VAALCO Energy (NYSE: EGY): Good quarter. Gearing-up for growth
• 1Q24 WI production was 21,807 boe/d, in line with our expectations. VAALCO held ~US$113 mm in cash at the end of March, which is also in line.• With the completion of the acquisition of Svenska, the company now expects to produce 23.6-26.5 mboe/d in FY24. This incorporates 2.8-3.1 mboe/d for Cote d’Ivoire (the production expectations for the other assets are unchanged).
• The FY24 capex guidance has been increased from US$70-90 mm to US$115-140 mm. It now incorporates (1) the capex for the preparation for the FPSO modification at Baboab (Cote d’Ivoire) expected to take place in 2025, (2) long lead items ahead of a 5-7 well drilling programme in Gabon in 2025, (3) the cost of the FEED in EG (to reach FID in 1Q25) and (4) the cost of an extra well in Canada (southern part of the licence) that could potentially unlock new drilling locations and add reserves.
• The capex budget could increase by a further US$18 mm if VAALCO manages to secure a rig for a new drilling campaign in Egypt in 2H24. This would also increase the production expectations for 2024.
• In EG, VAALCO will now hold 60% WI in Block P and carry its partners, The carry will be repaid by the partners with interest (at SOFR+7%) and repaid from cost oil and profit oil.
• Ahead of obtaining further details on the cost of the FPSO modification and the future drilling programme in Cote d’Ivoire, we re-iterate our target price of US$10 per share in line with our ReNAV.
Gabon and Ebouri
VAALCO is expecting to take FID on the development of 8-12 mmboe stranded 2C resources at the Ebouri field. High H2S content has prevented the commercialization of this area. VAALCO has managed to reduce the H2S content at wells 2H and 4H with chemical treatment. The company is now assessing how to commercialize the entire area. Wells 2H and 4H could be worked-over and a new well drilled to add ~5 mbbl/d production. Outside of Ebouri, the 2025 drilling programme in Gabon is expected to include two new production wells plus one exploration well targeting a nearby exploration prospect. All these wells are expected to be produced through the Etame platform that still has three open well slots. One gas well to reduce fuel cost will also be drilled as part of the programme.
Valuation
Our FY24 and FY25 production forecasts of respectively 25 mboe/d and 25.7 mboe/d now include Cote d’Ivoire but not the optional 2H24 programme in Egypt nor the Ebouri field development. Our Core NAV and ReNAV are respectively US$5.91/sh and US$9.51/sh. The development of Ebouri could add >US$1.0/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.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.