VAALCO ENERGY INC DE

For the period ended Jun 30, 2024. Filed Aug 9, 2024.

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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.

Jun 30, 2024 · Filed Aug 9, 2024

EGY$5.39+0.2%Stored close · as of Nov 9, 2026

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Contents

Notes to Condensed Consolidated Financial Statements (unaudited)

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 NGLs properties. As operator, the Company has production operations and conducts exploration activities in Gabon and Canada and hold interests intwo 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.

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 arenot necessarily indicative of results expected for the full year.

These condensed consolidated financial statements have been prepared in accordance with rules of the Securities and Exchange Commission (“SEC”) and donot 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 consolidated financial statements and notes thereto included in the Company’s Annual Report on Form10-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 willnot be collected.

The following table provides an analysis of the change of the aggregate credit loss allowance and other allowances.

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
(in thousands)
Allowance for credit losses and other
Balance at beginning of period	$(7,829)	$(12,832)	$(6,029)	$(8,704)
Credit loss charges and other, net of receipts	(3,341)	(680)	(5,153)	(1,615)
Cumulative effect of adjustment upon adoption of ASU 2016-13 on January 1, 2023	—	—	—	(3,120)
Foreign currency gain (loss)	(1,434)	(7)	(1,422)	(80)
Balance at end of period	$(12,604)	$(13,519)	$(12,604)	$(13,519)

Fair value of financial instruments

	Balance Sheet Line	Level 1	Level 2	Level 3	Total
(in thousands)
Assets
Derivative asset	Prepayments and other	$—	$—	$—	$—
		$—	$—	$—	$—
Liabilities
Derivative liability	Accrued liabilities and other	$—	$155	$—	$155
		$—	$155	$—	$155

`	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,FASB issued new guidance to provide specific guidance on how a joint venture, upon formation, should recognize and initially measure assets contributed and liabilities assumed. 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.

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.

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 Company subsequently closed its acquisition of Svenska for the net purchase price of $40.2 million, on* April 30, 2024after 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 Condensed Consolidated Statements of Cash Flows.

(in thousands)
Purchase Consideration
Cash	$40,166
Total purchase consideration	$40,166
(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	185,172
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 butnot* 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 acquisition of Svenska for all identified liabilities in accordance with the requirements of ASC Topic805. 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. A bargain purchase gain of*$19.9* million is included in “Other, net” under “Other income (expense)” in the condensed consolidated statements of operations. An income tax expense of $37.8 million, related to the bargain purchase gain, is also included in the condensed consolidated statements of operations. 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 acquisition of Svenska to the Company's consolidated results for the period from* April 30, 2024through June**30,* 2024.

(in thousands)
Crude oil, natural gas and natural gas liquids sales	$17,240
Net loss	$(2,921)

The unaudited pro forma results presented below have been prepared to give the effect to the acquisition of Svenska discussed above on the Company’s results of operations forthree andsix months ended* June 30, 2024and2023,* as if the acquisition had been consummated on* January 1, 2023.The unaudited pro forma results donot* purport to represent what the Company’s actual results operations would have been if the acquisition of Svenska had been completed on such date or to project the Company’s results of operations for any future date or period.

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
(in thousands) · (in thousands)
Pro forma (unaudited)
Crude oil, natural gas and natural gas liquids sales	$116,778	$158,631	$248,458	$269,547
Operating income	(7,336)	53,476	38,091	84,836
Net income (loss)	(5,842)(a)	23,668	9,316	32,182
Basic net income (loss) per share:
Income (loss) from continuing operations	$(5,842)	$23,668	$9,316	$32,182
Net income (loss) per share	$(0.06)	$0.22	$0.09	$0.30
Basic weighted average shares outstanding	103,528	106,965	103,594	107,175
Diluted net income (loss) per share:
Income (loss) from continuing operations	$(5,842)	$23,668	$9,316	$32,182
Net income (loss) per share	$(0.06)	$0.22	$0.09	$0.30
Diluted weighted average shares outstanding	103,676	107,613	103,677	108,050

(a) The unaudited pro forma net income for thethree andsix months ended* June 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, who is the chief operating decision maker, evaluates the operation 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 is primarily corporate and operations support costs that arenot allocated to the reportable operating segments.

