VAALCO Energy, Inc. Provides Positive Additional Information Regarding Its Acquisition Of Svenska
VAALCO Energy (NYSE: EGY; LSE: EGY) has provided positive additional information regarding its acquisition of Svenska Petroleum Exploration AB. Key highlights include:
- Updated SEC net proved reserves as of December 31, 2023: 16.9 MMBOE (93% oil), higher than previous estimates
- Increased 2P WI CPR reserves to 22.5 MMBOE (93% oil)
- Significant upside potential with Best Estimate Working Interest Contingent Resources of 20.4 MMBOE
The acquisition, closed on April 30, 2024, includes a 27.39% non-operated working interest in the Baobab field, offshore Côte d'Ivoire. The net purchase price of $40.2 million was fully funded by cash on hand. This strategic move expands VAALCO's West African presence and is expected to support future growth.
- SEC net proved reserves increased to 16.9 MMBOE, 30% higher than previous estimates
- 2P WI CPR reserves increased to 22.5 MMBOE from 21.7 MMBOE
- Acquisition price of $2.37 per net proved barrel of reserves, indicating a cost-effective deal
- Pro-forma year-end 2023 SEC net proved reserves increased by 59% to 45.6 MMBOE
- Standardized Measure of reserves totaled $107.1 million as of December 31, 2023
- Significant upside potential with 20.4 MMBOE of Best Estimate Working Interest Contingent Resources
- None.
Insights
The acquisition of Svenska Petroleum Exploration AB marks a significant strategic move for VAALCO Energy, Inc. The updated reserves data presented in the SEC filings provide a clearer understanding of the acquisition's value. Net proved reserves of 16.9 MMBOE as of December 31, 2023, indicate an increase from the previously reported 1P working interest reserves of 13.0 MMBOE. This
From a financial perspective, the acquisition cost of
Going forward, the focus will be on how VAALCO leverages these increased reserves to generate revenue. Investors should also watch for the company's ability to manage operational costs in developing these assets to ensure profitability.
The acquisition of Svenska Petroleum Exploration AB, including its substantial deepwater asset in Côte d'Ivoire, aligns well with VAALCO's strategic focus on West Africa. The Baobab field, where Svenska holds a 27.39% non-operated working interest, is particularly noteworthy. The updated reserve estimates and the contingent resources in this field signal strong potential for future development.
For the oil and gas industry, the concept of proved reserves is crucial. These are quantities of petroleum which, by analysis of geologic and engineering data, can be estimated with reasonable certainty to be commercially recoverable from known reservoirs under existing economic conditions. The increase in these reserves from 13.0 MMBOE to 16.9 MMBOE indicates that VAALCO has a more robust resource base than initially expected.
Investors should consider the risks associated with offshore exploration and production, including regulatory and environmental challenges. However, the relatively stable and investment-friendly environment in Côte d'Ivoire mitigates some of these risks.
The acquisition's broader market implications reflect positively on VAALCO's strategic positioning. The inclusion of Svenska's assets enhances VAALCO's portfolio and provides significant upside potential from contingent resources like the Baobab field. Contingent resources, though not as certain as proved reserves, represent potential reserves awaiting further appraisal and development before becoming economically viable.
In market terms, the fact that the acquisition was financed entirely through cash reserves without issuing debt or equity suggests a strong financial position and prudent capital management. This decision avoids dilution of existing shareholders and adds financial stability, which can be attractive for long-term investors.
Furthermore, the regional focus on West Africa, particularly in a stable country like Côte d'Ivoire, positions VAALCO well within an area known for substantial hydrocarbon potential. As the company continues to develop these assets, it is likely to benefit from economies of scale and operational synergies, enhancing shareholder value over time.
HOUSTON, July 16, 2024 (GLOBE NEWSWIRE) -- VAALCO Energy, Inc. (NYSE: EGY; LSE: EGY) (“VAALCO” or the “Company”) today announces that it has filed a Form 8-K/A with the Securities and Exchange Commission (“SEC”) that provides historical financial statements and additional reserves disclosures regarding its acquisition of Svenska Petroleum Exploration AB (“Svenska”).
Key highlights:
- Updated SEC net proved reserves as of December 31, 2023 of 16.9 million barrels of oil equivalent (“MMBOE”) (
93% oil), significantly higher than previous 1P working interest (“WI”) CPR reserves of 13.0 MMBOE (99% oil) as of October 1, 2023; - Increased 2P WI CPR reserves as of December 31, 2023 to 22.5 MMBOE (
93% oil) from 21.7 MMBOE (97% oil) estimate; and - Significant further upside identified from contingent resources at the Baobab field with Best Estimate Working Interest Contingent Resources (“2C”) of 20.4 MMBOE.
