,041
================= ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,788 $ 463
Accounts with partners 2,457 2,047
Income taxes payable 2 10
----------------- ------------------
Total current liabilities 5,247 2,520
----------------- ------------------
MINORITY INTEREST 13 13
FUTURE ABANDONMENT COSTS 3,294 3,294
----------------- ------------------
Total liabilities 8,554 5,827
----------------- ------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $25 par value, 500,000 shares authorized;
10,000 shares issued and outstanding in 2001 and 2000 250 250
Common stock, $.10 par value, 100,000,000 authorized shares
20,749,964 shares issued of which 5,395 are in the treasury in 2001 and 2000 2,075 2,075
Additional paid-in capital 41,215 41,215
Accumulated deficit (30,656) (30,314)
Less treasury stock, at cost (12) (12)
----------------- ------------------
Total stockholders' equity 12,872 13,214
----------------- ------------------
TOTAL $ 21,426 $ 19,041
================= ==================
See notes to consolidated financial statements.
3
VAALCO ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(in thousands of dollars, except per share amounts)
Three months Ended June 30, Six months Ended June 30,
------------------------------------ ---------------------------------------
2001 2000 2001 2000
--------------- ---------------- --------------- ----------------
REVENUES:
Oil and gas sales $ 517 $ 486 $ 834 $ 775
Gain on sale of assets -- -- 215 --
--------------- ---------------- --------------- ----------------
Total revenues 517 486 1,049 775
--------------- ---------------- --------------- ----------------
OPERATING COSTS AND EXPENSES:
Production expenses 216 153 309 227
Depreciation, depletion and amortization 49 4 52 8
Exploration expense -- 36 -- 590
General and administrative expenses 537 452 788 860
--------------- ---------------- --------------- ----------------
Total operating costs and expenses 802 645 1,149 1,685
--------------- ---------------- --------------- ----------------
OPERATING LOSS (285) (159) (100) (910)
OTHER INCOME (EXPENSE):
Interest income 84 135 222 290
Equity loss in unconsolidated entities (12) (562) (445) (2,955)
Other, net -- (20) (2) (20)
--------------- ---------------- --------------- ----------------
Total other income (expense) 72 (447) (225) (2,685)
--------------- ---------------- --------------- ----------------
LOSS BEFORE TAXES (213) (606) (325) (3,595)
Income tax expense 2 3 17 3
--------------- ---------------- --------------- ----------------
NET LOSS ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ (215) $ (609) $ (342) $ (3,598)
=============== ================ =============== ================
LOSS PER COMMON SHARE:
BASIC AND DILUTED $ (0.01) $ (0.03) $ (0.02) $ (0.17)
=============== ================ =============== ================
WEIGHTED AVERAGE COMMON SHARES:
BASIC AND DILUTED 20,745 20,745 20,745 20,745
=============== ================ =============== ================
See notes to consolidated financial statements.
4
VAALCO ENERGY, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
(in thousands of dollars)
Six months Ended June 30,
----------------------------------------------
2001 2000
------------------ ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (342) $ (3,598)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation, depletion and amortization 52 8
Equity loss in unconsolidated entities 445 2,955
Exploration expense -- 590
Gain on sale of assets (215) --
Change in assets and liabilities that provided (used) cash:
Funds in escrow 715 10,043
Trade receivables (69) (292)
Accounts with partners 410 116
Other receivables 19 (1,312)
Materials and supplies (2) 1
Prepaid expenses and other (90) (41)
Accounts payable and accrued liabilities 2,325 (61)
Income taxes payable (8) --
------------------ ----------------
Net cash (used in) provided by operating activities 3,240 8,409
------------------ ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Disposals of property and equipment 1,023 27
Additions to property and equipment (5,056) (451)
Investment in unconsolidated entities 169 (398)
Other 3 (26)
------------------ ----------------
Net cash used in investing activities (3,861) (847)
------------------ ----------------
NET CHANGE IN CASH AND CASH EQUIVALENTS (621) 7,561
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,440 2,925
------------------ ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 11,819 $ 10,486
================== ================
Cash Income Taxes Paid $ 21 $ --
================== ================
See notes to consolidated financial statements.
5
VAALCO ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)
1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of VAALCO Energy, Inc. and subsidiaries
(collectively, "VAALCO" or the "Company"), included herein are unaudited, but
include all adjustments consisting of normal recurring accruals which the
Company deems necessary for a fair presentation of its financial position,
results of operations and cash flows for the interim period. Such results are
not necessarily indicative of results to be expected for the full year. These
financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB for the
year ended December 31, 2000.
