VAALCO Energy will go ahead with its previously announced acquisition of the working interest of Sasol in the Etame Marin block, offshore Gabon, as no other partner exercised their pre-emptive right.
After the acquisition, Vaalco will nearly double its total production and reserves. Last month, Vaalco announced that it will acquire Sasol’s 40% non-operated participating interest in Block DE-8 offshore Gabon.
Before Sasol decided to sell its interest, the company’s working interest in Etame is 27.8%, and its participating interest is 30%. Vaalco’s working interest in the block is 31.1%, and its participating interest in 33.6%. Sasol’s working interest is subject to government rights for a 20% carried interest and 10% back-in interest.
In the latest announcement by Vaalco on Monday, 21st December 2020, the Company said that Perenco, the owner of 60% operated participating interest, had exercised its rights in the block. This means that Perenco will acquire Sasol’s 40% non-operated participating interest, denying Vaalco the potential obligation of drilling an appraisal well.
The terms of the Sale and Purchase Agreement (SPA) did not attribute a material value to the undeveloped resource at Block DE-8, so the purchase price for Sasol’s 27.8% working interest of $44 million less customary post-effective date adjustments has not changed. The maximum future contingency payments have also been reduced by a million dollar from $6 million.
The Chief Executive Officer of Vaalco, Cary Bound said, “Based on production performance in November, our production capacity, including volumes acquired from Sasol, would be over 9,000 barrels of oil per day and with the recent increase in oil pricing, this should significantly boost our free cash flow profile in 2021.”
“In addition, this transaction is lowering our breakeven cost per barrel by increasing production with minimal increases to G&A expense. While we are disappointed that we will not be participating in Block DE-8, this eliminates the cost to drill the appraisal well, thereby reducing our overall capital commitment in 2021 by between $7 million and $9 million and removes the $1 million potential contingency obligation.”
“We are even more confident in the future for Vaalco and this acquisition coupled with the new proprietary 3-D seismic data we are processing over the entire Etame Marin block will allow us to maximize the value of our Gabon resources.”
%20did%20not%20attribute%20a%20material%20value%20to%20the%20undeveloped%20resource%20at%20Block%20DE-8,%20so%20the%20purchase%20price%20for%20Sasol’s%2027.8%%20working%20interest%20of%20$44%20million%20less%20customary%20post-effective%20date%20adjustments%20has%20not%20changed.%20The%20maximum%20future%20contingency%20payments%20have%20also%20been%20reduced%20by%20a%20million%20dollar%20from%20$6%20million.The%20Chief%20Executive%20Officer%20of%20Vaalco,%20Cary%20Bound%20said,%20“Based%20on%20production%20performance%20in%20November,%20our%20production%20capacity,%20including%20volumes%20acquired%20from%20Sasol,%20would%20be%20over%209,000%20barrels%20of%20oil%20per%20day%20and%20with%20the%20recent%20increase%20in%20oil%20pricing,%20this%20should%20significantly%20boost%20our%20free%20cash%20flow%20profile%20in%202021.”“In%20addition,%20this%20transaction%20is%20lowering%20our%20breakeven%20cost%20per%20barrel%20by%20increasing%20production%20with%20minimal%20increases%20to%20G&A%20expense.%20While%20we%20are%20disappointed%20that%20we%20will%20not%20be%20participating%20in%20Block%20DE-8,%20this%20eliminates%20the%20cost%20to%20drill%20the%20appraisal%20well,%20thereby%20reducing%20our%20overall%20capital%20commitment%20in%202021%20by%20between%20$7%20million%20and%20$9%20million%20and%20removes%20the%20$1%20million%20potential%20contingency%20obligation.”“We%20are%20even%20more%20confident%20in%20the%20future%20for%20Vaalco%20and%20this%20acquisition%20coupled%20with%20the%20new%20proprietary%203-D%20seismic%20data%20we%20are%20processing%20over%20the%20entire%20Etame%20Marin%20block%20will%20allow%20us%20to%20maximize%20the%20value%20of%20our%20Gabon%20resources.”){kind=link}