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Summary

• Vaalco Vitality released its third-quarter benefits on November 10. The firm noted web income of $3.one million or $.05 per diluted share for the third quarter of 2014.
• Two new manufacturing platforms were put in and the first improvement nicely of the 6 scheduled commenced in Ocotber at the Etame Marin bloc.
• The inventory has dropped significantly considering that September or about thirty%. It is nearly time to cautiously accumulate once more, even so, the frustrated price of oil is a worry that demands endurance.

Vaalco Vitality (NYSE:EGY)

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Impression: Vaalco Gabon Site

Vaalco Vitality Inc., was included in 1985 and is headquartered in Houston, Texas United states. The company has 111 complete-time personnel (fifty nine in Gabon).

EGY is an impartial crude oil and normal gasoline mid-tier organization. The firm's principal business is found in both onshore and offshore West Africa, and to a lesser diploma in the United states of america:

Impression from EGY web site.

one - Offshore Angola

The business owns 40% functioning fascination in Block 5 offshore with roughly one.4 million acres.

From the conference phone on November 11, 2014, CEO Steve Guidry explained:

In Angola, we took methods to assure we keep the exploration possibilities on Block 5 by electing to enter into the subsequent exploration period.

2 - Offshore Gabon

The firm owns:

• 30.35% interest in the exploration offshore acreage within the Etame Marin block (primary subject for the organization).
• 28.1% desire in the development places in and bordering the Etame, Avouma, South Tchibala, and Ebouri fields

From the very last meeting get in touch with:

we are notably happy of the fantastic performance of our undertaking group, as they flawlessly sent not a single, but two totally built manufacturing platforms from South Louisiana to the Continental Shelf of Gabon, on time and on funds. In fact the platforms ended up constructed, transported and set up in 1 working day of the undertaking scheduled that was recognized some 18 months previously.

three - Onshore Gabon

The firm owns 50% functioning curiosity in Mutamba Iroru block with an exploration location of around 270,000 acres positioned onshore around the coast in central Gabon.

4 - United states (non-standard and shale plays)

1. Onshore Texas: 640 and 480 acre leases in the Hefley discipline (Granite Clean development) in North Texas (Could 2011).
2. Onshore Montana: 70% doing work desire in roughly 5,two hundred acres in Sheridan County, Montana (September 2011).
3. Onshore Montana: 65% doing work fascination in roughly 22,000 gross acres in Roosevelt County, Montana (December 2012).
4. Onshore South Dakota: a hundred% working curiosity in roughly ten,000 acres in Harding County, South Dakota (September 2012).

5 - The firm is also existing in West Africa as a non-operator in Offshore Equatorial Guinea

EGY owns 31% operating desire in Block P found offshore Equatorial Guinea. EGY is teaming up with GEPetrol who is the operator.

From the convention call on November 11:

We keep on to progress our options in Equatorial Guinea and Angola as well. In EG, we worked with GEPetrol, the countrywide oil firm of Equatorial Guinea and operator of Block P to put together a revised cash funds and function plan for submittal to The Ministry of Mines Market and Energy that moves the growth of the uncovered resource at the Venus Area, in advance of any exploration drilling on the Block. We are nevertheless doing work by means of the specifics of the perform sharing and organizational construction that we will use in the joint operator ship product.

3rd-quarter results snapshot:

Hyperlink: Third quarter results launch.

For comparison purpose link to the Next quarter August six, 2014. And the hyperlink for the Initial quarter May possibly 7, 2014.

Q3 2014Q2 2014Q1 2014Revenue in $ tens of millions24.486fifty two.09828.071Operating expenses and costs in $ millionseventeen.79918.26928.721Net Revenue in $ million3.10924.712(7.036)G&ampA in $ million3.ninety seven7.03.59Cash on hand in $ million133.50118.5780.72Restricted income in $ million12.thirty12.312.16Long-time period credit card debt in $ million*1500Earnings for each share.05.forty three(.twelve)Simple share Fantastic (+decide) in million54.ninefifty seven.456.86

Throughout the third quarter of 2014, the business took an initial attract of $15 million on our $55 million IFC credit rating facility that we concluded in the initial quarter, 2014. VAALCO's expenditure price range for 2014 is expected to be roughly $99 million.

Oil and Fuel generation specifics:

Q3 2014Q2 2014Q1 2014Net oil revenue (MBbls)256478257Net Fuel revenue (MMCF)fifty five5669Net Oil and Fuel income (MBOE)265488269Oil price $94.sixty seven108.24107.98Gas price $4.fifty ninefive.613.95All fees (Expenses, Depletion, G&ampA) $/BOEfifty eight.1thirty.752.8Capital expenditure $ million26.3724.2415.31

YTD EGY Chart:

EGY info by YCharts

Commentary:

Vaalco Strength released the 3rd quarter outcomes, and it was a mixed bag with only $2 minix neo x8 android tv box.five million in revenue, forty three% down from the preceding quarter, due to decreased listings associated to a scheduled upkeep executed by the operator of the organization FPSO facility located offshore Gabon, and a thirteen% fall in the value of oil, quarter to quarter.

