VAALCO Energy, Inc. :EGY-US: Earnings Analysis: Q4, 2016 By the Numbers : March 20, 2017

VAALCO Energy, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of VAALCO Energy, Inc. – Harvest Natural Resources, Inc., Hyperdynamics Corporation, Erin Energy Corporation, QEP Resources, Inc., Noble Energy, Inc., Zion Oil and Gas, Inc., TransGlobe Energy Corporation and Chesapeake Energy Corporation (HNR-US, HDYN-US, ERN-US, QEP-US, NBL-US, ZN-US, TGL-CA and CHK-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 15.33 million, Net Earnings of USD -3.36 million.
  • Gross margins widened from -81.76% to 15.37% compared to the same period last year, operating (EBITDA) margins now 14.58% from -11.84%.
  • Year-on-year change in operating cash flow of -351.92% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 15.33 14.64 18.85 10.98 17.52
Revenue Growth (%YOY) -12.54 -16.59 -30.55 -39.82 -23.94
Earnings (mil) -3.36 0.18 -0.26 -8.06 -80.78
Earnings Growth (%YOY) 95.85 100.55 94.98 79.33 17.85
Net Margin (%) -21.89 1.26 -1.38 -73.46 -460.99
EPS -0.06 -0.27 -0 -0.14 -1.38
Return on Equity (%) -941.42 6.53 -5.47 -143.64 -488.95
Return on Assets (%) -16.86 0.87 -1 -26.8 -202.56

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Market Share Versus Profits

Revenues History
Earnings History

EGY-US‘s change in revenue this period compared to the same period last year of -12.54% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that EGY-US is holding onto its market share. Also, for comparison purposes, revenues changed by 4.72% and earnings by -1,923.37% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from -81.76% to 15.37% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from -11.84% to 14.58% compared to the same period last year. For comparison, gross margins were 40.07% and EBITDA margins were 31.87% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

EGY-US‘s change in operating cash flow of -351.92% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from -117.78% to 7.14% and (2) one-time items. The company’s pretax margins are now -6.47% compared to -436.78% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

VAALCO Energy, Inc. engages in the provision of acquisition, exploration, development and production of crude oil and natural gas. It focuses in the following geographical segments: Gabon, Angola, Equatorial Guinea and the United States. The company was founded in 1985 and is headquartered in Houston, TX.

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