VAALCO Energy today announced successful completion of the Floating Storage and Offloading vessel (“FSO”) installation and field reconfiguration at Etame. Additionally, the Company disclosed strong third quarter 2022 production which was above the high-end of quarterly guidance and sales volumes that were above the midpoint of quarterly guidance.

Highlights

Related to the FSO and field reconfiguration, VAALCO successfully completed:

• All diving, subsea connections, subsea infrastructure and reconfigurations;
• All pipeline tie-ins and pressure testing;
• All the new riser connections to the Teli FSO;
• Disconnected all production lines from the Petroleo Nautipa Floating Production, Storage and Offloading unit (“FPSO”) and performed a lifting of export oil from the FPSO on September 26 of 300,510 barrels followed by a lifting from the FPSO on October 5 of 275,817 barrels;
• Delivered first oil from the Etame field to the Teli FSO on October 18;
• Completed the annual field-wide maintenance turnaround concurrently with the FSO and field reconfiguration;
• Disclosed preliminary third quarter 2022 production of approximately 9,150 net revenue interest (“NRI”) barrels of oil per day (“BOPD”), or 10,525 working interest (“WI”) BOPD, which was above the high-end of third quarter guidance;
• Announced third quarter 2022 sales volumes of 731,000 net barrels of oil or 7,952 net BOPD, which was 8% above the midpoint of guidance; and
• Provided update on third quarter financial impacts due to successful TransGlobe transaction.

George Maxwell, VAALCO’s Chief Executive Officer, commented, 
"We are very pleased to have successfully delivered this highly complex, full field reconfiguration, maintenance turnaround and upgraded FSO installation, as planned and on time. This project was completed despite a difficult global supply chain environment and is a testament to the dedication of our workforce and partners who helped complete the project, underlining VAALCO’s status as a quality Operator. The new FSO provides us with additional flexibility and has an effective capacity for storage that is 50% larger than our relinquished FPSO. It also reduces our expected storage and offloading costs by 50% which should lead to an extension of the economic field life, resulting in a corresponding increase in recovery and reserves at Etame.

Additionally, we reported very strong VAALCO standalone third quarter 2022 production and sales volumes both above the midpoint of our guidance ranges. Production for the third quarter was approximately 9,150 net BOPD and sales volumes were approximately 7,952 net BOPD. Our team worked tirelessly to ensure that we maximized our production and sales in the third quarter. We were able to complete three liftings during the quarter plus an additional smaller one on October 5, shortly before the FPSO was decommissioned. The team successfully overlapped the maintenance turnaround with the field reconfiguration to minimize downtime and deliver operating efficiencies. We continue to execute on our strategy and remain focused on generating meaningful free cash flow to enhance shareholder value."

Since the strategic combination with TransGlobe Energy did not close until October 14, 2022, production volumes and associated revenues and expenses will not be included in VAALCO’s financial results until post-closing in the fourth quarter of 2022. However, the Company said that the majority of the transaction costs associated with the strategic combination were incurred in the third quarter and will be recognized as special, one-time expenses in third quarter financial results. The Company also expects to incur a realized derivative loss in the third quarter as a result of the settlement of the remaining derivative swaps. Both the transaction costs and realized derivative losses are not deductible for Gabonese taxes, so the effective tax rate will be higher than normal during the third quarter. Additionally, costs associated with the relinquishment of the FPSO and transition to the FSO will be included in the third quarter. 

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