Exhibit 99.2

 

 

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

 

Introduction 

 

On April 30, 2024, VAALCO Energy (Holdings), LLC (“Buyer”), a Delaware limited liability company and wholly-owned subsidiary of VAALCO Energy, Inc. (“VAALCO”), completed the previously announced acquisition of Svenska Petroleum Exploration Aktiebolag, a company incorporated in Sweden (“Svenska”) from Petroswede AB, a company incorporated in Sweden (“Seller”), whereby Buyer acquired all of the issued shares in the capital Svenska and Svenska became a direct wholly-owned subsidiary of Buyer and an indirect wholly-owned subsidiary of VAALCO (the “Acquisition”), pursuant to a Share Purchase Agreement entered into by Buyer and Seller on February 29, 2024.

 

The unaudited pro forma combined financial information of VAALCO is comprised of (i) the unaudited pro forma combined balance sheet as of December 31, 2023, after giving effect to the Acquisition as if it had occurred on December 31, 2023; (ii) the unaudited pro forma combined statement of operations for the year ended December 31, 2023, after giving effect to the Acquisition as if it had occurred on January 1, 2023; and (iii) the accompanying notes (collectively, the “Unaudited Pro Forma Combined Financial Information”).

 

The Unaudited Pro Forma Combined Financial Information has been derived from the (i) historical audited condensed consolidated financial statements and the related notes of VAALCO and Svenska, respectively as of and for the year ended December 31, 2023. The consolidated financial statements of VAALCO were prepared in accordance with U.S. GAAP. The consolidated financial statements of Svenska were prepared in accordance with IFRS as issued by the IASB.

 

The Unaudited Pro Forma Combined Financial Information has been prepared by VAALCO's management for illustrative purposes only. The Unaudited Pro Forma Combined Financial Information does not purport to represent what the actual results of operations of VAALCO or the combined entity would have been had the Acquisition occurred on the respective dates assumed, nor is it indicative of the future results of VAALCO. The Unaudited Pro Forma Combined Financial Information and underlying pro forma adjustments are based upon currently available information and include certain estimates and assumptions made by VAALCO management; accordingly, actual results could differ materially from the Unaudited Pro Forma Combined Financial Information.

 

The Unaudited Pro Forma Combined Financial Information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using assumptions set forth in the notes herein. The Unaudited Pro Forma Combined Financial Information does not reflect any cost savings, operating synergies or revenue enhancements that the combined entity may achieve as a result of the Acquisition. The pro forma adjustments reflected in the accompanying Unaudited Pro Forma Combined Financial Information reflect estimates and assumptions made by our management that we believe to be reasonable. Significant estimates and assumptions include, but are not limited to, the preliminary purchase price allocation.

 

The Unaudited Pro Forma Combined Financial Information should be read together with (i) VAALCO’s audited consolidated financial statements and related notes included in its Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 15, 2024; (ii) Svenska’s audited consolidated financial statements and related notes for the year ended December 31, 2023, included in Exhibit 99.1 of VAALCO’s Current Report on Form 8-K filed with the Securities Exchange Commission on July [15], 2024; and (iii) the accompanying notes to the Unaudited Pro Forma Combined Financial Information.

 

 

VAALCO Energy, Inc.

Pro Forma Combined Balance Sheet (Unaudited)

As of December 31, 2023

 

 

​

 

VAALCO (U.S.

 

​

 

Svenska

 

​

       

​

 

​

  Total Pro Forma Combined  
 

​

  GAAP, Historical)       (IFRS, Reclassified)  

​

  Pro Forma Adjustments  

​

Notes

   

Balance Sheet

 
 

​

       

​

 

Note 2.1

 

​

 

Note 3 and 4

 

​

 

​

       
 

​

                      (in thousands)      

​

       

ASSETS

​

       

​

       

​

       

​

 

​

       

Current assets:

​

       

​

       

​

       

​

 

​

       

Cash and cash equivalents

​

  $ 121,001  

​

  $ 65,550  

​

  $ (40,166 )

​

3(a)

​

  $ 90,518  
 

​

       

​

       

​

    (30,000 )

​

3(b)(iv)

​

       
                            (25,867 )  

3(b)(vii)

         

Restricted cash

​

    114  

​

    —  

​

    —  

​

 

​

    114  

Receivables:

​

       

​

       

​

       

​

 

​

       

Trade, net

​

    44,888  

​

    26,066  

​

    —  

​

 

​

    70,954  

Accounts with joint venture owners

​

    1,814  

​

    —  

​

    —  

​

 

​

    1,814  

Egypt receivables and other, net

​

    45,942  

​

    1,591  

​

    —  

​

 

