Vaalco to Acquire Svenska for $67MM

Vaalco Energy Inc. has entered a deal to purchase Stockholm-based Svenska Petroleum Exploration AB, expanding its West African footprint, the Houston-based oil and gas exploration and production company said.

Upon completion of the $66.5 million all-cash transaction, Vaalco takes over Svenska’s 27.39 percent non-operator working stake (30.43 percent paying interest) in the CI40 license in Cote d’Ivoire. The license includes the Baobab deepwater field, which has current production of about 4,500 barrels of oil equivalent per day (boepd) net to Svenska. Baobab holds 21.7 million boe, 97 percent of which are oil, in proved and probable reserves net to Svenska, Vaalco said in a news release announcing the merger.

Canadian Natural Resources Ltd. operates the block with a 57.61 percent working interest while Ivory Coast national oil and gas company Petroci Holding holds the remaining 15 percent working interest.

Another field under the license, Kossipo, could be developed in the future, with two wells appraised 2002 and 2019, Vaalco said.

Vaalco would also join United States energy giants Chevron Corp. and Exxon Mobil Corp. in Oil Mining Lease (OML) 145 in Nigeria if the transaction is consummated. Svenska holds a 21.05 working interest in the Uge discovery while Chevron and ExxonMobil hold 21.05 percent each. Local partners Oando PLC and Nigerian Petroleum Development Co. hold 21.05 percent and 15.8 percent respectively.

However Vaalco said of OML 145, “There are minimal commitments on this license interest and no drilling or development is currently planned”.

CI40, though, “has been significantly de-risked as a result of development drilling (24 production and five injection wells) since discovery in 2001, with production to date of approximately 150 MMBOE on a gross basis”, Vaalco said.

Nine of the wells are subsea producing wells that are tied to a floating, producing, storage and offloading (FPSO) vessel, it noted. The FPSO unit is planned to be turned off 2025 for maintenance and expected to resume production 2026, Vaalco said.

Vaalco said “significant development drilling” is expected to start 2026 “with meaningful additions to production from the main Baobab field in CI-40, as well as potential future development of the Kossipo field also on the license”. The joint venture partners have already started ordering long-lead drilling items, it said.

Vaalco put the net cash range at around $30 million to $40 million. “The gross purchase price will be partially funded by a pre-closing dividend of cash on Svenska’s balance sheet to the Seller with the balance funded by a portion of VAALCO’s cash-on-hand with no issuance of debt or equity”, it said.

Vaalco said Svenska has “attractive concession terms with an 80 percent cost recovery cap, a 25 percent cost recovery uplift on development expenditures, and a 53 percent contractor profit oil take”.

Svenska also has “relatively low expected operating expenses of about $15 per BOE and crude price realizations closely aligned with Brent oil prices”.

Vaalco expects to close the acquisition in the second quarter of 2024.

Vaalco chief executive George Maxwell said in a statement, “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”, Maxwell said. “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”.

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