VAALCO Energy announces that the Company has commenced its 2019/2020 drilling campaign and spud the Etame 9P appraisal wellbore at the Etame field offshore Gabon.
Drilling of the Etame 9P appraisal wellbore is expected to take approximately four weeks, after which the Company will commence drilling the Etame 9H development well targeting the Gamba reservoir.
The objective of the Etame 9P appraisal wellbore is to test the Dentale reservoirs beneath the Etame field. The Company estimates that there could be up to 4.6 million gross barrels of recoverable oil present in the Dentale reservoirs beneath the Etame field.
If these resources are present in the Dentale, the Company will need to drill additional wells to exploit these reservoirs. As previously announced, VAALCO contracted the Vantage Drilling International Topaz jackup drilling rig to execute the 2019/2020 drilling campaign, which will include two appraisal wellbores and up to three development wells.
Cary Bounds, the Company’s Chief Executive Officer, commented, “We have entered into the first phase of our growth strategy starting with the Etame 9P appraisal wellbore where we are seeking to de-risk significant resources in the Dentale formation with a view to future exploitation opportunities. The resources we are targeting were identified in oil-bearing Dentale reservoirs encountered in wells drilled beneath the Gamba reservoir at the Etame field. The Etame 9P appraisal wellbore represents the first of many opportunities where we are attempting to create substantial value for our shareholders by converting resources to reserves in a cost-effective manner.”
Based on actual production volumes thus far in the third quarter of 2019, the Company reaffirms its prior production guidance and expects third quarter 2019 production to be in the range of 3,000 to 3,300 barrels of oil per day (“BOPD”), net, and full year 2019 production to be in the range of 3,300 to 3,900 BOPD, net.
In early September 2019, the Electric Submersible Pump (“ESP”) failed in the Etame 10H well after operating for 4.5 years. Prior to the ESP failure, the well was producing approximately 200 BOPD, net to VAALCO. VAALCO is investigating various cost-effective options available to replace the ESP, including utilizing the Vantage drilling rig to perform a workover.
The Company does not anticipate the loss of production from the Etame 10H well to change third quarter 2019 or full year 2019 production guidance. In setting its range for production guidance, the Company considers unforeseen events such as mechanical issues as well as the timing and results from the 2019/2020 drilling campaign.
The Company also signed definitive agreements to finalize the previously announced agreement in principle with the Etame joint venture owners to resolve past audit findings for the periods from 2007 through 2016 for $4.4 million net to VAALCO.
The agreement provides for procedures to minimize the chances of future audit claims. As the Company accrued the $4.4 million settlement amount in the 2019 second quarter financial statement, no further adjustments are expected.