Quarterly report pursuant to Section 13 or 15(d)

Note 3 - Acquisitions and Dispositions

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Note 3 - Acquisitions and Dispositions
 9 Months Ended
Sep. 30, 2023
Notes to Financial Statements  
Mergers, Acquisitions and Dispositions Disclosures [Text Block]

3. ACQUISITIONS AND DISPOSITIONS

 

TransGlobe Merger

 

In 2022 VAALCO completed the acquisition of TransGlobe during the fourth quarter. Subsequent to the acquisition, during the first quarter of 2023, a bargain purchase gain adjustment was recorded, impacting the deferred tax liability. At September 30, 2023, the purchase accounting for the business combination has been completed. During the three months ended  September 30, 2023 the deferred tax liability in Egypt did not change. During the nine months ended September 30, 2023, the deferred tax liability in Egypt was increased by $1.4 million, respectively, as of the date of the acquisition. This resulted in a decrease to the bargain purchase gain of a corresponding $1.4 million for the nine months ended September 30, 2023, and is reflected in VAALCO's condensed consolidated statements of operations in the line, “Other expense, net.” 

 

The actual impact of the TransGlobe acquisition was an increase to “Crude oil, natural gas and NGLs sales” of $134.0 million and $21.0 million of “Net income” in the condensed consolidated statements of operations and comprehensive income for the nine months ended September 30, 2023. The impact for the three months ended  September 30, 2023 was an increase to “Crude oil, natural gas and NGLs sales” of $59.0 million and $19.3 million of “Net Income” in the condensed consolidated statements of operations and comprehensive income. 

 

The unaudited pro forma results presented below have been prepared to give the effect of the TransGlobe acquisition discussed above on the Company’s results for the three and nine months ended September 30, 2022, as if the acquisition had been consummated on January 1, 2021. The unaudited pro forma results do not purport to represent what the Company’s actual results of operations would have been if the TransGlobe acquisition had been completed on such date or project the Company’s results of operations for any future date or period.

 

   

Three Months Ended September 30,

      

Nine Months Ended September 30,

    
   

2022

      

2022

    
   

(in thousands)

      

(in thousands)

    

Pro forma (unaudited):

                    

Crude oil, natural gas and natural gas liquids sales

   $ 137,926  

(a)

   $ 442,718  

(a)

Operating income

   $ 60,176  

(b)

   $ 231,694  

(d)

Net income

   $ 32,544  

(c)

   $ 105,401  

(e)
                     
                     

Basic net income per share:

   $ 0.30       $ 0.97    

Basic weighted average shares outstanding

     108,375         108,207    
                     

Diluted net income per share:

   $ 0.30       $ 0.97    

Diluted weighted average shares outstanding

     108,757         108,642    

 

(a)

 The unaudited pro forma net revenues associated with Crude oil, natural gas and natural gas liquids sales have been adjusted for shipping and handling costs based on the Company’s historical policy and revenue recognition is based on the Company’s working interest, less royalties, the entitlement method.
(b) The unaudited pro forma operating income for the three months ended September 30, 2022 reclassifies depreciation expense, for certain leases identified as operating leases, to production expense and adjusts depreciation, depletion and amortization expense related to the depletable assets and asset retirement obligations acquired in the acquisition based on the purchase price allocation.
(c) The unaudited pro forma net income for the three months ended September 30, 2022 reclassifies interest expense, for certain leases identified as operating leases, as production expense.

(d)

 The unaudited pro forma operating income for the nine months ended September 30, 2022 removes the $26.0 million impairment reversal recorded by TransGlobe in 2022, reclassifies depreciation expense, for certain leases identified as operating leases, to production expense and adjusts depreciation, depletion and amortization expense related to the depletable assets and asset retirement obligations acquired in the acquisition based on the purchase price allocation.

(e)

The unaudited pro forma net income for the nine months ended September 30, 2022 reclassifies interest expense, for certain leases identified as operating leases, as production expense.