egy20230930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 1-32167

VAALCO Energy, Inc.

(Exact name of registrant as specified in its charter)

Delaware	76-0274813
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

9800 Richmond Avenue Suite 700 Houston, Texas	77042
(Address of principal executive offices)	(Zip code)

(713) 623-0801

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock	EGY	New York Stock Exchange
Common Stock	EGY	London Stock Exchange

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non‑accelerated filer

☐

Smaller reporting company

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 3, 2023, there were outstanding 105,158,757 shares of common stock, $0.10 par value per share, of the registrant.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
Condensed Consolidated Balance Sheets September 30, 2023 and December 31, 2022	2
Condensed Consolidated Statements of Operations and Comprehensive Income Three and Nine Months Ended September 30, 2023 and 2022	3
Condensed Consolidated Statements of Shareholders’ Equity Three and Nine Months Ended September 30, 2023 and 2022	4
Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, 2023 and 2022	5
Notes to Condensed Consolidated Financial Statements (unaudited)	7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
ITEM 4. CONTROLS AND PROCEDURES	38
PART II. OTHER INFORMATION	39
ITEM 1. LEGAL PROCEEDINGS	39
ITEM 1A. RISK FACTORS	39
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	39
ITEM 5. OTHER INFORMATION	47
ITEM 6. EXHIBITS	41

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)

	*As of September 30, 2023*			*As of December 31, 2022*
	*(in thousands)*
ASSETS
Current assets:
Cash and cash equivalents	$	103,353		$	37,205
Restricted cash		111			222
Receivables:
Trade, net		22,788			52,147
Accounts with joint venture owners, net of allowance for credit losses of $0.6 and $0.3 million, respectively		1,635			15,830
Foreign income taxes receivable		—			2,769
Other, net of allowance for credit losses of $3.5 and $0.0 million, respectively		64,826			68,519
Crude oil inventory		9,287			3,335
Prepayments and other		16,115			20,070
Total current assets		218,115			200,097

Crude oil and natural gas properties, equipment and other - successful efforts method, net		467,877			495,272
Other noncurrent assets:
Restricted cash		1,787			1,763
Value added tax and other receivables, net of allowance of $9.9 million and $8.4 million, respectively		9,462			7,150
Right of use operating lease assets		3,510			2,777
Right of use finance lease assets		87,971			90,698
Deferred tax assets		31,222			35,432
Abandonment funding		6,268			20,586
Other long-term assets		1,616			1,866
Total assets	$	827,828		$	855,641
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	43,924		$	59,886
Accounts with joint venture owners		1,151			—
Accrued liabilities and other		76,470			91,392
Operating lease liabilities - current portion		3,539			2,314
Finance lease liabilities - current portion		7,810			7,811
Foreign income taxes payable		33,256			—
Current liabilities - discontinued operations		673			687
Total current liabilities		166,823			162,090
Asset retirement obligations		45,201			41,695
Operating lease liabilities - net of current portion		82			686
Finance lease liabilities - net of current portion		77,862			78,248
Deferred tax liabilities		76,120			81,223
Other long-term liabilities		17,369			25,594
Total liabilities		383,457			389,536
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred stock, $25 par value; 500,000 shares authorized, none issued		—			—
Common stock, $0.10 par value; 160,000,000 shares authorized, 121,341,251 and 119,482,680 shares issued, 105,714,499 and 107,852,857 shares outstanding, respectively		12,134			11,948
Additional paid-in capital		356,424			353,606
Accumulated other comprehensive income		844			1,179
Less treasury stock, 15,626,752 and 11,629,823 shares, respectively, at cost		(65,145	)		(47,652	)
Retained earnings		140,114			147,024
Total shareholders' equity		444,371			466,105
Total liabilities and shareholders' equity	$	827,828		$	855,641

See notes to condensed consolidated financial statements.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)

