Ladies and gentlemen. Thank you for standing by and welcome to the VAALCO Energy First Quarter 2015 Earnings Report. For the conference, all the participants are in a listen-only mode. There will be an opportunity for your questions. Instructions will be given at that time. [Operator Instructions] And as a reminder, today's call is being recorded.
I will turn the conference now to Chief Financial Officer, Mr. Greg Hullinger. Please go ahead..
Thank you, John and good morning everyone. Thank you for joining us on our call today to review the company's first quarter 2015 operating and financial performance.
After I cover the forward looking statements narrative, Steve Guidry, VAALCO Energy's Chairman of the Board and Chief Executive Officer will provide an update on our operations in West Africa and a high level summary of the financials. Following Steve's comment, I'll provide a more in-depth financial review and provide an update to our 2015 guidance.
And then Russell Scheirman, the company's President and Chief Operating Officer will provide a review of our operations in Gabon, Angola and Equatorial Guinea. Following all three presentations, we will be pleased to answer any questions you may have. With that, let me proceed with our forward-looking statements guidance.
During the course of this conference call, the company will be making forward-looking statements. We caution you that any statement that is not a statement of historical fact is a forward-looking statement.
Forward-looking statements are those concerning VAALCO's plans, expectations, future drilling and completion activities, expected capital expenditures, prospect evaluations, negotiations with governments and third parties, reserve growth and other operations.
Statements made during this conference call that address activity, events or developments that VAALCO expects, believe or anticipate, will or may occur in the future are forward-looking statements.
These statements are based on assumptions made by VAALCO based on its experience, perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances.
Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond VAALCO's control. Investors are cautioned that forward-looking statements are not guarantees of future performance and those actual results or developments may differ materially from those projected in the forward-looking statements.
VAALCO disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, you should not place undue reliance on forward-looking statements.
These and other risks are described in yesterday's press release titled Forward Looking Statements and in the reports we filed with the Securities and Exchange Commission, notably the 2014 Form 10-K filed with the Commission on March 16 of this year. Please note that this conference call is being recorded.
Having provided you with our forward-looking statement guidance, I'll now turn the meeting to Steve Guidry.
Steve?.
Good morning, everyone. And welcome to our first quarter 2015 earnings conference call. I'll begin the key highlights of the quarter as well as some additional developments that occurred since March 31. From an operational standpoint we had a good quarter.
We successfully drilled and completed the Etame 10-H and Etame 12-H wells from our new Etame platform offshore Gabon. The 10-H well went online in February while the 12-H began producing in April. Together both well are currently producing about 4,600 BOPD which is exceeding our expectations.
While we were disappointed that we encountered H2S in the essential 8-H well, we are very pleased that these two well are producing above where we had initially estimated we would be with the first three wells.
With additional testing last month we reconfirmed that the 8-H will produce significant amounts of H2S so we have return that well to the shut-in status while we find a long-term solution for handling this sour crude in the Etame field.
Those two new wells increased our Gabon production capacity from 30% above where we were in the fourth quarter of 2014. This is importantly the wells confirmed our hypothesis of an un-drained lower lobe of the Gama reservoir in the Etame 1B-4 block which is estimated to have some 25 million barrels of gross oil in place.
Russ will review the status of our development program at Etame in more detail shortly. But we assist mobilize the Transocean Constellation II rig to our second new platform at the Southeast Etame/North Tchibala fields to commence our development drilling program there.
The first well was started in April and its target is the Gamba formation in the Southeast Etame field which we discovered in 2010. We should reach TD on that well later this month with first oil targeted for mid June. After that well we will drill our next well to the North Tchibala field targeting the Dentale formation.
While VAALCO does not currently have any production from the Dentale reservoir, it is being produced by other onshore operators in Gabon.
One explanatory well and a total of three subsequent appraisal wells were identify multiple reservoirs from several zones and tested the flow of hydrocarbon at significant rates in the Dentale in the North Tchibala field.
Due to the lack of infrastructure and very low commodity prices at that time and somewhat lower than they are today, the field was not developed and the license was relinquished. VAALCO's efforts in North Tchibala field represent development drilling not exploration.
Hydrocarbons are known to exist in as many as seven different reservoirs representing as much as 100 million barrels gross oil in place. We are continuing to evaluate options for handling the oil containing H2S that is impacted both Etame and Ebouri fields.
