VAALCO Energy, Inc. announced that it has signed a sale and purchase agreement (“SPA”) to acquire Sasol Gabon S.A.’s 27.8% working interest(1) in the Etame Marin block offshore Gabon. Since VAALCO currently owns and operates a 31.1% working interest(1) in Etame, the transaction will almost double VAALCO’s total production and reserves. In addition, VAALCO is acquiring Sasol’s 40% non-operated participating interest(1) in Block DE-8 offshore Gabon.

Highlights

- Acquiring an additional 27.8% working interest in the Etame Marin block offshore Gabon, increasing VAALCO’s total working interest to 58.8%;
- Nearly doubles VAALCO’s total net production and reserves;
- Increases net revenue interest (“NRI”) production from 4,850 to 9,150 barrels of oil per day (“BOPD”) based on current month production
- Increases year-end 2019 SEC reserves(2) from 5.0 million to 9.4 million barrels of oil (“MMBO”)
- Increases year-end 2019 independent 2P CPR reserves(3) from 9.2 MMBO to 17.5 MMBO
- Immediately accretive to VAALCO, with estimated increase of 23% in free cash flow per barrel(4) from approximately $10.90 to $13.30 at $45 realized oil price;
- Adds optionality from acquisition of Sasol’s 40% non-operated participating interest in Block DE-8 offshore Gabon;
- Agreed to total consideration to Sasol for the entire transaction of $44 million, subject to customary post-effective date adjustments, and future contingent payments of up to $6 million; and
- Funding for the acquisition will be from cash on hand and cash from operations.


(1) Prior to the closing of the acquisition, VAALCO’s working interest in Etame is 31.1% and its participating interest is 33.6%; Sasol’s working interest in Etame is 27.8% and its participating interest is 30%. All NRI production rates and volumes are based on working interest less 13% royalty volumes. Sasol’s participating interest in DE-8 is 40% and its working interest is subject to government rights for a 20% carried interest and 10% back-in interest.
(2) “SEC reserves” are Netherland, Sewell & Associates estimates prepared in accordance with the definitions and regulations of the U.S. Securities and Exchange Commission as of December 31, 2019.
(3) “2P CPR Reserves” are Netherland, Sewell & Associates proved plus probable estimates prepared in accordance with the definitions and guidelines set forth in the 2018 Petroleum Resources Management Systems approved by the Society of Petroleum Engineers as of December 31, 2019 using VAALCO’s management assumptions for escalated crude oil price and costs. 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 of December 31, 2019. As a result, 2P CPR reserves may not be comparable to SEC reserves determined under 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.
(4) Free cash flow per barrel is calculated as (i) revenues less production expenses, general and administrative expense, annual abandonment funding and current income tax expense divided by (ii) the number of NRI barrels of oil sold.

About VAALCO

VAALCO (NYSE: EGY; LSE: EGY), 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 33.6% participating interest in the Etame Marin block, located offshore Gabon, which to date has produced over 118 million barrels of crude oil and of which the Company is the operator.

About Sasol

Sasol is an international integrated energy and chemicals company that leverages the talent and expertise of our more than 31 000 people working in 37 countries. We develop and commercialise technologies, and build and operate world-scale facilities to produce a range of high-value product streams, including liquid fuels, chemicals and low-carbon electricity.