VAALCO Energy Inc. has signed a sale and purchase agreement to acquire Sasol Gabon SA 27.8% working interest in the Etame Marin block offshore Gabon, the company said on Nov. 17. In addition, VAALCO is acquiring Sasol’s 40% non-operated participating interest in Block DE-8 offshore Gabon.

The agreed to total consideration for the entire transaction was $44 million, subject to customary post-effective date adjustments, and future contingent payments of up to $6 million. Funding for the acquisition will be from cash on hand and cash from operations.

In the deal, VAALCO acquires an additional 27.8% working interest in the Etame Marin block offshore Gabon, increasing VAALCO’s total working interest to 58.8%.

Since VAALCO currently owns and operates a 31.1% working interest in Etame, the transaction will almost double VAALCO’s total production and reserves. The deal increases the company’s net revenue interest production from 4,850 to 9,150 barrels of oil per day based on current month production; increases year-end 2019 SEC reserves from 5 million to 9.4 million barrels (MMbbl) of oil; and increases year-end 2019 independent 2P CPR reserves from 9.2 MMbbl to 17.5 MMbbl of oil.

Additionally, the acquisition is immediately accretive to VAALCO, with estimated increase of 23% in free cash flow per barrel from approximately $10.90 to $13.30 at $45 realized oil price and adds optionality from acquisition of Sasol’s 40% non-operated participating interest in Block DE-8 offshore Gabon.

“We believe that the acquisition of Sasol’s interest at Etame is a very attractive and value accretive strategic acquisition for the company that confirms our position as one of the leading independent exploration and production companies in West Africa. In what was a competitive sales process, this is the ideal growth transaction that we have been seeking for VAALCO,” Cary Bounds, VAALCO CEO, said.

He added: “We are focused on maximizing the value of our Gabon resources as well as expanding into new development opportunities across Africa.”