egy-20240930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-Q

______________________

(Mark One)


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

For the quarterly period ended September 30, 2024


o			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.)

2500 CityWest Blvd. Suite 400 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

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 x No o

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 x No o

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. o

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

As of November 7, 2024, there were outstanding 103,743,163 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, 2024 and December 31, 2023			2
Condensed Consolidated Statements of Operations and Comprehensive Income Three and Nine Months Ended September 30, 2024 and 2023			3
Condensed Consolidated Statements of Shareholders’ Equity Three and Nine Months Ended September 30 , 2024 and 2023			4
Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30 , 2024 and 2023			5
Notes to Condensed Consolidated Financial Statements (unaudited)			7
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			37
ITEM 4. CONTROLS AND PROCEDURES			39
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			40
ITEM 5. OTHER INFORMATION			40
ITEM 6. EXHIBITS			41

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PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

VAALCO ENERGY, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)


	As of September 30, 2024		As of December 31, 2023
	(in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	89,101	$	121,001
Restricted cash	146		114
Receivables:
Trade, net of allowances for credit loss and other of $0.7 million and $0.5 million, respectively	84,344		44,888
Accounts with joint venture owners, net of allowance for credit losses of $1.2 million and $0.8 million, respectively	1,131		1,814
Egypt receivables and other, net of allowances for credit loss and other of $0.0 million and $4.6 million	42,163		45,942
Crude oil inventory	4,776		1,948
Prepayments and other	15,138		12,434
Total current assets	236,799		228,141
Crude oil, natural gas and NGLs properties and equipment, net	531,589		459,786
Other noncurrent assets:
Restricted cash	9,462		1,795
Value added tax and other receivables, net of allowances for credit loss and other of $0.0 million	10,228		4,214
Right of use operating lease assets	2,320		2,378
Right of use finance lease assets	83,093		89,962
Deferred tax assets	57,035		29,242
Abandonment funding	6,268		6,268
Other long-term assets	1,109		1,430
Total assets	$	937,903	$	823,216
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	15,047	$	22,152
Accounts with joint venture owners	984		5,990
Accrued liabilities and other	103,848		67,597
Operating lease liabilities - current portion	335		2,396
Finance lease liabilities - current portion	12,560		10,079
Foreign income taxes payable	43,473		19,261
Total current liabilities	176,247		127,475
Asset retirement obligations	65,868		47,343
Operating lease liabilities - net of current portion	2,006		33
Finance lease liabilities - net of current portion	70,912		78,293
Deferred tax liabilities	103,356		73,581
Other long-term liabilities	18,482		17,709
Total liabilities	436,871		344,434
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, 122,304,124 and 121,397,553 shares issued, 103,743,163 and 104,346,233 shares outstanding, respectively	12,230		12,140
Additional paid-in capital	361,147		357,498
Accumulated other comprehensive income	1,013		2,880
Less treasury stock, 18,560,961 and 17,051,320 shares, respectively, at cost	(78,024)		(71,222)
Retained earnings	204,666		177,486
Total shareholders' equity	501,032		478,782
Total liabilities and shareholders' equity	$	937,903	$	823,216

See notes to unaudited 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,
	2024		2023		2024		2023
	(in thousands, except per share amounts)
Revenues:
Crude oil, natural gas and natural gas liquids sales	$	140,334	$	116,269	$	357,267	$	305,912
Operating costs and expenses:
Production expense	42,324		39,956		126,859		106,760
FPSO demobilization and other costs	—		—		—		5,647
Exploration expense	—		1,194		48		1,259
Depreciation, depletion and amortization	47,031		32,538		105,987		94,958
General and administrative expense	6,929		6,216		21,230		16,835
Credit losses and other	69		822		5,222		2,437
Total operating costs and expenses	96,353		80,726		259,346		227,896
Other operating income (expense), net	102		5		68		(298)
Operating income	44,083		35,548		97,989		77,718
Other income (expense):
Derivative instruments gain (loss), net	210		(2,320)		(380)		(2,268)
Interest expense, net	(588)		(1,426)		(2,640)		(5,375)
Bargain purchase gain	—		—		19,898		(1,412)
Other income (expense), net	(141)		183		(3,925)		(97)
Total other income (expense), net	(519)		(3,563)		12,953		(9,152)
Income before income taxes	43,564		31,985		110,942		68,566
Income tax expense	32,574		25,844		64,115		52,203
Net income	$	10,990	$	6,141	$	46,827	$	16,363
Other comprehensive income (loss)
Currency translation adjustments	1,655		(2,216)		(1,867)		(335)
Comprehensive income	$	12,645	$	3,925	$	44,960	$	16,028