Three established production of that sour crude, we are focusing on more cost effective options for processing the oil including chemical removal option, construction of smaller facilities on existing platforms or the use of surplus or used structures. I am confident that these sour crude reserves will be produced.
It is expected that the project concept will be decided and the timing of the project start up will be known as early as the fourth quarter of this year. In Angola, we safely drill the Kindele post salt prospect, our first well offshore Angola.
While well did encountered thick, well-developed sands were in the primary objective, they water bearing within the fall within the closure and the well was plugged and abandoned. Thus we wrote off of full cost of the well plus a portion of the associated capitalized leasehold costs.
The encouraging news from Kindele is that we found non commercial quantities of oil higher in the Pinda formation which further confirmed the existence of working hydrocarbon system in the area. The dry hole at Kindele does not diminish the attractiveness of other post- salt or pre- salt prospects on the block.
Which is not the main focus of our team? We are continuing to interpret our newly reprocess 3D seismic survey over Block 5 and are very encouraged with the number and size of the new pre-salt prospects that are being developed in both the Sag and Sinris [ph] sections.
We won't be doing any further exploratory drilling in Angola until late 2016 at the earliest which gives us sufficient time to refine the data on the prospects we will drill, possibly seek a partner from a number of interested companies to reduce our risk, plus avail ourselves of lower drilling cost that we are seeing due to the decline in crude prices.
At both onshore Gabon and offshore Equatorial Guinea, we are moving at a more measured pace to prepare our development plans to give us time to work with our partners to find more cost effective way to develop both licenses and increase our returns on our contemplated investments on each project.
Our business development efforts continue as we remain committed to finding new opportunity that can place VAALCO on even strong growth trajectory. Our focus continues to be West Africa, discovered resources with upside. Although we've begun to widen the aperture of our search.
We are finding that the current industry economic environment is presenting opportunities that are good fit with VAALCO's skill set and experience. We believe there will be a shift in West Africa landscape that will open new opportunities for companies our size.
May just will begin to looking to sell asset as part of their portfolio rationalization effort which will likely to lead the assets being increasingly held by smaller companies. We will however remain diligent and assuring that any transaction we do we will be accretive and meet acceptable economic threshold. Turning to our financial results.
Greg will review the numbers in more detail but here are just some general comments. We benefiting from higher production during the quarter but substantially lower oil prices more than offset the volume growth impact of our -- on our revenue and earnings.
Since we are successful -- and P company from financial reporting purposes, we had to write-off the full cost of the Kindele dry hole in the first quarter. And also recorded a non-cash charge to write down the portion of the associated leasehold cost. The combination of those two items totaled $27.5 million, which reduced earnings by $0.47 per share.
Like most other EMP companies we are required to record a non-cash impairment charge to reduce the carrying value of our assets due to the decline oil prices on March 31 as compared to December 31, 2014 which is mandated by the SEC guideline. That additional impairment charge totaled $5.4 million.
All in we reported a net loss of $39 million, or $0.67 per share. If we set aside the impact of the dry hole at Kindele and the $5.4 million asset value impairment, VAALCO's first quarter earnings would have been a loss of $6.4 million, or $0.11 per share. I do have some recent and very positive financial news to share with you this morning.
As previous calls you know we talked about an audit that has been filed last fall by Gabon Taxation Department as part of special industry wide review of all the companies in the Gabon, all this practices and financial transaction. This audit was commonly referred to as the Alex Stuart audit.
We properly responded to all requests for information and then met with Gabon Taxation Department in April to review the result of the audit. At that meeting, the majority of the exceptions noted in the audit were closed out without requiring any adjustments at all.
We did agree that there was one billing for approximately $1 million growth that was incorrectly charged to us by a third party vendor as operator. Tha was then charged to our working interest partners. We expect to settle this item to close out the entire audit. And we are very pleased to have managed this audit to such a favorable outcome.
The success we have achieved operationally with our development drilling program in Gabon and the long-term positive impact of the program will have on the company should not be overshadowed by the dry hole cost and the non-cash impairment caused by the lower prices that we have experienced.
We have seen the benefit of the growth in production, on our revenue to date in 2015 and we expect further increases in production and revenue as we place each of the next three development wells online in the coming months of 2015.
We are today reconfirming our annual production guidance of 3,900 to 4,600 barrels of oil per day net and our CapEx guidance of between $65 million and $75 million. We still see upside to our production this year and will revisit our annual estimate next quarter after we have additional results from our 2015 drilling program.
