Vaalco closes Etame Marin block stake buy from Sasol
Houston-based oil and gas company Vaalco Energy has closed the acquisition of Sasol’s 27.8 per cent working interest in the Etame Marin block offshore Gabon.
Before the acquisition, Vaalco owned 31.1 per cent working interest in Etame and was the operator of the block. Now, the company holds a 58.8 per cent stake in the block and has nearly doubled its total production and reserves.
This increases net revenue interest production from 4,850 to 9,150 barrels of oil per day based on current month production. Furthermore, the acquisition will increase year-end 2019 SEC reserves from 5.0 million to 9.4 million barrels of oil and 2019 independent 2P CPR reserves from 9.2 mmbo to 17.5 mmbo.
Vaalco paid $29.6 million in cash to Sasol, taking into account the agreed-upon transaction price of $44 million, the $4.3 million deposit already paid and post-effective date adjustments, with a future contingent payment of up to $5 million. The closing of the acquisition was entirely funded from cash on hand and cash from operations. The transaction had an economic effective date of July 1, 2020.
It is worth noting that the contingent payment of $5 million will be payable to Sasol only if Brent oil pricing averages greater than $60 per barrel for 90 consecutive days during the period from 1 July 2020 to 30 June 2022.
The company stated that it expects to materially increase free cash flow in 2021 and beyond, particularly in the current increasing price environment.
Cary Bounds, CEO of Vaalco, said: “We are extremely pleased to close this transformational and accretive transaction in a rising price environment. All cash payments were funded entirely by cash on hand. With the additional production from the acquisition, we are forecasting significant cash flow generation in 2021.
“In addition, we believe the recently acquired 3D seismic will improve our subsurface interpretation at Etame and lead to another successful drilling campaign, starting late this year or early next year, funded from cash on hand and cash from operations.
“Sustained operational and robust financial performance at Etame serves as the foundation for growing the company through future accretive acquisition opportunities in line with our strategy and operational expertise in West Africa”.
To remind, Vaalco entered into a sale and purchase agreement with Sasol to acquire the 27.8 per cent stake back in November 2020.