VAALCO Energy, Inc. (NYSE: “EGY”; LSE: “EGY”)
("
VAALCO" or the
"
Company")
announced the
closing of the strategic combination (the “Arrangement”) of VAALCO
and TransGlobe Energy Corporation (“TransGlobe”). As previously
disclosed, the combined Company will now trade on the NYSE and LSE
under the ticker symbol EGY. The combined Company is a leading
African-focused operator with a strong production and reserve base,
a diverse portfolio of assets in Gabon, Egypt, Equatorial Guinea
and Canada, and significant future growth potential. In conjunction
with the closing, VAALCO welcomes three new directors to the Board,
expanding the Board of Directors to seven directors.
KEY HIGHLIGHTS
- Enhanced
stockholder returns with increased dividend, announced share
buyback and potential for special distributions;
- Targeted
annualized dividend of US$0.25 per share, or approximately US$27.3
million(1), for calendar 2023, nearly double VAALCO’s targeted
annualized dividend of US$0.13 per share prior to the
combination;
- Planned share
buyback program of up to US$30 million, the equivalent of US$0.27
per share(1), to be implemented following yesterday’s closing;
- Potential to
further enhance stockholder distributions through returning excess
cash via special distributions;
- Boosts size and
scale through material growth in proved reserves and production
volumes;
- Further enhances
VAALCO’s balance sheet with an increased, robust cash position and
no net debt;
- Reduces VAALCO’s
overall risk profile through geographic diversification and
multiple sources of production;
- Increases
optionality with expanded inventory of high-quality, multi-year
investment options;
- Potential to
capture US$30 to US$50 million in synergistic cost savings over the
next seven years as a result of the combination that can
meaningfully improve margins and enhance future cash flow
generation;
- Immediately
accretive to key metrics and significantly increases future
Adjusted EBITDAX(2) generation potential;
- Allows for
improved public market valuation multiples based on VAALCO’s
significantly enhanced scale and profile post-closing; and
- Expands the
Board of Directors to seven members with the addition of David
Cook, Edward LaFehr and Timothy Marchant.
(1) Amount calculated based on VAALCO’s
approximately 109.1 million issued and outstanding shares of common
stock, par value $0.10 per share, as of October 13, 2022.
(2) Adjusted EBITDAX is a Non-GAAP financial
measure.
George Maxwell, VAALCO’s Chief Executive
Officer commented, “We are excited to complete this
transformational transaction and appreciate the strong support we
received from our now unified set of stockholders. The combination
is meaningful because it builds a business of scale with a stronger
balance sheet and a more diversified baseline of production that
will underpin the combined Company’s opportunities for success.
There is significant inherent value within the combined portfolio,
which should allow us to generate meaningful cash flow to fund
increased stockholder dividends, share buybacks and potential
supplemental stockholder returns at a rate that would not have been
achievable by either VAALCO or TransGlobe on a standalone
basis.
We are eager to begin this new chapter in
VAALCO’s journey, with three new Board members to help guide our
strategy in the future. On behalf of the Board, I would like to
welcome David, Edward and Timothy. We believe that their
significant experience in the energy industry will help guide
VAALCO and we look forward to their unique perspectives on our
expanded Board. We plan to report third quarter results for VAALCO
separately, and will provide additional insight into our plans for
2023 as we better assess and evaluate the attractive inventory of
opportunities we have across our diversified portfolio of
assets.”
David Cook was appointed to TransGlobe’s Board
of Directors in August 2014 and was elected Chairman of the
TransGlobe Board in May 2019. Previously, Mr. Cook was the Chief
Executive Officer of Noreco (Norwegian Energy Company). Prior to
Noreco, Mr. Cook was the Head of Strategy at INEOS Oil & Gas
and, prior thereto, the Chief Executive Officer of INEOS DeNoS.
Prior to INEOS, Mr. Cook was the Chief Executive Officer of the
Danish upstream company DONG Oil and Gas, owned by what is today
Orsted. He possesses more than 30 years of experience in the energy
business having held senior positions at Noreco, INEOS, DONG Energy
(now Orsted), the Abu Dhabi National Energy Company PJSC (“TAQA”),
BP, TNK-BP and Amoco. Mr. Cook has previously served on the Board
of WesternZagros Ltd., in addition to previously serving as a
Director for three BP/Rosneft joint ventures. Mr. Cook holds a BSc
in Geophysics and a PhD in Geological Sciences from Michigan State
University and currently resides in Houston, Texas.
Edward LaFehr was appointed to TransGlobe’s
Board of Directors in March 2019. Mr. LaFehr was the Chief
Executive Officer of Baytex Energy Corporation, a mid-sized oil and
gas company based in Calgary, until his retirement in October 2022.
