LONDON: VAALCO Energy, a Houston-based oil and gas company, has announced that it has signed a deal to acquire Svenska Petroleum Exploration AB, a Swedish E&P company with a stake in a deepwater field in West Africa.

The deal, which has an effective date of October 1, 2023, is valued at $66.5 million, subject to customary adjustments. VAALCO will pay for the acquisition partly with a dividend from Svenska’s cash reserves and partly with its own cash, without issuing any debt or equity.

The acquisition is expected to close in the second quarter of 2024, pending regulatory and government approvals.

Svenska’s main asset is a 27.39% non-operated working interest in the Baobab field, located in Block CI-40, offshore Cote d’Ivoire. The field, which has been producing since 2005, is operated by CNRL, a Canadian oil and gas company, with Petroci Holding, the state-owned oil company of Cote d’Ivoire, holding the remaining 15% interest.

The Baobab field has five reservoir units with an estimated original oil in place of over one billion barrels of oil equivalent. The current production from the field is about 4,500 barrels of oil equivalent per day, with proven and probable reserves of 21.7 million barrels of oil equivalent.

VAALCO said that the acquisition will add significant value to its portfolio, as the Baobab field has further development potential and a long-term production outlook. The company also said that the acquisition will diversify its geographic exposure and enhance its operational and financial flexibility.

The acquisition price represents a low valuation multiple of $3.06 per barrel of oil equivalent of proven and probable reserves, or $14,800 per flowing barrel of oil equivalent, based on the gross consideration. VAALCO expects to pay between $30 and $40 million in net cash at closing, which could lower the valuation multiple to as low as $1.38 per barrel of oil equivalent of proven and probable reserves, or $6,700 per flowing barrel of oil equivalent.

George Maxwell, VAALCO’s Chief Executive Officer commented, “Building a diversified portfolio of high performing assets is a key component of our strategic vision. We believe that this acquisition enhances all the key aspects of our strategy.

It provides us with additional diversification, strong production and reserves from a proven producing asset, significant organic upside opportunity that is well defined, enhances our ability to generate sustainable cash flow and continue to return cash to shareholders. The Baobab field in Cote d’Ivoire has many parallels with Etame in terms of the historic production profile and how the upside is realized through development drilling campaigns meaning this is an asset type that we understand well. The field has been significantly de-risked through the drilling of 24 production wells, five injection wells and a near 20-year production history.

The planned dry-docking and upgrading of the FPSO in 2025 will position us well for the expected production growth from the 2026 drilling program and for future drilling campaigns for many years to come.  We are partnering with a great operator and believe our significant development experience offshore West Africa and the successful managing of our FPSO changeover in 2022 will provide insight and experience to help enhance future success at Baobab. We are adding an asset with strong current production and reserves at a very attractive price and using a portion of our cash on hand to fund the deal. This is highly accretive on key metrics to our shareholder base and provides another strong asset to support future growth.”

“Our strategic vision has proven highly successful and VAALCO is financially stronger, with more reserves and production, than at any other time in our history. We are in an even better position now to grow in 2024 and beyond. We continue to have no bank debt and we will use our strong cash position to fund organic and inorganic growth opportunities as we remain focused on growing the business. The diversity and strength of our assets are paramount and support our ability to sustainably grow our production and reserves, and generate cash flow while returning value to our shareholders.”