George Maxwell, VAALCO’s Chief Executive Officer commented, “We are very pleased with the results of our third-party reserve engineer’s calculation of proved reserves as of December 31, 2023 for Svenska that shows even greater reserves than we initially disclosed. This strategic and highly cost-effective acquisition strategically expands our West African focus area with a sizeable producing asset that has significant upside potential and considerable future development opportunities in Côte d’Ivoire, a well-established and investment-friendly country. This transaction was highly accretive on key metrics to our shareholder base and provides another strong asset to support future growth.”
As previously disclosed, VAALCO closed the acquisition of Svenska on April 30, 2024. Svenska’s primary asset is a
At the time of initial announcement of the acquisition, VAALCO disclosed that the transaction included estimated 1P WI CPR reserves, as of October 1, 2023, of 13.0 MMBOE (
In today’s SEC filing, VAALCO reported that SEC net proved reserves as of December 31, 2023 totaled 16.9 MMBOE. The Standardized Measure of those reserves as of December 31, 2023 totaled
2P WI CPR reserves for Svenska as of December 31, 2023 are estimated at 22.5 MMBOE compared with the previously disclosed 21.7 MMBOE as of October 1, 2023. The discounted value of the future cash flows from those reserves as of December 31, 2023 totaled
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, Côte 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 |
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; and (ii) expectations regarding VAALCO’s ability to effectively integrate assets and properties it has acquired as a result of the Acquisition into its operations. 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, the inherent uncertainty in estimating oil and natural gas resources, the fact that the decision as to whether to develop the field to pursue any contingent resource estimates cannot be made unilaterally by VAALCO, who is not operator of the Svenska asset, and to the other risks described under the caption “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, in each case filed with the U.S. Securities and Exchange Commission (the “SEC”). 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 Svenska acquisition; however, such measures may not be reliable indicators of future performance.
Contingent Resources
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible reserves that meet the SEC’s definitions for such terms. In this announcement, VAALCO uses certain broader terms such as “contingent resources” “working interest contingent resources” and “2C” that the SEC’s guidelines strictly prohibit VAALCO from including in filings with the SEC. These types of estimates do not represent, and are not intended to represent, any category of reserves based on SEC definitions, are by their nature more speculative than estimates of proved, probable and possible reserves and do not constitute “reserves” within the meaning of the SEC’s rules. As defined by the Society of Petroleum Engineers and the independent engineer’s report VAALCO obtained for the Svenska asset, “contingent resources” as those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from known accumulations, but which are not currently considered to be commercial owing to one or more contingencies. The independent engineer’s report states that the contingent resources included in the report are contingent upon approval of a development plan with sufficient development wells to economically produce the volumes prior to the termination of the production sharing contract and commitment to develop the resources. The independent engineer’s report states that, if these contingencies are successfully addressed, some portion of the contingent resources estimated in the report may be reclassified as reserves but notes that the estimates have not been risked to account for the possibility that the contingencies are not successfully addressed. The independent engineer’s report does not address (1) the portion of contingent resources that could be reclassified as a reserves if the contingencies are successfully addressed; or (2) whether or to what extent any of the contingent resources that could be so reclassified would be classified as proved, probable or possible reserves. The independent engineer’s report states that once all contingencies have been successfully addressed, the approximate probability that the quantities of contingent resources actually recovered will equal or exceed the estimated amounts is generally inferred to be
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 assumption was
$79.79 per barrel of oil beginning in 2024,$69.79 in 2025, and inflating2% thereafter; - 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.
Other Oil and Gas Advisories
Investors are cautioned when viewing BOEs in isolation. The Svenska reserves estimates as of October 1, 2023 were calculated using a BOE conversion ratio of six thousand cubic feet of natural gas to one barrel of oil equivalent (6 MCF: 1 Bbl). The Svenska reserves estimates as of December 31, 2023 were calculated using a BOE conversion ratio of five thousand eight hundred cubic feet of natural gas to one barrel of oil equivalent (5.8 MCF: 1 Bbl). BOE conversion ratio 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 equivalencies described above, utilizing such equivalencies may be 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.
FAQ
What are VAALCO Energy's (EGY) updated SEC net proved reserves as of December 31, 2023?
How much did VAALCO Energy (EGY) pay per net proved barrel of reserves in the Svenska acquisition?
What is the impact of the Svenska acquisition on VAALCO Energy's (EGY) pro-forma year-end 2023 SEC net proved reserves?
What is the Standardized Measure of VAALCO Energy's (EGY) newly acquired reserves as of December 31, 2023?