Basic net income per share:
Net income per share	$	0.10	$	0.06	$	0.45	$	0.15
Basic weighted average shares outstanding	103,743		106,289		103,644		106,876
Diluted net income per share:
Net income per share	$	0.10	$	0.06	$	0.45	$	0.15
Diluted weighted average shares outstanding	103,842		106,433		103,728		107,072

See notes to unaudited 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, 2024	121,398	(17,051)	$	12,140	$	357,498	$	2,880	$	(71,222)	$	177,486	$	478,782
Shares issued - stock-based compensation	543	—	54		393		—		—		—		447
Stock-based compensation expense	—	—	—		936		—		—		—		936
Treasury stock	—	(1,434)	—		—		—		(6,344)		—		(6,344)
Dividend distributions	—	—	—		—		—		—		(6,463)		(6,463)
Other comprehensive loss	—	—	—		—		(2,454)		—		—		(2,454)
Net income	—	—	—		—		—		—		7,686		7,686
Balance at March 31, 2024	121,941	(18,485)	12,194		358,827		426		(77,566)		178,709		472,590
Shares issued - stock-based compensation	364	—	36		(36)		—		—		—		—
Stock-based compensation expense	—	—	—		1,012		—		—		—		1,012
Treasury stock	—	(76)	—		—		—		(458)		—		(458)
Dividend distributions	—	—	—		—		—		—		(6,579)		(6,579)
Other comprehensive loss	—	—	—		—		(1,068)		—		—		(1,068)
Net income	—	—	—		—		—		—		28,151		28,151
Balance at June 30, 2024	122,305	(18,561)	12,230		359,803		(642)		(78,024)		200,281		493,648
Shares issued - stock-based compensation	—	—	—		—		—		—		—		—
Stock-based compensation expense	—	—	—		1,344		—		—		—		1,344
Treasury stock	—	—	—		—		—		—		—		—
Dividend distributions	—	—	—		—		—		—		(6,605)		(6,605)
Other comprehensive loss	—	—	—		—		1,655		—		—		1,655
Net income	—	—	—		—		—		—		10,990		10,990
Balance at September 30, 2024	122,305	(18,561)	$	12,230	$	361,147	$	1,013	$	(78,024)	$	204,666	$	501,032

See notes to unaudited condensed consolidated financial statements.


	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
Treasury stock	—	(981)	—		—		—		(5,377)		—		(5,377)
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
Treasury stock	—	(1,161)	—		—		—		(6,026)		—		(6,026)
Dividend Distribution	—	—	—		—		—		—		(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
Treasury stock	—	(1,403)	—		—		—		(6,090)		—		(6,090)
Dividend Distribution	—	—	—		—		—		—		(6,701)		(6,701)
Other comprehensive loss	—	—	—		—		(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

See notes to unaudited 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,
	2024		2023
	(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	46,827	$	16,363
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	105,987		94,958
Bargain purchase gain	(19,898)		1,412
Exploration expense	48		1,194
Deferred taxes	(7,762)		(2,305)
Unrealized foreign exchange loss	(613)		932
Stock-based compensation	3,362		2,332
Cash settlements paid on exercised stock appreciation rights	(154)		(282)
Derivative instruments (gain) loss, net	209		2,268
Cash settlements paid on matured derivative contracts, net	(15)		(62)
Cash settlements paid on asset retirement obligations	(315)		(4,796)
Credit losses and other	5,222		2,437
Other operating loss, net	34		317
Equipment and other expensed in operations	1,589		2,560
Change in operating assets and liabilities:
Trade, net	(39,456)		29,364
Accounts with joint venture owners, net	(4,739)		15,090
Egypt receivables and other, net	(394)		694
Crude oil inventory	12,153		(5,952)
Prepayments and other	(1,847)		1,198
Value added tax and other receivables	(5,713)		(3,719)
Other long-term assets	1,808		2,942
Accounts payable	(9,034)		(10,083)
Foreign income taxes receivable/(payable)	24,327		36,025

Accrued liabilities and other	(42,441)		(11,076)
Net cash provided by (used in) operating activities	69,185		171,811
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures	(61,530)		(77,365)
Cash paid in business combination, net of cash acquired	412		—
Net cash provided by (used in) investing activities	(61,118)		(77,365)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuances of common stock	447		593
Dividend distribution	(19,647)		(20,153)
Treasury shares	(6,803)		(17,493)
Deferred financing costs	—		(83)
Payments of finance lease	(6,261)		(5,246)
Net cash provided by (used in) in financing activities	(32,264)		(42,382)
Effects of exchange rate changes on cash	(4)		(321)
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(24,201)		51,743
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT BEGINNING OF PERIOD	129,178		59,776
CASH, CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD	$	104,977	$	111,519

