Document:

Exhibit 10.2

RIDER No. 1 TO THE CONTRACT

FOR EXPLORATION AND PRODUCTION SHARING ETAME No. G4-160.

BETWEEN:

VAALCO GABON (ETAME), INC., a company constituted under the current law in the State of Delaware, United States of America, headquartered in Houston, Texas, 77027, United States of America, 4600 Post Oak Place, Suite 309, represented by Virgil WALSTON, with all powers for this instrument, 

AND

THE STATE OF GABON, represented by Paul TOUNGUI, State Minister, Minister of Mines, Energy, Oil and Hydraulic Resources.

Hereinafter the “Parties”

RECITALS:

	
·
	
VAALCO GABON (ETAME), INC. and the STATE OF GABON signed on July 7, 1995 a Contract for Exploration and Production Sharing (“the MARIN CEEP ETAME No. G4-160”) concerning the permit for research, so-called Marin ETAME permit No. G4-160, valid for liquid and gaseous hydrocarbons bearing No. G4-160 (the “permit”).

	
·
	
By decree No. 0001513/PR/MMEP/DGEEH of December 12, 1995, a permit for research of liquid and gaseous hydrocarbons was issued, named “ETAME” No. G4-160, and the related Contract for Exploration and Production Sharing was approved;

	
·
	
By Decision No. 00043/MMEPRH of July 17, 2001, an Exclusive Exploitation Authorization valid for liquid and gaseous hydrocarbons named “EAME [sic] MARIN No.G5-88” was issued and granted to VAALCO GABON (ETAME), INC., pursuant to the provisions of Article 16.4 of the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”);

	
·
	
VAALCO GABON/(ETAME), INC. presented on May 20, 2001, a request for amendment of the contractual provisions concerning the exploration periods, in order to enable it to examine and evaluate boring results; to judge the interest of the research permit named Marin ETAME No. G4-160, and to proceed with additional seismic and drilling work;

	
·
	
The Parties have consequently agreed to make, by this rider, the necessary amendments in the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”) in order to change the new exploration periods and the related work, among the rights and obligations of the Contractor.

CONSEQUENTLY, IT HAS BEEN AGREED AS FOLLOWS:

Article 1:

Article 3.3 of the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”) is replaced by this Article and Articles 2 and 3 of the Rider.

This Article now has the following language:

“If the Contractor, during the second period, extended if applicable pursuant to Article 3.2, met its obligations arising from the Contract, in particular the commitments for the work defined in Article 4, the Exclusive Exploration Authorization is renewed at its request for a third period of three Contractual Years.

The third period may also be extended by three months as a maximum for the same reasons and under the same conditions as indicated in Article 3.2.

The Contractor must submit its renewal request for the third period at least thirty days before the expiration of the second. The renewal is granted by decisions of the Minister of Hydrocarbons.”

 

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Article 2:

If, during the third period, extended if applicable, pursuant to Article 1 of the Rider, the Contractor met its obligations arising from the Contract, especially the commitments for the work defined in Article 5 of this Rider, at its request, the Exclusive Exploration Authorization is renewed for a fourth period of two (2) Contractual Years on an area of the Delimited Zone, reduced by fifty percent (50%) of the remaining area.

The area so released must be simple is shape and limited by terrestrial parallels and meridians.

The fourth period may also be extended by three months as a maximum for the same reasons and under the same conditions as indicated above.

Article 3:

If, at the end of any period, the Exclusive Exploration Authorization is not renewed, the Contractor must release the entire Delimited Zone, except for the Exploitation Zones or areas for which it submitted a request for Exclusive Exploitation Authorization which is pending.

Article 4:

The Delimited Zone is now that defined in Addendum 1 of the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”), less the area of the MARIN ETAME Exclusive Exploitation Authorization.

Article 5:

5.1

During the third exploration period defined in Article 1 above, the Contractor must carry out at least the following work:

	
·
	
optional seismic 3D;

	
·
	
two (2) mandatory wells.