Segment activity of continuing operations for thethree andsix months ended* June 30, 2024and2023* as well as long-lived assets and segment assets at* June 30, 2024* and* December 31, 2023* are as follows:

(in thousands)	Gabon	Egypt	Canada	Equatorial Guinea	Cote d'Ivoire	Corporate and Other	Total
Revenues:
Crude oil, natural gas and natural gas liquids sales	$53,674	$35,481	$10,383	$—	$17,240	$—	$116,778
Operating costs and expenses:
Production expense	18,486	13,424	3,359	272	16,905	—	52,446
Exploration expense	—	—	—	—	—	—	—
Depreciation, depletion and amortization	13,344	8,416	5,294	—	6,049	29	33,132
General and administrative expense	319	207	(127)	93	124	6,975	7,591
Credit losses and other	—	3,178	—	163	—	—	3,341
Total operating costs and expenses	32,149	25,225	8,526	528	23,078	7,004	96,510
Other operating income (expense), net	132	—	—	—	—	—	132
Operating income	21,657	10,256	1,857	(528)	(5,838)	(7,004)	20,400
Other income (expense):
Derivative instruments loss, net	—	—	—	—	—	257	257
Interest (expense) income, net	(1,158)	(350)	14	—	(1,540)	1,917	(1,117)
Bargain purchase gain	—	—	—	—	—	19,898	19,898
Other (expense) income, net	(137)	—	5	3	(301)	(1,554)	(1,984)
Total other expense, net	(1,295)	(350)	19	3	(1,841)	20,519	17,054
Income (loss) before income taxes	20,362	9,906	1,876	(525)	(7,679)	13,515	37,454
Income tax (benefit) expense	9,731	8,749	—	—	(3,050)	(6,127)	9,303
Net income (loss)	$10,631	$1,157	$1,876	$(525)	$(4,630)	$19,642	$28,151
Consolidated capital expenditures	$5,102	$1,868	$7,155	$—	$7,152	$1,153	$22,431

(in thousands)	Gabon	Egypt	Canada	Equatorial Guinea	Cote d'Ivoire	Corporate and Other	Total
Revenues:
Crude oil, natural gas and natural gas liquids sales	$111,178	$72,442	$16,073	$—	$17,240	$—	$216,933
Operating costs and expenses:
Production expense	35,199	26,175	5,738	517	16,905	1	84,535
Exploration expense	—	48	—	—	—	—	48
Depreciation, depletion and amortization	26,795	16,752	9,191	—	6,049	169	58,956
General and administrative expense	953	376	(115)	171	124	12,792	14,301
Credit losses and other	20	4,812	—	321	—	—	5,153
Total operating costs and expenses	62,967	48,163	14,814	1,009	23,078	12,962	162,993
Other operating income, net	(34)	—	—	—	—	—	(34)
Operating income (loss)	48,177	24,279	1,259	(1,009)	(5,838)	(12,962)	53,906
Other income (expense):
Derivative instruments gain, net	—	—	—	—	—	(590)	(590)
Interest (expense) income, net	(2,475)	(760)	38	—	(1,540)	2,685	(2,052)
Bargain purchase gain	—	—	—	—	—	19,898	19,898
Other income (expense), net	(231)	—	5	2	(301)	(3,259)	(3,784)
Total other expense, net	(2,706)	(760)	43	2	(1,841)	18,735	13,472
Income (loss) before income taxes	45,471	23,519	1,302	(1,007)	(7,679)	5,773	67,378
Income tax expense (benefit)	26,024	15,782	—	—	(3,050)	(7,215)	31,541
Net income (loss)	$19,447	$7,737	$1,302	$(1,007)	$(4,630)	$12,988	$35,837
Consolidated capital expenditures	$11,389	$6,196	$19,714	$—	$7,152	$2,001	$46,453

