TransGlobe and VAALCO announced that they have entered into a definitive arrangement agreement pursuant to which VAALCO will acquire all of the outstanding common shares of TransGlobe in a stock-for-stock strategic business combination transaction valued at $307 million.

Under the terms of the arrangement agreement, VAALCO will acquire each TransGlobe share for 0.6727 of a VAALCO share of common stock, which represents a 24.9% premium per TransGlobe common share based on the companies’ respective 30-day volume weighted average share prices as of market close on July 13, 2022.

The transaction will result in VAALCO stockholders owning approximately 54.5% and TransGlobe shareholders owning approximately 45.5% of the Combined Company.

The combination of VAALCO and TransGlobe will create a world-class African-focused E&P Company supporting sustainable growth and stockholder returns, and provide a host of benefits to the Combined Company’s stockholders and other stakeholders:

• The transaction will bring together two complementary businesses, creating an operated, full-cycle portfolio of low-risk, high return assets under a production and development-oriented business model
• Assets located in prolific and established basins in Egypt, Gabon, Equatorial Guinea and Canada, with significant future growth potential;
• Combination of two highly capable subsurface / technical, operational and business development teams enabling the pooling of operational best practices, skills and technology across the combined portfolio.

The Combined Company will have a larger, and more diversified reserves and production base, enhancing risk management, increasing portfolio optionality to high-grade and sequence investment projects towards the highest-return projects, as well as increasing access to a broader set of capital sources relative to each company on a standalone basis. The management of VAALCO and TransGlobe estimate:

• Combined 2022 mid-point production guidance of 19,100 barrels of oil equivalent per day (“boepd”) on a net revenue interest (“NRI”) (96% oil & liquids) basis across Egypt, Gabon and Canada and 24,400 boepd on a working interest (“WI”) basis;
• Combined proved (1P) reserves on an NRI basis of 32 million barrels of oil equivalent (“MMboe”) (92% oil) and 41 MMboe on a WI basis (92% oil) (as at January 1, 2022 in the case of VAALCO and as at December 31, 2021 in the case of TransGlobe); and
• Combined proved plus probable (2P) reserves on an NRI basis of 51 MMboe (90% oil) and 66 MMboe (91% oil) on a WI basis (as at January 1, 2022 in the case of VAALCO and as at December 31, 2021 in the case of TransGlobe);

George Maxwell, VAALCO’s Chief Executive Officer, commented: “This transformational transaction is consistent with VAALCO’s strategic growth objectives of expanding our African footprint and providing an enlarged platform to deliver long-term, sustainable value for our stockholders. The respective portfolios complement one another well and result in a diverse, full-cycle asset base which materially increases our production, more than doubles our reserves, and significantly enhances our ability to generate meaningful cash flow. Just as important, this combination results in a financially stronger company with no net debt, significant cash on the balance sheet and the size and scale to better fund and execute on a robust set of organic opportunities while delivering accretive long-term growth objectives.

Randy Neely, TransGlobe’s President and Chief Executive Officer, said: “We are very pleased to bring together two leading international oil and gas companies, each with decades of operational excellence in Africa. Under the stewardship of a joint VAALCO and TransGlobe board, we are confident that the assets of VAALCO and TransGlobe will continue to provide strong shareholder returns. The additional scope and scale of the combined entity will provide a larger platform, which will provide greater stability to TransGlobe’s practice of distributing cash to shareholders as well as growth investment in TransGlobe’s operations in Egypt and Canada. The TransGlobe management team is committed to working with George, Ron and their team to ensure a successful combination of our industry-leading teams.”

The Combined Company will continue to be led by George Maxwell as Chief Executive Officer and Ron Bain as Chief Financial Officer, with the executive team of TransGlobe remaining with the business through a three to six month transition period. The transaction is expected to close in the second half of 2022.