VAALCO Receives Five-Year Extension for Etame Block

VAALCO Energy has reached an agreement with the Government of Gabon for a five-year extension of the Etame Marine Permit. The extension, which will go into effect July 2006, is divided into a three-year first term and an optional two-year second term. An exploration well is required during each term.

Separately, the Company also announced that it will now sell its Etame crude oil to Trafigura Beheer B.V. Trafigura was the high bidder for the contract which is based on Rabi Light. At current market prices, the Company would expect to receive a price of approximately Dated Brent less $1.25. This represents a significant improvement over the beginning of 2004, when due to weakness in the Rabi price, the Company was receiving Dated Brent less approximately $5.00. The first lifting under the new contract of approximately 720,000 barrels is ongoing.

VAALCO Opens Aberdeen Office

To support future drilling activity and planned exploration activity in the U.K. sector of the North Sea, VAALCO has opened an office in Aberdeen, Scotland. The company plans to enter into two partnerships to perform studies of the blocks upcoming in the 24th Licensing round expected to occur in June 2006. One will focus on the Central North Sea area, and one will be focused on the Southern Gas Basin and Fallow Discoveries. The Company has budgeted approximately $2.0 million to support these North Sea Activities in 2006.

VAALCO Pre-Qualified by Sonangol as Operator for Angolan Licensing Round

In another new venture area, VAALCO has successfully qualified as an Operator for bidding in the upcoming Angolan Licensing Round. Seven blocks are up for bid, with three of them being shallow water blocks of interest to the Company. VAALCO was one of twenty-nine companies qualified and one of only a handful of independents successfully able to qualify. Bids are due March 31, 2006.

Mr. Robert Gerry stated, "We have begun the diversification process for VAALCO as promised. The award of the Mutamba Iroru block in Gabon has strengthened our position within Gabon where our core assets lie. The Avouma platform is expected to be fully constructed by April 2006, with installation in Gabon over the summer. We still anticipate first production from Avouma in the fourth quarter of 2006. We are analyzing the seismic data obtained over Ebouri with hopes to file a development plan with the government in the near future. The opening of an office in Aberdeen commences our North Sea initiative and we continue to pursue other potential projects in West Africa through such activities as the Angolan bid round and discussions with other operators."
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