(in thousands)	Gabon	Egypt	Canada	Equatorial Guinea	Cote d'Ivoire	Corporate and Other	Total
Revenues:
Crude oil, natural gas and natural gas liquids sales	$77,924	$21,308	$10,008	$—	$—	$—	$109,240
Operating costs and expenses:
Production expense	23,931	11,089	3,255	386	—	(57)	38,604
FPSO demobilization and other costs	5,647	—	—	—	—	—	5,647
Exploration expense	43	14	—	—	—	—	57
Depreciation, depletion and amortization	19,457	13,757	4,747	—	—	42	38,003
General and administrative expense	318	202	—	87	—	4,788	5,395
Credit losses and other	518	—	—	162	—	—	680
Total operating costs and expenses	49,914	25,062	8,002	635	—	4,773	88,386
Other operating income, net	(62)	(241)	—	—	—	—	(303)
Operating income (loss)	27,948	(3,995)	2,006	(635)	—	(4,773)	20,551
Other income (expense):
Derivative instruments gain, net	—	—	—	—	—	31	31
Interest (expense) income, net	(1,376)	(503)	—	—	—	176	(1,703)
Other income (expense), net	(619)	—	—	1	—	79	(539)
Total other expense, net	(1,995)	(503)	—	1	—	286	(2,211)
Income (loss) before income taxes	25,953	(4,498)	2,006	(634)	—	(4,487)	18,340
Income tax expense (benefit)	16,251	4,261	—	—	—	(8,924)	11,588
Net income (loss)	$9,702	$(8,759)	$2,006	$(634)	$—	$4,437	$6,752
Consolidated capital expenditures	$1,375	$8,526	$6,491	$—	$—	$36	$16,427

(in thousands)	Gabon	Egypt	Canada	Equatorial Guinea	Cote d'Ivoire	Corporate and Other	Total
Revenues:
Crude oil, natural gas and natural gas liquids sales	$114,661	$56,092	$18,890	$—	$—	$—	$189,643
Operating costs and expenses:
Production expense	38,346	22,199	5,509	748	—	2	66,804
FPSO demobilization and other costs	5,647	—	—	—	—	—	5,647
Exploration expense	51	14	—	—	—	—	65
Depreciation, depletion and amortization	29,302	24,552	8,458	—	—	108	62,420
General and administrative expense	936	381	—	216	—	9,086	10,619
Credit losses and other	1,453	—	—	162	—	—	1,615
Total operating costs and expenses	75,735	47,146	13,967	1,126	—	9,196	147,170
Other operating income, net	(62)	(241)	—	—	—	—	(303)
Operating income (loss)	38,864	8,705	4,923	(1,126)	—	(9,196)	42,170
Other income (expense):
Derivative instruments gain, net	—	—	—	—	—	52	52
Interest (expense) income, net	(2,883)	(1,311)	(4)	—	—	249	(3,949)
Other income (expense), net	(102)	—	1	(1)	—	(1,590)	(1,692)
Total other expense, net	(2,985)	(1,311)	(3)	(1)	—	(1,289)	(5,589)
Income (loss) before income taxes	35,879	7,394	4,920	(1,127)	—	(10,485)	36,581
Income tax expense (benefit)	22,829	9,253	—	—	—	(5,723)	26,359
Net income (loss)	$13,050	$(1,859)	$4,920	$(1,127)	$—	$(4,762)	$10,222
Consolidated capital expenditures	$5,064	$20,097	$16,656	$—	$—	$36	$41,852

(in thousands)	Gabon	Egypt	Canada	Equatorial Guinea	Cote d'Ivoire	Corporate and Other	Total
Long-lived assets:
As of June 30, 2024	$160,240	$160,668	$112,373	$10,000	$101,690	$3,444	$548,415
As of December 31, 2023	$171,787	$171,224	$105,189	$10,000	$—	$1,586	$459,786

(in thousands)	Gabon	Egypt	Canada	Equatorial Guinea	Cote d'Ivoire	Corporate and Other	Total
Total assets:
As of June 30, 2024	$289,669	$260,414	$119,229	$11,482	$145,427	$91,143	$917,364
As of December 31, 2023	$309,394	$263,015	$114,215	$11,327	$—	$125,265	$823,216

5. EARNINGS PER SHARE

Basic earnings per share (“EPS”) is calculated using the average number of shares of common stock outstanding during each period. For the calculation of diluted shares, the Company assumes that restricted stock is outstanding on the date of vesting, and the Company assumes the issuance of shares from the exercise of stock options using the treasury stock method.

A reconciliation of reported net income to net income used in calculating EPS as well as a reconciliation from basic to diluted shares follows:

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
(in thousands)
Net income (loss) (numerator):
Net Income	$28,151	$6,752	$35,837	$10,222
Income attributable to unvested shares	(307)	(27)	(368)	(56)
Numerator for basic	27,844	6,725	35,469	10,166
Loss attributable to unvested shares	—	27	—	(41)
Numerator for dilutive	$27,844	$6,752	$35,469	$10,125
Weighted average shares (denominator):
Basic weighted average shares outstanding	103,528	106,965	103,594	107,175
Effect of dilutive securities	148	648	83	875
Diluted weighted average shares outstanding	103,676	107,613	103,677	108,050
Stock options and unvested restricted stock grants excluded from dilutive calculation because they would be anti-dilutive	281	431	506	238

6. REVENUE

Gabon

The Company currently sells crude oil production from Gabon under term crude oil sales and purchase agreements (“COSPAs”) or crude oil sales and marketing agreements ("COSMA or COSMAs"). The following table presents revenues from contracts with customers as well as revenues associated with the obligations under the Etame PSC.

