Q3 highlights
- Reported loss from continuing operations of $0.1 million or $0.00 loss per diluted share
- Generated operating income of $3.7 million
- Produced an average of 3,707 barrels of oil per day (BOPD)
- Production from the South Tchibala 1-HB was restored at a rate of 1,100 BOPD gross (300 BOPD net)
- Current production has increased to approximately 15,300 BOPD gross (4,150 net)
- Discontinued Operations – Angola
Gabon and Equatorial Guinea
In the third quarter of 2017, production decreased to 3,707 BOPD compared with 4,363 BOPD in the second quarter of 2017 primarily due to a planned maintenance turnaround, an ESP failure in the Avouma field, and natural decline.
VAALCO continues to examine alternative, lower cost development options for discoveries in the Mutamba Iroru permit onshore Gabon, and in Block P offshore Equatorial Guinea. These discoveries present unique development opportunities that will be re-evaluated as prices continue to recover.
Conference call Q&A
Q: First of all, the higher production on the 1H well. Is that simply a function of it having been shut-in and pressure rebuilt? Or is there something different about the equipment that’s leading to the higher production?
VAALCO Energy CEO Cary Bounds: Thanks for the question. Your first assumption is correct. It’s really more about reservoir performance, not about equipment changes, and so as the well was shut-in for an extended period, pressure did build up and so we are seeing slightly higher volumes today than we saw in the past. That is correct.
Q: On the equipment front, since you did have some failures and there was an analysis taking place… What additional information do you have about that and the implications for the remaining wells?
CEO Bounds: Right, right. Well, as I’ve mentioned in the past, the cause of the ESP failures on the Avouma platform was corrosion, we’re still trying to determine, whether the cause of the corrosion was a manufacturing defect or due to the operating environment. And so we’re working with the equipment — the original equipment manufacturer to make that determination. But regardless of the cause of the corrosion, we have taken steps to ensure the corrosion will not happen again. And we’re using different materials, when we manufacture certain components that will mitigate the corrosion.
And also we’re working closely with Schlumberger to improve the reliability of all of our ESP systems and reduce costs going forward. We’re taking steps and putting measures in place not only to increase reliability, but also reduce costs.
Q: Let’s jump to the onshore conversations — onshore conversations that you might be having. Are those progressing at all? Or, are oil prices still too low? And your focus really is on extending the offshore production sharing agreement?
CEO Bounds: Well, first, our focus is on extending the offshore — the Etame offshore production sharing contract, but you mentioned the onshore opportunity in Gabon and we also have the development in Equatorial Guinea. And so we are doing the technical work to determine if those projects are viable at current pricing.
Right now, we’re not making a commitment to those projects, like you said, we’re — our focus is on offshore Gabon, but we are evaluating and we will move those projects forward at the right time. Now is not the right time, they’re still under technical evaluation. But — anyway, we do recognize, there will come a point, when those projects might make sense.
