VAALCO Energy, Inc. (NYSE: EGY) today announced 2018 year-end
reserves and plans for drilling in 2019.
Highlights
- Produced an average of 3,750 barrels of oil per day (“BOPD”)
net in 2018 and sold 1.44 million barrels of oil (“MMBO”) net to
the Company in 2018
- Increased year-end proved reserves to 5.4 MMBO, up 76% compared
to year-end 2017 proved reserves- Added 2.2 MMBO as a result of
extending the Production Sharing Contract (“PSC”) in Gabon, 1.1
MMBO from improved performance and 0.4 MMBO through higher oil
pricing- Replaced over 270% of 2018 production
- Increased year-end 2018 proved and probable (“2P”) reserves to
9.7 MMBO, an increase of 144% versus year-end 2017
- Grew present value discounted at 10% per annum (“PV-10”) of
proved reserves at SEC pricing to $80.1 million and PV-10 of 2P
reserves at SEC pricing to $132.0 million (1)
- Finalizing plans to drill up to three development wells in 2019
at net cost to VAALCO of $25 to $30 million, all of which will be
funded from cash on hand and cash generated from operations
Cary Bounds, Chief Executive Officer, commented,
“Last year was a transformational year for VAALCO as we were able
to secure the future of the Company by extending our license to
operate the Etame permit in Gabon for up to twenty more years.
Delivering consistent and predictable production from Etame is the
foundation of our Company. Achieving our 2018 production goals at
Etame enabled us to generate sufficient cash in 2018 to pay off all
of our debt and fund a substantial portion of our 2019 development
drilling program. In addition, we were able to substantially
increase our reserve base as a result of the solid production
performance, license extension and improved pricing.
In 2019 we plan to drill up to three development
wells and two appraisal wellbores funded from cash on hand and cash
generated from operations. The three development wells are
expected to immediately increase production and the appraisal
wellbores will help further define opportunities to potentially add
reserves and production in future drilling campaigns beyond 2019.
Our vision is to repeat this process multiple times and continue
adding reserves and production for many years to come. We
have a strong, stable reserve base with substantial upside
opportunities to create additional value and we are working
diligently to deliver that value to our shareholders.”
(1) A non-GAAP measure. See “Supplemental
Non-GAAP Financial Measure” below.
2018 Year-End Proved
Reserves
VAALCO’s proved reserves at December 31, 2018
have increased by 76% to 5.4 MMBO consisting of 3.4 MMBO of proved
developed reserves and 2.0 MMBO of proved undeveloped reserves. The
Company’s reserves were fully engineered by its third-party
independent reserve consultant, Netherland, Sewell &
Associates, Inc., who has provided annual independent estimates of
VAALCO’s year-end reserves for over 15 years. In 2018, the Company
replaced 270% of production by adding a total of 3.7 MMBO of proved
reserves including 2.2 MMBO of proved reserves additions as a
result of extending the Etame Marin PSC in Gabon. VAALCO also added
1.1 MMBO of proved reserves as a result of improved reservoir
performance and another 0.4 MMBO of proved reserves as a result of
higher oil pricing. Year-end probable reserves have also increased
by 3.4 MMBO resulting in year-end 2018 proved and probable (“2P”)
reserves of 9.7 MMBO, an increase of 144% versus year-end
2017. This reserve growth occurred despite no capital being
spent on drilling new wells in 2018. VAALCO’s proved and probable
reserves are 100% oil attributable to the Etame Marin Permit area
offshore Gabon.
The PV-10 value of VAALCO’s proved reserves at
year-end 2018, utilizing SEC pricing of $70.83 per barrel of oil
(average of monthly Brent prices on the first of each month for
calendar year 2018), nearly quadrupled to $80.1 million from $22.5
million at December 31, 2017. The PV-10 value of VAALCO’s 2P
reserves at year-end 2018 utilizing SEC pricing increased by nearly
$100 million to $131.9 million from $33.9 million at year-end
2017.
2019 Development Drilling
Program
VAALCO and its joint owners are moving forward
with executing a development drilling program in 2019. The Company
is already in discussions to secure a rig to drill up to three
development wells and two appraisal wellbores in 2019. The Company
believes that there is significant reserve upside associated with
the two appraisal wellbores as they may confirm 2.8 to 5.6 MMBO of
resources that could be converted into 2P reserves at year end
2019. The Company is forecasting that the 2019 drilling program
will be funded by cash on hand and cash generated from operations.
