VAALCO Energy, Inc. (NYSE: EGY; LSE: EGY)
("
VAALCO" or the
"
Company")
today announced
that the Government of Equatorial Guinea has approved the Venus -
Block P Plan of Development (“POD”). VAALCO has an 80%
participation interest in the project and is the operator. Upon the
execution of final documents, VAALCO will proceed directly to
project execution which targets first oil in 2026 and adds 23.1
million barrels of oil (“MMBO”) of 2P CPR gross reserves, and 18.5
MMBO of 2P CPR Working Interest (“WI”) reserves (16.2 MMBO net 2P
reserves).1
Highlights
- Substantially adds to VAALCO’s 2P
CPR WI reserves;
- Adds 18.5 MMBO of 2P CPR WI
reserves as of September 2022, which includes 9.1 MMBO of WI proved
undeveloped reserves (“PUDs”);
- Additional future upside with
Europa development and exploration upside with Saturno and
Southwest Grande prospects;
- Allows VAALCO to proceed with the development of the Venus
discovery;
- Plans to spud first development well in early 2024;
- Acquire, convert and install production facilities over the
next three years;
- Expects to spud an additional development and a water injection
well in 2025/2026;
- Estimates the preliminary project
cost of drilling two development wells, an injection well and
related production facility to be approximately $310 million gross,
or approximately $13.40 per barrel of 2P gross reserves;
- Anticipates first oil production
from Block P in mid to late 2026; and
- Based on results from the initial
discovery well and reservoir modeling, VAALCO expects production
from the field to reach approximately 15,000 gross barrels of oil
per day upon completion of the two development wells and injector
well.
George Maxwell, VAALCO’s Chief Executive
Officer, commented, "With approval of the POD, and upon execution
of final documents, we are very excited to proceed with our plans
to operate, develop and begin producing from our discovery at Block
P in Equatorial Guinea over the next few years. We have a strong
and highly economic plan of development in place and are looking
forward to working with our carried partner GEPetrol and the
Equatorial Guinea government in efficiently developing this
exciting discovery. We believe that adding another asset to our
portfolio with significant 2P WI CPR is a very positive step for
VAALCO and further demonstrates the meaningful value of our asset
base. We believe that Block P in Equatorial Guinea has the upside
potential to become a world class asset in line with our Etame
asset and see clear strategic benefits in diversifying the revenue
generation and country focus of our portfolio. VAALCO has a proven
operating track record for a development of this kind and we look
forward to demonstrating these capabilities as we progress Block P
into production. As you can see, we are very excited for the future
of VAALCO and believe that we can significantly enhance shareholder
value through the drill bit on our outstanding assets."
On July 15, 2022, VAALCO, on behalf of itself
and Guinea Ecuatorial de Petroleós (“GEPetrol”), submitted to the
EG MMH a plan of development for the Venus development in Block
P. The other Block P joint venture owner, Atlas Petroleum
International Limited, opted not to participate in the POD. On
September 16, 2022, the Equatorial Guinea Minister approved
VAALCO’s POD. As a result, VAALCO will hold an 80% working interest
in the Venus development in Block P and GEPetrol will hold a
20% carried interest. The Block P PSC provides for a
development and production period of 25 years from the date of
approval of the POD.
VAALCO has added a supplemental investor deck on
the Block P development program to its web site, www.vaalco.com, in
the “Presentations” section under the “Investor Relations” tab.
About VAALCO
VAALCO, founded in 1985, is a Houston, USA
based, independent energy company with production, development and
exploration assets in the West African region.
The Company is an established operator within
the region, holding a 63.6% participating interest in the Etame
Marin block, located offshore Gabon, which to date has produced
over 126 million barrels of crude oil and of which the Company is
the operator.
For Further Information |
|
|
|
VAALCO Energy, Inc.
(General and Investor Enquiries) |
+00 1 713 623 0801 |
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 / Jon Krinks |
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 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, our 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.
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, 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 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.
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.
Supplemental Non-GAAP Financial
Measures
2P CPR Reserves
2P CPR reserves represent proved plus probable
estimates as provided by Netherland, Sewell & Associates, Inc.,
(“NSAI”) 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 using
escalated crude oil price and cost assumptions made by VAALCO’s
management. 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, 2P 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.
2P CPR reserves, as calculated 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 2P CPR
pricing is based on management pricing assumptions for future Brent
oil pricing for 2022: $70.00 escalated 2% per year thereafter
through 2031; and
- Lease operating expenses are not
escalated in the SEC case, while for the 2P CPR reserves case they
are escalated at 2% annually beginning on January 1, 2023.
Management uses 2P 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 the Company to other companies. Management
believes that the presentation of 2P 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 the Company’s reserve information to other London Stock
Exchange-traded companies that report similar measures. VAALCO also
believes that this information enhances its investors’ and
securities analysts’ understanding of its business. However, 2P 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 the
Company’s SEC proved reserves and consider 2P CPR reserves only
supplementally. SEC reserves will be evaluated as of December 31,
2022 for this approved Venus Development Plan.
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.
1 See “Supplemental Non-GAAP Financial Measures” below
concerning 2P CPR reserves.
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