	*Three Months Ended September 30,*						*Nine Months Ended September 30,*
	*2023*			*2022*			*2023*			*2022*
	*(in thousands, except per share amounts)*
Revenues:
Crude oil, natural gas and natural gas liquids sales	$	116,269		$	78,097		$	305,912		$	257,738
Operating costs and expenses:
Production expense		39,956			23,312			106,760			67,147
FPSO Demobilization		—			8,867			5,647			8,867
Exploration expense		1,194			56			1,259			250
Depreciation, depletion and amortization		32,538			8,963			94,958			21,827
General and administrative expense		6,216			1,979			16,835			10,507
Credit losses and other		822			1,020			2,437			2,083
Total operating costs and expenses		80,726			44,197			227,896			110,681
Other operating income (expense), net		5			—			(298	)		(5	)
Operating income		35,548			33,900			77,718			147,052
Other income (expense):
Derivative instruments gain (loss), net		(2,320	)		3,778			(2,268	)		(37,522	)
Interest expense, net		(1,426	)		(234	)		(5,375	)		(355	)
Other income (expense), net		183			(7,707	)		(1,494	)		(10,514	)
Total other expense, net		(3,563	)		(4,163	)		(9,137	)		(48,391	)
Income from continuing operations before income taxes		31,985			29,737			68,581			98,661
Income tax expense (benefit)		25,844			22,843			52,203			64,467
Income from continuing operations		6,141			6,894			16,378			34,194
Loss from discontinued operations, net of tax		—			(26	)		(15	)		(58	)
Net income	$	6,141		$	6,868		$	16,363		$	34,136
Other comprehensive income (loss)
Currency translation adjustments		(2,216	)		—			(335	)		—
Comprehensive income	$	3,925		$	6,868		$	16,028		$	34,136

Basic net income per share:
Income from continuing operations	$	0.06		$	0.12		$	0.15		$	0.57
Loss from discontinued operations, net of tax		—			—			—			—
Net income per share	$	0.06		$	0.12		$	0.15		$	0.57
Basic weighted average shares outstanding		106,289			59,068			106,876			58,900
Diluted net income per share:
Income from continuing operations	$	0.06		$	0.11		$	0.15		$	0.57
Loss from discontinued operations, net of tax		—			—			—			—
Net income per share	$	0.06		$	0.11		$	0.15		$	0.57
Diluted weighted average shares outstanding		106,433			59,450			107,072			59,335

See notes to condensed consolidated financial statements.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

	*Common Shares Issued*		*Treasury Shares*			*Common Stock*		*Additional Paid-In Capital*			*Accumulated Other Comprehensive Loss*			*Treasury Stock*			*Retained Earnings*			*Total*
	*(in thousands)*
Balance at January 1, 2023		119,483		(11,630	)	$	11,948	$	353,606		$	1,179		$	(47,652	)	$	147,024		$	466,105
Shares issued - stock-based compensation		633		(187	)		64		210			—			—			—			274
Stock-based compensation expense		—		—			—		683			—			—			—			683
Common shares purchased		—		(981	)		—		—			—			(4,517	)		—			(4,517	)
Treasury stock		—		—			—		—			—			(860	)		—			(860	)
Dividend distributions		—		—			—		—			—			—			(6,735	)		(6,735	)
Cumulative effect of adjustment upon adoption of ASU 2016-13 on January 1, 2023		—		—			—		—			—			—			(3,120	)		(3,120	)
Other comprehensive loss		—		—			—		—			(125	)		—			—			(125	)
Net income		—		—			—		—			—			—			3,470			3,470
Balance at March 31, 2023		120,116		(12,798	)	$	12,012	$	354,499		$	1,054		$	(53,029	)	$	140,639		$	455,175
Shares issued - stock-based compensation		1,090		(249	)		109		(1	)		—			—			—			108
Stock-based compensation expense		—		—			—		708			—			—			—			708
Common shares purchased		—		(1,161	)		—		—			—			(5,023	)		—			(5,023	)
Treasury stock		—		—			—		—			—			(1,003	)		—			(1,003	)
Dividend distributions		—		—			—		—			—			—			(6,717	)		(6,717	)
Other comprehensive loss		—		—			—		—			2,006			—			—			2,006
Net income		—		—			—		—			—			—			6,752			6,752
Balance at June 30, 2023		121,206		(14,208	)	$	12,121	$	355,206		$	3,060		$	(59,055	)	$	140,674		$	452,006
Shares issued - stock-based compensation		135		(16	)		13		198			—			—			—			211
Stock-based compensation expense		—		—			—		1,020			—			—			—			1,020
Common Shares Purchased		—		(1,403	)		—		—			—			(6,026	)		—			(6,026	)
Treasury stock		—		—			—		—			—			(64	)		—			(64	)
Dividend Distributions		—		—			—		—			—			—			(6,701	)		(6,701	)
Other comprehensive income		—		—			—		—			(2,216	)		—			—			(2,216	)
Net income		—		—			—		—			—			—			6,141			6,141
Balance at September 30, 2023		121,341		(15,627	)	$	12,134	$	356,424		$	844		$	(65,145	)	$	140,114		$	444,371

