Petroleum Africa
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Monday, May 11, 2015
VAALCO Energy offered an overview of its activities across West Africa during Q1 and since the end of the reporting period, specifically in Gabon, Angola, and Equatorial Guinea.
In Gabon VAALCO drilled two new development wells from the recently installed Etame platform. The Etame 10-H well was brought on production in Q1 2015 at an initial rate of approximately 3,000 bpd on a gross basis. The company began drilling the Etame 12-H in March which was subsequently completed in early Q2 and was brought on production in April 2015 at an initial rate of approximately 2,000 bpd on a gross basis.
After the completion of the Etame 12-H well, the drilling rig currently under contract was moved to begin drilling additional development wells from the recently installed SEENT platform. VAALCO began drilling a development well in the Southeast Etame Field in April 2015, and after completion, expects to drill to the North Tchibala field. The company drilled a successful exploration well in the Southeast Etame area in 2010 to the Gamba formation which will be developed from the second platform. An oil discovery was made in the North Tchibala field in the Dentale formation prior it acquiring the lease on the Etame Marin block in 1995.
Currently the company and its partners are evaluating options for handling oil containing hydrogen sulfide (H2S) that has impacted certain wells in the Ebouri and Etame fields. The extended test of the Etame 8-H well that was drilled from the Etame Platform late last year was performed in the first quarter of 2015 and confirmed the presence of H2S; as a result, the well remains shut-in and is being evaluated for future utility.
To re-establish and maximize production from the impacted areas, additional capital investment will be required, including a processing facility (or facilities) capable of removing H2S, recompletion of the temporarily abandoned wells, and potentially, additional new wells. Considering the substantial fall in oil prices, the company and its partners are focusing on more cost efficient options for processing (e.g. chemical removal options, construction of smaller facilities on existing structures, or the use of surplus equipment and used structures). It is expected that the project concept will be decided and the timing of the project startup will be known as early as the fourth quarter of 2015 with a goal of re-establishing production from the area impacted by H2S as soon as practical.
Onshore Gabon, VAALCO continues to work with its concession partner and the government of Gabon to obtain approval of a revised PSC for the MutambaIroru block. Once the contract is approved, a plan of development will be submitted. Costs and design are being re-evaluated to improve returns on the investment contemplated.
In Angola a drilling rig contract was signed in July 2014 for a semi-submersible rig to drill an exploration well on the Kindele prospect, a post-salt objective. The well was drilled in Q1 and while thick, well-developed sands were encountered in the primary objective, the sands were determined to be water-bearing, and the well was plugged and abandoned. However, non-commercial quantities of oil were encountered higher in the Pinda section, thus proving the existence of a working hydrocarbon system. Accordingly, VAALCO has expensed $24.5 million related to the Kindele prospect to exploration expense during the three months ended March 31, 2015. Additionally in Q1, the company recognized an exploration expense of $2.7 million related to a portion of the capitalized leasehold costs for its interests in Angola Block 5 as a result of the unsuccessful well.
The unfavorable results from the Kindele well do not diminish the attractiveness of other post-salt or pre-salt prospects on Block 5. VAALCO continues to interpret the 3D seismic data that it previously acquired over the block and is pleased with the new post-salt and pre-salt leads that have been identified to date. No additional exploratory drilling in Angola is expected before late-2016.
In the country of Equatorial Guinea the company continues to work with GEPetrol, the block operator and the state-run oil firm, on a joint operatorship model and with the Ministry of Mines, Industry and Energy regarding timing and budgeting for development and exploration activities. Field development options are being re-evaluated to take advantage of lower capital costs for equipment and services resulting from the current industry downturn to improve the economics of the Block P development.
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