VAALCO Announces Letter of Intent for FSO at Etame
April 27 2021 - 4:45PM
VAALCO Energy, Inc. (NYSE: EGY; LSE: EGY) (“VAALCO” or the
“Company”) today announced that it has signed a non-binding letter
of intent (“LOI”) with Omni Offshore Terminals Pte Ltd (“Omni”) to
provide and operate a Floating Storage and Offloading (“FSO”) unit
at VAALCO’s Etame Marin field offshore Gabon for up to 11 years
upon the expiration of the current Floating Production, Storage and
Offloading (“FPSO”) contract with BW Offshore in September 2022.
Key Highlights
-
Omni has provided VAALCO with a preliminary proposal for leasing
and also operating an FSO;
-
The Omni FSO proposal could reduce VAALCO’s operating costs by 15%
to 25% when compared to the current FPSO contract during the term
of the proposed agreement;
-
Maintaining the current FPSO beyond its current contract or
transitioning to a different FPSO would require substantial capital
costs;
-
Estimated capital investment of $40 - $50 million gross ($25 - $32
million net to VAALCO) for deployment of the Omni FSO and the
required field reconfiguration, with approximately 20% invested in
the second half of 2021 and the balance in 2022 with an expected
payback of less than three years;
-
In the new field configuration, the FSO would store and offload the
production and processing would be completed on the existing
platforms;
-
Currently forecasting that VAALCO’s capital costs for the FSO and
field reconfiguration, as well as its planned 2021/2022 drilling
program, can be funded with cash from operations and cash on
hand;
-
VAALCO and Omni, having agreed to an exclusivity period through
June 1, 2021, will engage in further discussions with the intent to
finalize a definitive agreement; and
-
There is no assurance such an agreement will be finalized and any
such agreement will be subject to Board approval by both parties as
well as Etame joint-owner and Gabonese government approvals.
George Maxwell, Chief Executive Officer and
Director, commented, “Sustained operational excellence and robust
financial performance at Etame serves as the foundation for growing
VAALCO through organic drilling and future accretive acquisition
opportunities in line with our strategy. This development approach
could allow us to enhance our operations, reduce costs, improve
net-backs and secure our ability to maintain production growth and
maximize value at Etame for the next decade. We will continue
working to finalize an agreement with Omni that will be mutually
beneficial for all parties. We remain focused on sustainable growth
that provides benefits to all stakeholders, enhances margins and
provides strong investor returns.”
VAALCO has studied a variety of alternatives
regarding the expiration of the contract on its current FPSO in
September 2022. The proposed development approach utilizing an FSO
and processing on existing platforms aligns with VAALCO’s ongoing
strategy to reduce operating costs and extend field life. This is
particularly attractive due to the potential for meaningful ongoing
operating cost reductions over its term compared with the current
FPSO arrangement and other options analyzed.
VAALCO’s initial forecasts indicate that a
capital investment of $40 - $50 million gross ($25 - $32 million
net to VAALCO) could lead to annual operating expense savings of
$15 - $20 million gross ($9 - $12 million net to VAALCO) over the
life of the new agreement, resulting in a fast payback of its
invested capital and enhancing margins. These savings are achieved
due to a more simplified processing system that avoids duplication
of processing on the platforms and again on the FSO. This change is
expected to reduce or eliminate the need for most ongoing life
extension costs. Additionally, given the current commodity price
environment, VAALCO believes that the capital costs for the FSO
conversion and the upcoming planned 2021/2022 drilling campaign can
be funded with cash from operations and cash on hand.
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 120 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 / Kelsey
Traynor / James Husband |
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.
Inside Information
This announcement contains inside information as
defined in Regulation (EU) No. 596/2014 on market abuse (“MAR”) and
is made in accordance with the Company’s obligations under article
17 of MAR.
Vaalco Energy (NYSE:EGY)
Historical Stock Chart
From Aug 2024 to Sep 2024
Vaalco Energy (NYSE:EGY)
Historical Stock Chart
From Sep 2023 to Sep 2024