First quarter 2009 results mainly reflect the costs associated with the earlier announced unsuccessful exploration wells and the overall decline in crude oil prices, which resulted in average selling prices for VAALCO Energy’s product that were about half of what they were in the first quarter previous year.

Robert Gerry, chairman and chief executive officer, said, “We are naturally disappointed with our first quarter performance, given the results of our exploration program. However, we believe that the opportunities we are currently reviewing, such as moving forward with seismic processing for prospects in Angola, have the potential to add meaningful reserves for the benefit of our shareholders. In addition, we successfully brought on line two new development wells in Ebouri and achieved a new production record for the Etame Marin block in April. With these wells, we expect 2009 production levels to be up about 11% over last year.”

As earlier announced, the company plans to drill two exploratory wells offshore Angola for late 2009 and 2010, and a prospect in Southeast Etame, the timing of which will depend on consortium negotiations. Besides, VAALCO Energy is now in discussions with its partners regarding a new development well in the Etame Marin block, which it has at present budgeted to commence in 2009.

Financial Results Discussion

During the first quarter of 2009, VAALCO Energy sold about 503,700 net barrels of oil equivalent at an average price of $42.15 per barrel, compared to 446,000 net barrels at an average price of $94.44 per barrel in the year-ago quarter. VAALCO Energy incurred an operating loss of $10.5 million in the first quarter of 2009 compared with the operating income of $24.1 million in the year-ago quarter.

Capital expenditures for the 2009 first quarter were $18.6 million consisting mainly of property and equipment additions, principally associated with the platform and drilling of the three wells in the Ebouri field (an appraisal well plus two development wells).

Production expenses for the 2009 first quarter of 2009 were $5.7 million compared with the production expenses of $4.4 million in the year-ago quarter. The raise reflects the new production from Ebouri as well as higher FPSO costs and related transport and support costs.

Exploration expense of $20.5 million in the first quarter 2009 reflects four unsuccessful exploration wells and compares to $6.7 million of costs in the year-ago quarter.

Income taxes for the first quarter of 2009 were $2.4 million compared to $21.4 million in the year-ago quarter. The decrease in income taxes reflects the lower oil revenues as commodity prices declined as well as a higher percentage of oil production allocated as cost oil against profit oil.