The current estimated net capital expenditure in 2019 associated
with this drilling program is $25 million to $30 million.
About VAALCO
VAALCO Energy, Inc. is a Houston-based
independent energy company principally engaged in the acquisition,
development and production of crude oil. The Company's properties
and acreage are located primarily in Gabon and Equatorial Guinea in
West Africa.
Forward Looking Statements
This document includes "forward-looking
statements" within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. All statements, other than statements of
historical facts, included in this document that address
activities, events, plans, expectations, objectives or developments
that VAALCO expects, believes or anticipates will or may occur in
the future are forward-looking statements. Forward-looking
statements include all statements regarding wells anticipated
to be drilled and placed on production, future levels of drilling
activity and associated production and cash flow expectations, the
Company's 2019 guidance and capital expenditure forecast, estimated
reserve quantities and the present value thereof, the
implementation of the Company's business plans and strategy,
expected sources of future capital funding and future
liquidity, future operating losses, future changes in oil and
natural gas prices, future strategic alternatives, prospect
evaluations, negotiations with governments and third parties,
expectations regarding processing facilities, production and sales
projections, and reserve growth, as well as statements including
the words "believe," "expect," "plans" and words of similar
meaning. These statements are based on assumptions made by VAALCO
based on its experience and perception of historical trends,
current conditions, expected future developments and other factors
it believes are appropriate in the circumstances. No
assurances can be given, however, that these events will occur or
that these projections will be achieved, and actual results could
differ materially from those projected as a result of certain
factors. Some of the factors which could affect our future results
and could cause results to differ materially from those expressed
in our forward-looking statements include oil and gas price
volatility, inflation, general economic conditions, the Company's
success in discovering, developing and producing reserves,
production and sales differences due to timing of liftings,
decisions by future lenders, the risks associated with liquidity,
lack of availability of goods, services and capital, environmental
risks, drilling risks, foreign regulatory and operational risks,
and regulatory changes.
These and other risks are further described in
VAALCO's annual reports on Form 10-K and quarterly reports on Form
10-Q and other reports filed with the SEC which can be reviewed at
http://www.sec.gov, or which can be received by contacting VAALCO
at 9800 Richmond Avenue, Suite 700, Houston, Texas 77042, (713)
623-0801. VAALCO disclaims any intention or obligation to
update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
Supplemental Non-GAAP Financial
Measure
PV-10 and Probable Reserves
PV-10 is a non-GAAP financial measure and
represents the period-end present value of estimated future cash
inflows from VAALCO’s reserves, less future development and
production costs, discounted at 10% per annum to reflect timing of
future cash flows and using SEC pricing assumptions in effect at
the end of the period. PV-10 generally differs from standardized
measure, the most directly comparable GAAP financial measure,
because it does not include the effects of income taxes. PV-10 is a
widely used measure within the industry and is commonly used by
securities analysts, banks and credit rating agencies to evaluate
the estimated future net cash flows from proved reserves on a
comparative basis across companies or specific properties. VAALCO’s
PV-10 is the same as its standardized measure for the periods
presented herein. Neither PV-10 nor the standardized measure
purports to represent the fair value of the Company’s oil and
natural gas reserves.
VAALCO has provided summations of its proved and
probable reserves and summations of its PV-10 for its proved and
probable reserves in this press release. The SEC strictly prohibits
companies from aggregating proved, probable and possible reserves
in filings with the SEC due to the different levels of certainty
associated with each reserve category. GAAP does not provide a
measure of estimated future net cash flows for reserves other than
proved reserves. Investors should be cautioned that estimates of
PV-10 of probable reserves, as well as the underlying volumetric
estimates, are inherently more uncertain of being recovered and
realized than comparable measures for proved reserves.
Further, because estimates of probable reserve volumes have not
been adjusted for risk due to this uncertainty of recovery, their
summation may be of limited use. Nonetheless, VAALCO believes that
PV-10 estimates for probable reserves present useful information
for investors about the future net cash flows of its reserves in
the absence of a comparable GAAP measure such as standardized
measure.
Investor Contact Phil Patman
713-623-0801
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