VAALCO Energy is a producer of oil and natural gas, focusing primarily in West Africa. The company has a 1,186 square mile offshore concession in Gabon, West Africa; 1.4 million acres offshore in Angola, West Africa; and four minor interests in Brazos Country Texas and non-operating interest in the Gulf of Mexico. VAALCO generated $11.2 million in net income on revenues of $46.8 million.
VAALCO fuels its growth through strategic acquisitions of reserves. Keeping production high and replacing reserves allow VAALCO to keep reverses up. In 2009, declining production, primarily from the negative fallout of BP's offshore drilling accident, caused VAALCO to see a drop in revenue.
Following BP's oil spill, the US government put a hold on deepwater drilling and instituted new regulations. Although the ban was lifted, the US and other countries have instituted new, tighter rules and stronger regulatory oversight. Increased regulation will increase costs for producers that operate in deepwater drilling.
The price of oil and gas directly affects the revenue of E&P companies. If the price of oil remains high, producers will be incentivized to produce more and tap into once unprofitable reserves. On the other hand, if the price of oil remains low, E&P companies will put projects on hold and see a decrease in their revenue streams.