VAALCO Energy, Inc. provided an update on the successful completion of its 2019/2020 drilling program as well as an operational update.
- Successfully completed the South East Etame 4H development well including approximately 750 feet of horizontal section in the Gamba reservoir;
- Brought the South East Etame 4H well onto production on March 21, 2020 at an initial flow rate of approximately 2,200 gross barrels of oil per day (“BOPD”), 600 BOPD net revenue interest (“NRI”) to VAALCO;
- Commenced workover of the South East Etame 2H well to replace the electric submersible pumps (“ESPs”) and expects to restore production around the end of March; and
- To date, operations have not been materially disrupted by current worldwide COVID-19 crisis.
Cary Bounds, Chief Executive Officer, commented, “We are proud of the highly successful 2019/2020 drilling campaign in which we have drilled and brought online three development wells and drilled two successful appraisal wellbores that confirmed additional resources to exploit from this quality asset. The drilling campaign has been transformational for VAALCO and has added meaningful production and cash flow with minimal increase in operating costs. This has helped to improve our margins and drive our operational breakeven down to $31 per barrel of realized pricing. Following the completion of the South East Etame 4H well, we began the planned workover on the South East Etame 2H well to replace ESPs. We expect to bring the South East Etame 2H well back online around the end of March, which should restore production of approximately 2,400 gross BOPD.”
“Our lowered operational breakeven, strong hedge position and increased production has enabled us to establish a solid financial footing which puts us in a stronger position to navigate the current low price oil environment. With that said, the global pandemic and energy industry events that began in late February of 2020 have been unprecedented and caused significant uncertainty across the oil sector with regards to outlook and budgets. The world is battling COVID-19 which has disrupted our everyday lives and negatively impacted the worldwide economy. As of right now, VAALCO’s operations have not been disrupted, and we have managed through the logistical challenges that we have faced since the outbreak. VAALCO has contingency plans in place in the event that we are directly impacted, and we continue to put the safety of our workers and local stakeholders first. We remain committed to generating long-term value for our shareholders by focusing on capital efficiency, controlling costs and optimizing production.”
With the drilling of the South East Etame 4H well, VAALCO has completed its 2019/2020 drilling campaign. As previously announced, with the drilling of the South East Etame 4P appraisal wellbore, VAALCO has also satisfied the drilling commitment as part of the PSC extension that VAALCO signed in late 2018.
After installing production equipment, the South East Etame 4H well was brought online at an initial rate of approximately 2,200 gross BOPD, (600 BOPD NRI to VAALCO), with no H2S which is at the high end of the February 2020 pre-drill initial production rate of 1,200 to 2,500 gross BOPD (325 to 675 BOPD NRI to VAALCO). The well was drilled and completed as planned, with no safety or environmental incidents.
As previously announced, on March 7, 2020, the South East Etame 2H well stopped producing due to an ESP failure. The drilling rig on the South East Etame North Tchibala (“SEENT”) platform was already scheduled to replace the ESP on that well in a preemptive workover upon completion of the South East Etame 4H well. The workover on the South East Etame 2H well is currently underway and the well is expected to be returned to production around the end of March. The well was producing 2,400 gross BOPD, or 650 BOPD NRI to VAALCO, when the ESP failed. VAALCO will not perform any additional workovers with the contracted drilling rig and the rig will be released after completion of operations on the South East Etame 2H well.