Our conservative financial management in the past had us well prepared with a significant cash reserve to undertake our platform construction and the drilling program without incurring substantial debt or any equity issuance even faced with significant fall in oil prices.
We are pleased to see the recent firming in the crude prices and foresee a substantially lower CapEx spend in 2016. We believe this will allow us to return to a cash building position in 2016 well ahead of the next capital spending program in onshore of Gabon, in Equatorial Guinea and Angola.
So let me now turn the call over to Greg for more details on the first quarter and guidance for the balance of 2015.
Greg?.
Thank you, Steve. I am going to spend next few minutes providing an overview of key financial information pertaining to the first quarter of 2015 that we reported yesterday in our earnings press release and the SEC Form 10-Q. I will also be providing guidance information pertaining to the second quarter and full year 2015.
As mentioned by Steve the company reported a net loss of $39.0 million, or $0.67 per diluted share for the first quarter of 2015.
And as Steve mentioned that loss is largely attributable to the dry hole and non-cash leasehold costs that we expense during the quarter totaling $27.2 million relating to unsuccessful exploration well drilled on the Kindele prospect on Block 5 offshore Angola.
And a $5.4 million non-cash impairment charge related to the projected oil prices at March 31, 2015 that were used in the impairment evaluation for the Etame marine block offshore Gabon. When we exclude those two items and again as Steve mentioned the net loss for the quarter would have been $6.4 million or $0.11 per diluted share.
Notwithstanding the recent increase in oil prices since the end of the first quarter, on average the forward prices used in the impairment calculation were approximately $4 lower than the projected oil prices at December 31, 2014.
Thus further price reduction or projection resulted in a write down at the combined Southeast Etame and North Tchibala fields. And then the third factor contributing to the reporting net loss for the quarter is fairly obviously. This is attributable to the lower realized oil sales prices.
The net loss of $39 million or $0.67 per diluted share for the first quarter compared to a net loss of $7 million, or $0.12 per diluted share in first quarter of 2014. The impact of lower oil prices is clearly seen in our revenue number.
Revenues of $18.2 million reported for first quarter of 2015 were substantially lower than the $28.1 million of revenues reported for the same quarter in 2014. The average prices we received in the first quarter of 2015 were $48.66 per barrel compared to $107.97 per barrel in the first quarter of 2014. This being a decrease of 55%.
On a positive note our share of the barrel listed in Gabon during first quarter of 2015 of approximately 3, 72,000 barrels was 45% higher than the approximately 2,57,000 barrels listed in the first quarter of 2014.
Beside the price of oil, quarterly revenue were highly impacted by the amount of barrels sold via crude listing that occur on approximately on monthly basis. Since we can only sell what we produce, key measure is to understand our production profile.
Production on a net basis for three months ended March 31, 2015 was approximately 3,80,000 net barrels or approximately 4200 barrels of oil per day as compared to approximately 3,60,000 net barrels for the same period in 2014.
Production guidance previously provided was that production for 2015 was likely being in the range of 3,900 to 4,600 barrels of oil per day net of VAALCO. We expect second quarter production to be in the range of 4,300 to 4,600 barrels of oil per day and we maintain the full year guidance previously provided.
Russ will be providing more information regarding our Gabon operations in just a few minutes. VAALCO's working interest in the inventory of over the FPSO vessel excluding royalty barrels as March 31, 2015 was approximately 85,000 versus approximately 83,000 at March 31, 2014.
With improving oil prices we will be selling these barrels at prices in the second quarter of 2015 that will be higher sales prices than what we sold oil for in the first quarter of the year. Now let me move to few other key financial components for the first quarter of 2015.
Operating loss was $35.3 million for the first quarter of 2015 compared to an operating loss of $650,000 for the first quarter of 2014. Production expenses for the 2015 first quarter were $9.9 million compared to $9.7 million for the 2014 first quarter. The first quarter 2015 does include a non-recurring item of $1.4 million.
Excluding the non-recurring item production expense during the first quarter was $22.49 on a per BOE basis. We continue to believe that production expenses for the full year will be in the range of $30 million to $33 million excluding work over.
For the second quarter of 2015, we expect operating expenses again excluding work over to be in the range of $7.5 million to $8.5 million. As mentioned last quarter, we have budgeted for two, third quarter work over in the Avouma field to replace some electrical reversible pumps as in process of combined net cost VAALCO of $6 million.