Not all was unfavorable, so, and the company introduced couple of important good steps throughout Q3.

1. Two new production platforms ended up effectively put in precisely on routine in the shallow waters offshore Gabon on the Etame Marin block.
2. Drilling on the very first of six advancement wells on the Etame Marin block offshore Gabon commenced in Oct 2014.
3. The Company entered into Subsequent Exploration Section (&quotSEP&quot) on Block 5 offshore Angola and drilling of the first well predicted to begin in December 2014.

Listed here is a map of the Gabon Offshore Field:

Throughout Q3, the Gabon production averaged approximately sixteen,000 BOPD, which is 3,900 BOPD net to EGY.

A modern news, on November four, relates to the effectively 2H in the Ebouri discipline that was temporarily shut-in. The nicely was making 2,500 BOPD gross (700 BOPD web for EGY,) which could result in a sizable decline in production for This autumn or about 40 days at 700 BOPD (Appr. twenty five Kbopd.)

We assume to have the wire-line device in excess of there sometime early up coming thirty day period.

The Ebouri area had also two other wells shut-in, in 2012, because they produced Hydrogen sulfide, H2S, in the oil, and require EGY to set up a crude sweetening facility. The function is even now in progress now, but the facility ought to be operational only all around 2017.

In the Etame discipline, COO, Russell Scheirman mentioned at the CC:

The first nicely, which is the Etame eight-H effectively is being drilled in the Northern part of the Etame field and we lately set 9 and 5 casing right after tagging the Gamba sand. As of this morning, we have drilled out and executed our force integrity test and we are going to be drilling the horizontal part of that properly, this week...The purpose of these two assignments will be to develop our creation to twenty,000 barrels for each day or far more into 2016.

Progress has been manufactured in the onshore prospect with the Gabonese federal government concerning the improvement region for EGY's N'Gongui discovery in the Mutamba block.

In Equatorial Guinea, the firm is also advancing:

Task arranging has commenced, to arrive up with this advancement strategy and probably prolonged direct time things. We are looking for production in the 10,000 barrels to 12,000 barrel for each working day gross range from the field if all logistics can be labored out. We could have very first effectively in 2017.

In Angola, the company elected to enter into the subsequent exploration period of time on Block 5, which enables the contractor to unilaterally prolong the Block by 3 years, which presents far more time for EGY to drill the two exploration wells needed. EGY will use the Transocean Celtic Sea to drill the first well, which will consider about 45 days.

Steve Guidry stated at the CC:

Lastly, by the time of our subsequent contact we count on to have drilled and potentially tested the Kindele exploration well in Angola that Russ talked about focusing on a submit-salt framework on Block five.We have waited a very long time unfold out first properly on Block 5 and we are quite excited to lastly get that chance.

Throughout the final convention call, CEO Steve Guidry was not notably enthusiastic about getting a new discipline owing to oil price tag now below $eighty.

I have stated a calendar year back, that Harvest Normal Methods (NYSE:HNR) Tortue prospect in Gabon, adjacent to the Etame area, could be an ideal acquisition, and provides an exceptional synergy for Vaalco, which could dispatch their semi-submersible from Transocean, which is drilling now the Etame, six wells to Tortue up coming doorway, after that.

However, due to an unrelenting falling oil cost, and a more time forecast for recovery, this likely acquisition may possibly not be possible, unless it is accomplished at a distress stage, which could be attainable if HNR are not able to market its Venezuelan assets to Petroandina, which appears a lot more and far more most likely?

At very last, yet another subject that may be a adverse, is the character of the crude make of the Gabon subject. Right up until lately, manufacturing was marketed to the United states, nevertheless, with the shale production achieving a record, this market is not offered any more for the gentle sweet that EGY is generating, in West Africa. This situation may set even more anxiety on the oil price tag that EGY is receiving. Just lately, an Australian purchaser took handful of cargoes and a refinery in Wales also.

Summary:

I nevertheless like EGY, and I imagine the company is demonstrating a very good prospect for a long term growth. Nevertheless, I recommend a Keep ranking, proper now, because of the depressed oil cost that will reduce significantly revenues for the This autumn and the first two quarters in 2015. Assuming an typical close to $eighty two for This fall I estimate now a fall of 14% from Q3.

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The stock cost has corrected previously from $9.50 to now all around $six.50 nevertheless, it may go more down based on the value of oil. I would be much more cozy to start accumulating EGY in the $six to $5.seventy five location with a target about $10 in 2016 assuming a greater oil value.