	*Common Shares Issued*		*Treasury Shares*			*Common Stock*		*Additional Paid-In Capital*		*Accumulated Other Comprehensive Loss*		*Treasury Stock*			*Retained Earnings*			*Total*
	*(in thousands)*
Balance at January 1, 2022		69,562		(10,939	)	$	6,956	$	76,700	$	—	$	(43,847	)	$	104,488		$	144,297
Shares issued - stock-based compensation		300		(64	)		30		168		—		—			—			198
Stock-based compensation expense		—		—			—		404		—		—			—			404
Treasury stock		—		—			—		—		—		(387	)		—			(387	)
Dividend Distributions		—		—			—		—				—			(1,929	)		(1,929	)
Net income		—		—			—		—		—		—			12,164			12,164
Balance at March 31, 2022		69,862		(11,003	)	$	6,986	$	77,272	$	—	$	(44,234	)	$	114,723		$	154,747
Shares issued - stock-based compensation		263		(54	)		27		31		—		—			—			58
Stock-based compensation expense		—		—			—		616		—		—			—			616
Treasury stock		—		—			—		—		—		(401	)		—			(401	)
Dividend Distribution																(1,943	)		(1,943	)
Net income		—		—			—		—		—		—			15,104			15,104
Balance at June 30, 2022		70,125		(11,057	)	$	7,013	$	77,919	$	—	$	(44,635	)	$	127,884		$	168,181
Shares issued - stock-based compensation		—		—			—		—		—		—			—			—
Stock-based compensation expense		—		—			—		581		—		—			—			581
Treasury stock		—		—			—		—		—		—			—			—
Dividend Distribution		—		—			—		—		—		—			(1,944	)		(1,944	)
Net income		—		—			—		—		—		—			6,868			6,868
Balance at September 30, 2022		70,125		(11,057	)	$	7,013	$	78,500	$	—	$	(44,635	)	$	132,808		$	173,686

See notes to condensed consolidated financial statements.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	*Nine Months Ended September 30,*
	*2023*			*2022*
	*(in thousands)*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	16,363		$	34,136
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations, net of tax		15			58
Depreciation, depletion and amortization		94,958			21,827
Bargain purchase gain		1,412			—
Exploration Expense		1,194			—
Deferred taxes		(2,305	)		39,540
Unrealized foreign exchange loss		932			914
Stock-based compensation		2,332			2,300
Cash settlements paid on exercised stock appreciation rights		(282	)		(805	)
Derivative instruments (gain) loss, net		2,268			37,522
Cash settlements paid on matured derivative contracts, net		(62	)		(42,683	)
Cash settlements paid on asset retirement obligations		(4,796	)		—
Credit losses and other		2,437			2,083
Other operating loss, net		317			5
Operational expenses associated with equipment and other		2,560			953
Change in operating assets and liabilities:
Trade receivables		29,364			5,683
Accounts with joint venture owners		15,090			(11,118	)
Other receivables		694			(2,904	)
Crude oil inventory		(5,952	)		(2,661	)
Prepayments and other		1,198			(1,120	)
Value added tax and other receivables		(3,719	)		(5,371	)
Other long-term assets		2,942			(2,842	)
Accounts payable		(10,083	)		4,129
Foreign income taxes receivable/payable		36,025			24,928
Accrued liabilities and other		(11,076	)		25,182
Net cash provided by (used in) continuing operating activities		171,826			129,756
Net cash used in discontinued operating activities		(15	)		(57	)
Net cash provided by (used in) operating activities		171,811			129,699
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures		(77,365	)		(103,853	)
Net cash provided by (used in) continuing investing activities		(77,365	)		(103,853	)
Net cash used in discontinued investing activities		—			—
Net cash provided by (used in) investing activities		(77,365	)		(103,853	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock		593			257
Dividend distribution		(20,153	)		(5,816	)
Treasury shares		(17,493	)		(788	)
Deferred financing costs		(83	)		(1,535	)
Payments of finance lease		(5,246	)		(193	)
Net cash provided by (used in) in continuing financing activities		(42,382	)		(8,075	)
Net cash used in discontinued financing activities		—			—
Net cash provided by (used in) in financing activities		(42,382	)		(8,075	)
Effects of exchange rate changes on cash		(321	)		—
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		51,743			17,771
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD		59,776			72,314
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	111,519		$	90,085