​

    47,533  

Crude oil inventory

​

    1,948  

​

    —  

​

    —  

​

 

​

    1,948  

Prepayments and other

​

    12,434  

​

    5,121  

​

    —  

​

 

​

    17,555  

Total current assets

​

    228,141  

​

    98,328  

​

    (96,033 )

​

 

​

    230,436  

Crude oil, natural gas and NGLs properties and equipment, net

​

    459,786  

​

    139,001  

​

    (62,598 )

​

3(a)

​

    536,189  

Other noncurrent assets

​

       

​

       

​

       

​

 

​

       

Restricted cash

​

    1,795  

​

    —  

​

    8,788  

​

3(b)(v)

​

    10,583  

Value added tax and other receivables

​

    4,214  

​

    37  

​

    —  

​

 

​

    4,251  

Right of use operating lease assets

​

    2,378  

​

    23  

​

    (23 )

​

3(b)(vi)

​

    2,378  

Right of use finance lease assets

​

    89,962  

​

    —  

​

    —  

​

 

​

    89,962  

Deferred tax assets

​

    29,242  

​

    28,196  

​

    5,681  

​

3(a)

​

    63,119  

Abandonment funding

​

    6,268  

​

    —  

​

    —  

​

 

​

    6,268  

Other long-term assets

​

    1,430  

​

    —  

​

    —  

​

 

​

    1,430  

Total assets

​

    823,216  

​

    265,585  

​

    (144,185 )

​

 

​

    944,616  

LIABILITIES AND SHAREHOLDERS’ EQUITY

​

       

​

       

​

       

​

 

​

       

Current liabilities:

​

       

​

       

​

       

​

 

​

       

Accounts payable

​

  $ 22,152  

​

  $ 1,488  

​

  $ —  

​

 

​

  $ 23,640  

Accounts with joint venture owners

​

    5,990  

​

    —  

​

    —  

​

 

​

    5,990  

Accrued liabilities and other

​

    66,924  

​

    60,800  

​

    15,075  

​

3(a)

​

    142,799  

Operating lease liabilities – current portion

​

    2,396  

​

    35  

​

    (35 )

​

3(b)(vi)

​

    2,396  

Finance lease liabilities – current portion

​

    10,079  

​

    —  

​

    —  

​

 

​

    10,079  

Foreign income taxes payable

​

    19,261  

​

    —  

​

    —  

​

 

​

    19,261  

Current liabilities – discontinued operations

​

    673  

​

    —  

​

    —  

​

 

​

    673  

Total current liabilities

​

    127,475  

​

    62,323  

​

    15,040  

​

 

​

    204,838  

Asset retirement obligations

​

    47,343  

​

    50,121  

​

    (36,413 )

​

 

​

    61,051  

Operating lease liabilities – net of current portion

​

    33  

​

    27  

​

    (27 )

​

3(b)(vi)

​

    33  

Finance lease liabilities – net of current portion

​

    78,293  

​

    —  

​

    —  

​

 

​

    78,293  

Deferred tax liabilities

​

    73,581  

​

    —  

​

    —  

​

 

​

    73,581  

Other long-term liabilities

​

    17,709  

​

    —  

​

    —  

​

 

​

    17,709  

Total liabilities

​

    344,434  

​

    112,471  

​

    (21,400 )

​

 

​

    435,505  

Shareholders’ equity

​

       

​

       

​

       

​

 

​

       

Preferred stock

​

    —  

​

    —  

​

    —  

​

 

​

    —  

Common stock

​

    12,140  

​

    7,350  

​

    (7,350 )

​

3(b)(ii)

​

    12,140  

Additional paid-in capital

​

    357,498  

​

    22,544  

​

    (22,544 )

​

3(b)(ii)

​

    357,498  

Accumulated other comprehensive income

    2,880         —         2,880                

Less treasury stock

​

    (71,222 )

​

    —  

​

    —  

​

 

​

    (71,222 )

Retained earnings

​

    177,486  

​

    123,220  

​

    (123,220 )

​

3(b)(ii)

​

    207,815  
 

​

       

​

       

​

    30,329  

​

3(a)

​

       

Total shareholders’ equity

​

    478,782  

​

    153,114  

​

    (122,785 )

​

 

​

    509,111  

Total liabilities and shareholders’ equity

​

    823,216  

​

    265,585  

​

    (144,185 )

​

 

​

    944,616  

 

The Unaudited Pro Forma Combined Financial Information should be read in conjunction with the accompanying notes.

 

 

 

VAALCO Energy, Inc.