We expect to start up the new SEENT platform in the second quarter as we complete our development wells currently being drilled from that platform. We will be re-looking at our guidance after the second quarter when we will have a better basis to project operating expenses for the remainder of the year. Moving to exploration expense.
Exploration expense for the first quarter of 2015 was $27.5 million which compared to $11.3 million recorded in the first quarter of 2014.
$24.5 million of this amount is the company's total share of cost for drilling in Kindele exploration well in Angola and we also expense $2.7 million of leasehold investments on the block due to unsuccessful exploration effort.
As there are no additional exploration low budget report in 2014, exploration expense for the remaining quarters in 2015 will be minimal and related to seismic interpretation. DD&A for first quarter of 2015 was $5.9 million compared to $4.2 million in the first quarter of 2014.
The increase reflects increased sales volume and a higher composite DD&A rate for the offshore Gabon asset. Our prior guidance which remains applicable for the remaining quarters of 2015 for DD&A expense is expected to be in the range of $15 to $18 per barrel.
First quarter DD&A was $15.62 per barrel and we expect a similar DD&A rate in the second quarter of 2015. General and administrative expenses for the first quarter of 2015 totaled $4.9 million compared to $3.6 million in the same period in 2014.
The higher G&A expense in the first quarter of 2015 was primarily attributable to the personnel cost associated with expanded operation Gabon and professional support service expense. G&A expense does include $1.7 million and $1.4 million of non-cash compensation expense for March 31, 2015 and March 31, 2014 respectively.
Guidance previously projected for net G&A expense is expected to be in the range of $12.5 million to $15 million in 2015. And even though the G&A was $4.9 million in Q1 of this year, this amount contains expenses primarily non-cash compensation expense that will not be incurred at the same level in the remaining quarters of the year.
We expect to end the year at the upper end of the guidance previously provided. Income tax expenses for the first quarter of 2015 were $3.4 million compared to $6.1 million in the same period in 2014. The decrease in income taxes reflect to the impact of the lower sales price received for oil sales during the first quarter of year.
Cash and cash equivalent including restricted cash totaled $63.6 million at the end of the first quarter of 2015. This compares to $91.5 million at the end of 2014.
However, accounts receivable from partners of $30 million was significantly higher at the end of the first quarter of 2015 compared to $10.9 million at December 31 right at the end of the year of last year.
This entire $30 million amount is associated with our Gabon operation and to see they are already been collected or expected to be paid in the second quarter of 2015.
Capital expenditure spent during the quarter totaled $28.1 million and again reiterating what Steve has already mentioned, our guidance regarding capital expenditures in 2015 is expected to be in the range of $65 million to $75 million in conjunction with our development well program that began in the fourth quarter of last year in Gabon from our two new production platforms and the Kindele exploration well that was recently drilled offshore Angola.
So that concludes my review of VAALCO Energy first quarter 2015 financial results. I'll be pleased to answer any financial questions you may have during the Q&A segment of the call. Russell Scheirman, our President and Chief Operating Officer will now provide you with an operational update..
Thank, Greg. I'll start off with our offshore Gabon activities. Production averaged 17,000 barrels per day which is about 4,150 barrels a day net for the first quarter of 2015 which compares to 14,570 barrels per day or 3,500 barrels per day net during the fourth quarter.
Production increase in the first quarter due to a wire lining invention that repaired the tubing leak in the Ebouri 2-H well in December of last year and the addition of the 10-H well in February of 2015.
The 10-H was successfully drilled and completed in to the Gamba sandstone in the southern portion of the Etame field and came online with about 3,000 barrels per day.
As Steve mentioned earlier the 10-H is going to step up four blocks in the main portion of the field and was drilled into the lower Gamba lobe which is pressure separated from the upper lobe.
And lower lobe has not experienced water influx to the extent seen in the upper lobe and therefore the well was initially completed wire free and continuous to perform in line with our reservoir model in project.
We followed on with the second lower lobe Gamba completion in the same fall block the Etame 12-H well which we placed on production in April and that well is currently producing over 2,000 barrels of oil per day from the lower lobe Gamba.
After this well we moved to this Southeast Etame/North Tchibala or SEENT platform to drill well into the Southeast Etame Gamba discovery and into the North Tchibala Dentale reservoir.