See notes to condensed consolidated financial statements.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS SUPPLEMENTAL DISCLOSURES (Unaudited)

	*Nine Months Ended September 30,*
	*2023*		*2022*
	*(in thousands)*
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	6,622	$	401
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment additions incurred but not paid at end of period	$	23,820	$	39,105
Recognition of right-of-use operating lease assets and liabilities	$	2,582	$	—
Recognition of right-of-use finance lease assets and liabilities	$	3,273	$	1,851
Asset retirement obligations	$	2,487	$	—

See notes to condensed consolidated financial statements.

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VAALCO ENERGY, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND ACCOUNTING POLICIES

VAALCO Energy, Inc. (together with its consolidated subsidiaries “we”, “us”, “our”, “VAALCO” or the “Company”) is a Houston, Texas-based independent energy company engaged in the acquisition, exploration, development and production of crude oil, natural gas and natural gas liquids ("NGLs") properties. As operator, the Company has production operations and conducts exploration activities in Gabon and Canada and hold interests in two production sharing contracts (“PSCs”) in Egypt. The Company has opportunities to participate in development and exploration activities in Equatorial Guinea, West Africa. As discussed further in Note 3 below, VAALCO has discontinued operations associated with activities in Angola, West Africa and Yemen.

The Company’s consolidated subsidiaries are VAALCO Gabon (Etame), Inc., VAALCO Production (Gabon), Inc., VAALCO Gabon S.A., VAALCO Angola (Kwanza), Inc., VAALCO Energy (EG), Inc., VAALCO Energy Mauritius (EG) Limited, VAALCO Energy, Inc. (UK Branch), VAALCO Energy (USA), Inc., VAALCO Energy (International), LLC, VAALCO Energy (Holdings), LLC, TransGlobe Energy Corporation, TG Energy UK Ltd., TransGlobe Petroleum International Inc., TG Holdings Yemen Inc., TransGlobe West Bakr Inc., TransGlobe West Gharib Inc., TG Energy Marketing Inc., and TG NW Gharib Inc., TG S Ghazalat Inc.

These unaudited condensed consolidated financial statements (“Financial Statements”) reflect the opinion of management and all adjustments necessary for a fair presentation of results for the interim periods presented. All adjustments are of a normal recurring nature unless disclosed otherwise. Interim period results are not necessarily indicative of results expected for the full year.

These condensed consolidated financial statements have been prepared in accordance with rules of the Securities and Exchange Commission (“SEC”) and do not include all the information and disclosures required by accounting principles generally accepted in the United States (“GAAP”) for complete financial statements. They should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, which includes a summary of the significant accounting policies.

Allowance for credit losses and other – On January 1, 2023, the Company adopted Accounting Standards Update 2016-13, Financial Instruments—Credit Losses (“ASU 2016-13”). ASU 2016-13 requires an entity to measure credit losses of certain financial assets, including trade receivables, utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to form credit loss estimates.

The Company estimates the current expected credit losses based primarily using either an aging analysis or discounted cash flow methodology that incorporates consideration of current and future conditions that could impact its counterparties’ credit quality and liquidity. Uncollectible receivables are written off when a settlement is reached for an amount that is less than the outstanding historical balance or when the Company has determined that the balance will not be collected.

