Fourth quarter 2004 revenues were $18.5 million compared to $10.8 million in fourth quarter 2003. The average price received for crude oil from the Etame field during the fourth quarter 2004 was $43.80 per barrel compared to $29.02 in the fourth quarter of 2003. The Company sold 420,000 net barrels from the Etame field offshore Gabon during the fourth quarter and had inventory on board the FPSO (Floating Production Storage and Offloading facility) of 115,000 net barrels at December 31, 2004. The Etame field continues to produce at a rate of approximately 19,000 barrels of oil per day.
For the year ended December 31, 2004, revenues were $56.5 million compared to $35.5 million for the year ended December 31, 2003. Average oil price received for the full year 2004 was $38.36 compared to $28.54 in 2003. The Company sold 1.5 million barrels during 2004 compared to 1.3 million barrels in 2003. Through December 31, 2004 the Company has sold 2.8 million net barrels from the Etame field at an average price per barrel of $32.80 per barrel.
Discretionary cash flow, a non-GAAP financial measure of the amount of cash generated that can be used for working capital, debt service or for future investments was $7.0 million for the three months ended December 31, 2004. For the year ended December 31, 2004, discretionary cash flow was $30.9 million.
In addition to the financial results, the Company announced that its independent reserve engineers estimated total net proved reserves as of December 31, 2004 for the Company of 8.7 million barrels. Reserves at year end 2003 stood at 9.0 million barrels of which 0.4 million barrels were associated with the assets sold in the Philippines. Proved developed reserves declined from 6.1 million barrels (net of the Philippines), to 4.7 million barrels reflecting 2004 production. The Company added 1.4 million barrels of proved undeveloped reserves associated with the South Tchibala/Avouma discoveries, where the Company recently received Gabon government approval to pronounce the discoveries commercial. Due to the decision to shoot additional seismic over the Ebouri discovery to better delineate the size of the discovery, the Company did not apply for the necessary governmental approval to develop the Ebouri discovery. Therefore, the Company did not book any proved reserves attributable to the Ebouri discovery at year end 2004. The Company expects to complete its review of the Ebouri seismic in 2005, and expects to book proved reserves attributable to the discovery at year end 2005.
Robert L. Gerry, III, Chairman and CEO stated, "We are extremely pleased with our financial results for 2004, having achieved a 257% increase in net income compared to 2003. With the declaration of commerciality for the South Tchibala/Avouma prospect, we are proceeding with implementing a development plan. The development plan has been approved by our partners and we look forward to placing the field on production during the first half of 2006. In addition, we expect to commence drilling the ET-6H infield well at Etame in June which we expect will add an additional 5,000 to 7,000 barrels (gross) of production in July. Immediately following the development well, we intend to drill an exploration prospect."
VAALCO plans to drill the ET-6H development well in the Etame field during the second or third quarter of 2005. This well will be drilled at the high point of the structure and is anticipated to have between 5,000 and 7,000 barrels per day of initial gross production (between 1,200 and 1,670 barrels oil per day net to VAALCO after royalties). VAALCO expects drilling and completion costs will be approximately $15 million ($4.6 million net to VAALCO) and that it will fund these costs from cash flows from operations. The Company expects to commence production from the ET-6H well in the third quarter of 2005.
During 2005 and 2006, VAALCO expects to drill two additional development wells and construct a platform and related facilities on the Avouma discovery. Total costs are projected to be $65 million ($19.7 million net to VAALCO) which the Company plans to fund from available cash and cash flows. VAALCO expects to begin production from Avouma in the second half of 2006.
During 2006, the Company also plans to drill to a development well and construct a platform and production facilities on the Ebouri discovery. VAALCO expects total costs to be approximately $48 million ($14.6 million net to VAALCO), which VAALCO expects to fund from available cash and cash flows. The Company expects to commence production from Ebouri in early 2007.
The Company also expects to conduct additional seismic work and to modify the gas lifting facilities at its Etame field. Total costs are estimated to be $5.0 million ($1.5 million net to VAALCO), which the Company expects to fund from available cash and cash flows. The Company has also budgeted $8.0 million ($2.4 million net to VAALCO) to drill an exploration well on its Gabon acreage south of the Avouma discovery. Costs of this well are anticipated to be funded from available cash and cash flows.
The Company expects daily production to average 18,000 to 19,000 barrels per day (4,300 to 4,500 barrels per day net to VAALCO after royalties) during the first half of 2005. When the ET-6H well begins production during the second half of 2005, VAALCO expects average daily production to increase to approximately 23,000 to 25,000 barrels per day.
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