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Thursday, November 10, 2016
VAALCO Energy is exiting Block 5 offshore Angola. The company said in its Q3 report that it has informed Sonangol P&P of its intention to withdraw from the Joint Operating Agreement. The effective date of the withdrawal was October 31.
Further to the decision to withdraw from Angola, the company has taken actions to begin closing its office in Angola and does not intend to conduct future activities in Angola. VAALCO previously wrote off essentially all of its investment in Angola.
Prior to the end of Q3 the company reported $15.0 million as long-term restricted cash relating to its share of the penalty for not drilling the three remaining Angola exploratory well commitments. However, as a result of the decision to withdraw from the joint operating agreement, VAALCO is no longer reflecting the $15.0 million as restricted cash.
The company evaluated the penalty provisions and believes that a substantial portion of the penalty amount has been reduced due to exploration expenditures already made. Due to the uncertainties as to the ultimate outcome, it accrued a $15.0 million liability for the penalty during the third quarter of 2016 which represents the maximum potential amount that may be due under the agreement.
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