Houston’s Vaalco Energy makes its exit from Angola discontinuing all operations, as the company picked up stake in Etame off Gabon in Q3 2016, narrowing its focus and reducing costs.
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Image of Gabon operations, from Vaalco. |
“We have recently taken several strategic steps to narrow our operational focus, reduce costs and enhance shareholder value. We intend to concentrate on our production activities in Gabon and continue to seek low risk, discovered resource opportunities in West Africa or other similar areas internationally,” Cary Bounds, Vaalco’s COO and interim CEO said. “Our plan to acquire an additional interest in the Etame permit is a good example of the first step in that process. We also decided to exit Angola and discontinue all operations in that country.”
Vaalco notified joint venture partner Sonangol P&P of the Angola exit on 30 September, with the effective date being 31 October. The company has also taken actions to begin closing its office in Angola and does not intend to conduct future activities in Angola, Vaalco confirmed.
As a result of the company’s decision to discontinue operations in Angola and withdraw from its joint operating agreement, the operating results of the Angola segment have been classified as discontinued operations for all periods presented in the condensed consolidated statement of operations, Vaalco said.
Vaalco took a hit due to its decision to discontinue operations in Angola in Q3 2016 that totaled US$15.8 million. The loss included a non-cash liability accrual of $15 million related to the potential maximum penalty for not drilling the three remaining exploratory wells required under the Angola production sharing agreement.
Offshore Gabon, Vaalco’s production fell 20% from 4725 b/d in the Q2 2016 to 3772 b/d in Q3, due to electrical submersible pump (ESP) failures at the Avouma field.
Vaalco has recently experienced ESP failures at two wells in the Avouma field, and has since mobilized a hydraulic workover unit onto the Avouma platform to remove the ESPs and have them analyzed for the cause of the failure by the manufacturer.
The company said it is developing a plan to replace the ESPs in the affected wells and anticipates restoring at least a portion of the shut-in production by late Q4 2016 that will cost about $3.1 million.
“Despite the mechanical issues we encountered during the summer with our wells on the Avouma platform, we met production guidance for the quarter and still expect to meet our previously-announced production guidance for the full year,” Bounds said. “With the planned deployment of the hydraulic workover unit to replace the electrical submersible pumps on the Avouma platform, we should see an increase in production later in the fourth quarter. The initiatives that we have enacted in 2016 have solidified our near-term outlook and we believe they will benefit us further with the ultimate recovery in oil prices.”
During the period on 1 August, Vaalco entered into a purchase and sale agreement to acquire an additional 2.98% stake (3.23% participating interest) in the Etame Marin Permit offshore Gabon from Sojitz Etame, which represents the full interest owned by Sojitz in the concession.
Once completed, Vaalco said this acquisition will boost net production by 11%, and will not require any additional staffing. The deal is expected to close by 31 December 2016, subject to customary closing conditions.
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