Vaalco Energy acquires Sasol’s 27.8% working interest in Etame Marin

GABONVaalco Energy, a company engaged in hydrocarbon exploration, has signed a sale and purchase agreement (SPA) to acquire Sasol Gabon S.A.’s (Sasol’s) 27.8% working interest in the Etame Marin block offshore Gabon.

Since Vaalco currently owns and operates a 31.1% working interest 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 in Block DE-8 offshore Gabon.

The Company has agreed to total cash consideration for both properties of approximately US$44 million. The effective date of the transaction is July 1, 2020, and the Company anticipates that the transaction will close within 90 days.

Cash paid at closing is expected to be less than US$44 million as the amount paid will be subject to certain customary financial adjustments, including adjustments to account for estimated positive net cash flows attributable to the period from the effective date until the closing date.

“We believe that the acquisition of Sasol’s interest at Etame is a very attractive and value accretive strategic acquisition for the Company that confirms our position as one of the leading independent exploration and production companies in West Africa,” Cary Bounds, Chief Executive Officer, VAALCO Energy said.

The acquisition is expected to deliver a step change in our production to over 9,000 barrels of oil per day net based on current production and significantly boosts our cash flow profile.

“With minimal additions to our overhead costs, we expect this transaction to lower our G&A cost per barrel by approximately 40%. The strong operational and economic performance of Etame in recent years has enabled us to grow our net cash position, which we are now using to fund this value accretive acquisition and profitably expand our reserve base,” Cary added.

VAALCO plans to fund the net cost of the transaction with cash on hand and cash from operations. The SPA contains customary closing conditions including receipt of all necessary written consents, approvals or waivers, and provides for certain contingent payments of up to US$6 million, as discussed below.

Reserves, production and financial results for the interests being acquired will be included in VAALCO’s results for periods after the closing date of the transaction.

“We completed a highly successful drilling program earlier this year that demonstrated the quality of the asset and the upside that resides in the field, and this transaction, coupled with our recent announcement of acquiring new proprietary 3-D seismic data over the entire Etame Marin block, underscores the belief that we have in the long-term potential at Etame,” said Cary. 

Under the terms of the SPA, VAALCO is acquiring a 40% non-operated participating interest in Block DE-8 offshore Gabon, with Perenco, the operator, holding the remaining 60%. Block DE-8 is in shallow waters and encompasses multiple producing fields that are not part of the transaction and are carved out of the contract area that VAALCO is acquiring.

The SPA includes an interest in the Akoum-B discovery on Block DE-8 that was drilled in 2003 and has a potential appraisal well planned for 2021. If the appraisal well is successful, it could be tied back through a subsea completion to a Perenco-operated existing platform on Block DE-8.

Under the terms of the SPA, a contingent payment of US$5 million will be payable to Sasol by VAALCO if Brent oil pricing averages greater than US$60 per barrel for 90 consecutive days during the period from July 1, 2020 to June 30, 2022. There is an additional contingent payment of US$1 million if the DE-8 appraisal well is successful.

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