VAALCO Energy, Inc., a Delaware corporation, is a Houston-based independent
energy company principally engaged in the acquisition, exploration,
development and production of crude oil and natural gas. VAALCO owns
producing properties and conducts exploration activities as operator of
consortiums internationally in the Philippines and Gabon. Domestically, the
Company has interests in the Texas Gulf Coast area.
VAALCO's Philippine subsidiaries include Alcorn (Philippines) Inc., Alcorn
(Production) Philippines Inc. and Altisima Energy, Inc. VAALCO's Gabon
subsidiaries are VAALCO Gabon (Etame), Inc. and VAALCO Production (Gabon),
Inc. VAALCO Energy (USA), Inc. holds interests in certain properties in the
United States.
2. RECENT DEVELOPMENTS
In January 2001, the Company acquired a 65% interest in the Etame Block
offshore Gabon, West Africa from Western Atlas Afrique, Ltd. a subsidiary of
Baker Hughes. Consideration for the acquisition was $1 million in cash and a
future net profits interest in the event the existing discoveries on the
block are developed. The Company resold 52.5% of the interest held by Western
Atlas Afrique to two companies for $1 million and their proportionate
assumption of the future net profits interest. The Company now holds a 30.35%
interest in the Etame Block and is operator of the 3,073 square kilometer
concession.
The Company drilled the Etame 1 well and made a Gamba sandstone discovery on
the Etame concession in 1998, which tested approximately 3,700 barrels of oil
per day on a 32/64's inch choke. In January 1999, the Company completed the
drilling of the Etame 2V well, which delineated the oil water contact for the
discovery. Because the Gamba reservoir lies below a layer of salt and is
structurally complex, during 1999 and the first half of 2000, a seismic
reprocessing effort was performed to better map the Gamba reservoir. Based on
the seismic reprocessing effort, the Company drilled a third well, the Etame
3V well, on the discovery during the first quarter of 2001. The well found
pay in the Gamba sandstone approximately 1.2 kilometers (0.75 miles) away
from the Etame 1 well. In addition, pay was found in the Dentale sandstones
below the Gamba sandstone. A total of 34 meters (110 feet) of gross pay
interval was encountered in the Etame 3V well.
6
VAALCO ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)
In June 2001, drilling of the Etame 4V delineation well was completed. The
well was drilled approximately 2.4 kilometers (1.5 miles) from the Etame 1
discovery well and logged 32 meters (105 feet) of oil column with net pay of
approximately 24 meters (80 feet). The well was conventionally cored and
recovered 17 meters (57 feet) of oil-saturated sandstone in the Gamba and
Dentale formations. The Gamba sandstone, the primary target reservoir, was
approximately 14 meters (45 feet) thick in the well and was full of oil
throughout the entire interval. This represents approximately 30 percent
greater sand thickness than seen in the previous wells within the Gamba
formation.
As a result of the two successful delineation wells drilled this year, the
Etame consortium has approved a budget to develop the field. Initial
development will consist of three subsea wells connected to a floating
production, storage and offloading tanker at a cost of approximately $37
million ($11.2 million net to the Company). The project is expected to come
online in the third quarter of 2002 at initial flow rates of at least 12,000
barrels of oil per day. To fund its share of the development project, the
Company has negotiated a line of credit of $10 million available through
2002. The Company is actively negotiating with other funding sources for
permanent financing for the project.
In June 2001, the Company announced the results of a well drilled in Brazos
County, Texas. The well was completed at an initial flow rate of 525 barrels
of oil per day and 1.4 million cubic feet of gas per day. The well was
completed horizontally in the Buda and Georgetown formations. An offset
location to the well was spudded in July and is currently drilling. VAALCO
has a 30 percent interest in the project.
Effective June 30, 2000, the Company elected to withdraw from Hunt Overseas
Exploration Company L.P. ("Hunt"). The Company formerly held a 7.5% limited
partnership interest in Hunt. The Company's obligations under the partnership
were to contribute up to $22.5 million for its share of the exploration phase
of the partnership, $22.3 million of which had been funded as of June 30,
2000. In addition, if Hunt discovered oil, the Company may have been required
to contribute an additional $7.5 million to fund the appraisal of the
discovery. As a result of withdrawing from the Hunt venture, Hunt released
certain funds in escrow totaling $8.4 million and reimbursed the Company $1.3
million for its share of net working capital in the partnership as of June
30, 2000.