We are currently drilling into the Southeast Etame Gama structure .In addition to the drilling activity we utilize the rig performed two work over at Avouma platform, the Avouma 3-H well has been offline since August of last year with an ESP failure and we will restore that well of production later this year which should add about a 1,000 barrels a day to our production capacity.
We have second well at Gabala 1-HB with one failed pump producing on a second pump and our policy is to replace both pumps at the first opportunity which will when we have the rig on that platform. We will do that work over after we finish the 3-H work over.
In this environment we continue to seek ways to reduce cost both for our drilling program and for ongoing production operations. These actions have recently begun to bear fruit with agreement signed in March and April with numerous vendors to implement discount from pre 2015 rates.
We've managed to get cost savings on our directional completion, gravel packing, mud, cementing and logging services. And on the production side we eliminated one service boat and are lowering helicopter and play cost by sharing with other operators. We've also been able to secure discounts on vessels that we used during lifting.
We will continue to reduce in country personnel costs as well. Doing all these we hope to exit the year with 15% to 20% reduction in lifting cost to our cost reduction program.
We formed the steering committee with our partners to update our long-term strategic plan for the Etame complex including addressing our thermogenic H2S use, our contracting philosophy with the FPSO, our license extension strategy and future development alternatives.
To summarize as Greg mentioned in his guidance we anticipate growing production to at least 20,000 gross barrels per day entering into 2016 as a result of the drilling and work over activity at Etame and SEENT.
Moving towards this goal production for April averaged 17,700 barrels per day which is about 4,300 net of VAALCO for the month of April with the addition of the 12-H well during that month. So I'd like to next move to our onshore Gabon block, the Mutamba Block where we have the N'Gongui discovery.
Last month we had discussion with our partner Tutao [ph] and with the Japanese government and we have a solution to the issues that have been impeding moving this project forward.
We put those on the table for final approval by Tutao [ph] and the government, and we remain confident that it will resolution later this year so we can evaluate development option for N'Gongui and seek to go that discovery.
And Equatorial Guinea, we have a 31% increased in the provision of the offshore development area in Block P which is operated by GE Petrol, the national oil company who have a 58% interest. We are working on a drilling operatorship model for the project with GE Petrol that I mentioned on the last call.
The recent drop in oil prices will undoubtedly affect the timing of this project and we will keep investors informing on subsequent conference call. We continue to see capital cost declining and this may result in our project moving forward sooner.
Finally in Angola, after some week in delays caused by the default of our original partner in Block 5, we started our first prospect the post-salt well being Kindele. We use the Transocean help see semi submersible rig. Unfortunately the well was unsuccessful and was abandoned in April.
We completed the seismic processing project over 2025 square kilometers and 3D data that we license over central and outward portion of the block. The seismic will be the base which will maturing additional prospects on Block 5 and will allow us to evaluate post-salt structures as well as pre-salt structures.
We are targeting structures similar to the ones drilled by Cobalt which led to their conservation discoveries including the recently announced Sag and Sinris [ph] pre-salt discovery offsetting their work of find.
As Steve mentioned we are encouraged about the number of lease that we've identified to date and by way of reminder we have that license until November 2017. So that Steve I will turn it back over to you..
Okay. Well, thanks Russ and before we take questions I wanted to take a few minutes to recognize Russ for his 24 years of dedicated service to VAALCO. As we have recently announced Russ has decided to retire from the company and the Board of Directors following this year's annual meeting which is on June 3rd.
And Russ has made some very significant contributions to VAALCO and to the company's long-term success. Since he initially joined back in 1991 when he was the company's CFO. He has made President in 1992 and was subsequently named the Chief Operating Officer in 2008.
He held that position since then and of course he has been integral member of the management team as well as the Board of Directors. We all will certainly miss working with Russ. We wish him and his family the very best in retirement. And we will continue to have access to Russ. He will continue to work in an advisory role for us through end of 2015.
So we will have access to Russ' 24 years of institutional knowledge of our assets. On the related note our search for new Chief Operating Officer is in the advance stages and we would hope to be in a position to be able to announce something in the very near future.
So to close out what you heard this morning I would just say that we are encouraged by the recent rise in rate pricing which we think is very timely as we had new production over the coming months.
However, we will continue to find ways to reduce our operating cost and reduce our overhead in order to position ourselves in the good position regardless of how long that commodity price downturn might last. I remain excited about the long-term growth prospects that we have with VAALCO.
