VAALCO Energy, Inc has entered into the Subsequent Exploration Phase ("SEP") on Block 5 offshore Angola together with its working interest partner, Sonangol P&P, as provided for in the Production Sharing Agreement signed in 2006 with the Republic of Angola.
The SEP extends the exploration license for an additional three year period such that the new expiry date for exploration activities is November 30, 2017. The SEP requires the Company and its partner to acquire a 3D seismic program covering six hundred square kilometers and to drill two additional exploration wells. The seismic obligation has been satisfied with a seismic program already completed covering 1,058 square kilometers over the outboard portion of the block.
By entering the SEP, the Company is now required to drill a total of four exploration wells during the exploration extension period. The four well obligation includes the two well commitment under the primary exploration period that carries over to the SEP period. A ten million dollar assessment (five million dollars net to VAALCO) applies to each of the four commitment exploration wells, if any, that remain undrilled at the end of the exploration period in 2017.
As previously announced, the Company has contracted for the Transocean "Celtic Sea" semi-submersible rig to drill the first exploration well, the post-salt, Kindele-1 well. The Kindele well is targeting the Mucanzo sand (Pinda group) with a planned total depth of 2,250 meters in a water depth of 101 meters. Gross unrisked recoverable resources are estimated to be between 20-49 million barrels. The rig is currently estimated to be on location in mid-December 2014.
The decision to enter the SEP was made in part to remove uncertainty that the primary term of the exploration license would be extended by the Republic of Angola before the November 30, 2014 expiration date.
Steve Guidry, Chairman and CEO, commented, "We believe entering into the SEP is a sound strategy for the Company. Although the SEP comes with additional commitments, we believe this is a coveted block with potential in the deep syn-rift and sag play. The SEP allows VAALCO and its partner to properly assess the results of the current seismic reprocessing that is being merged with previously licensed seismic data through pre-stack depth migration. This will help us determine the best opportunities in the pre-salt horizons. The action we took to enter into the SEP removes the uncertainty of an exploration license extension and allows us to focus on our exploration activities on the block."
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