VAALCO Energy Inc (NYSE:EGY, LON:EGY) has made a steady start to its life on the London stock exchange, which seems befitting for a business whose ambition is steady growth from mature and proven oil basins.
There’ll be no wildcatting in the deepest parts of the ocean from Vaalco, says Cary Bounds, chief executive.
Instead, the aim to produce steady increments in the 4,000 barrels per day net currently being produced from its Etame licence offshore Gabon and, when funds permit, expand by adding me-too projects elsewhere in Africa.
If that sounds a bit mundane next to the huge discoveries recently off the coasts of South Africa, Guyana and Mexico, that doesn’t bother Bounds one bit.
“We have been producing in Gabon for 17 years and have a very robust asset with lots of potential to grow.”
Indeed, even with its low-risk approach, Bounds believes there is potential for Vaalco to increase in size considerably.
“We are a US$100mln company currently but we don’t want to stay that that size.
“We believe we can repeat the success we've seen in Gabon, so we’ve set ourselves a goal to become a US$500mln company within five years.”
Acquisitions will play a part in this, but Bounds says there is a lot of opportunity at Etame.
Some 110mln barrels has been extracted from the field since 2002 but Bounds says: “We see a line of sight to producing another 123 million barrels over the next 10 to 20 years.”
A 12 -month programme of five development and appraisal wells has already started, with the first staging post to get daily production up by a quarter to 5,000 barrels by the end of 2020.
Vaalco has a 31% interest in Etame and believes significant development opportunities remain in the area, supported by the existing infrastructure, which can allow new production to come online quickly.
Etame’s base casework programme has an estimated capital cost of US$61.2mln gross, US$20.5mln net to Vaalco, and an ‘expansive’ programme with cost an additional US$25-30mln or US$8.5-10mln net to the company.
The company has US$49mln of cash and is debt-free at the end of June so funding this work won’t be a problem.
The Texas-headquartered firm has joined the standard listing segment of the official list and Bounds says building up the shareholder base was one of the reasons Vaalco headed to the UK.
“We know there are investors in the UK interested in small companies focused on Africa E&P.
“Plus, we've set ourselves up for possibly raising capital in the future.
“We intend to grow the company through mergers and acquisitions and we feel the investment community here understand the business and would support the growth later.”
Operating costs currently are a net $37 a barrel, which rises to US$47 with all of the overheads of the office in Houston included, but Bounds says these costs will come down as production increases.
“We are drilling very low-risk development wells that will immediately add production and reserves.”
Shares are trading at 167.5p.