To carry out this Work Program under the best technical conditions generally admitted in the Hydrocarbon industry, the Contractor shall invest an amount estimated at two million US Dollars.

5.2

During the fourth exploration period defined in Article 2 above, the Contractor must carry out at least: one (1) optional well.

To carry out this Work Program under the best technical conditions generally admitted in the Hydrocarbon industry, the Contractor shall invest an amount estimated at five million US Dollars.

5.3

The drilling referred to above shall take place up to the depth of at least two thousand five hundred (2,500) meters, or until the Gamba geological formation is surveyed on at least fifty meters if it extends beyond the contractual depth. If, at 2,500 m, the formation referred to above has not been found, the Parties shall consult each other to examine whether they have an interest in continuing to drill.

Drilling is stopped at a lesser depth than initially planned if, after being executed pursuant to the rules of the art generally admitted in the Hydrocarbon industry, the stoppage is justified by one of the following reasons:

	
·
	
the Gamba formation is found at a lesser depth than the contractual depth; in this case, the Parties shall consult each other to examine whether they have an interest in continuing to drill;

	
·
	
the bedrock is found at a lesser depth than planned;

	
·
	
the continuation of drilling presents a manifest danger because of the existence of an abnormal layer pressure;

 

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·
	
rock formations are found, with a hardness that does not allow continuing drilling with the usual equipment;

	
·
	
oil formations are found, which, in order to be crossed, require, for their protection, the installation of tubes which do not allow reaching the contractual depth.

The drilling stopped for the above reasons shall be reputed to have been done at the contractual depth, provided the reasons invoked are communicated in a timely manner to the Administration and are considered justified by latter.

5.4

The Contractor must carry out all the work planned for a considered exploration period, even if it causes it to overrun the amount estimated for this period.

However, if, for a given exploration period, the Contractor met its work commitment for an amount lower than the amount estimated for this period, it shall be deemed that it met its obligations.

The Contractor may decide not to drill the wells in the third period; in this case, it must pay an opt-out fee equal to 5 million US Dollars.

5.5

When the Administration finds that the Contractor has not met its work commitment for a given exploration period, it shall notify the latter in writing. The procedure set forth in Article 48.10 of the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”) is then implemented as needed. 

Article 6:

Article 21.7 of the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”) is replaced by this Article and shall now have the following language:

“The Contractor contributes annually to a Hydrocarbon Support Fund created in order to assure the progress of Oil Research and Promotion. This contribution is distributed as follows:

	
a)
	
Payment of 150,000 US Dollars when signing this Rider;

	
b)
	
Payment during the exploration periods in the amount of 60,000 US Dollars per Calendar Year. This amount shall be paid to an account opened for this purpose, managed by a Parity Commission presided over by the Minister of Hydrocarbons and consisting of representatives of the General Department of Hydrocarbons and of the Contractor. This Parity Commission must decide on various oil projects prepared by the Technical Committee for Oil Operation Follow-up, and presented by the General Department of Hydrocarbons, which assures its Technical Secretariat and forwards the files for final decision. This contribution shall be included in Petroleum Costs.

	
c)
	
Payment, in exploitation phase, of the amount of 75,000 US Dollars per Calendar Year and 0.05 US Dollars per Barrel of Total Available Production. This contribution shall be managed by the Minister of Hydrocarbons and shall not be included in Petroleum Costs.

Article 7:

In addition to the obligations referred to in Article 28 of the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”), the Contractor pays to the State a signing bonus of six hundred thousand (600,000) US Dollars when signing this Rider.

 

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Article 8:

Article 39 of the Contract for Exploration and Production Sharing (“the MARIN CEPP ETAME No. G4-160”) is replaced by this Article and shall now have the following language:

“39.1

In addition to the obligation set forth in Article 38, the Contractor is now obligated to contribute to the training of other Gabon citizens designated by the Administration, dedicating for this training throughout the term of the Contract:

	
a)
	
one hundred thousand (100,000) US Dollars per Calendar Year during the period preceding the start of Production;

	
b)
	
one hundred fifty thousand (150,000) US Dollars per Calendar Year during the development and exploitation periods.

