Plans call for the installation of a platform and drilling of two development wells to produce the South Tchibala/Avouma accumulations. The platform will be tied back via a pipeline to the floating production, storage and offloading facility ("FPSO"), which is currently servicing the Etame field. The estimated cost of the development is approximately $65 million for the platform, wells and pipeline ($19.5 million net to VAALCO). Production from the development is expected to commence in the second quarter of 2006.
To ensure the availability of the FPSO to produce Etame, South Tchibala and Avouma, the Company signed a contract extension as operator with the FPSO owners. The extension allows the consortium to keep the FPSO through 2012, and gives the consortium the option to purchase the FPSO at the end of the contract on favorable terms. The Company's independent reserve engineers report has the fields producing until at least 2015. The contract extension provides for annual reductions in the day rate for the FPSO in each year of the term. As a result of signing the extension, VAALCO has commenced certain modifications of the tanker to allow for gas lifting of the Etame wells, and will perform future activities to expand the capacity of the tanker to handle additional production.
Also, VAALCO has spudded the EAVSM-1 wildcat well on a prospect south of the Avouma field. The well will test a separate Gamba sandstone structure adjacent to the existing Avouma discovery. Total depth of the well is anticipated to be approximately 8,800 feet, and should take 30 days to drill.
Mr. Robert Gerry, Chairman and CEO of the Company stated, "VAALCO and its partners continue to aggressively pursue maximizing the potential of the Etame Marin permit. Upon completion of our exploration well, we will move the rig to the Etame field to drill and complete the Etame 6H well. Production from that well should commence in July 2005."
The Company's subsidiary VAALCO Gabon Etame, Inc. operates and owns a 28.07% interest in the Etame Field. Other field partners are Pan-Ocean Energy Corporation Limited (31.36%), Sasol Petroleum West Africa (Ltd.) (27.75%), Sojitz Etame Limited (2.98%), PetroEnergy Resources Corp. (2.34%) and Tullow Oil plc (7.5%).
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