See notes to unaudited 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,
	2024		2023
	(in thousands)
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	$	4,900	$	6,622
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment additions incurred but not paid at end of period	$	8,894	$	23,820
Recognition of right-of-use operating lease assets and liabilities	$	2,035	$	2,582
Recognition of right-of-use finance lease assets and liabilities	$	—	$	3,273
Asset retirement obligations	$	15,796	$	2,487

See notes to unaudited 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 holds interests in two production sharing contracts (“PSCs”) in Egypt and holds a non-operator interest in Cote d’Ivoire. The Company has opportunities to participate in development and exploration activities in Equatorial Guinea, West Africa and Nigeria.

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 unaudited interim 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 audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which includes a summary of the significant accounting policies.

Allowance for credit losses and other – 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,
	2024		2023		2024		2023
	(in thousands)
Allowance for credit losses and other
Balance at beginning of period	$	(12,604)	$	(13,519)	$	(6,029)	$	(8,704)
Credit loss charges and other, net of receipts	(69)		(822)		(5,222)		(2,437)
Cumulative effect of adjustment upon adoption of ASU 2016-13 on January 1, 2023	—		—		—		(3,120)
Reversal of allowance resulting from the settlement of the related receivable	11,200		—		11,200		—
Foreign currency gain (loss)	(425)		238		(1,847)		158
Balance at end of period	$	(1,898)	$	(14,103)	$	(1,898)	$	(14,103)

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Fair value of financial instruments


		As of September 30, 2024
	Balance Sheet Line	Level 1		Level 2		Level 3		Total
		(in thousands)
Assets
Derivative asset	Prepayments and other	$	—	$	244	$	—	$	244
		$	—	$	244	$	—	$	244
Liabilities
Derivative liability	Accrued liabilities and other	$	—	$	35	$	—	$	35
		$	—	$	35	$	—	$	35


		As of December 31, 2023
	Balance Sheet Line	Level 1		Level 2		Level 3		Total
		(in thousands)
Assets
Derivative asset	Prepayments and other	$	—	$	403	$	—	$	403
		$	—	$	403	$	—	$	403
Liabilities
SARs liability	Accrued liabilities and other	$	—	$	163	$	—	$	163
		$	—	$	163	$	—	$	163

2. NEW ACCOUNTING STANDARDS

Not Yet Adopted

In August 2023, the Financial Accounting Standards Board (“FASB”) issued new guidance to provide specific guidance on how a joint venture, upon formation, should recognize and initially measure assets contributed to and liabilities assumed by such joint venture. The rules become effective prospectively for all joint venture formations occurring on or after January 1, 2025. VAALCO is currently assessing the impact of this guidance on the consolidated financial statements.

In November 2023, FASB issued new guidance to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The rules become effective for annual periods beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. The standard requires additional disclosures about operating segments. VAALCO is currently evaluating the impact of adopting this guidance on the consolidated financial statements.

In December 2023, FASB issued new guidance to improve income tax disclosures to provide information to assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. The rules become effective for annual periods beginning after December 15, 2024. The standard modifies required income tax disclosures. VAALCO is currently evaluating the impact of adopting this guidance on the consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, Accounting Standards Update 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses to improve financial reporting by requiring that public business entities disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. This ASU is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. VAALCO is currently evaluating the impact of adopting this ASU to our notes to the consolidated financial statements and processes.

3. 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

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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

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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.

4. SEGMENT INFORMATION

The Company’s operations are based in Gabon, Egypt, Canada, Equatorial Guinea and Cote d'Ivoire. Each of the reportable operating segments are organized and managed based upon geographic location. The Company’s Chief Executive Officer,

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who is the chief operating decision maker, evaluates the operational results 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 category is primarily corporate and operations support costs that are not allocated to the reportable operating segments.