The contributions defined in paragraphs (a) and (b) above are used:

	
·
	
in part, for the training of Gabon citizens in higher schools or universities of international reputation. The training program is established by the Department of Hydrocarbons;

	
·
	
in part, for the entry-level training of Gabon citizens on the sites and in the main activity centers of the Contractor; the conditions for such training being established on a case-by-case basis by mutual consent;

	
·
	
in part, for the training of Gabon citizens chosen by the Administration, outside the Contractor’s structures, in the form of participation in seminars or transfers to other companies.

The amounts established in this Article are managed by the Contractor and must be used exclusively for the training of Gabon citizens designated by the General Department of Hydrocarbons. At the expiration of the Exclusive Exploitation Authorization or at the end of the exploitation period of the deposit, the Contractor shall pay the amounts mentioned above to the Administration “prorata temporis.”

39.2

The contributions referred to in this Article are included in the Petroleum Costs.

Article 8 [sic]:

All other provisions of the Contract for Exploration and Production Sharing (“MARIN CEPP ETAME No. G4-160”) not amended under the Articles of this Rider remain unchanged.

 

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Article 9:

This Rider to the Contract for Exploration and Production Sharing (“MARIN CEPP ETAME No. G4-160”) shall enter in effect as of the date of its signing by the Parties, with retroactive effect as of July 7, 2001.

 

	
 
	
 
	
 
	
Libreville, on

	
 
	
 
	
 
	
 
	
 
	
 

	
For the Republic of Gabon,
	
 
	
 
	
 
	
For VAALCO

	
 
	
 
	
 
	
 
	
GABON (ETAME), INC.

	
 
	
 
	
 
	
 
	
[signature]

	
The Minister of State, Minister of
	
 
	
 
	
 
	
(Title of Signatary)

	
Mining, Energy, Oil and Hydraulic Resources,
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 
	
 

	
[signature]
	
 
	
 
	
 
	
 
	
 

	
Paul TOUNGUI
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
Virgil WALSTON

	
 
	
 
	
 
	
 
	
Vice Chairman and

	
 
	
 
	
 
	
 
	
Chief Operating Officer

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
(Name of Signatary)

	
 
	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
[stamp]

	
 
	
 
	
 
	
 
	
VAALCO Gabon (Etame), Inc.

	
The Minister of Economy, Finance,
	
 
	
 
	
 
	
1995

	
Budget and Participation,
	
 
	
 
	
 
	
 
	
 

	
[signature]
	
 
	
 
	
 
	
 
	
 

	
Emile DOUMBA
	
 
	
 
	
 
	
 
	
 

	
[stamp]
	
The Minister of Economy, Finance, Budget and Participation – The Minister

	
 
	
Republic of Gabon[illegible]

 

 

5Exhibit 10.3

ADDENDUM n° 2- (English version.)

Of the exploration and production sharing contract « ETAME N° G4-160 »

Between:

VAALCO-Gabon, Inc., a company incorporated under the laws of the state of Delaware, United states of America, with main office in Houston, Texas, United States Of America, at 4600 Post Oak Place, Suite 309, and represented by Russell SCHEIRMAN duly authorized to this effect;

And

The Republic of Gabon, herein represented by M. Richard August ANOUVIET, Minister of Mines, Energy, Petroleum and Hydraulic Resources,

Hereinafter denominated the “parties”

Have previously agreed that:

VAALCO-Gabon (ETAME) Inc. and the Republic of Gabon have signed on July the 7th 1995 a contract of Exploration and Production Sharing Contract “EPC ETAME MARIN n° G4-160” related to the Exploration permit, denominated “ETAME MARIN permit”, valid for liquid and gaseous hydrocarbon, and bearing the number G4-160.