Pro Forma Combined Statement of Operations (Unaudited)

Year Ended December 31, 2023

 

 

​

 

VAALCO

 

​

                 

​

 

​

  Total Pro Forma  
 

​

  (U.S. GAAP, Historical)       Svenska (IFRS, Reclassified)  

​

  Pro Forma Adjustments  

​

Notes

    Combined Income Statement  
 

​

       

​

 

Note 2.1

 

​

 

Note 3 and 4

 

​

 

​

       
 

​

       

​

 

(in thousands, except per share amounts)

 

​

 

​

       

Revenues:

​

       

​

       

​

       

​

 

​

       

Crude oil, natural gas and natural gas liquids sales

​

  $ 455,066  

​

  $ 164,665  

​

  $ —  

​

 

​

    619,731  

Operating costs and expenses:

​

       

​

       

​

       

​

 

​

       

Production expense

​

    153,157  

​

    29,336  

​

    —  

​

 

​

    182,493  

FPSO demobilization and other costs

    7,484         —         —             7,484  

Exploration expense

​

    1,965  

​

    —  

​

    —  

​

 

​

    1,965  

Depreciation, depletion and amortization

​

    115,302  

​

    44,816  

​

    11,831  

​

4(a)

​

    171,949  

Impairment of oil and gas properties

    —         227,158         (227,158 )  

4(b)

    —  

General and administrative expense

​

    23,840  

​

    23,786  

​

    —  

​

 

​

    47,626  

Credit (recovery) losses and other

​

    (4,906 )

​

    (122 )

​

    —  

​

 

​

    (5,028 )

Total operating costs and expenses

​

    296,842  

​

    324,974         (215,327 )

​

 

​

    406,489  

Other operating income (expense), net

​

    433  

​

    —  

​

    —  

​

 

​

    433  

Operating income (loss)

​

    158,657  

​

    (160,309 )

​

    215,327  

​

 

​

    213,675  

Other income (expense):

​

       

​

       

​

       

​

 

​

       

Derivative instruments gain (loss), net

​

    232  

​

    (367 )

​

    —  

​

 

​

    (135 )

Interest income (expense), net

​

    (6,452 )

​

    1,178  

​

    (157 )

​

4(c)

​

    (5,431 )

Other income (expense), net

​

    (2,291 )

​

    —  

​

    —  

​

 

​

    (2,291 )

Total other expense, net

​

    (8,511 )

​

    811  

​

    (157 )

​

 

​

    (7,857 )

Income (loss) from continuing operations before income taxes

​

    150,146  

​

    (159,498 )

​

    215,170  

​

 

​

    205,818  

Income tax expense (benefit)

​

    89,777  

​

    7,028  

​

    44,326  

​

4(d)

​

    141,131  

Income (loss) from continuing operations

​

    60,369  

​

    (166,526 )

​

    170,844  

​

 

​

    64,687  

Loss from discontinued operations, net of tax

​

    (15 )

​

    —  

​

    —  

​

 

​

    (15 )

Net income (loss)

​

  $ 60,354  

​

  $ (166,526 )

​

  $ 170,844  

​

 

​

  $ 64,672  

Other comprehensive income (loss)

                                           

Currency translation adjustments

    1,701         1,171         —             2,872  

Comprehensive Income

  $ 62,055  

​

  $ (165,355 )

​

  $ 170,844  

​

 

​

  $ 67,544  
 

​

       

​

       

​

       

​

 

​

       

Basic net income per share:

                                           

Income from continuing operations

​

  $ 0.56  

​

       

​

       

​

 

​

  $ 0.61  

Loss from discontinued operations, net of tax

    (0 )                               (0 )

Net income per share

  $ 0.56                               $ 0.61  

Basic weighted average shares outstanding

​

    106,376  

​

       

​

       

​

 

​

    106,376  

Diluted net income per share:

​

       

​

       

​

       

​

 

​

       

Income from continuing operations

  $ 0.56                               $ 0.61  

Loss from discontinued operations, net of tax

    (0 )                               (0 )

Net income per share

  $ 0.56                               $ 0.61  

Diluted weighted average shares outstanding

​

    106,555  

​

       

​

       

​

 

​

    106,555  

 

The Unaudited Pro Forma Combined Financial Information should be read in conjunction with the accompanying notes.

 

 

 

Notes to Unaudited Pro Forma Combined Financial Statements

 

1. Basis of Preparation

 

This Unaudited Pro Forma Combined Financial Information has been derived from the unaudited condensed consolidated financial statements of VAALCO and Svenska as of and for the year ended December 31, 2023. The Unaudited Pro Forma Combined Financial Information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses,” using assumptions set forth in the notes herein.