The Company has elected to terminate its joint venture with Paramount
Petroleum, Inc., effective June 1, 2001, which focused on domestic onshore
prospects in Mississippi, Alabama and Louisiana. The Company will receive its
proportionate 93.75% interest in kind in all remaining prospects within the
joint venture upon completion of assignment documentation.
7
VAALCO ENERGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(Unaudited)
3. EARNINGS PER SHARE
The weighted average common shares outstanding represent those of historical
VAALCO for the applicable periods.
The Company accounts for earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128 - "Earnings per Share," which
establishes the requirements for presenting earnings per share ("EPS"). SFAS
No. 128 requires the presentation of "basic" and "diluted" EPS on the face of
the income statement. Basic EPS is calculated using the average number of
common shares outstanding during each period. Diluted EPS assumes the
conversion of preferred stock to common stock and the exercise of all stock
options having exercise prices less than the average market price of the
common stock using the treasury stock method. The Company's preferred stock
is convertible to 27,500,000 shares of common stock.
4. RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" which was
amended in June 1999 by SFAS No. 137, "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133" and in June 2000 by SFAS No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities". SFAS No. 133, as amended, is
effective for derivative instruments and hedging activities that require an
entity to recognize all derivatives as an asset or liability measured at its
fair value. Depending on the intended use of the derivative, changes in its
fair value will be reported in the period of change as either a component of
earnings or a component of comprehensive income. Retroactive application to
periods prior to adoption is not allowed. The Company adopted SFAS No. 133,
as amended, effective January 1, 2001. The adoption had no effect on the
Company's financial position or results of operations as all existing
contracts either do not meet the definition of a derivative or qualify for
the normal purchases and sales exemption. The Company does not currently
engage in hedging activities.
8
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This report includes "forward looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended ("Exchange Act"). All statements other than
statements of historical fact included in this Report (and the exhibits hereto),
including without limitation, statements regarding the Company's financial
position and estimated quantities and net present values of reserves, are
forward looking statements. The Company can give no assurances that the
assumptions upon which such statements are based will prove to have been
correct. Important factors that could cause actual results to differ materially
from the Company's expectations ("Cautionary Statements") are disclosed in the
section "Risk Factors" included in the Company's Forms 10-KSB and other periodic
reports filed under the Exchange Act, which are herein incorporated by
reference. All subsequent written and oral forward looking statements
attributable to the Company or persons acting on its behalf are expressly
qualified by the Cautionary Statements.
INTRODUCTION
------------
The Company's results of operations are dependent upon the difference between
prices received for its oil and gas production and the costs to find and produce
such oil and gas. Oil and gas prices have been and are expected in the future to
be volatile and subject to fluctuations based on a number of factors beyond the
control of the Company. The Company's production in the Philippines is from
mature offshore fields with high production costs. The Company's margin on sales
from these fields (the price received for oil less the production costs for the
oil) is lower than the margin on oil production from many other areas. As a
result, the profitability of the Company's production in the Philippines is
affected more by changes in oil prices than production located in other areas.
The Company's results of operations are also affected by currency exchange
rates. While oil sales are denominated in U.S. dollars, operating costs are
predominately denominated in pesos. An increase in the exchange rate of pesos to
the dollar will have the effect of increasing operating costs while a decrease
in the exchange rate will reduce operating costs.
A substantial portion of the Company's oil production is located offshore of the
Philippines. The Company produces into barges, which transport the oil to
market. Due to weather and other factors, the Company's production is generally
highest during the first and fourth quarters of the year.
The Company uses the successful efforts method to account for its investment in
oil and gas properties, whereby costs of productive wells, developmental dry
holes and productive leases are capitalized and amortized using the units-of-
production method based on estimated net proved reserves. The costs of
development wells are capitalized but charged to expense if and when the well is
determined to be unsuccessful. Geological and geophysical costs and the costs of
carrying and retaining undeveloped properties are expensed as incurred.
9
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
-------------------------------
Historically, the Company's primary source of capital resources has been from
cash flows from operations, private sales of equity, borrowings and purchase
money debt. In 2001 and 2000, the Company's primary uses of capital have been to
fund its exploration operations.
The Company produces oil from the Matinloc and Nido fields in the South China
Sea, the Philippines. The fields produced approximately 415,000 gross barrels of
oil during 2000. For the six months ended June 30, 2001, total production from
the fields was approximately 196,000 gross barrels of oil. Substantially all of
the Company's crude oil and natural gas is sold at the well head at posted or
index prices under short-term contracts, as is customary in the industry. The
Company markets its share of crude oil under agreements with Seaoil and Caltex,
both local Philippines refiners. While the loss of these buyers might have a
material effect on the Company in the near term, management believes that the
Company would be able to obtain other customers for its crude oil.
