Vaalco Energy Update

Vaalco Energy (NYSE: EGY) ended the week up over 20%, after releasing an update on its drilling program. From the release:

HOUSTON, Dec. 31 /PRNewswire-FirstCall/ -- VAALCO Energy, Inc. (NYSE: EGY - News) today provided an update on the new development well being drilled in the Ebouri field and the new appraisal well (North Ebouri) being drilled in the Etame block. VAALCO commenced drilling these wells in November with the jack-up rigs Adriatic 6 and Pride Cabinda, respectively, as previously announced.

For the development well in the Ebouri field, VAALCO announced that it has drilled one pilot hole to the south of the original Ebouri discovery and a second pilot hole to the northeast of the original discovery. Both of these pilot holes were successful in delineating additional Gamba sandstone reservoir above the oil water contact, thereby increasing the acreage and reserves of the Ebouri field. VAALCO is currently completing the development well horizontally on the same orientation as the second pilot hole. First oil production from this well is expected in January 2009.

The Company also announced that it drilled the North Ebouri appraisal well in the Etame block approximately 1.5 miles to the northeast of the Ebouri platform and found 21 feet of oil column, further expanding the Ebouri field. VAALCO is now planning a sidetrack to optimize the location for a potential second horizontal development well. In addition, the Company is planning two exploration wells (North Etame and South East Etame) on newly mapped structures. The wells will be drilled back to back using Pride Cabinda.

VAALCO continues to expect production at a rate sufficient to bring total production from the Etame license area to approximately 25,000 barrels of oil per day (bopd). The Etame license production areas currently produce approximately 20,000 bopd, of which VAALCO has a 28.1% working interest.

"Results from the Ebouri development drilling have exceeded expectations, and we are pleased with the initial results from our drilling program in the Etame block, with more wells to come," said Robert L. Gerry, III, Chairman and CEO of VAALCO. "We have substantially enlarged the productive acreage of the Ebouri field, thereby greatly enhancing the recoverable reserves. We look forward to continued success with our exploration program."

Last time EGY rose over $7, I sold 5% of my position and used those funds to buy more AYSI.OB. I may sell a little more at these prices, but I plan on holding most of my EGY for the long term, as I'm bullish on oil over the next five years, and I'm bullish on Vaalco's ability to increase its reserves through its drilling program. The image above, which shows Vaalco's Ebouri field, is from the company's website.