Mr. LaFehr has 35 years of experience in the oil and gas industry
working with Amoco, BP, Talisman and TAQA, holding senior positions
in North American, Europe and the Middle East regions. Prior to
joining Baytex, he was President of TAQA's North American oil and
gas business based in Calgary and subsequently Chief Operating
Officer for TAQA, globally. Prior to this, he served as Senior Vice
President for Talisman Energy in Calgary. From 2009 to 2011 Mr.
LaFehr was Managing Director of Pharaonic Petroleum Company in
Cairo, Egypt. In this capacity he served on BP Egypt's executive
team and represented BP's interests on the Board of Directors of
Pharaonic and ENI's Petrobel JV companies with the Egyptian
Government. Mr. LaFehr holds Masters degrees in geophysics and
mineral economics from Stanford University and the Colorado School
of Mines, respectively.
Dr. Timothy Marchant was appointed to
TransGlobe’s Board of Directors in March 2020. Dr. Marchant has 40
years of oil and gas industry experience in Canada and
international locations, with extensive experience in exploration,
foreign growth strategies, sustainability and international
operations. Currently, he is the Adjunct Professor of Strategy and
Energy Geopolitics at the Haskayne School of Business, University
of Calgary where he teaches energy, corporate social responsibility
and sustainability strategies; he also lectures on board
environment, social and governance strategies for the Institute of
Corporate Directors Education Program. Dr. Marchant has served in a
variety of senior executive positions with British Petroleum and
Amoco in Egypt, Saudi Arabia, Abu Dhabi and Kuwait. Prior to his
international assignments, he spent 17 years with Amoco Canada. Dr.
Marchant has a Ph.D. in Geology from Trinity College, University of
Dublin, Ireland. He completed the Executive Program at the Ivey
School of Business, University of Western Ontario in 1994 and the
Institute of Corporate Directors Education Program in 2011.
Canadian Early Warning
Reporting
This press release is being issued, in part,
pursuant to National Instrument 62-103 – The Early Warning System
and Related Take-Over Bid and Insider Reporting Issues which
requires a report to be filed under TransGlobe’s profile on SEDAR
(sedar.com) containing additional information respecting the
matters described herein. In order to obtain a copy of the early
warning report, please contact Jason Doornik, Chief Accounting
Officer and Controller at jdoornik@vaalco.com, or 713-623-0801.
Prior to the Arrangement, neither VAALCO nor
VAALCO Energy Canada ULC (“AcquireCo”) owned any
common shares of TransGlobe (the “TransGlobe
Shares”). Pursuant to the Arrangement, AcquireCo acquired
73,296,764 TransGlobe Shares, representing 100% of the issued and
outstanding TransGlobe Shares and accordingly, following completion
of the Arrangement, VAALCO beneficially owns 100% of the issued and
outstanding TransGlobe Shares.
Under the terms of the Arrangement, the
shareholders of TransGlobe (the “TransGlobe
Shareholders”) received, for each TransGlobe Share, 0.6727
of a share of VAALCO common stock, par value US$0.10 per share, of
VAALCO (each, a “VAALCO Share”). No fractional
shares of VAALCO Shares were issued in the Arrangement, and
TransGlobe’s registered shareholders received cash in lieu of any
fractional shares of VAALCO Shares. In the aggregate, TransGlobe
Shareholders received approximately 49.3 million VAALCO Shares.
The purpose of the Arrangement was to permit
AcquireCo to acquire all of the issued and outstanding TransGlobe
Shares such that TransGlobe will be an indirect wholly-owned
subsidiary of VAALCO. TransGlobe Shares will be delisted from the
Toronto Stock Exchange, the Nasdaq Capital Market and the AIM
market operated by the London Stock Exchange plc as promptly as
practicable following the effective date of the Arrangement and
TransGlobe will cease to be a reporting issuer in the applicable
jurisdictions.
AcquireCo was incorporated under the laws of
Alberta and is an indirect wholly-owned subsidiary of VAALCO. The
address of the registered office of AcquireCo is 2700, 255-6 Avenue
SW, Calgary, Alberta T2P 1N2 and VAALCO’s head office is located at
9800 Richmond Avenue, Suite 700, Houston, TX 77042.
Advisors
VAALCO has retained Stifel, Nicolaus &
Company, Incorporated as sole financial advisor, and Mayer Brown
International LLP, Osler, Hoskin & Harcourt LLP, and Al Kamel
Law Firm as legal counsel.
In connection with the transaction, TransGlobe
retained Evercore Partners International LLP as the sole financial
advisor, and Burnet, Duckworth & Palmer LLP, Paul, Weiss,
Rifkind, Wharton & Garrison LLP, Bird & Bird LLP and
Sharkawy & Sarhan as legal counsel.
About VAALCO
VAALCO, founded in 1985 and incorporated under
the laws of Delaware, is a Houston, USA based, independent energy
company with production, development and exploration assets in
Africa and Canada.
Following its business combination with
TransGlobe in October 2022, VAALCO owns a diverse portfolio of
operated production, development and exploration assets across
Gabon, Egypt, Equatorial Guinea and Canada.