Segment activity of continuing operations for the three and nine months ended September 30, 2024 and 2023 as well as long-lived assets and segment assets at September 30, 2024 and December 31, 2023 are as follows:


	Three Months Ended September 30, 2024
(in thousands)	Gabon		Egypt		Canada		Equatorial Guinea		Cote d'Ivoire		Corporate and Other		Total
Revenues:
Crude oil, natural gas and natural gas liquids sales	$	47,608	$	34,544	$	8,387	$	—	$	49,795	$	—	$	140,334
Operating costs and expenses:
Production expense	13,932		12,477		3,015		195		12,701		4		42,324
Exploration expense	—		—		—		—		—		—		—
Depreciation, depletion and amortization	12,796		8,729		6,106		—		19,184		216		47,031
General and administrative expense	241		(79)		(4)		62		1,061		5,648		6,929
Credit losses and other	—		—		—		69		—		—		69
Total operating costs and expenses	26,969		21,127		9,117		326		32,946		5,868		96,353
Other operating income (expense), net	—		—		102		—		—		—		102
Operating income (loss)	20,639		13,417		(628)		(326)		16,849		(5,868)		44,083
Other income (expense):
Derivative instruments gain(loss), net	—		—		—		—		(169)		379		210
Interest (expense) income, net	(964)		(360)		—		—		2,029		(1,293)		(588)
Bargain purchase gain	—		—		—		—		—		—		—
Other (expense) income, net	(72)		(101)		669		(4)		(37)		(597)		(141)
Total other expense, net	(1,036)		(461)		670		(4)		1,823		(1,511)		(519)
Income (loss) before income taxes	19,603		12,956		42		(330)		18,672		(7,379)		43,564
Income tax (benefit) expense	12,932		3,613		—		—		8,454		7,575		32,574
Net income (loss)	$	6,671	$	9,343	$	42	$	(330)	$	10,218	$	(14,953)	$	10,990
Consolidated capital expenditures	$	8,859	$	1,698	$	3,014	$	38	$	11,158	$	1,839	$	26,606

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	Nine Months Ended September 30, 2024
(in thousands)	Gabon		Egypt		Canada		Equatorial Guinea		Cote d'Ivoire		Corporate and Other		Total
Revenues:
Crude oil, natural gas and natural gas liquids sales	$	158,786	$	106,986	$	24,460	$	—	$	67,035	$	—	$	357,267
Operating costs and expenses:
Production expense	49,131		38,652		8,753		712		29,606		5		126,859
Exploration expense	—		48		—		—		—		—		48
Depreciation, depletion and amortization	39,591		25,481		15,297		—		25,233		385		105,987
General and administrative expense	1,194		297		(119)		233		1,185		18,440		21,230
Credit losses and other	20		4,812		—		390		—		—		5,222
Total operating costs and expenses	89,936		69,290		23,931		1,335		56,024		18,830		259,346
Other operating income (expense), net	(34)		—		102		—		—		—		68
Operating income (loss)	68,816		37,696		631		(1,335)		11,011		(18,830)		97,989
Other income (expense):
Derivative instruments gain, net	—		—		—		—		(169)		(211)		(380)
Interest (expense) income, net	(3,439)		(1,120)		38		—		489		1,392		(2,640)
Bargain purchase gain	—		—		—		—		—		19,898		19,898
Other income (expense), net	(303)		(101)		674		(2)		(338)		(3,856)		(3,925)
Total other expense, net	(3,742)		(1,221)		713		(2)		(18)		17,223		12,953
Income (loss) before income taxes	65,074		36,475		1,344		(1,337)		10,993		(1,608)		110,942
Income tax expense (benefit)	38,956		19,395		—		—		5,404		360		64,115
Net income (loss)	$	26,118	$	17,080	$	1,344	$	(1,337)	$	5,589	$	(1,967)	$	46,827
Consolidated capital expenditures	$	20,248	$	7,894	$	22,728	$	38	$	18,310	$	3,840	$	73,058


	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 and other costs	—		—		—		—		—		—
Exploration expense	—		1,194		—		—		—		1,194
Depreciation, depletion and amortization	14,583		12,967		4,948		—		40		32,538
General and administrative expense	348		54		—		94		5,720		6,216
Credit losses and other	684		—		—		138		—		822
Total operating costs and expenses	36,346		30,255		7,575		491		6,059		80,726
Other operating income, net	5		—		—		—		—		5
Operating income (loss)	20,934		20,052		1,112		(491)		(6,059)		35,548
Other income (expense):
Derivative instruments loss, net	—		—		—		—		(2,320)		(2,320)
Interest income (expense), net	(1,371)		(270)		—		—		215		(1,426)
Other income (expense), net	111		—		—		(3)		75		183
Total other expense, net	(1,260)		(270)		—		(3)		(2,030)		(3,563)
Income (loss) before income taxes