Vaalco Energy’s experienced a 72% increase in its revenue in Q2 2016, in addition to a new setback offshore Gabon with another failed electrical submersible pump (ESP) on the Avouma platform.
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Map from Vaalco. |
In the company’s Q2 report, Vaalco revealed that one of the two ESPs failed recently in the Avouma 2-H well; the same platform in which EPSs failed in the South Tchibala 2-H well in June.
“Prior to attempting to start the second ESP installed in the well, Vaalco and the original equipment manufacturer who installed the ESPs, are working together to determine if the cause of the failure is due to operation, design or installation of the equipment,” Vaalco said. “The well was producing approximately 2700 gross b/d, or 660 b/d net to Vaalco. If the Avouma 2-H ESPs require replacement, the workover unit that is being mobilized onto the Avouma platform to replace ESPs in the South Tchibala 2-H well will be utilized to replace ESPs in the Avouma 2-H.”
On 23 June, ESPs in the South Tchibala 2-H well on the Avouma platform failed, and the well was temporarily shut-in. The 2-H was producing approximately 1700 b/d, or 415 b/d net to Vaalco, just before the pumps failed. Vaalco is mobilizing a hydraulic workover unit onto the Avouma platform to replace the ESPs and the well is expected to be back on production by early Q4 2016. The company’s net share of the cost is expected to be approximately US$1.7 million.
Production increased 6% from 4440 b/d in the first quarter of 2016 to 4725 b/d offshore Gabon that Vaalco said was primarily due to the completion of the six-day planned shutdown in Q1.
During the period, the Houston-based company increased its revenue by 72% to $19 million, from Q1 2016’s $11 million. Its operating income also jumped $11.2 million to $4.6 million in Q2, compared with a loss of $6.6 million in Q1.
“We are very pleased with the significant improvement in our financial results in the second quarter. Compared with this year’s first quarter, our operating income increased over $11 million on the strength of improved realized pricing, higher sales volumes, and lower total operating costs,” Steve Guidry, Vaalco CEO said. “Because of the steps we implemented to reduce production costs and G&A expenses, we maintained positive downward momentum and came in below the midpoint of our production cost guidance and remain on track to meet full year G&A guidance.”
Last week, Vaalco entered into an agreement with Sojitz Etame to acquire an additional 3.23% stake in the Etame Marin permit, off Gabon. The small percentage represents Sojitz’s full interest in the concession.
Should the deal be approved, Vaalco will hold 33.58% stake in the concession, which encompasses approximately 28,700 gross acres in shallow water.
“We entered into a purchase and sale agreement for an additional participating interest in our flagship asset in the Etame Marin Permit that would increase our net production by 11% without requiring any additional staffing. We were able to negotiate a fair and amicable agreement regarding our remaining contract term on the offshore Gabon drilling rig,” Guidry said. “We converted our IFC credit facility to a term loan with attractive rates and terms that provide the opportunity to request up to $5 million in additional borrowings. These achievements have improved Vaalco’s near-term outlook and positioned the company to benefit further from the ultimate recovery in oil prices.”
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