Summary
- VAALCO Energy announced that first production from Etame 12H well at its Etame prospect in Gabon.
- The well was brought online at the rate of approximately 2,000 BOPD with no indication of hydrogen sulfide (H2S). This follows the 3,000 BOPD from the preceding well Etame 10H.
- The Etame Marin block has produced over 85 million of oil, and two new platforms have been installed. The Etame 10H and the Etame 12H are producing now 5,000 BOPD.
This article updates my recent article on VAALCO Energy (NYSE:EGY) published on February 11, 2015.
VAALCO prospect in Gabon. Source: Company website.
VAALCO announced the following today:
VAALCO Energy, today announced first production from Etame 12-H, a development well drilled from the Etame platform offshore Gabon. Etame 12-H was drilled to a measured depth of approximately 3,450 meters targeting the recently discovered, untapped lower lobe of the Gamba reservoir. Following completion operations, the well was brought online at the rate of approximately 2,000 BOPD on a gross basis (approximately 500 BOPD net to VAALCO) with no indication of hydrogen sulfide (H2S). The well is currently being temporarily constrained at the above production level while it is being optimized for efficiency. The Etame 12-H is an offset well to the Etame 10-H well which began producing in February 2015, at a rate of 3,000 BOPD, and was the first oil production from the recently commissioned Etame platform.
Commentary:
The company owns the following:
- 30.35% interest in the exploration offshore acreage within the Etame Marin block (main field for the company)
- 28.1% interest in the development areas in and surrounding the Etame, Avouma, South Tchibala, and Ebouri fields
The Transocean (NYSE:RIG) jackup "Constellation II" started its work in October 2014, and is contracted to drill six development wells in the Etame marin block. This drilling campaign followed the recent installation of two new platforms on the block called the Etame platform and the South East Etame/North Tchibala, also called the (SEENT) platform.
The first well was called the Etame 8H and was spudded in Q4 2014 and was followed by two more wells in the Etame, called the Etame 9H and 10H. All three wells now drilled to target the Gamba sand formation.
The "Constellation II" has been mobilized for the SEENT location and will drill another three development wells targeting the Dentale sand formation. EGY has the option to drill five more development wells in the area using the "Constellation II."
Source: Company website.
On Feb. 11, EGY announced that the three development wells in the Etame have been drilled and are actually evaluated. The second well, the Etame 10H, was tested at 3,200 BOPD on a gross basis with negligible amounts of water and no trace of hydrogen sulfide, which was a situation that posed problems to EGY not long ago. Etame 10H is currently being produced at approximately 3,000 BOPD.
Today, the Etame 12H which is an offset of the Etame 10H is producing 2,000 BOPD on a gross basis, which bring the total production at 5,000 BOPD on a gross basis now or approximately 1,300 BOPD net to EGY.
"The offshore Gabon drilling campaign that we began last year has so far resulted in increased production of approximately 5,000 gross barrels per day of sweet crude," said Steve Guidry, CEO. "We are pleased with the encouraging results from the Etame 12-H well, and are optimistic about the opportunities we have to expand production offshore Gabon as part of our ongoing development campaign."
The Transocean "Constellation II" is now mobilized to drill additional development wells from the ("SEENT") platform. The Jackup will start with the 2-H well in the SouthEast Etame field where EGY already drilled a successful well in 2010.
Following the 2-H well, the rig will drill the North Tchibala 1-H well which is the first well targeting the Dentale formation. It is important to notice that no H2S is expected from the SouthEast Etame/ North Tchibala fields.
This is an important indication because On Nov. 4, 2014, The Etame well 2H in the Ebouri field was temporarily shut-in.
The well production was 2,500 BOPD gross (700 BOPD net to EGY). The Ebouri field had also two other wells shut-in, in 2012, for the same reason as well, (Hydrogen sulfide, H2S, found in the oil), and required EGY to install a crude sweetening facility. The work is still in progress now, but the facility should be operational only around 2017.
COO, Russell Scheirman explained in the third-quarter 2014 conference call that:
The goal of these two projects will be to grow our production to 20,000 barrels per day or more in 2016.
Conclusion:
EGY announced today an important positive news regarding its prospect in Gabon. The company needed this success to counterbalance the recent unfortunate costly bust in its Angola offshore prospect, the Kindele-1.
I believe the next well 2-H will be another success, due to the fact that an initial well was drilled in 2010. Of course, the 12-H is an easy success, because it is just an offset of the 10-H well, but I am not going to comment on that.
Finally, EGY will be testing the Dentale formation with the North Tchibala 1-H well, which will be an excellent test for EGY's struggling neighbor Harvest Natural Resource (NYSE:HNR) and Panoro Energy (PEN) who owns the prospect directly adjacent which is for sale.
I believe EGY should acquire HNR prospect before HNR is forced to file bankruptcy. The two prospects present a great synergy and could be developed simultaneously.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I purchased recently shares of EGY and HNR.