And while we are going to proceed as measure paced with the project that you and Russ talked about in EG and in onshore Gabon.
We certainly feel that we wanted to be prudent in the way we approach those projects, be mindful of the forward cost curve, and be mindful of the capital cost so that we can ensure that we maximize returns when we move forward on these projects. So with that I think we will turn it over to back to the moderator and doing Q&A..
[Operator Instructions] And we will go to line Leo Marina with RBC Capital Markets. Please go ahead..
Hey, guys. I was hoping you could talk a little bit more about what you may have seen early on in your seismic interpretation in Angola. And you guys mentioned that you got a number of pre-salt and post-salt structures.
Any sort of quantification you can kind of put on any of that? Just in terms of size of some of those structures you might think you have and these are somewhat guesstimate but anything you offer would be helpful..
Yes, thanks for that Leo. This is Steve. A couple of things about the work that we've done to this point. We see over 20 leases combing post-salt and pre-salt in our early analysis of the reprocess seismic.
The pre-salt opportunities that we see has very interesting character in that they seemed they are large structure grate over the basement highs a very similar geology that Cobalt Cs and Block 20 and 21, we are still at a point where we are looking to size those and get some idea of what -- how much closer might be there and so we don't really have any kind of volume just to share but we are very encouraged by what we see in the south and west portion of Block 5 as it relates to the pre-salt opportunity.
And same with the post-salt. The seismic survey did allow us to get a better sense of number of the post-salt lease on the block as well and so we are encouraged by what we see there.
But pre-salt there is obviously -- the opportunity they get to us most excited and as we pointed out, we are not -- we have some time yet to continue to understand that pre-salt. We don't see ourselves spreading a well until late 2016 at the earliest. And I will also say that we had a number of companies come to us interested in the block as well.
And one of the things that we will do is decided exactly what our overall position is in Block 5 going forward and how much of the future of exploration commitment we wanted to maintain. So that's an option for us as to potentially found on that block as well..
Okay. That's helpful.
Just moving over to CapEx, Steve, you talked about much lower budget in 2016, could you may be speak even if it is high level to kind of what type of activities you might see in 2016 and why you think the budget is going to be lot lower? I mean will there be any potential for Etame development next year maybe just talk through some of the things you might try to do.
And when you lot lower are you talking about half the budget this year, any guidance you would have will be helpful..
Yes. If we even we pull the trigger on the Mutamba or Block P right now, most of them spends would be as early as the 2017 spend and we may long lead in 2016 but it would be something that would be out in time. And we are not on the verge of pulling a trigger right on Mutamba or Block P.
So that alone says that 2016 will have some fairly bold CapEx as it relates to those projects. In Etame, we potentially could see some additional development there. I think it is going to depend largely on how our six well programs perform. If whether we continue the program or looks for opportunities to drill more development work.
So that's a bit uncertain. I don't see it's having another six well development program at Etame in 2016. But we might have something there. And then from an exploration standpoint as we said earlier, late 2016 would likely be the earliest we would spread a well in Angola. So maybe we see a partial well in Angola..
All right. That's helpful. I guess just quick question for Greg here on the G&guidance for the year $12.5 million to $15 million. That includes your non-cash stock compensation in those numbers..
It does..
Our next question is from Bill Dezellem with Tieton Capital Management. Please go ahead..
Thank you. Actually I'd like to follow up on your last comment relative to Etame.
What are your thoughts on additional drilling as once you are ready to spread up from your current platform?.
We are formulating those thoughts now. We had, Russ mentioned that we are working through this update of our long term strategic plan at Etame. And we work closely with our partners to establish just what that might be. We are really not in a position yet to really identify exactly what that additional development drilling might look like.
But for sure we are finished the six well that are in the initial program, may be there might be a seven but beyond that we need to settle on that with our partners here in the coming months..
And is it correct that those platforms do have space for additional well?.
Yes. They do. The two platforms we set both H platforms, and so they have capacity to accommodate additional wells and currently we have three wells on Etame and we program as it stands right now calls for three wells at the SEENT platform. So we have an ample platform capacity in that regard..
Right, okay, thank you. And then relative to the Southeast Etame well that you referenced in the press release, it was drilled in 2010.
Is it that well that you will rent or soon to be completing and as a result you almost a guarantee production because there was six best full well?.
Yes. We are actually using the exploration well as our pilot well if you will.