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Revenues from customer contracts: · (in thousands)
Sales under the COSPA or COSMA	$62,327	$87,478	$127,115	$130,079
Other items reported in revenue not associated with customer contracts:
Carried interest recoupment	—	2,212	1,174	2,212
Royalties	(8,653)	(11,766)	(17,111)	(17,630)
Net revenues	$53,674	$77,924	$111,178	$114,661

With respect to the government’s share of Profit Oil, the Etame PSC provides that corporate income tax is satisfied through the payment of Profit Oil. In the consolidated statements of operations and comprehensive income, the government’s share of revenues from Profit Oil is reported in revenues with a corresponding amount reflected in the current provision for income tax expense. Payments of the income tax expense are reported in the period that the government takes its Profit Oil in-kind, i.e. the period in which it lifts the crude oil. As of* June 30, 2024*, the Company had a $9.7 million foreign income tax payable related to Gabon. The Company had an $18.9 million foreign income tax payable as of* December 31, 2023.*

Egypt

The following table presents revenues in Egypt from contracts with customers:

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Revenues from customer contracts: · (in thousands)
Gross sales	$65,314	$50,201	$128,506	$104,822
Royalties	(29,716)	(28,892)	(55,836)	(48,232)
Selling costs	(117)	(1)	(228)	(498)
Net revenues	$35,481	$21,308	$72,442	$56,092

Canada

The following table presents revenues in Canada from contracts with customers:

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Revenues from customer contracts: · (in thousands)
Oil revenue	$9,547	$8,325	13,700	$14,979
Gas revenue	384	703	1,205	1,661
NGL revenue	1,921	1,885	3,898	4,348
Royalties	(1,151)	(905)	(2,268)	(2,098)
Selling costs	(318)	—	(461)	—
Net revenues	$10,384	$10,008	16,073	$18,890

Cote d'Ivoire

The following table presents revenues in the Cote d'Ivoire from contracts with customers:

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Revenues from customer contracts: · (in thousands)
Revenues	$17,240	$—	$17,240	$—

Information about the Company’s most significant customers

For thethree months ended* June 30, 2024*the Company hadone customer that comprised 100% of its sales for Gabon. In Egypt, one customer made up 100% of its sales. In Canada, three separate customers made up approximately 45%,24% and 20% of its sales, respectively. In Cote d'Ivoire, one customer made up 100% of its sales.

For thesix months ended* June 30, 2024*the Company hadone customer that comprised 100% of its sales for Gabon. In Egypt, one customer made up 100% of its sales. In Canada, three separate customers made up approximately 35%,30% and 24% of its sales, respectively. In Cote d'Ivoire, one customer made up 100% of its sales.

7. CRUDE OIL, NATURAL GAS and NGLs PROPERTIES AND EQUIPMENT

The Company’s crude oil, natural gas and NGLs properties and equipment is comprised of the following:

	As of June 30, 2024	As of December 31, 2023
(in thousands)
Crude oil, natural gas and NGLs properties and equipment - successful efforts method:
Wells, platforms and other production facilities	$1,590,704	$1,468,542
Work-in-progress	9,424	4,183
Undeveloped acreage	53,758	52,109
Equipment and other	55,147	47,794
Total crude oil, natural gas and NGLs properties, equipment and other	1,709,033	1,572,628
Accumulated depreciation, depletion, amortization and impairment	(1,160,618)	(1,112,842)
Net crude oil, natural gas and NGLs properties, equipment and other	$548,415	$459,786

8. DERIVATIVES AND FAIR VALUE

The Company uses derivative financial instruments from time to time to achieve a more predictable cash flow from crude oil and gas production by reducing the Company’s exposure to price fluctuations. See the table below for the list of outstanding contracts as of* June 30, 2024*:

Settlement Period	Type of Contract	Index	Average Monthly Volumes	Weighted Average Put Price	Weighted Average Call Price
(Bbls) · (per Bbl) · (per Bbl)
July 2024 - September 2024	Collars	Dated Brent	80,000	$65.00	$92.00

