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Vaalco Energy signs letter of intent for FSO at Etame field

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Oilfield Technology,

Vaalco Energy has signed a non-binding letter of intent (LOI) with Omni Offshore Terminals Pte Ltd to provide and operate a Floating Storage and Offloading (FSO) unit at Vaalco's Etame Marin field offshore Gabon for up to 11 years upon the expiration of the current FPSO contract with BW Offshore in September 2022.

George Maxwell, CEO and Director, commented: "Sustained operational excellence and robust financial performance at Etame serves as the foundation for growing Vaalco through organic drilling and future accretive acquisition opportunities in line with our strategy. This development approach could allow us to enhance our operations, reduce costs, improve net-backs and secure our ability to maintain production growth and maximise value at Etame for the next decade. We will continue working to finalise an agreement with Omni that will be mutually beneficial for all parties. We remain focused on sustainable growth that provides benefits to all stakeholders, enhances margins and provides strong investor returns."

Vaalco has studied a variety of alternatives regarding the expiration of the contract on its current FPSO in September 2022. The proposed development approach utilising an FSO and processing on existing platforms aligns with the company's ongoing strategy to reduce operating costs and extend field life.

Vaalco's initial forecasts indicate that a capital investment of US$40 - US$50 million gross (US$25 - US$32 million net to Vaalco) could lead to annual operating expense savings of US$15 - US$20 million gross (US$9 - US$12 million net to Vaalco) over the life of the new agreement, resulting in a fast payback of its invested capital and enhancing margins. These savings are achieved due to a more simplified processing system that avoids duplication of processing on the platforms and again on the FSO. This change is expected to reduce or eliminate the need for most ongoing life extension costs. Additionally, given the current commodity price environment, Vaalco believes that the capital costs for the FSO conversion and the upcoming planned 2021/2022 drilling campaign can be funded with cash from operations and cash on hand.

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