The Company has invested $3.0 million in the Paramount joint venture of which
$2.0 million has been impaired as of June 30, 2001. The Company has elected to
terminate its joint venture with Paramount Petroleum, Inc., effective June 1,
2001 and received a cash payment of $169 thousand from the joint venture. The
Company will receive its proportionate 93.75% interest in kind in all remaining
prospects within the joint venture upon completion of assignment documentation.
Effective June 30, 2000 the Company elected to withdraw from Hunt Overseas
Exploration Company L.P. ("Hunt"). The Company formerly held a 7.5% limited
partnership interest in Hunt. The Company's obligations under the partnership
were to contribute up to $22.5 million for its share of the exploration phase of
the partnership, $22.3 million of which had been funded as of June 30, 2000. In
addition, if Hunt discovered oil, the Company may have been required to
contribute an additional $7.5 million to fund the appraisal of the discovery. As
a result of withdrawing from the Hunt venture, Hunt released certain funds in
escrow totaling $8.4 million and reimbursed the Company $1.3 million for its
share of net working capital in the partnership as of June 30, 2000.
The Company continues to seek financing to fund the development of existing
properties and to acquire additional assets. The Company will rely on the
issuance of equity and debt securities, asset sales and cash flow from
operations to provide the required capital for funding future operations. While
there can be no assurance the Company will be successful in raising new
financing, management believes the prospects the Company has in hand will enable
it to attract sufficient capital to fund required oil and gas activities.
During 2001, the Company anticipates that it will make capital expenditures on
oil and gas properties of approximately $8.0 million, primarily in Gabon. An
additional $7 million is anticipated to be spent in Gabon in 2002 to complete
initial development of the Etame Field. The Company has negotiated a $10 million
line of credit through 2002 to fund the Etame Field development. The Company is
actively seeking more permanent financing to fund additional development of the
Etame field. The anticipated capital expenditures exclude potential
acquisitions. Other than the funding required to develop the Etame field, which
will be sourced
10
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
from outside the Company, the Company believes the cash on hand at June 30, 2001
will be sufficient to fund the Company's capital budget through 2001.
RESULTS OF OPERATIONS
---------------------
Three months ended June 30, 2001 compared to three months ended June 30, 2000
Revenues
--------
Total revenues were $517 thousand for the three months ended June 30, 2001
compared to $486 thousand for the comparable period in 2000. Revenues recognized
in 2001 include one month of production from the Brazos County discovery.
Operating Costs and Expenses
----------------------------
Total production expenses for the three months ended June 30, 2001 were $216
thousand compared to $153 thousand in 2000. Expenditures in 2001 included
additional activity at the Nido field. Exploration expense was $0 for the three
months ended June 30, 2001, compared to $36 thousand in 2000. Exploration
expense in 2000 represented dry hole expense associated with a well drilled in
Demitt County, Texas. Depreciation, depletion and amortization increased from $4
thousand in the three months ended June 30, 2000 to $49 thousand in the three
months ended June 30, 2001 due to depletion associated with production from the
Brazos County discovery. General and administrative expenses for the three
months ended 2001 and 2000 were $537 thousand and $452 thousand. Increased
activity level associated with the planning for the development of the Etame
field in Gabon accounted for the increase in general and administrative costs.
Other Income (Expense)
----------------------
Interest income of $84 thousand was received from amounts on deposit in 2001
compared to $135 thousand in the quarter ended June 30, 2000. The decrease can
be attributed to smaller balances on deposit in 2001 when compared to 2000 and
lower interest rates in 2001. The equity loss in unconsolidated entities in the
quarter ended June 30, 2001 is $12 thousand compared to a loss of $562 thousand
in 2000. The loss reported in the quarter ended June 30, 2001 was associated
only with the Paramount joint venture and consisted of the write off of unsold
prospect costs. The loss reported in the first quarter of fiscal 2000 was
primarily associated with exploration costs incurred by the Hunt partnership
from which the Company withdrew effective June 30, 2000.
Income Taxes
------------
The Company incurred $2 thousand in income tax expense, associated with activity
in the Philippines, in the quarter ended June 30, 2001, compared to $3 thousand
in 2000.
11
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net Loss
--------
Net loss attributable to common stockholders for the three months ended June 30,
2001 was $215 thousand, compared to a net loss attributable to common
stockholders of $609 thousand for the same period in 2000. The reduced net loss
in 2001 was primarily due to the lack of exploration costs associated with the
Company's investment in unconsolidated entities.
