Vaalco Energy has struck a deal to buy Svenska Petroleum, which has production in Cote d’Ivoire, for $66.5 million.
The sale will have an effective date of October 1, 2023, and the price paid will have various closing adjustments. As a result, Vaalco said it expected the cash payable on closing would be around $30-40mn, dependent on timing. It will use cash on hand for the purchase.
Svenska has production of around 4,500 barrels of oil equivalent per day, based on its 27.39% stake in the Baobab field. This is in Cote d’Ivoire’s CI-40 licence.
Diversifying the portfolio is key to Vaalco, said CEO George Maxwell. The purchase “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 deal will add 13mn boe to Vaalco’s 1P reserves, as of October 2023, and 21.7mn boe of 2P reserves.
Baobab has a number of parallels with Vaalco’s Etame field, in Gabon. The operator has drilled 24 production wells on Baobab, with five injection wells.
Maintenance and drilling
While the deal is immediately accretive to Vaalco, the FPSO on Baobab will go offline in early 2025 for maintenance and upgrades. It should be back in production in 2026.
Maxwell said the move would “position us well for the expected production growth from the 2026 drilling programme and for future drilling campaigns for many years to come”.
In 2026, development drilling is expected and should add to production. There is also potential for future development of the Kossipo field, on the same licence. Svenska does have a stake in a Nigerian licence as well, but Vaalco said it did not expect progress on this.
Canadian Natural Resources Limited (CNRL) is the operator of CI-40.
Vaalco is now financially stronger than at other time in the company’s history, Maxwell continued. “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 company acquired TransGlobe Energy in 2022, making an expansion into Egypt.
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