VAALCO Announces Letter of Intent for FSO at Etame

HOUSTON, April 27, 2021 (GLOBE NEWSWIRE) -- VAALCO Energy, Inc. (NYSE: EGY; LSE: EGY) (“VAALCO” or the “Company”) today announced that it has signed a non-binding letter of intent (“LOI”) with Omni Offshore Terminals Pte Ltd (“Omni”) to provide and operate a Floating Storage and Offloading (“FSO”) unit at VAALCO’s Etame Marin field offshore Gabon for up to 11 years upon the expiration of the current Floating Production, Storage and Offloading (“FPSO”) contract with BW Offshore in September 2022.

Key Highlights

• Omni has provided VAALCO with a preliminary proposal for leasing and also operating an FSO;
• The Omni FSO proposal could reduce VAALCO’s operating costs by 15% to 25% when compared to the current FPSO contract during the term of the proposed agreement;
• Maintaining the current FPSO beyond its current contract or transitioning to a different FPSO would require substantial capital costs;
• Estimated capital investment of $40 - $50 million gross ($25 - $32 million net to VAALCO) for deployment of the Omni FSO and the required field reconfiguration, with approximately 20% invested in the second half of 2021 and the balance in 2022 with an expected payback of less than three years;
• In the new field configuration, the FSO would store and offload the production and processing would be completed on the existing platforms;
• Currently forecasting that VAALCO’s capital costs for the FSO and field reconfiguration, as well as its planned 2021/2022 drilling program, can be funded with cash from operations and cash on hand;
• VAALCO and Omni, having agreed to an exclusivity period through June 1, 2021, will engage in further discussions with the intent to finalize a definitive agreement; and
• There is no assurance such an agreement will be finalized and any such agreement will be subject to Board approval by both parties as well as Etame joint-owner and Gabonese government approvals.

George Maxwell, Chief Executive Officer and Director, commented, “Sustained operational excellence and robust financial performance at Etame serves as the foundation for growing VAALCO through organic drilling and future accretive acquisition opportunities in line with our strategy. This development approach could allow us to enhance our operations, reduce costs, improve net-backs and secure our ability to maintain production growth and maximize value at Etame for the next decade. We will continue working to finalize an agreement with Omni that will be mutually beneficial for all parties. We remain focused on sustainable growth that provides benefits to all stakeholders, enhances margins and provides strong investor returns.”