 

The unaudited pro forma combined balance sheet as of December 31, 2023, gives effect to the Acquisition as if it had occurred on December 31, 2023. The unaudited pro forma combined statements of and for the year ended December 31, 2023, give effect to the Acquisition as if it had occurred on January 1, 2023.

 

The consolidated financial statements of VAALCO were prepared in accordance with U.S. GAAP. The consolidated financial statements of Svenska were prepared in accordance with IFRS as issued by the IASB. As such, the Unaudited Pro Forma Combined Financial Information includes adjustments to align the accounting policies of Svenska to those of VAALCO.

 

The Unaudited Pro Forma Combined Financial Information and underlying pro forma adjustments are based upon currently available information and include certain estimates and assumptions made by management; accordingly, actual results could differ materially from the pro forma information. Management believes the assumptions provide a reasonable and supportable basis for presenting the estimated significant effects of the Acquisition. The Unaudited Pro Forma Combined Financial Information is provided for illustrative purposes only and may or may not provide an indication of results in the future.

 

2. Application of U.S. GAAP and Reclassification Adjustments

 

The consolidated financial statements of Svenska were prepared in accordance with IFRS as issued by the IASB. For purposes of preparing the Unaudited Pro Forma Combined Financial Information, the financial information of Svenska has been adjusted to give effect to the material differences between IFRS and U.S. GAAP, to the extent that such historical IFRS and U.S.GAAP differences are not affected by the adjustments relating to preliminary purchase price allocation described in Note 3 below. Other differences impacted by the preliminary purchase price allocation are included as other “pro forma adjustments” as described in Note 3 and 4 below. Further, certain adjustments to Svenska’s financial information are required to conform Svenska’s presentation and classification policies to those of VAALCO, as described below.

 

 

 

2.1  Reclassification of Svenska  financial statement line items to align with VAALCO’s financial statements

 

Balance sheet as of December 31, 2023

 

 

​

 

Svenska (IFRS, Historical)

 

​

 

Reclassification

 

​

Notes

 

Svenska (IFRS, Reclassified)

 
 

​

 

(in thousands)

 

ASSETS

​

       

​

       

​

         

Current assets:

​

       

​

       

​

         

Cash

​

  $ —  

​

       

​

    $ —  

Cash and cash equivalents

​

    65,550  

​

       

​

      65,550  

Accounts receivable balances

​

    —  

​

       

​

      —  

Drilling equipment and consumable supplies

    7,894         (7,894 )  

(A)

    —  

Receivables:

​

       

​

       

​

      —  

Trade receivables

​

    26,066  

​

       

​

      26,066  

Accounts with joint venture owners

​

    —  

​

       

​

      —  

Tax receivables

                          —  

Financial Investments

    4,028         (4,028 )  

(B)

    —  

Other receivables

​

    1,591  

​

       

​

      1,591  

Prepayments and accrued income

​

    1,093  

​

    4,028  

​

(B)

    5,121  

Total current assets

​

    106,222  

​

    (7,894 )

​

      98,328  
                                 

Other noncurrent assets:

​

       

​

       

​

         

Property and equipment

​

       

​

       

​

         

Petroleum and natural gas assets

​

    —  

​

       

​

      —  
 

​

       

​

       

​

         

Other noncurrent receivables

​

    37  

​

       

​

      37  
 

​

       

​

       

​

      —  

Tangible fixed assets

    131,107         (131,107 )  

(C)

    —  

Crude oil and natural gas properties, equipment and other- successful efforts method, net

​

    —  

​

    139,001  

​

(A)(C)

    139,001  

Intangible assets

​

    —  

​

    —  

​

      —  

Right of use assets

    23         (23 )  

(D)

    —  

Right of use operating lease assets

​

    —  

​

    23  

​

(D)

    23  

Deferred tax assets

    28,196                     28,196  

Total assets

​

    265,585  

​

    —  

​

      265,585  
 

​

       

​

       

​

         

LIABILITIES AND SHAREHOLDERS’ EQUITY

​

       

​

       

​

         

Current liabilities:

​

       

​

       

​

         

Accounts payable and accrued liabilities

​

  $ —  

​

       

​

    $ —  
 

​

       

​

       

​

         

Accounts payable

​

       

​

       

​

      —  

Trade payables

    1,488                     1,488  

Current portion of share-based compensation liabilities

​

       

​

       

​

      —  

Modernization payment liabilities

​

       

​

       

​

      —  

Derivative commodity contracts

​

       

​

       

​

      —  

Accruals and deferred income

    57,346         (57,346 )  

(E)

    —  

Accrued liabilities and other

​

    3,454  

​

    57,346  

​

(E)

    60,800  

Leasing liability short term

​

    35  

​

    (35 )

