VAALCO Energy, Inc. is a Houston based independent energy company principally engaged in the acquisition, exploration, development and production of crude oil. VAALCO places high emphasis on international opportunities and holds acreage in Gabon, Angola and Equatorial Guinea in West Africa. A total of 2,487,000 gross acres (902,000 net) are in EGY’s portfolio, with the majority (roughly 89%) located offshore.
Oil & Gas 360® spoke with Steve Guidry, Chief Executive Officer of VAALCO Energy, Inc., in this exclusive interview.
OAG360: Steve, please provide us some general information about VAALCO, the strategy, and where the Company operates.
GUIDRY: VAALCO is a unique small cap E&P company in that all of our operations are currently focused in three countries in West Africa, Gabon, Angola and Equatorial Guinea, but we are based in Houston and trade on the NYSE. What’s also unique is our financial position in that we have only $15 million in debt and over $90 million in cash as of year-end 2014. We have a history of conservative financial management combined with a strong record of success in developing the West African fields we operate.
Our current strategy is to remain focused in that region and further develop our producing fields offshore Gabon at the same time we are exploring offshore Angola and are moving ahead with development plans for our onshore Gabon discovery and a discovery we acquired offshore Equatorial Guinea.
OAG360: You joined the team back in October 2013. What was it about the opportunity set in West Africa that attracted you to VAALCO?
GUIDRY: I had 33 years of experience with Marathon before I joined VAALCO, about a third of that experience in sub-Saharan Africa in the same three countries where VAALCO is currently active. That fit was too good to ignore. What was even more compelling was VAALCO’s exciting exploration and development portfolio and a strong balance sheet to pursue growth.
OAG360: VAALCO’s first Offshore Angola exploration well on Block 5 was water-bearing and is being plugged and abandoned. What lessons, knowledge and data sets will your team take from this well and use on future wells on Block 5?
GUIDRY: The first well we drilled, Kindele – 1, was a post salt well and helped to satisfy a portion of our drilling obligation under the concession agreement. While we were disappointed it was not hydrocarbon bearing, we did find good, well developed sands that provide encouragement for future post salt wells on the Block. Nonetheless, our primary focus will be pre salt prospects on the Block as those have a much higher unrisked resource potential and are on-trend with a number of industry successes in the same Basin. The results from the Kindele well do not have any negative effect on the attractiveness of our pre salt prospects which has been further enhanced with extensive 3D seismic data we have over the area.
OAG360: Tell us a little about your recent successes at Etame in Gabon and how you’ve been able to grow EURs? What are your near-term operational objectives?
GUIDRY: Last year we installed two new platforms offshore Gabon on our Etame Marin concession acreage. One was the Etame Platform which was built to produce reserves we believe exist but could not be produced from our previous subsea wells in that area. The second was our SEENT Platform which stands for Southeast Etame – North Tchibala which are two fields that were previously discovered but never produced. After the platforms were set, we immediately began a drilling program last December that will include at least three development wells on each of the new platforms. The first well at the Etame Platform encountered H2S in initial testing so we had to shut that well in while we finalize plans to add facilities to remove the H2S. The second well was very successful and H2S free and is currently producing 3,000 gross barrels of oil per day. We are drilling the third well and expect to have it completed and on production by the end of April. We will then move the rig to the SEENT Platform and start drilling three wells there. After that, we will decide if we want to drill additional wells as both new platforms can handle up to 8 wells each.
The result of all this new drilling activity is that we anticipate seeing growth in production throughout 2015 as these new wells are placed on production. This is another example of how our team has continued to find new reserves on a block that initially went on production in 2002 and is producing more now than went it began producing 13 years ago. VAALCO has had a history of repeatable development success that has allowed us to consistently increase our EUR on our concession.
OAG360: Like all producers, VAALCO is dealing with the effects of a 50% drop in oil prices, what is the company’s strategy in today’s price cycle?
GUIDRY: Like everyone else, our cash flow has fallen because of the drop in prices. The differentiating story for us is that our strong balance sheet and cash reserves has kept us from having to incur additional debt or issue equity to weather the downturn in prices. We are also working with our service companies to reduce our operating and planned drilling expenses. We are committed to our multi-well development program and are moving ahead with our plans to develop our onshore Gabon discovery as well as the Venus Discovery offshore Equatorial Guinea but at a measured pace to allow us to benefit from lower development costs that we believe will be available in the future.
OAG360: Steve, could you talk about the balance sheet and hedge book? How will the company fund its capital needs in 2015?
GUIDRY: Our balance sheet is strong relative to our small cap E&P peers. We have minimal debt and over $90 million in cash at year end 2014. We also have used only $15 million on our IFC credit facility. We don’t hedge our production but believe we have sufficient cash, cash flow and availability on our credit facility to fund our drilling program this year and hope to begin building cash again in 2016 if prices begin to firm.
OAG360: Thank you for your time.
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