VAALCO Energy, Inc. (NYSE:EGY) recently reported net income attributable to VAALCO of $4.2 million or $0.07 per diluted share for the third quarter of 2009 compared to net income attributable to VAALCO of $22.3 million or $0.38 per diluted share for the comparable period in 2008. Third quarter 2009 revenues were $29.3 million compared to $55.5 million in the third quarter of 2008. Third quarter 2009 results primarily reflect the overall decline in crude oil prices from the year-ago period.
"We anticipate commencing an aggressive drilling program before year-end that we expect to add considerable reserves in both Gabon and Angola," said Robert Gerry, Chairman and CEO. "VAALCO's strong balance sheet positions us to execute these prospects, while also exploring additional opportunities for growth."
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The Company provided the following update on its exploration and development program.
VAALCO has a jack-up drilling rig, The Sapphire Driller, under contract. Previously announced, VAALCO has a production sharing contract for a 40% working interest in Block 5 offshore Angola. The Company has acquired approximately 1,700 square kilometers of seismic data over a portion of the Block 5 and has been interpreting the seismic data for two well locations. Assuming consortium agreement on the well objectives and rig availability, the Company expects these two exploration wells to be drilled in the second half of 2010. During the third quarter of 2009, the Company sold approximately 436,000 net barrels of oil equivalent at an average price of $67.07 per barrel compared to 517,000 barrels of oil equivalent at an average price of $107.48 per barrel in the third quarter of 2008. The Company reported operating income of $19.6 million in the third quarter of 2009 compared to operating income of $41.8 million in the third quarter of 2008.VAALCO increased crude oil production to an average of 23,300 barrels of oil per day (bopd) in the three months ended September 30, 2009 compared to approximately 20,800 bopd in the three months ended September 30, 2008. Total production expenses of $5.7 million for the 2009 third quarter compared to $5.9 million in the prior year quarter. The slight decline in the 2009 third quarter expense was due to higher unsold crude oil inventory offset by higher floating production, storage and offloading (FPSO) costs.
The Company matches production expenses with crude oil sales. Any production expenses associated with unsold crude oil inventory are capitalized. Exploration expense was $0.9 million in the third quarter of 2009 compared to $0.3 million of costs in the comparable period in 2008, primarily due to additional costs on the previously announced unsuccessful exploration wells in onshore Gabon and the British North Sea. Income tax expenses for the third quarter of 2009 were $13.3 million compared to $17.4 million in the 2008 third quarter. The decline in income taxes reflects lower oil prices and crude oil sales volumes, which decreased taxable revenues.
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