Settlement Period	Type of Contract	Index	Average Monthly Volumes	Weighted Average Put Price
(Bbls)a · (per Bbl)
July 2024 - December 2024	Put Options	Dated Brent	125,000	$65.00

a) The premium for these options was $4.01 per barrel and was paid in* October 2023.*

Settlement Period	Type of Contract	Index	Average Monthly Volumes	Weighted Average SWAP Price in CAD
(GJ)b · (per GJ)
November 2024 - March 2025	Swap	AECO (7A)	67,000	$2.80

b) One gigajoule (GJ) equals one billion joules (J). A gigajoule of natural gas is about 25.5 cubic metres at standard conditions.

The following table sets forth the loss on derivative instruments on the Company’s unaudited condensed consolidated statements of operations and comprehensive income:

Three Months Ended June 30, · Six Months Ended June 30,
Derivative Item	Statements of Operations Line	2024	2023	2024	2023
(in thousands) · (in thousands)
Commodity derivatives	Cash settlements paid on matured derivative contracts, net	$(9)	$(4)	$(33)	$(63)
	Unrealized gain (loss)	266	35	(557)	115
	Derivative instruments gain (loss), net	$257	$31	$(590)	$52

9. CURRENT ACCRUED LIABILITIES AND OTHER

Accrued liabilities and other balances were comprised of the following:

	As of June 30, 2024	As of December 31, 2023
(in thousands)
Accrued accounts payable invoices	$41,174	$21,225
Gabon contractual obligations	11,550	15,794
Accrued tax settlement	8,788	—
State oil liability	19,447	—
Capital expenditures	8,883	10,136
Egypt modernization payments	9,555	9,933
Accrued wages and other compensation	11,754	3,746
Seismic data	2,455	—
Other	1,780	6,763
Total accrued liabilities and other	$115,386	$67,597

10. COMMITMENTS AND CONTINGENCIES

Abandonment funding

Under the terms of the Etame PSC, the Company has a cash funding arrangement for the eventual abandonment of all offshore wells, platforms and facilities on the Etame Marin block. At* June 30, 2024*, $10.7 million ($6.3 million, net to VAALCO) of the abandonment fund has been funded on an undiscounted basis. The annual payments will be adjusted based on revisions in the abandonment estimate. This cash funding is reflected under “Other noncurrent assets” in the “Abandonment funding” line item of the condensed consolidated balance sheets. Future changes to the anticipated abandonment cost estimate could change the asset retirement obligation and the amount of future abandonment funding payments.

Share Buyback Program

On* November 1, 2022,the Company announced that the Company’s board of directors formally ratified and approved a share buyback program. The board of directors also directed management to implement a Rule10b5*-1 trading plan (the*“10b5*-1 Plan”) to facilitate share purchases through open market purchases, privately negotiated transactions, or otherwise in compliance with Rule10b-18 under the Securities Exchange Act of1934. The10b5-1 Plan provides for an aggregate purchase of currently outstanding common stock up to $30 million over a maximum period of 20 months. Payment for shares repurchased under the share buyback program were funded using the Company's cash on hand and cash flow from operations. The share buyback program was completed* March 12, 2024.*Under the share buyback program, we purchased a total of 6,797,711 shares at an average price of $4.41 per share.

Merged Concession Agreement

The Company is a party to the Merged Concession Agreement with the Egyptian General Petroleum Corporation (“EGPC”). In accordance with the Merged Concession Agreement, the Company is required to make $10.0 million annual modernization payments through* February 1, 2026.The $10.0 million modernization payment due February 1, 2024was offset against receivables owed to the Company from EGPC. On the condensed consolidated balance sheet at June 30, 2024*, $9.6 million of the remaining modernization payment liability was recorded in the line item "Accrued liabilities and other" and $8.8 million was recorded in "Other long-term liabilities".

The Company also has minimum financial work commitments of $50.0 million per each five-year period of the primary development term, commencing on* February 1, 2020for a total of $150 million over the15* year license contract term. Through* June 30, 2024*, the Company's financial work commitments have exceeded thefive-year minimum*$50* million threshold and any excess carries forward to offset against subsequentfive-year commitments.

