VAALCO Remains on Track with Strong Q2 Net, Exploration Growth

VAALCO Energy, Inc. announced that for the second quarter of 2008, net income was $13.0 million or $0.22 per diluted share compared to net income of $3.7 million or $0.06 per diluted share for the comparable period in 2007. For the six months ended June 30, 2008, net income was $14.8 million or $0.25 per diluted share compared to $8.3 million or $0.14 per diluted share in the six months ended June 30, 2007. Discretionary cash flow was up 72% to $35.0 million for the six months ended June 30, 2008, compared to $25.4 million in the first half of 2007.

"We are pleased with our second quarter results,” said Robert L. Gerry, III, Chairman and CEO. “The growth largely reflects the increased pricing environment and additional barrels sold during the quarter compared to the same period last year.

"With rigs arranged and properties identified, VAALCO's exploration program provides a number of exciting opportunities for continued growth and value creation,” said Gerry. “We are poised to increase reserves with additional exploration and development wells expected over the next three to eighteen months."

Exploration Summary

VAALCO currently has six producing wells in offshore Gabon, West Africa: four in its Etame field and two in the Avouma / Tchibala fields. To support continued growth, the Company is planning seven development and exploration wells over the next three to eighteen months, exposing the Company to over 50 million net barrels, or an 8-fold potential increase to VAALCO’s current 6.2 million barrels of proved reserves. These seven wells include:

  • A development well in the Ebouri field. As previously announced, VAALCO has completed the installation of the production platform for this well, and the platform has been tied back via pipeline to the Floating Production, Storage and Offloading (FPSO) facility that also serves VAALCO’s Etame and Avouma / Tchibala fields. VAALCO remains on schedule to commence drilling the Ebouri development well, with oil production expected in December 2008 at an initial rate of 4,000 to 6,000 barrels per day (bpd).
  • Three exploratory wells in the Etame block , including an appraisal well (North Ebouri) for possible expansion of the Ebouri field and two wells ( North Etame and South East Etame) on newly mapped structures. The jack-up drilling rig, Pride Cabinda, is expected to be on location by late September/early October with drilling to commence shortly thereafter. The wells will be drilled back to back and have combined gross reserve potential additions in excess of 60 million barrels (approximately 15 million net barrels to VAALCO).
  • Two exploratory wells onshore Gabon in the Mutamba concession. As previously announced, VAALCO remains on schedule to commence drilling the first of these two exploratory wells in December. VAALCO has a 100% working interest in the onshore Mutamba block. Combined potential reserves for these wells are expected to be in excess of 30 million barrels.
  • One Exploratory well in Angola. The Company continues to move forward on the previously announced planning for a well on Angola Block 5 during the first half of 2009 depending upon rig availability. The Company has recommended to the consortium a prospect with three objective zones, both above and below salt layer on the block. Total potential from all three objectives is 150 million barrels. VAALCO has a 40 percent working interest in Block 5.

In addition, VAALCO has a 25% interest in a gas prospect on Block 48/25c in the British North Sea. The Company is participating with Century Exploration on the well, which is an offset to a former Shell gas discovery made in 1987. 3D seismic data indicates the ability to get higher on the structure than the earlier well, increasing the potential reserves to 60 Bcf. Drilling is anticipated to begin in the fourth quarter of 2008.