VAALCO Energy (NYSE: EGY): EG unlocked
• The final documents for the Joint Operating agreement (JOA) for the Venus-Block P Plan of Development have now been signed by all the partners. The JOA has also been approved by the EG government.• The Block P PSC is for 25 years from the date of approval.
• FEED is expected in 2024, FID in 2025 with installation of facilities and drilling thereafter and ultimately production. We currently carry US$0.69 per share for EG in our valuation.
• There are multiple sources of potential upside on the block. including Europa, Saturno, Urano and SW Grande, with over 100 mmbbl WI prospective and contingent resources.
• Other small companies are operating successfully offshore EG, including Trident Energy, Kosmos Energy and Panoro Energy.
• Typical fiscal terms in EG (based on Ceiba Okume operated by Trident Energy/Kosmos Energy) include 11% royalty, cost stop of 70% of revenue (for cost oil calculation), ~19% of profit oil being allocated to the State and 25% corporate tax on profit.
• We re-iterate our target price of US$10 per share in line with our ReNAV.
Newsflow
VAALCO is also expecting to take FID on the development of 8-12 mmboe 2C resources at the Ebouri field in Gabon. This would trigger the conversion of these 2C resources into the 2P reserves category and potentially add ~5 mbbl/d once in production. The acquisition of Svenska is expected to complete during 2Q24 and add ~4.5 mboe/d WI production. The redevelopment of Baobab could double that production. Success at the drilling programme in Egypt in 1H24 could trigger the sanction of further drilling in 2H24 that could have a positive impact on FY24 production.
Valuation
Our FY24 and FY25 production forecasts of respectively 21.7 mboe/d and 25.3 mboe/d exclude Cote d’Ivoire, the optional 2H24 programme in Egypt and the Ebouri field development. Our Core NAV and ReNAV of respectively US$6.4/sh and US$9.7/sh are unchanged. The development of Ebouri could add US$0.85/sh to our Core NAV.
VAALCO Energy is an independent energy company engaged in the acquisition, exploration, development and production of crude oil. The company is primarily engaged in its Etame Production Sharing Contract related to the Etame Marin block located offshore the Republic of Gabon in West Africa. The company also owns interests in an undeveloped block offshore Equatorial Guinea, West Africa.
Auctus Advisors is a specialist Equity Capital Markets and Advisory business with a focus in the Energy Sector.
The partners have complementary skill sets, with decades of experience across Equity Capital Markets, Investment Banking and the Energy industry. We have worked at Société Générale, Canaccord Capital, BMO Capital Markets and Schlumberger. Most recently we have worked together for many years at GMP FirstEnergy.
Auctus has been set up at the beginning of a new decade in which we see significant opportunities in the Energy space. Globally, demand for energy is at record levels and continues to grow. Conversely, investment in traditional energy sources has been severely constrained. We believe this imbalance creates opportunities for both companies and investors.
Auctus provides Corporate Broking, Equity Research and Investment Banking services.
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