So we are planning on lending the development well that we are drilling now right in the vicinity of where the exploration well was drilled so that we know where the Gamba is so that we hit -- because we hit in a high angle and you need to know where it is so you don't over shoot or under shoot.
So we are using that as our guidance and that well should be on production in June..
Okay.
So you are actually re-drilling to that location rather than actually been able to complete that exploration well from 2010?.
That's right. Because the exploration well was open water well and we didn't set the platform over where that well is located. It had been abandoned at that time we made discovery and did the side tracks..
Our next question is from Eric Anderson with Hartford. Please go ahead..
Hi, just want to follow up a little bit, it seems to me that company given your size is got really more on your plate than you can handle it on your own, if you don't want to really levered up the balance sheet.
And so following up on the comment about maybe partners in Angola, would the same be true in Equatorial Guinea and other areas where you got some exciting prospects but maybe they are capital intensive?.
I think the way I would response to that Eric is that we are always looking for alternative ways to raise fund or participate in certain projects. Angola comes -- I mentioned Angola specifically because over 50% paying interest there and the wells are going to be expensive.
And so further to your point it takes a quite balance sheet to be able to support the wells in Angola. And so that's one of the thought we had. The other project for example Block P, we are only there with just 31% interest.
So we left the exposure there and to the extent that the spend is related to a development, yes budget funding option available to you, it is a fund development that you wouldn't have to drill exploration well and so that's also part of the consideration.
But we are always looking at our portfolio and asking ourselves a question, how much of that should we own and what's the current market to be able to bring others in. Ideally bring others into have them promoted and carryout some of part of the cost which is -- that's the ultimate objective..
Now if you were to do that Angola, would you remain the operator or would you have to possible give that up?.
That's not been decided. That -- there is a lot of factors that have to be brought in. A new participant, the government has lot of things that we have to decide there, our intent is to remain as operator..
You have question from Joe Pratt with Stifel. Please go ahead..
Hi, good morning, Steve.
I was just wondering if the SIBC report March 17, page 6 were say that average production in 2012 was 4,998 and that goes down 2,439 to and then 3,806, this year's projecting 4,825, but if you are at 46 now and you are going to pick up three sand wells and let's say they each average 500 could you exit the year at 6,100?.
Yes. The math you -- I hadn't to think about the check the math you did, but I think the point is you have to consider a number of things. One is there is natural decline occurring in the field, the whole all year along.
So we can't just add the increments and end up with the total number at the end of the year, because you are offsetting natural decline. Then they have issues there operational issues, we just recognized pump -- some pump issues like a Avouma platform that we have to dealt with, reducing the overall net rate for the year. So that also a consideration.
And I think when we talk about -- because you only 500 barrels a day example but I think we wanted to be conservative in terms of what we think the remaining development wells might contribute. Because there is some uncertainty. We've talked about that before at Dentale.
We -- I said in the comment that this will be our first Dentale production although Dentale is produced onshore Gabon. There is some degree of uncertainty around that so we were trying to be conservative in terms of how those wells might perform so..
And onshore at rate of those wells produced? And really is that -- any indication of what the rate could be of your SEENT platform?.
Yes. You would have to look at what the wells producing. Surely this field is a much older field. That has been online; I don't have the number in front of me what they are currently producing. I don't have what they initially produced either but it is apples-and-apples in terms of the quality of the reservoir.
It is apples not just in terms of the current state because the onshore fields are more mature..
And lastly you don't stroll out for say an EBITDA number but I am looking at this March 17, RBC report which is very well written and it appears to come up about $30 million in EBITDA for the year assuming $52 or $0.57 per end.
And given the range about 65 and production might be a little higher I mean is $40 million in EBITDA reasonable estimate? Yes. Assuming the price stays flat..
No. EBITDA is not a number that we generally publish, you are right and so maybe this is something that we can talk about offline. We aren't going to publish an EBITDA number but there are too many variables.
I mean there is -- if you look at its range we are getting for things like OpEx and production and you can get pretty wide range to what your EBITDA will be. So that's just not -- we choose not to provide guidance on..
[Operator Instructions] And to the presenters there are no further questions coming in..
Okay. Well, we want to thank everyone for your interest this morning. And your continued support of VAALCO. And again I want to thank Russ for his 24 years of service. This will be his last conference call. So next time he will on the other end of line listening I am sure. So thank you very much..
Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation. You may now disconnect..