​

(I)

    —  

Operating lease liabilities - current portion

​

    —  

​

    35  

​

(I)

    35  

Other liabilities

    —                        

Total current liabilities

​

    62,323  

​

    —  

​

      62,323  

Non-current liabilities:

​

       

​

       

​

         

Asset retirement obligations

​

    50,121  

​

       

​

      50,121  

Share-based compensation liabilities

​

    —  

​

       

​

      —  

Leasing liability long term

​

    27  

​

    (27 )

​

(J)

    —  

Operating lease liabilities - net of current portion

​

    —  

​

    27  

​

(J)

    27  

Deferred tax liabilities

    —                        

Other provisions

                               

Long-term debt

​

       

​

       

​

      —  

Modernization payment liabilities

​

       

​

       

​

      —  

Other long-term liabilities

​

       

​

       

​

      —  

Total liabilities

​

    112,471  

​

    —  

​

      112,471  

Shareholders’ equity

​

       

​

       

​

         

Share capital

​

    7,350  

​

    (7,350 )

​

(F)

    —  

Reserves

    22,544         (22,544 )  

(G)

    —  

Retained Earnings, incl. loss for the year

    123,220         (123,220 )  

(H)

    —  

Common stock

​

    —  

​

    7,350  

​

(F)

    7,350  

Additional paid-in capital

​

    —  

​

    22,544  

​

(G)

    22,544  

Accumulated other comprehensive income

​

    —  

​

    123,220  

​

(H)

    123,220  

Deficit

​

    —  

​

    —  

​

      —  

Contributed surplus

​

    —  

​

       

​

      —  

Total equity

​

    153,114  

​

    —  

​

      153,114  

Total equity and liabilities

​

    265,585  

​

    —  

​

      265,585  

 

 

 


(A)

Drilling equipment and consumable supplies of $7,894 thousand reclassified to Crude oil and natural gas properties, equipment and other- successful efforts method, net.

(B)

Financial Investments of $4,028 thousand reclassified to Prepayments and accrued income.

(C)

Tangible fixed assets of $131,107 thousand reclassified to Crude oil and natural gas properties, equipment and other- successful efforts method, net.

(D)

Right of use assets of $23 thousand reclassified to Right of use operating lease assets.

(E)

Accruals and deferred income of $57,346 thousand reclassified to Accrued liabilities and other.

(F)

Share capital of $7,350 thousand reclassified to Common Stock.

(G)

Reserves of $22,544 thousand reclassified to Additional paid-in capital.

(H)

Retained Earnings, incl. loss for the year of $123,220 thousand reclassified to Accumulated other comprehensive income.

(I) Leasing liability short term of $35 thousand reclassified to Operating lease liabilities - current portion.
(J) Leasing liability long term of $27 thousand reclassified to Operating lease liabilities - net of current portion.

 

 

 

Statement of operations for the year ended December 31, 2023

 

 

​

 

Svenska (IFRS, Historical)

 

​

 

Reclassification

 

​

Notes

 

Svenska (IFRS, Reclassified)

 
 

​

 

(in thousands)

 

Revenues

​

       

​

       

​

         

Revenue from oil & gas

​

  $ 164,665  

​

  $ (164,665 )

​

(A)

  $ —  

Crude oil, natural gas and natural gas liquids sales

​

    —  

​

    164,665  

​

(A)

    164,665  

Other revenue

​

    277  

​

    (277 )

​

(C )

    —  

Total revenues

    164,942         (277 )         164,665  
                                 

Expenses

​

       

​

       

​

         

Operational and exploration costs

    29,336         (29,336 )  

(D)

    —  

Fair value loss on financial instruments

    367         (367 )  

(L)

    —  

Other external costs

    12,000         (12,000 )  

(E)

    —  

Employee benefits expenses

    11,786         (11,786 )  

(F)

    —  

Production and operating

​

    —  

​

    29,336  

​

(D)

    29,336  

General and administrative

​

    —  

​

    23,786  

​

(E ), (F)

    23,786  

Depreciation and impairment

    271,975         (271,975 )  

(H)

    —  

Depletion, depreciation and amortization

​

    —  

​

    44,817  

​

(H)

    44,817  

Impairment of oil and gas properties

    —         227,158    

(H)

    227,158  

Other operating expenses

    155         (155 )  

(I)

    —  

Credit (recovery) losses and other

    —         (122 )  

(C ), (I)

    (122 )

Operating loss

    (160,677 )       367           (160,310 )

Other income (expense):

                               

Derivative instruments gain (loss), net

    —         (367 )  

(L)

    (367 )

Finance income

    4,295         (4,295 )  

(B)

