Author Charlie Mitchell
Editor Shashwat Pradhan
M&A, increased marginal field production to drive growth
Company has ‘boots on ground’ philosophy, high risk appetite
Gabon projects unaffected by coup, FID nearing on EG’s Venus
Africa-focused Vaalco Energy plans to double crude production to over 50,000 b/d in three years through a “boots on the ground” operating philosophy and a greater appetite for risk than its competitors, the company’s CEO told S&P Global Commodity Insights.
In a wide-ranging interview, George Maxwell, who took over the Houston-based company in 2021, said the significant production increase would come primarily through “inorganic growth” as well as growing output at mature fields.
“We look at areas where there is perhaps a discount because of geography, or production risk. Whatever risk elements we think we can manage, to take advantage of that discount, that’s where we’re focused,” Maxwell said. “Where do I want to be in three years’ time? Above 50,000 [b/d].”
The New York- and London-listed company, which has long operated the Etame Marin permit off Gabon, merged with TransGlobe Energy in October 2022 to scale up, “broaden its horizons” and become a leading Africa-focused operator.
With TransGlobe’s Canadian and Egyptian assets, the company boasts current working interest production of 24,000 b/d, as well as significant acreage in Equatorial Guinea.
“In TransGlobe we saw an opportunity to put our operating philosophy to work in those areas, where we knew we could get greater efficiencies … purely through scale and adding some functionality into it that a larger business could do,” Maxwell said. “The increased footprint and diversification and de-risking of the revenue stream was also key.”
Maxwell said Vaalco is following a strategy of responsible growth, seeking to double the size of the business “every couple of years” while streamlining it “to ensure we’re highly cash generative.”
On the operations front, “we’re very much boots on the ground,” he said. “I travel constantly. And if anything we over-communicate with our host countries. We don’t sit back and have the country manager shoulder the responsibility.”
“We understand how to operate with the concessions we have and how to manage them effectively. How to take advantage of mature licenses … the management team have spent collectively a couple of hundred years working in Africa.”
In Gabon, for instance, Vaalco has extracted 127 million barrels from its Etame permit, and is focused on ensuring the project is still producing in a decade, Maxwell said.To that end, the company is looking at how to step up its operations in Gabon to turn contingent resources into proved developed producing (PDP) ones.
Due to its rapid growth strategy and high-risk threshold, Vaalco is “always viewing and in some kind of process,” Maxwell said.
While he would not offer details on future investments, Maxwell said he would welcome an opportunity to be back in Nigeria,” describing it as “the giant production kitchen of sub-Saharan Africa.”
Maxwell built Eland Oil & Gas into a significant producer in Nigeria before selling the company to Nigerian firm Seplat Energy in 2019.
Angola is also of interest, Maxwell said. “Any process you may hear about that may fit our risk profile and geography you can rest assured we’ll be there.”
And unlike other small, nimble oil companies venturing into mature basins in West and Central Africa, Vaalco is not looking to farm down any of its assets.
Gabon, Equatorial Guinea update
Maxwell said Vaalco’s operations in Gabon were unaffected by the August military coup in the West African OPEC member, which saw president Ali Bongo deposed after 14 years in office.
Although top figures have been replaced, including the oil minister, the personnel remains the same, Maxwell said. “There’s no change to the day-to-day people that we operate with. It really has been, for us, absolutely seamless.” He added that Vaalco is perhaps the only foreign oil company in Gabon with a Gabonese country manager.
Meanwhile, over the border in Equatorial Guinea, Vaalco is nearing FID on its Venus development, a more than 20 million-barrel prospect in Block P offshore.
“Venus — we are still waiting to finalize all partners’ signatures on the JOA. Once that’s complete, we’ll move into a feed study,” followed five to eight months later by a final investment decision. “Probably Q3, Q4 next year you’ll see an FID, then we would be able to move straight into a drilling campaign,” Maxwell said.
From there, Vaalco would look to exploit its 6 million-barrel Europa prospect through a tie-back to existing infrastructure. Longer term, Maxwell said, the company plans to exploit its SW Grande prospect, also in Block P, which could contain up to 200 million barrels. “It’s definitely in our future plans once we get Venus up and running,” he said.
One thing Maxwell is not concerned about is the oil price, which has been especially volatile this year amid low Chinese demand, poor global economic indicators and wars in Europe and the Middle East.
“We’re not concerned,” he said. “We can’t control the oil price and focus on what we can control. Our focus is ensuring we are operating as cost effectively as possible and focusing on high margin barrels.”
He added: “Long term oil outlook is positive based on fundamentals and the current commodity price environment results in a decent market backdrop for M&A, which is part of our growth strategy.”