The following table provides an analysis of the change of the aggregate credit loss allowance and other allowances.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	*(in thousands)*
Allowance for credit losses and other
Balance at beginning of period	$	(13,519	)	$	(6,389	)	$	(8,704	)	$	(5,741	)
Credit loss charges and other, net of receipts		(822	)		(1,020	)		(2,437	)		(2,083	)
Cumulative effect of adjustment upon adoption of ASU 2016-13 on January 1, 2023		—			—			(3,120	)		—
Foreign currency gain (loss)		238			355			158			770
Balance at end of period	$	(14,103	)	$	(7,054	)	$	(14,103	)	$	(7,054	)

Prepayments and Other – Included in “Prepayments and other” line item of the Company’s September 30, 2023 condensed consolidated balance sheet are $2.3 million of prepayments related to fixed assets, $4.3 million of prepayments related to royalties in Gabon, $1.0 million in Gabon and corporate prepaid insurance, $1.2 million in short-term employees loans and advances to Gabon employees, $4.0 million in Egyptian advances to contractors, and $3.3 million in other prepaid items.

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Fair value of financial instruments

As of September 30, 2023

Balance Sheet Line

Level 1

Level 2

Level 3

Total

(in thousands)

Assets

Derivative asset

Prepayments and other

—

Liabilities

SARs liability

Accrued liabilities and other

—

239

—

239

Derivative liability

Accrued liabilities and other

—

2,162

—

2,162

—

2,401

—

2,401

`		As of December 31, 2022
	Balance Sheet Line	Level 1		Level 2		Level 3		Total
		*(in thousands)*
Assets
Derivative asset	Prepayments and other	$	—	$	102	$	—	$	102
		$	—	$	102	$	—	$	102
Liabilities
SARs liability	Accrued liabilities and other	$	—	$	556	$	—	$	556
		$	—	$	556	$	—	$	556

2. NEW ACCOUNTING STANDARDS

Adopted

The Company adopted ASU 2016-13 (“ASC 326”) on January 1, 2023 using the modified-retrospective approach. The modified-retrospective approach consists of applying the amendments in ASU 2016-03 through a cumulative-effect adjustment, if required, to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The Company’s current method and timing of recognizing credit losses is in accordance with ASC 326 and is consistent with the previous method of recognizing credit losses, except for one receivable, which now utilizes the Discounted Cash Flow method for computing its Expected Credit Loss (“ECL”). The Company recorded an ECL allowance of $3.1 million as an opening balance adjustment to retained earnings at January 1, 2023.

On October 3, 2023 the Company adopted the provisions of ASU 2022-06, “Reference Rate Reform (Topic 848)”: Deferral of the Sunset Date of Topic 848, to extend the expiration date of Topic 848 through December 31, 2024 and ASU 2020-04, which provides optional expedients and exceptions for applying U.S. GAAP to debt contracts, receivables, leases, derivatives, and other contracts impacted by reference rate reform and other transactions affected by the cessation of the LIBOR. The adoption of these provisions changed the LIBOR rate interest rate component under the Company’s RBL Facility to a Secured Overnight Financing Rate (“SOFR”) plus margin and changed the discount rate component under the Company’s RBL Facility from a 6 month LIBOR to a 6 month SOFR rate. Due to the provisions of ASU 2020-04 and 2023-06, the Company accounted for the change as a modification of debt.

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.”

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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.

4. SEGMENT INFORMATION

The Company’s operations are based in Gabon, Egypt, and Canada, and the Company has an undeveloped block in Equatorial Guinea. Each of the Company’s reportable operating segments is organized and managed based upon geographic location. The Company’s Chief Executive Officer, who is the chief operating decision maker, and management review and evaluate the operation of each geographic segment separately, primarily based on operating income (loss). The operations of all segments include exploration for and production of hydrocarbons where commercial reserves have been found and developed. Revenues are based on the location of hydrocarbon production. Corporate and other is primarily corporate and operations support costs that are not allocated to the reportable operating segments.

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Segment activity of continuing operations for the three and nine months ended September 30, 2023 and 2022 as well as long-lived assets and segment assets at September 30, 2023 and December 31, 2022 are as follows:

Three Months Ended September 30, 2023

(in thousands)

Gabon

Egypt

Canada

Equatorial Guinea

Corporate and Other

Total

Revenues:

Crude oil, natural gas and natural gas liquids sales

57,275

50,307

8,687

—

116,269

Operating costs and expenses:

Production expense

20,731

16,040

2,627

259

299

39,956

FPSO Demobilization

—

Exploration expense

—

1,194

—

1,194

Depreciation, depletion and amortization

14,583

12,967

4,948

—

32,538

General and administrative expense

348

—

5,720

6,216

Credi