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Vaalco Energy Reports Results for Q4 of 2011

Source: www.gulfoilandgas.com 3/12/2012, Location: Africa

VAALCO Energy, Inc. reported results for the fourth quarter and full-year of 2011. For the 2011 fourth quarter, VAALCO reported net income attributable to VAALCO of $8.7 million, or $0.15 per diluted share, compared to net income attributable to VAALCO of $8.9 million, or $0.15 per diluted share, for the comparable period in 2010. Fourth quarter 2011 revenues were $67.8 million compared to $38.2 million in the fourth quarter of 2010. Fourth quarter 2011 results reflect higher crude prices and higher sales volumes resulting from four crude liftings in Gabon in the fourth quarter 2011 versus three crude liftings in the fourth quarter 2010. The higher revenues were offset primarily by operating expenses associated with the increased sales volumes, substantially higher income taxes and a non-cash impairment charge on a domestic well in the Granite Wash formation.

For the year ended December 31, 2011, VAALCO reported net income attributable to VAALCO of $34.1 million, or $0.59 per diluted share, compared to $37.3 million, or $0.65 per diluted share, for the year ended December 31, 2010. Operating income in 2011 was $132.6 million compared to $78.1 million for 2010. The significant increase in operating income in 2011 versus 2010 was attributable to both an 11% increase in sales volumes and higher average crude sales prices of $111.92 per barrel, an increase of $33.47 per barrel.

Robert Gerry, Chairman and CEO, commented: “2011 was an outstanding year for VAALCO with revenues up 56% and income from continuing operations up 73%. Due to the unavailability of drilling rigs towards the end of the year, however, we were forced to postpone our planned drilling until this year thereby paying approximately $93 million in income taxes to the Republic of Gabon, an increase of 165% from the previous year. Even so, we ended the year with cash of nearly $150 million which will support our 2012 drilling programs in Angola, Gabon and the Bakken Shale.” “One of the Company’s focus areas in 2012 will be to successfully drill Block 5. We believe that our 1.4 million acres in the Kwanza basin is a very important asset for VAALCO and we expect this to be the year that we bring its potential to fruition.”

Recent discoveries by other operators confirm the presence of hydrocarbons in high quality pre-salt reservoirs in the Kwanza basin offshore Angola. VAALCO currently holds a 40% interest in Block 5 containing approximately 1.4 million acres in the basin. Earlier exploration by previous operators confirmed the presence of post-salt structures containing hydrocarbons on Block 5, however, due to the low price of oil, none were developed. VAALCO has reprocessed existing 3-D seismic, shot additional 3-D seismic and believes it has drilling opportunities in both the pre-salt and post-salt reservoirs.

VAALCO believes it will have a new partner for Block 5 in 2012. Depending on timing and the availability of a drilling rig, VAALCO may consider the drilling of at least one well 100% for its own account. With post-salt accumulations already known and with the addition of pre-salt possibilities, VAALCO remains confident and committed to the upside potential of Block 5.

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