VAALCO Energy Inc., Houston, (NYSE: EGY) says its NGongui-1 well onshore Gabon will be plugged and abandoned after it encountered the objective reservoir but was found to be water-bearing.

NGongui-1, which is in the Mutamba concession, was drilled to approximately 4,100 feet.

However, VAALCO says it has successfully completed EEBOM-3H, its second horizontal well in the Ebouri field offshore Gabon. Two days after first oil production, the well reached a record 24,993 barrels of oil per day. The company says production from the Etame block should average 25,000 barrels of oil per day.

VAALCO chairman and chief executive officer Robert Gerry says, While we are naturally disappointed with the Mutamba results, particularly given the data available, we are pleased to have successfully brought on-line our new development well in Ebouri. This new well, together with the development well brought online in January, will enable VAALCOs production to meaningfully exceed 2008 levels. We remain committed to taking prudent exploration risks as part of our focus on growth for our shareholders.

VAALCO adds that it plans to drill the Southeast Etame prospect and two exploratory wells offshore Angola in late 2009 and 2010.