Etame Oil Production Commences

VAALCO Energy today provided an update on its horizontal development well (ET-7H) in a known separate fault block in the Etame field and on its exploration well (ETOMG-1) on the Omangou prospect, both wells located offshore Gabon.

The Company has laid and connected production, service and gas lift lines between the sub-sea tree and the Company's floating production, storage and offloading ("FPSO") facilities. The sub-sea work on the ET-7H development well was completed earlier than previously anticipated. Oil production from the well estimated at 3,600 barrels per day commenced on December 4th, 2010, and on December 7th, 2010 VAALCO's total production offshore Gabon was reported to be 24,037 barrels per day.

The ETOMG-1 exploration well was drilled to a depth of approximately 8,670 feet to evaluate both the Gamba and Dentale sand reservoirs. The reservoirs were encountered but were discovered to be water-bearing. Accordingly, the well will be logged, plugged and abandoned.

In late November, 2010 the Company completed its 110th lifting totaling 772,601 barrels. This is the third largest lifting volume since inception of operations in 2002. The Company's last lifting of the year is scheduled for the end of December.

The Company's subsidiary VAALCO Gabon Etame, Inc. operates the Etame Marin Permit in which it holds a 28.07% net interest in the Etame Field. Other participants in the permit are Sinopec Group (31.36%) through its subsidiary, Addax Petroleum Etame Inc., Sasol Petroleum Etame Limited (27.75%), Sojitz Etame Limited (2.98%), PetroEnergy Resources Corp. (2.34%) and Tullow Oil Gabon SA (7.5%).