For Further Information
VAALCO Investor Contact |
|
Al PetrieChris Delange |
+1 713 543
3422 |
|
|
VAALCO Financial Advisor |
|
Stifel, Nicolaus & Company, Incorporated Callum
StewartSimon Mensley |
+44 20 7710 7600 |
|
|
|
|
VAALCO Financial PR |
|
|
BuchananBen RomneyJon Krinks |
+44 20 7466 5000 |
VAALCO@buchanan.uk.com |
Forward Looking Statements
This document includes “forward-looking
statements” within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
historical facts, included in this document that address
activities, events, plans, expectations, objectives or developments
that VAALCO expects, believes or anticipates will or may occur in
the future are forward-looking statements. These statements may
include statements related to the expected operating performance of
VAALCO, estimates of future cost reductions, synergies, including
pre-tax synergies and efficiencies, expectations regarding VAALCO’s
ability to effectively integrate assets and properties it acquired
as a result of the arrangement with TransGlobe into VAALCO’s
operations, expectations regarding future dividends and returns to
stockholders including share buybacks, expectations of future
equity and enterprise value, the impact of the COVID-19 pandemic,
including the recent sharp decline in the global demand for and
resulting global oversupply of crude oil and the resulting steep
decline in oil prices, production quotas imposed by Gabon,
disruptions in global supply chains, quarantines of our workforce
or workforce reductions and other matters related to the pandemic,
well results, wells anticipated to be drilled and placed on
production, future levels of drilling and operational activity and
associated expectations, the implementation of the Company’s
business plans and strategy, prospect evaluations, prospective
resources and reserve growth, its activities in Equatorial Guinea,
expected sources of and potential difficulties in obtaining future
capital funding and future liquidity, its ability to restore
production in non-producing wells, its ability to find a
replacement for the FPSO or to renew the FPSO charter, future
operating losses, future changes in crude oil and natural gas
prices, future strategic alternatives, future and pending
acquisitions, capital expenditures, future drilling plans,
acquisition and interpretation of seismic data and costs thereof,
negotiations with governments and third parties, timing of the
settlement of Gabon income taxes, and expectations regarding
processing facilities, production, sales and financial projections.
Dividends of VAALCO beyond the third quarter 2022 have not yet been
approved or declared by the Board of Directors of VAALCO.
Expectations with respect to future dividends, annualized dividends
or other returns to stockholders, including share buybacks, are
forward-looking statements. Investors are cautioned that such
statements with respect to future dividends and share buybacks are
non-binding. The declaration and payment of future dividends or the
terms of any share buybacks remain at the discretion of the Board
of Directors of VAALCO and will be determined based on VAALCO’s
financial results, balance sheet strength, cash and liquidity
requirements, future prospects, crude oil and natural gas prices,
and other factors deemed relevant by the Board of Directors of
VAALCO. The Board of Directors of VAALCO reserves all powers
related to the declaration and payment of dividends and terms of
any share buybacks. Consequently, in determining the dividend to be
declared and paid on VAALCO common stock or the terms of any share
buyback, the Board of Directors of VAALCO may revise or terminate
such payment level or such terms at any time without prior notice.
These statements are based on assumptions made by VAALCO based on
its experience and perception of historical trends, current
conditions, expected future developments and other factors it
believes are appropriate in the circumstances. Such statements are
subject to a number of assumptions, risks and uncertainties, many
of which are beyond VAALCO’s control. These risks include, but are
not limited to, the tax treatment of the arrangement with
TransGlobe in the United States and Canada, crude oil and natural
gas price volatility, the impact of production quotas imposed by
Gabon in response to production cuts agreed to as a member of OPEC,
inflation, general economic conditions, the ability to attract
capital or obtain debt financing arrangements,; currency exchange
rates and regulations,; actions by joint venture co-owners, the
outbreak of COVID-19, the Company’s success in discovering,
developing and producing reserves, production and sales differences
due to timing of liftings, decisions by future lenders, the risks
associated with liquidity, lack of availability of goods, services
and capital, environmental risks, drilling risks, foreign
regulatory and operational risks, and regulatory changes and other
risks described (i) under the caption “Risk Factors” in VAALCO’s
2021 Annual Report on Form 10-K, filed with the SEC on March 11,
2022, VAALCO’s Second Quarter Quarterly Report on Form 10-Q, filed
with the SEC on August 10, 2022 and definitive proxy statement on
Schedule 14A filed with the SEC on August 30, 2022; and (ii) in
TransGlobe’s 2021 Annual Report on Form 40-F, filed with the SEC on
March 17, 2022.
Investors are cautioned that forward-looking
statements are not guarantees of future performance and that actual
results or developments may differ materially from those projected
in the forward-looking statements. VAALCO disclaims any intention
or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise.
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 Michael Silver, Corporate Secretary of
VAALCO.
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