As the Merged Concession Agreement was signed in* January 2022and is effective as of February 1, 2020,there was an effective date adjustment owed to the Company for the difference in the historic commercial terms and the revised commercial terms applied against the production since the Merged Concession Effective Date. In accordance with GAAP, the Company has recognized a receivable in connection with the effective date adjustment of $67.5 million as of October 13, 2022,based on historical realized prices. However, the cumulative value to be received because of the effective date adjustment is currently being finalized with the EGPC and could result in a range of outcomes based on the final price per barrel negotiated. As of June 30, 2024*, the remaining$51.7 million of the original $67.5 million receivable is recorded on the unaudited condensed consolidated balance sheet in "Egypt receivables and other, net". Further, the Company received written confirmation from EGPC that $51.7 million was recognized in their* June*Accounts Payable as owed to Company for our Merged Concession effective date adjustment, from which they will offset $11.2 million to satisfy any obligation of VAALCO or its subsidiaries in connection with the TransGlobe combination.

11. DEBT

As of* June 30, 2024* and* December 31, 2023,*the Company hadno outstanding debt.

RBL Facility

On* May 16, 2022,the Company entered into an agreement with Glencore, and other lenders, to provide a senior secured reserve-based revolving credit facility (the “RBL Facility”) for a maximum principal amount of up to $50.0 million. Beginning October 1, 2023and thereafter on April 1and October 1of each year during the term of the RBL Facility, the $50 million initial commitment, will be reduced by $6.3 million. At June 30, 2024,*the amount available to be drawn under the RBL Facility was $37.5 million.

The RBL Facility agreement contains certain debt covenants, including that, as of the last day of each calendar quarter, (i) the ratio of Consolidated Total Net Debt to EBITDAX (as each term is defined in the RBL Facility agreement) for the trailing12 months shallnot exceed 3.0x and (ii) consolidated cash and cash equivalents shallnot be lower than $10.0 million at any time. The amount the Company can borrow with respect to the borrowing base is subject to compliance with the financial covenants and other provisions of the RBL Facility agreement. Regarding the requirement, the Company must deliver its annual financial statements to Glencore within90 days of the end of each fiscal year. At* June 30, 2024*, the Company was in compliance with all debt covenants and hadno outstanding borrowings under the RBL Facility.

12. INCOME TAXES

VAALCO and its domestic subsidiaries file a consolidated U.S. income tax return. Certain foreign subsidiaries also file tax returns in their respective local jurisdictions that include Canada, Egypt, Equatorial Guinea, Gabon and Cote d'Ivoire.

The foreign taxes payable are attributable to Gabon as of thethree months ended* June 30, 2024* and2023.

The Company’s effective tax rate for thethree months ended* June 30, 2024* and2023, excluding the impact of discrete items, was 43.78% and 68.42%, respectively. The Company’s effective tax rate for thesix months ended* June 30, 2024* and2023, excluding the impact of discrete items, was 54.58% and 63.32%, respectively. For thethree andsix months ended* June 30, 2024* and2023, the Company’s overall effective tax rate was primarily impacted by tax rates in foreign jurisdictions higher than the US statutory rate and by non-deductible items associated with operations.

For thethree months ended* June 30, 2024*, the income tax expense of $9.3 million includes a $1.1 million unfavorable oil price adjustment as a result of the change in value of the government of Gabon's allocation of Profit Oil between the time it was produced and the time it was taken in-kind. After excluding this impact, income taxes were $10.4 million for the period. For thesix months ended* June 30, 2024*, the income tax expense of $31.5 million includes a $0.6 million unfavorable oil price adjustment as a result of the change in value of the government of Gabon's allocation of Profit Oil between the time it was produced and the time it was taken in-kind. After excluding this impact, income taxes were $30.9 million for the period.

As of* June 30, 2024*, the Company hadno material uncertain tax positions. The Company’s policy is to recognize potential interest and penalties related to unrecognized tax benefits as a component of income tax expense.

13. OTHER COMPREHENSIVE INCOME

The Company’s other comprehensive loss was$1.1 million for thethree months ended* June 30, 2024and $3.5 million for thesix* months ended* June 30, 2024.*The functional currency of our Canadian segment is the Canadian Dollar. All of the Company’s other comprehensive income arises from the currency translation of our Canadian segment to USD.

The components of accumulated other comprehensive income are as follows:

	Currency Translation Adjustments
(in thousands)
Balance at December 31, 2023	$2,880
Other comprehensive income (loss)	(2,454)
Balance at March 31, 2024	$426
Other comprehensive income (loss) before reclassifications	(1,068)
Balance at June 30, 2024	$(642)

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