    —  

Finance costs

​

    (3,117 )

​

    3,117  

​

(G)

    —  

Interest income (expense), net

    —         1,178    

(B), (G)

    1,178  

Total other expense, net

    1,178         (367 )         811  
                                 

Earnings before income taxes

​

    (159,499 )

​

    —  

​

      (159,499 )

Tax expense for the year

    7,028         (7,028 )  

(J)

    —  

Income tax expense (benefit)

​

    —  

​

    7,028  

​

(J)

    7,028  

Net Earnings (Loss)

​

    (166,527 )

​

    —  

​

      (166,527 )

Other comprehensive income (loss)

                               

Exchange differences for the year

  $ 1,171       $ (1,171 )  

(K)

  $ —  

Currency translation adjustments

    —         1,171    

(K)

    1,171  

Total other comprehensive income

    1,171         —           1,171  
                                 

Total comprehensive income

    (165,356 )       —           (165,356 )

 

 

 


(A)

Revenue from oil & gas of $164,665 thousand reclassified to Crude oil, natural gas and natural gas liquids sales.

(B) Finance income of $4,295 thousand reclassified to Interest income (expense), net.

(C)

Other revenue of $277 thousand reclassified to Credit (recovery) losses and other.

(D)

Operational and exploration costs of $29,336 thousand reclassified to Production and operating.

(E) Other external costs of $12,000 thousand reclassified to general and administrative.

(F)

Employee benefits expenses of $11,786 thousand reclassified to General and administrative.

(G) Finance costs of $3,117 thousand reclassified to Interest income (expense), net.

(H)

Depreciation and impairment of $271,975 thousand reclassified to Depletion, depreciation and amortization and Impairment of oil and gas properties in the amount of $44,817 thousand and $227,158 thousand, respectively.

(I)

Other operating expenses of $155 thousand reclassified to Credit (recovery) losses and other.

(J)

Tax expense for the year of $7,028 thousand reclassified to Income tax expense (benefit).
(K) Exchange differences for the year of $1,171 thousand reclassified to Currency translation adjustments.
(L) Fair value loss on financial instruments of $367 thousand reclassified to Derivative instruments gain (loss), net.

 

3. Preliminary Acquisition Accounting and Other Pro Forma adjustments and Assumptions

 

 

(a)

Consideration for the Combination and Purchase Price Allocation

 

The Acquisition will be accounted for using the acquisition method of accounting for business combinations in accordance with ASC 805, Business Combinations with VAALCO being the acquiring entity.

 

VAALCO’s allocation of the preliminary estimated purchase consideration with respect to the Acquisition is based on estimate of, and assumptions related to, the fair value of assets to be acquired and liabilities to be assumed as of April 30, 2024, using current available information. The preliminary purchase price allocation is subject to change due to several factors, including but not limited to changes in the estimated fair value of Svenska’s assets acquired and liabilities assumed as of the date of the Acquisition, which could result from changes in future oil and natural gas commodity prices, reserve estimates, interest rates, discount rates as well as other factors. Because the Unaudited Pro Forma Combined Financial Information has been prepared based on these preliminary estimates, the resulting effect on the financial position and results of operation of the combined business may be materially different from the pro forma amounts included herein.

 

VAALCO expects to finalize the purchase price allocation as soon as reasonably practicable after completing the Acquisition, and upon consideration of any incremental information as part of the finalization of the measurement process. The finalization of the purchase price allocation will not extend beyond the one-year measurement period provided under ASC 805. Further, the Unaudited Pro Forma Combined Financial Information does not reflect any revenue and operating synergies or cost savings that may result from the Acquisition.

 

 

 

Under the terms of the Acquisition, VAALCO paid approximately $40.2 million in cash as consideration for the acquisition.

 

The following information summarizes the provisional purchase consideration and preliminary allocation of the fair values assigned to the assets at the purchase date:

 

   

As of December 31, 2023

 
   

(In thousands)

 
    Carrying amount     PPA adjustments     Total Purchase Price Allocation  

Cash and cash equivalents

  $ 65,550     $ (55,867 )   $ 9,683  

Receivables:

                       

Trade, net

    26,066       —       26,066  

Other receivables, net

    1,591       —       1,591  

Prepayments and other

    5,121       —       5,121  

Crude oil and natural gas properties, equipment and other- successful efforts method, net

    139,001       (62,598 )     76,403  

Restricted cash

    —       8,788       8,788  

Value added tax and other receivables

    37       —       37  

Right of use operating lease assets

    23       (23 )     —  

Deferred tax asset

    28,196       5,681       33,877  

Accounts payable

    (1,488 )     —       (1,488 )

Accrued liabilities and other

    (60,800 )     (15,075 )     (75,875 )

Operating lease liabilities – current portion

    —       —       —  

Asset retirement obligations

    (50,121 )     36,413       (13,708 )

Operating lease liabilities – net of current portion

    (27 )     27       —  

Gain on acquisition

    —       (30,329 )     (30,329 )

Purchase consideration

                  $ 40,166  

            _______________

 

 

(b)

Other Impacts of the Acquisition on the unaudited pro forma combined balance sheet as of December 31, 2023

 

 

(i)

Adjustment to reflect the bargain purchase gain directly attributable to the Acquisition.

