VAALCO Energy (NYSE: EGY): Very good operating update in Canada
• VAALCO has brought online four new long (2.75 mile) lateral wells in Canada.• Three wells delivered IP rates of 500 bbl/d while the fourth well flowed 350 bbl/d for a total production capacity addition of 1.85 mbbl/d.
• This is a good result and compares with individual IP30 oil rates of 374-444 bbl/d achieved at the two wells drilled in 2023.
• This also bodes well for the 2Q24 and 3Q24 production in Canada. 1Q24 production in Canada was only ~2.4 mboe/d. This could also have a positive impact on economics given that the 1Q24 production included only 28% of oil plus 35% of NGL with the balance being lower value gas. The 2Q24 and FY24 production guidance for Canada is 3.0-3.3 mboe/d and 2.7-3.2 mboe/d respectively.
• VAALCO will drill an appraisal well in its Southern acreage that could prove up additional long lateral wells in the future with the potential to add proved undeveloped locations and reserves.
• Pending further visibility on the potential additional volumes associated with the upcoming appraisal well in Canada, we re-iterate our target price of US$10 per share in line with our ReNAV.
Other newsflow
The key near term newsflow will be the publication of further details on the capex and redevelopment programme in Cote d’Ivoire that is expected to deliver meaningful production growth in 2026. VAALCO is also expecting to take FID on the development of 8-12 mmboe stranded 2C resources at the Ebouri field that could add further production.
Valuation
Our Core NAV and ReNAV are unchanged at 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.
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