VAALCO Energy (NYSE: EGY): Increasing reserves. Further potential upside in Gabon. EG potential to be unlocked imminently
• VAALCO’s YE23 cash position of US$121 mm and FY23 WI production of 23,946 boe/d were in line with previous indications.• The company held 77.3 mmboe WI 2P reserves at YE23 including 15.8 mmbbl in Gabon, 24.5 mmbbl in Egypt, 18.6 mmboe in Canada and 18.5 mmboe in EG. This represents a 1% increase vs YE23 as VAALCO has more than replaced its FY23 production given the strong performance of the producing assets in 2023.
• The FY24 capex budget is US$70-90 mm (we forecasted US$138 mm) as only US$30-40 mm will be spent in Gabon (on long lead items) with a larger than previously expected drilling programme starting in 2025. 10-15% of the FY24 capex is for Egypt and 35-40% for Canada.
• VAALCO expects to produce 20.8-23.4 mboe/d in 2024, excluding Cote d’Ivoire. Canada is the only asset expected to deliver growth in 2024 (2.7-3.2 mboe/d WI production over FY24 vs 2.4-2.5 mboe/d in 1Q24) under the firm capex budget programme. However, VAALCO could sanction a further US$18 mm capex programme in Egypt in 2H24 (+15 wells) dependent on the results of the 1H24 programme. This could boost production beyond the FY24 guidance.
• Four sources of upside could be unlocked in 2024: (1) the negotiation phase for the EG asset is now over and the company is waiting for confirmatory documents to start the FEED ahead of sanctioning the development of 18.5 mmboe WI 2P reserves. (2) 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. (3) We expect further visibility on the Svenska acquisition in 2Q24. It is expected to add ~4.5 mboe/d WI production and 2P reserves. (4) An exploration well will be drilled in Canada in 2024 that could also add reserves.
• We re-iterate our target price of US$10 per share in line with our ReNAV.
More information on Gabon
The 2025 base drilling programme in Gabon is expected to include 4-5 development, exploration and appraisal wells. The development of Ebouri could require two further wells and one work-over (total of 6-7 wells plus one work-over). Success could add 10-16 mmboe (Ebouri + exploration).
Valuation
Our FY24 and FY25 production forecasts of respectively 21.7 mboe/d and 25.3 mboe/d exclude the optional 2H24 programme in Egypt and the Ebouri field development. They include further development wells at Etame Marine in 2025. Our new Core NAV and ReNAV stand at respectively US$6.4/sh and US$9.7/sh. 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.
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.