Quarterly report pursuant to Section 13 or 15(d)

ACQUISITION

v3.24.3
ACQUISITION
 9 Months Ended
Sep. 30, 2024
Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]  
ACQUISITION ACQUISITION
On February 29, 2024, the Company entered into a Share Purchase Agreement (the “Share Purchase Agreement”) to purchase all of the issued shares in the capital of Svenska Petroleum Exploration Aktiebolag, a company incorporated in Sweden (“Svenska”) for $66.5 million in cash (the “Purchase Price”), subject to certain adjustment as described in the Share Purchase Agreement (the “Svenska Acquisition”). The Company subsequently closed the Svenska Acquisition for
the net purchase price of $40.2 million, on April 30, 2024 after certain regulatory and government approvals were received. The Purchase Price was funded with $40.2 million of VAALCO’s cash-on-hand. Cash acquired in the business combination included $31.8 million of cash and cash equivalents as well as restricted cash of $8.8 million which nets to $0.4 million cash received on the business combination as disclosed within the unaudited condensed consolidated statements of cash flows.
April 30, 2024
(in thousands)
Purchase Consideration  
Cash $ 40,166 
Total purchase consideration $ 40,166 
 
April 30, 2024
(in thousands)
Assets acquired:  
Cash and cash equivalents $ 31,789 
Other receivables, net 830 
Crude oil inventory 14,981 
Prepayments and other 409 
Crude oil, natural gas and NGLs properties and equipment, net 100,188 
Restricted cash 8,788 
Other LT receivables 33 
Deferred tax asset 28,153 
Total assets acquired 185,171 
Liabilities assumed:  
Accounts payable (2,506)
State oil liability (19,447)
Accrued tax settlement (8,788)
Accrued accounts payable invoices (21,692)
Accrued liabilities and other (19,083)
Asset retirement obligations (15,694)
Deferred tax liability (37,897)
Total liabilities acquired (125,107)
Bargain purchase gain (19,898)
Total purchase price $ 40,166 


All assets and liabilities associated with Svenska’s interest in the producing Baobab field as well as the non-producing discovery located offshore of Nigeria, including crude oil and natural gas properties, asset retirement obligations and working capital items, were recorded at their estimated fair value. The Company used estimated future crude oil prices as of the closing date, April 30, 2024, to apply to the estimated reserve quantities acquired and market participant assumptions to the estimated future operating and development costs to arrive at the estimates of future net revenues. The future net revenues were discounted using the Company’s weighted average cost of capital to determine the fair value at closing. The valuations to derive the purchase price included the use of both proved and unproved categories of reserves, expectation for timing and amount of future development and operating costs, projections of future rates of production, expected recovery rates, and risk adjusted discount rates. Other estimates were used by the Company to determine the fair value of certain assets and liabilities. The fair value of the acquired identifiable assets and liabilities is provisional pending the final valuations for crude oil, natural gas and NGLs properties and equipment, net, asset retirement obligations, accrued liabilities and other and deferred tax assets and liabilities. Svenska is subject to the legal and regulatory requirements, including but not limited to those related to environmental matters and taxation, in each of the jurisdictions in countries in which it operates.

VAALCO has conducted a preliminary assessment of liabilities arising from these matters in each of these jurisdictions and has recognized provisional amounts in its initial accounting for the Svenska Acquisition for all identified liabilities in
accordance with the requirements of Accounting Standards Codification (“ASC”) Topic 805. However, VAALCO is continuing its review of these matters during the measurement period, and if new information obtained about facts and circumstances that existed at the acquisition date identifies adjustments to the assets and liabilities initially recognized, as well as any additional assets and liabilities that existed at the acquisition date, the acquisition accounting will be revised to reflect the resulting adjustments to the provisional amounts initially recognized. As a result of comparing the purchase price to the fair value of the assets acquired and liabilities assumed, a $19.9 million bargain purchase gain was recognized and is included in “Bargain purchase gain” under “Other income (expense)” in the unaudited condensed consolidated statements of operations and comprehensive income. The bargain purchase gain is primarily attributable to a stronger forward pricing curve for oil reserves than was used for the purposes of calculating the price paid for the business.

Post-Acquisition Operating Results. The table below summarizes amounts contributed by the Cote d’Ivoire assets acquired in the Svenska Acquisition to the Company's consolidated results for the period from April 30, 2024 through September 30, 2024.
April 30, 2024 through September 30, 2024
(in thousands)
Crude oil, natural gas and natural gas liquids sales $ 67,035 
Net income $ 5,589 
The unaudited pro forma results presented below have been prepared to give effect to the Svenska Acquisition discussed above on the Company’s results of operations for the three and nine months ended September 30, 2024 and 2023, as if the acquisition had been consummated on January 1, 2023. The unaudited pro forma results do not purport to represent what the Company’s actual results of operations would have been if the Svenska Acquisition had been completed on such date or to project the Company’s results of operations for any future date or period.
Three Months Ended September 30, Nine Months Ended September 30,
2024 2023 2024 2023
(in thousands) (in thousands)
Pro forma (unaudited)
Crude oil, natural gas and natural gas liquids sales $ 140,334  $ 167,634  $ 388,792  $ 437,181 
Operating income $ 44,083  $ 54,759  $ 82,174  $ 139,595 
Net income (loss) (a)
$ 10,990  $ 10,976  $ 20,306  $ 43,158 
         
Basic net income (loss) per share:        
Income (loss) from continuing operations $ 10,990  $ 10,976  $ 20,306  $ 43,158 
Net income (loss) per share $ 0.11  $ 0.10  $ 0.20  $ 0.40 
Basic weighted average shares outstanding $ 103,743  $ 106,289  $ 103,644  $ 106,876 
Diluted net income (loss) per share:        
Income (loss) from continuing operations $ 10,990  $ 10,976  $ 20,306  $ 43,158 
Net income (loss) per share $ 0.11  $ 0.10  $ 0.20  $ 0.40 
Diluted weighted average shares outstanding $ 103,842  $ 106,433  $ 103,728  $ 107,072 
(a)The unaudited pro forma net income (loss) for the nine months ended September 30, 2024 excludes a nonrecurring pro forma adjustment directly attributable to the Svenska Acquisition, consisting of a bargain purchase gain of $19.9 million.