Houston-based oil and gas company Vaalco Energy returned to profit in the last quarter of 2017 as opposed to a loss in the prior-year period.
Vaalco said on Wednesday that it saw a profit of $3.4 million for the fourth quarter of 2017 compared with a loss of $3.6 million in the same period of 2016.
As for full-year results, the company reported an income of $9.65 million in 2017 compared with a loss of $26.5 million in 2016.
The company’s revenues increased to $17.2 million in the fourth quarter 2017 from $15.3 million in the same period of 2016.
Vaalco also said that, despite two electrical submersible pump (ESP) failures on the Avouma platform in the quarter, it produced an average of 3,957 net barrels of oil per day in the fourth quarter of 2017 which was slightly below the guidance range.
The company realized pricing of $59.89 per barrel of oil in the fourth quarter of 2017 compared with $51.10 per barrel in the third quarter of 2017 and $41.88 per barrel in the fourth quarter of 2016.
As far as production is concerned, Vaalco produced 364 million barrels in 4Q 2017 while production figures for the same period in 2016 stood at 339 mbbls. Daily production for the quarter was 3,957 boepd which is an increase when compared to 3,682 boepd in 4Q 2016.
Cary Bounds, Vaalco’s chief executive officer, said: “The recent recovery in crude oil pricing combined with our efficient operations have enabled us to substantially improve our financial flexibility by increasing cash on hand to $19.7 million and reducing the principal amount of debt to $9.2 million at year end 2017.
“In the first quarter of 2018, we continue to generate substantial free cash flow with current production averaging approximately 3,500 bopd net to Vaalco. We are evaluating opportunities to increase production through workovers and development drilling at Etame. While we have experienced unexpected ESP failures on our Avouma platform (Avouma 2-H and the South Tchibala 1-HB wells), we have seen no similar failures of the ESPs operating on our other three platforms.
“Our subsurface team has identified several drilling opportunities at Etame that we may consider drilling later this year, subject to approvals from the Gabon government and our partners.
“In Angola, we continue to have productive discussions with officials from Sonangol in anticipation of reaching a fair and equitable agreement that allows Vaalco to exit Block 5 at a reasonable cost. With our realized pricing correlated to Brent, no hedges in place for 2018, and a forecasted free cash flow breakeven price in 2018 of approximately $40 per barrel of oil sales, Vaalco is well positioned to add to its cash position.”
Guidance for 2018
Looking ahead, Vaalco said that it estimated full-year 2018 production to be between 3,500 and 4,100 BOPD, with production during the first quarter of 2018 forecasted between 3,400 and 3,600 bopd.
Sales volumes for 2018 are currently estimated to average 3,700 to 4,300 bopd, higher than 2018 production due to the split-lifting impact in January.
For 2018, the company estimates that its operational cash flow breakeven is about $30 per barrel of oil sales while its free cash flow breakeven is about $40 per barrel of oil sales. At $60 realized prices, Vaalco realizes $24.90 per barrel in operational margin and $16.20 per barrel in free cash flow while at $70 it will realize $33.30 per barrel in operational margin and $24.70 per barrel in free cash flow.
The company estimated that each $5 increase in realized oil price increases annual cash flow by $6 million.