Six months ended June 30, 2001 compared to six months ended June 30, 2000
Revenues
--------
Total revenues were $1,049 thousand for the six months ended June 30, 2001
compared to $775 thousand for the comparable period in 2000. Revenues from one
month of production from the Brazos County discovery plus a gain on the resale
of certain interests acquired in Gabon in 2001 contributed to a net increase in
revenues.
Operating Costs and Expenses
----------------------------
Total production expenses for the six months ended June 30, 2001 were $309
thousand compared to $227 thousand in 2000. Expenditures in 2001 included
additional activity at the Nido field. Exploration expense was $0 for the six
months ended June 30, 2001, compared to $590 thousand in 2000. Exploration
expense in 2000 included $428 thousand for dry hole expense associated with a
well drilled in Demmit County, Texas and $162 thousand for costs associated with
lease expirations in Brazos County, Texas. Depreciation, depletion and
amortization increased from $8 thousand in the six months ended June 30, 2000 to
$52 thousand in the six months ended June 30, 2001 due to depletion associated
with production from the Brazos County discovery. General and administrative
expenses for the six months ended 2001 and 2000 were $788 thousand and $860
thousand. The Company benefited from overhead reimbursements associated with
capital expenditure programs in Gabon in 2001.
Other Income (Expense)
----------------------
Interest income of $222 thousand was received from amounts on deposit in 2001
compared to $290 thousand in the six months ended June 30, 2000. The decrease
can be attributed to smaller balances on deposit in 2001 when compared to 2000
and lower interest rates in 2001. The equity loss in unconsolidated entities in
the six months ended June 30, 2001 is $445 thousand compared to a loss of $2,955
thousand in 2000. The loss reported in the six months ended June 30, 2001 was
associated only with the Paramount joint venture and consisted of the write off
of unsold prospect costs. The loss reported in the six months ended June 30,
2000 was primarily associated with exploration costs incurred by the Hunt
partnership from which the Company withdrew effective June 30, 2000.
12
VAALCO ENERGY, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Income Taxes
------------
The Company incurred $17 thousand in income tax expenses, associated with
activity in the Philippines, in the six months ended June 30, 2001, compared to
$3 thousand in 2000.
Net Loss
--------
Net loss attributable to common stockholders for the six months ended June 30,
2001 was $342 thousand, compared to a net loss attributable to common
stockholders of $3,598 thousand for the same period in 2000. The net loss in
both periods was primarily due to exploration costs associated with the
Company's investment in unconsolidated entities.
13
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not presently a party to any material legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders held on June 6, 2001 the Common and
Preferred Stockholders elected one Class III Director and the Preferred
Stockholders, voting as a class, elected one additional Class III Director to
serve on the Company's Board of Directors. The stockholders also approved the
appointment of Deloitte & Touche as auditors of the Company.
Directors Elected by
Common and Preferred
Stockholders Votes Cast For Votes Cast Against Abstentions
------------ -------------- ------------------ -----------
Robert L. Gerry 42,188,417 11,150 0
Directors Elected by
Preferred Stockholders Votes Cast For Votes Cast Against Abstentions
---------------------- -------------- ------------------ -----------
Walter Grist 10,000 0 0
Regarding the proposal to approve the appointment of Deloitte & Touche as the
Company's auditors, 42,191,567 votes were cast for the proposal, 8,000 votes
were cast against the proposal and 0 votes abstained from voting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3. Articles of Incorporation and Bylaws
3.1(b) Restated Certificate of Incorporation
3.2(b) Certificate of Amendment to Restated Certificate of Incorporation
3.3(b) Bylaws
3.4(b) Amendment to Bylaws
3.5(c) Designation of Convertible Preferred Stock, Series A
_____________
14
27. Financial Data Schedule
(a) Filed as an exhibit to the Company's report on Form 8-K filed with the
Commission on March 4, 1998 (file no. 000-20928) and hereby incorporated
by reference herein.
(b) Filed as an exhibit to the Company's Registration Statement on Form S-3
filed with the Commission on July 15, 1998 and hereby incorporated by
reference herein.
(c) Filed as an exhibit to the Company's Report on Form 8-K filed with the
Commission on May 6, 1998 and hereby incorporated by reference herein.
(b) Reports on Form 8-K.
None
15
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VAALCO ENERGY, INC.
(Registrant)
By /s/ W. RUSSELL SCHEIRMAN
----------------------------------------------------
W. Russell Scheirman, President,
Chief Financial Officer and Director
(on behalf of the Registrant and as the
principal financial officer)
Dated August 3, 2001
16