 

 

(ii)

Adjustment to remove Svenska’s pre-acquisition equity balances on consolidation.

 

(iii)

 

To reflect the preliminary purchase price allocation of the Acquisition. Purchase price allocations for the acquired assets and liabilities assumed based upon estimated fair values, which are subject to adjustment and could change significantly as VAALCO continues to evaluate this preliminary allocation.

 

 

(iv)

Adjustment to reflect the payment of a dividend to the shareholders of Svenska that was condition precedent to the Acquisition.

 

 

(v)

Adjustment to reflect an escrow payable upon related to the resolution of certain tax issues arising from prior Svenska transaction.

 

 

(vi)

Adjustment to reflect the cancellation of leased assets upon the Acquisition.

 

 

(vii)

Adjustment to reflect the payment of severance expense and the corresponding adjustment to cash and cash equivalent on termination of certain executives of Svenska pursuant to the terms of their executive employment arrangement.

 

4. Impact of the Acquisition on the unaudited pro forma combined statements of operations for the year ended December 31, 2023

 

 

(a)

Depreciation, depletion and amortization

 

Represents the incremental depreciation, depletion and amortization related to the assets acquired in the Acquisition, which is based on the preliminary purchase price allocation. Depletion of petroleum and natural gas assets was calculated using the unit-of-production method, adjusted to reflect a) the fair value of Svenska’s Crude oil and natural gas properties, equipment and other – successful efforts method, net as of the Acquisition date as though the Acquisition occurred on January 1, 2023; and b) estimates of Svenska’s proved reserves following the methodology required by SEC regulations.

 

 

 

 

(b)

Impairment of oil and gas properties

 

Represents the reversal of impairment of oil and gas properties under IFRS. 

 

 

(c)

Interest income (expense), net

 

Adjustment to reflect the incremental accretion expense related to asset retirement obligations on Properties acquired.

 

 

(d)

Income Tax

 

Adjustment to reflect income tax expense resulting from acquisition. The adjustment was calculated by applying the applicable tax rate to the total change in income (loss) from continuing operations before income taxes.

 

5. Supplemental Pro Forma Information on Crude Oil and Natural Gas Producing Activities

 

The following tables present the estimated pro forma combined net proved developed and undeveloped crude oil, natural gas and natural gas liquids (“NGLs”) prepared as of December 31, 2023, along with a summary of changes in the quantities of net remaining proved reserves during the year ended December 31, 2022. The combined standardized measure of discounted future net cash flows relating to proved reserves as of December 31, 2023, are also presented.

 

This pro forma combined reserve, production and standardized measure information gives effect to the Acquisition as if it had been completed on January 1, 2023. The historical proved reserves information presented below represent the respective estimates made as of December 31, 2023, by VAALCO and Svenska while they were separate companies. These estimates have not been updated for changes in development plans or other factors, which have occurred or may occur subsequent to December 31, 2023, or subsequent to the completion of the Acquisition. This pro forma information has been prepared for illustrative purposes and is not intended to be a projection of future results of the combined business. 

 

 

(a)

Estimated Quantities of Proved Reserves

 

   

Oil (MBbls)

 
   

VAALCO

Historical(1)

   

Svenska SEC(2)

   

Pro Forma

Combined

 

Proved reserves:

                       

Balance at December 31, 2022

    22,403       17,601       40,004  

Production

    (6,302 )     (1,898 )     (8,200 )

Extensions and discoveries

    903       —       903  

Purchases of Reserves

    —       —       —  

Revisions of previous estimates

    6,083       —       6,083  

Balance at December 31, 2023

    23,087       15,703       38,790  

Year-end proved developed reserves:

                       

2023

    19,503       1,119       20,622  

Year-end proved undeveloped reserves:

                       

2023

    3,584       14,584       18,168  

 

 

 

   

Natural Gas (MMcf)(3)

 
   

VAALCO

Historical

   

Svenska SEC(4)

   

Pro Forma

Combined

 

Proved reserves:

                       

