REG - Vaalco Energy Inc - CLOSING OF SVENSKA ACQUISITION

VAALCO EnergyAnnouncement

30/04/2024 11:30

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RNS Number : 6202M  Vaalco Energy Inc  30 April 2024

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

 

 

 

VAALCO ENERGY, INC. ANNOUNCES CLOSING OF ACCRETIVE ALL CASH SVENSKA
ACQUISITION

 

HOUSTON - April 30, 2024 - VAALCO Energy, Inc. (NYSE: EGY; LSE: EGY) ("VAALCO"
or the "Company") today announced that it has closed the acquisition of
Svenska Petroleum Exploration AB ("Svenska"), an exploration and production
("E&P") company based in Stockholm, Sweden (the "Acquisition"). As
previously disclosed, Svenska's primary asset is a 27.39% non-operated working
interest in the deepwater producing Baobab field in Block CI-40, offshore Cote
d'Ivoire in West Africa. Net purchase price of $40.2 million was fully funded
by cash on hand with no issuance of debt or equity.

 

Transaction Highlights:

 

·    Immediately accretive to shareholders on key metrics:

o Following the planned shutdown for maintenance in April, the Baobab field is
back on production with a current rate in excess of 5,000 VAALCO working
interest ("WI") barrels of oil equivalent per day ("BOEPD") (99% oil);

o Includes estimated 1P WI CPR reserves as of October 1, 2023, of 13.0 million
barrels of oil equivalent ("MMBOE") (99% oil) and total 2P WI CPR reserves at
October 1, 2023, of 21.7 million MMBOE (97% oil);(1) and

·    Strategically expands West African focus area with a sizeable
producing asset that has significant upside potential and considerable future
development opportunities in Cote d'Ivoire, a well-established and
investment-friendly country.

 

George Maxwell, VAALCO's Chief Executive Officer commented, "We are very
pleased to have closed this highly accretive acquisition in less than two
months. We continue to enhance our diversified portfolio by building size and
scale that allows VAALCO to generate significant free cash flow and execute
our strategic vision. We are excited to be partnering with Petroci and
Canadian Natural Resources International, and believe the Baobab field in Cote
d'Ivoire is an outstanding asset with significant upside potential. We will be
incorporating the production, revenue and related operating expenses from the
acquisition into our Q2 2024 and full year 2024 guidance that we will discuss
in our upcoming first quarter earnings release and conference call in early
May. This is highly accretive on key metrics to our shareholder base and
provides another strong asset to support future growth. We continue to have no
bank debt and we will use our strong balance sheet to fund our growth
activities, all while returning value to our shareholders."

 

Advisors

 

VAALCO retained Stifel as sole financial advisor, and Mayer Brown
International LLP as legal counsel.

 

Svenska Petroleum Exploration AB retained Evercore Partners International LLP
and GKA Advisors LLP as financial advisers and Fieldfisher LLP as legal
counsel.

 

About VAALCO

 

VAALCO, founded in 1985 and incorporated under the laws of Delaware, is a
Houston, Texas, USA based, independent energy company with a diverse portfolio
of production, development and exploration assets across Gabon, Egypt, Cote
d'Ivoire, Equatorial Guinea and Canada.

 

For Further Information

 VAALCO Energy, Inc. (General and Investor Enquiries)  +00 1 713 543 3422
 Website:                                              www.vaalco.com

 Al Petrie Advisors (US Investor Relations)            +00 1 713 543 3422
 Al Petrie / Chris Delange

 Buchanan (UK Financial PR)                            +44 (0) 207 466 5000
 Ben Romney / Barry Archer                             VAALCO@buchanan.uk.com

 Stifel (Financial Advisor)                            +44 (0) 20 7710 7600

 Callum Stewart / Simon Mensley

Endnote

 

1.     Reserves estimates in this announcement were prepared in accordance
with the definitions and guidelines set forth in the 2018 Petroleum Resources
Management Systems approved by the Society of Petroleum Engineers. See "Oil
and Natural Gas Reserves" for further information.

 

 Forward Looking Statements

 

