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VAALCO awards Etame FSO contract to Omni in Gabon

VAALCO Energy, has announced that it has signed a non-binding letter of intent with Omni Offshore Terminals Pte Ltd to provide and operate a Floating Storage and Offloading 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  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 and the 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. And there is Current forecast 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.

CEO Statement

 “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” George Maxwell, Chief Executive Officer and Director, commented.

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.

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