Balance at December 31, 2022

    16,539       7,071       23,610  

Production

    (1,528 )     (30 )     (1,558 )

Extensions and discoveries

    3,219       —       3,219  

Purchases of Reserves

    —       —       —  

Revisions of previous estimates

    (1,298 )     —       (1,298 )

Balance at December 31, 2023

    16,932       7,041       23,973  

Year-end proved developed reserves:

                       

2023

    9,011       613       9,624  

Year-end proved undeveloped reserves:

                       

2023

    7,921       6,428       14,349  

 

   

NGLs (MBbls)(3)

 
   

VAALCO

Historical

   

Svenska SEC(4)

   

Pro Forma

Combined

 

Proved reserves:

                       

Balance at December 31, 2022

    2,797       —       2,797  

Production

    (270 )     —       (270 )

Extensions and discoveries

    505       —       505  

Purchases of Reserves

    —       —       —  

Revisions of previous estimates

    (295 )     —       (295 )

Balance at December 31, 2023

    2,737       —       2,737  

Year-end proved developed reserves:

                       

2023

    1,449       —       1,449  

Year-end proved undeveloped reserves:

                       

2023

    1,289       —       1,289  

 

 

   

Total (Mboe)(5)

 
    VAALCO Historical    

Svenska SEC

    Pro Forma Combined  

Proved reserves:

                       

Balance at December 31, 2022

    27,957       18,820       46,777  

Production

    (6,827 )     (1,903 )     (8,730 )

Extensions and discoveries

    1,945       —       1,945  

Purchases of Reserves

    —       —       —  

Revisions of previous estimates

    5,572       —       5,572  

Balance at December 31, 2023

    28,647       16,918       45,564  

Year-end proved developed reserves:

                       

2023

    22,454       1,224       23,678  

Year-end proved undeveloped reserves:

                       

2023

    6,193       15,693       21,886  
                         
                         
                         

            ____________

 

(1)

VAALCO’s proved developed and undeveloped oil reserves are located offshore Gabon in West Africa, Egypt and Canada.

 

(2)

Svenska’s proved oil reserves are located in Cote d'Ivoire.

 

 

(b)

Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Reserves

 

The pro forma combined standardized measure of discounted future net cash flows relating to proved crude oil, natural gas, and NGLs reserves as of December 31, 2023, is as follows:

 

 

   

International (in thousands)

 
    VAALCO Historical    

Svenska SEC

    Pro Forma Combined  

Future cash inflows

  $ 1,943,003     $ 1,490,278     $ 3,433,281  

Future production costs

    (923,699 )     (426,562 )     (1,350,261 )

Future development costs(1)

    (253,129 )     (468,422 )     (721,551 )

Future income tax expense(2)

    (293,019 )     (183,097 )     (476,116 )

Future net cash flows

    473,156       412,197       885,353  

Discount to present value at 10% annual rate

    (131,222 )     (216,742 )     (347,964 )

Standardized measure of discounted future net cash flows

    341,934       195,455       537,389  

 ______________

 

(1)

Includes costs expected to be incurred to abandon the properties.

 

(2)

For VAALCO, future income tax expense represents amounts payable to the Governments of Gabon and Egypt on Profit Oil as final payment of corporate income taxes, and domestic income taxes (including other expenses treated as taxes). For Svenska, future income tax expense represents amounts payable to the Government of Cote d'Ivoire on Profit Oil as final payment of corporate income taxes, and domestic income taxes (including other expenses treated as taxes).

 

The changes in the pro forma combined standardized measure of discounted future net cash flow relating to proved crude oil, natural gas, and NGLs reserves for the year ended December 31, 2023, are as follows:

 

   

Year Ended December 31, 2023 (in thousands)

 
    VAALCO Historical    

Svenska SEC

 

​

  Pro Forma Combined  

Balance at beginning of period

  $ 624,465     $ 319,223  

​

  $ 943,688  

Sales of crude oil and natural gas, net of production costs

    (296,209 )     (135,329 )

​

    (431,538 )

Net changes in prices and production costs

    (210,703 )     (184,957 )

​

    (395,660 )

Extensions and discoveries

    28,849       —  

​

    28,849  

Revisions of previous quantity estimates

    139,856       —  

​

    139,856  

Purchases

    —       —  

​

    —  

Changes in estimated future development costs

    (92,641 )     —  

​

    (92,641 )

Development costs incurred during the period

    —       40,145  

​

    40,145  

Accretion of discount

    62,447       31,922  

​

    94,369  

Net change of income taxes

    77,757       99,106  

​

    176,863  

Change in production rates (timing) and other

    8,113       25,345  

​

    33,458  

Balance at end of period

    341,934       195,455  

​

    537,389