The company expects to drill an initial well in the formation in the second quarter of this year and plans to drill further two wells during 2011, if the initial well is successful.

Vaalco chairman and CEO Robert Gerry said that this is a new venture for the company and signals its re-entry into the domestic oil and gas exploration and production market.

"We believe this lease is well located and anticipate adding additional acreage in the coming months," Gerry said.

Vaalco is principally engaged in the acquisition, exploration and production of crude oil, and its properties and exploration acreage are located primarily in Gabon and Angola, West Africa.