This announcement includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, which are intended to be covered by the safe harbors
created by those laws and other applicable laws. Where a forward-looking
statement expresses or implies an expectation or belief as to future events or
results, such expectation or belief is expressed in good faith and believed to
have a reasonable basis. All statements other than statements of historical
fact may be forward-looking statements. The words "anticipate," "believe,"
"estimate," "expect," "intend," "forecast," "outlook," "aim," "target,"
"will," "could," "should," "may," "likely," "plan," "probably" or similar
words may identify forward-looking statements, but the absence of these words
does not mean that a statement is not forward-looking.  Forward-looking
statements in this announcement may include, but are not limited to,
statements relating to (i) expectations and estimates of future drilling,
production and sales of crude oil and natural gas; (ii) expectations regarding
VAALCO's ability to effectively integrate assets and properties it has
acquired as a result of the Acquisition into its operations; (iii)
expectations of future balance sheet strength; and (iv) expectations of future
plans, priorities, focus and benefits of the Acquisition. Such forward-looking
statements are subject to risks, uncertainties and other factors, which could
cause actual results to differ materially from future results expressed,
projected or implied by the forward-looking statements. These risks and
uncertainties include, but are not limited to: risks relating to any
unforeseen liabilities of the Svenska; the outcome of any cost audits
undertaken by the Cote d'Ivoire government; timing and amounts of any
decommissioning or other wind up costs relating to any acquired Nigerian
assets; declines in oil or natural gas prices; the level of success in
exploration, development and production activities; actions of joint-venture
partners; adverse weather conditions that may negatively impact development or
production activities; risks relating to the timing and costs of completion
for scheduled maintenance of the FPSO servicing the Baobab field; the timing
and costs of exploration and development expenditures; inaccuracies of reserve
estimates or assumptions underlying them; revisions to reserve estimates as a
result of changes in commodity prices; impacts to financial statements as a
result of impairment write-downs; the ability to generate cash flows that,
along with cash on hand, will be sufficient to support operations and cash
requirements; the ability to attract capital or obtain debt financing
arrangements; currency exchange rates and regulations; actions by joint
venture co-owners; hedging decisions, including whether or not to enter into
derivative financial instruments; international, federal and state initiatives
relating to the regulation of hydraulic fracturing; failure of assets to yield
oil or gas in commercially viable quantities; uninsured or underinsured losses
resulting from oil and gas operations; inability to access oil and gas markets
due to market conditions or operational impediments; the impact and costs of
compliance with laws and regulations governing oil and gas operations; the
ability to replace oil and natural gas reserves; loss of senior management or
technical personnel; and other risks described under the caption "Risk
Factors" in the Company's 2023 Annual Report on Form 10-K, filed with the U.S.
Securities and Exchange Commission (the "SEC") on March 15, 2024. There may be
additional risks that VAALCO does not presently know, or that the Company
currently believes are immaterial, that could also cause actual results to
differ from those contained in the forward-looking statements.  In addition,
forward-looking statements reflect VAALCO's expectations, plans or forecasts
of future events and views as of the date of this announcement. Should one or
more of these risks or uncertainties materialize, or should any of the
assumptions prove incorrect, actual results may vary in material respects from
those projected in these forward-looking statements. No obligation is being
undertaken to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as may be
required under applicable securities laws.

Oil and Natural Gas Reserves

 

This announcement contains crude oil and natural gas metrics which do not have
standardized meanings or standard methods of calculation as classified by the
SEC and therefore such measures may not be comparable to similar measures used
by other companies. Such metrics have been included herein to provide readers
with additional measures to evaluate the proposed Acquisition; however, such
measures may not be reliable indicators of future performance.

 

WI CPR Reserves

 

WI CPR reserves represent proved (1P) and proved plus probable (2P) estimates
as reported by Petroleum Development Consultants Limited and prepared in
accordance with the definitions and guidelines set forth in the 2018 Petroleum
Resources Management Systems approved by the Society of Petroleum Engineers.
The SEC definitions of proved and probable reserves are different from the
definitions contained in the 2018 Petroleum Resources Management Systems
approved by the Society of Petroleum Engineers. As a result, 1P and 2P WI CPR
reserves may not be comparable to United States standards. The SEC requires
United States oil and gas reporting companies, in their filings with the SEC,
to disclose only proved reserves after the deduction of royalties and
production due to others but permits the optional disclosure of probable and
possible reserves in accordance with SEC definitions.

 

1P and 2P WI CPR reserves, as disclosed herein, may differ from the SEC
definitions of proved and probable reserves because:

 

·    Pricing for SEC is the average closing price on the first trading day
of each month for the prior year which is then held flat in the future, while
the 1P and 2P WI CPR pricing is based on pricing assumptions for future Brent
oil pricing for 2023 of $84.5 and up to 2030 the Brent Oil price follows the
average of four available forecasts and assumes flat real thereafter.  Oil
price is escalated 2% per year;

 

·    Lease operating expenses are typically not escalated under the SEC's
rules, while for the WI CPR reserves estimates, they are escalated at 2%
annually beginning in 2024.

 

Management uses 1P and 2P WI CPR reserves as a measurement of operating
performance because it assists management in strategic planning, budgeting and
economic evaluations and in comparing the operating performance of Svenska to
other companies. Management believes that the presentation of 1P and 2P WI CPR
reserves is useful to its international investors, particularly those that
invest in companies trading on the London Stock Exchange, in order to better
compare reserve information to other London Stock Exchange-traded companies
that report similar measures. However, 1P and 2P WI CPR reserves should not be
used as a substitute for proved reserves calculated in accordance with the
definitions prescribed by the SEC. In evaluating VAALCO's business, investors
should rely on VAALCO's SEC proved reserves and consider 1P and 2P WI CPR
reserves only supplementally. As a result of the consummation of the
Acquisition, VAALCO will report Svenska's reserves in accordance with the
definitions and regulations promulgated by the SEC.

 

Other Oil and Gas Advisories

 

Investors are cautioned when viewing BOEs in isolation.  A BOE conversation
ratio of six thousand cubic feet of natural gas to one barrel of oil
equivalent (6 MCF: 1 Bbl) is based on an energy equivalency conversion method
primarily applicable at the burner tip and does not represent a value
equivalency at the wellhead.  Given that the value ratio based on the current
price of crude oil as compared to natural gas is significantly different from
the energy equivalency of 6:1, utilizing a conversion on a 6:1 basis may be an
incomplete as an indication of value.

 

Inside Information

 

This announcement contains inside information as defined in Regulation (EU)
No. 596/2014 on market abuse which is part of UK domestic law by virtue of the
European Union (Withdrawal) Act 2018 ("MAR") and is made in accordance with
the Company's obligations under article 17 of MAR. The person responsible for
arranging the release of this announcement on behalf of VAALCO is Matthew
Powers, Corporate Secretary of VAALCO.

 

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