VAALCO Acquires Sasol's Interests in Gabonese Offshore Blocks
NYSE-listed VAALCO Energy Inc. has entered into a Sale and Purchase Agreement (SPA) with a wholly-owned subsidiary of Sasol Ltd. to acquire an additional 27.8% working interest in the Etame Marin block and a 40% non-operated working interest in Block DE-8 offshore Gabon, for a cash consideration of US$44.0 million, plus certain additional contingent payments.
Under the terms of the SPA, VAALCO will acquire the interests for an initial US$44.0 million in cash, subject to adjustments to account for estimated positive net cash flows attributable to the period from July 1st, 2020 until the closing date. A contingent payment of US$5.0 million will be payable to Sasol if Brent oil price averages greater than US$60 per barrel for 90 consecutive days during July 2020 to June 2022. An additional contingent payment of US$1 million will be payable if an appraisal well planned for 2021 drilling in Block DE-8 is successful.
The Etame Marin block covers an area of approximately 46,200 gross acres in water depths of approximately 250 ft. Oil was discovered on the block in 1998 and first production was achieved in 2002. The block contains the Etame, Avouma/South Tchibala, Ebouri, Southeast Etame and North Tchibala fields, and 13 producing platform wells. Upon completion of this deal, VAALCO will hold an increased 58.8% operated interest in the block.
Block DE-8 covers an area of 590,800 gross acres located in the North Gabon basin, and includes the Akoum-B discovery drilled in 2003. A potential appraisal well on the Akoum-B discovery is to be drilled in 2021, with an estimated cost of up to US$9.0 million. VAALCO will hold a 40% interest in the block, with privately-owned Anglo-French oil company Perenco SA holding the remaining 60% operated interest.
“The acquisition is expected to deliver a step change in our production to over 9,000 barrels of oil per day net based on current production and significantly boosts our cash flow profile. With minimal additions to our overhead costs, we expect this transaction to lower our G&A cost per barrel by approximately 40%,” said Cary Bounds, CEO of VAALCO.
Houston-based VAALCO is focused on upstream operations in West Africa, and currently holds interests in Gabon and Equatorial Guinea.
The transaction is subject to customary closing conditions, including receipt of all necessary written consents, and is expected to close within 90 days.
Evercore Group is acting as financial advisor to VAALCO.