That through the decree n°0001513/PR/MMEP/DGEEH of December the 12th 1995, it has been instituted a liquid and gaseous hydrocarbon permit denominated “ETAME” n° G4-160 and approved the Exploration and Production Contract that the present ADDENDUM is related to;

That through the decree n°00043/MMEPRH of July the 17th 2001, it has been instituted and attributed to VAALCO-Gabon (ETAME) Inc. an Exclusive Production Authorization valid for gaseous and liquid hydrocarbon, denominated “ETAME MARIN n° G5-88”, based on the terms of article 16.4 of the “EPC ETAME MARIN n°G4-160”.

That through the ADDENDUM n°1 of July the 7th 2001 related to the “EPC ETAME MARIN n° G4-160”, has been instituted and attributed to VAALCO-Gabon ( ETAME), Inc. the 3rd and the 4th Exploration Authorization period, based on the terms of articles 1,2,3,4 and 5 of the “EPC”;

That the 20th of may 2001, VAALCO-Gabon has requested changing the terms of contract concerning the Exploration periods -in order to assess the sampling results;

That the parties have agreed to make the required modifications to the “EPC ETAME MARIN n° G4-160” in order to make clear the rights and obligations of the operator within the frame work of the new period, in terms of tasks to perform.

It has been agreed that :

Article 1.

The article 3.3 of the “EPC ETAME MARIN n° G4-160” replaced with articles 1, 2 and 3 of the ADDENDUM n°1, is supplemented by the present article of the ADDENDUM n° 2.

From now on, the present article is read as followed:

“ If the operator, during the 4th period, postponed if necessary, based on the terms of article 5 of the ADDENDUM n°1, has fulfilled to its obligations as stated in the contract, mainly in terms of commitment regarding tasks to accomplish, as stated in article 5.2 of the ADDENDUM n°1, its Exclusive Exploration Authorization, upon request, renewed for the 5th period of three additional contractual years, this applicable to the area delimited in the contract.

The 5th period, as well, can be postponed at most for three months, for the same reasons, under the same conditions as pointed out in the article 3.2 of the “EPC ETAME MARIN n° G4-160”.

The operator must request for the renewing of this, at least, 30 days before the 5th period expires.

The renewal is issued by decree, by the Minister in charge of hydrocarbon.

Article 2.

If the operator, during the 5th period, postponed if necessary, based on the terms of the article 1. of the present ADDENDUM, has fulfilled to its obligations as pointed out in the contract, mainly in terms of commitments as specified in article 5 of the present ADDENDUM, upon request, its Exclusive Exploration Authorization is renewed for the 6th period of two contractual years, for the area delimitated, reduced up to 50% of the remaining area.

The released area must have a simple shape and limits based on terrestrial parallels and meridians.

The 6th period can, as well, be postponed for three months at most, for the same reasons, upon the same conditions than those above mentioned.

Article 3.

If, at the end of any period, the Exclusive Exploration Authorization is not renewed, the operator must release the whole delimited area, excepted those for which an Exclusive Exploration Authorization are proceeding.

Article 4.

From now on, The delimited zone is then that defined in the annex 1 of the “EPC ETAME MARIN n°G4-160”, reduced of Exclusive Exploration Authorizations areas.

Article 5.

5.1.

During the 5th Exploration period as defined in the article 1 above, the operator must execute at least the following tasks:

	
·
	
Drill one firm wells.

	
·
	
Drill one optional wells.

To accomplish the above tasks, under the better technical conditions, mainly those agreed in the petroleum industry, the operator must invest for about seven (7) millions dollars of the United States of America.

5.2

During the 6th Exploration period as pointed out in the article 2 above, the operator must perform at least the following task:

	
·
	
Drill of one firm wells.

To accomplish the tasks program, under the better technical conditions, mainly those agreed in the petroleum industry, the operator must invest for about seven (7) millions dollars of the United States of America.

5.3

The drills planned can be accomplished down to the depth of 2500 meters, or till It is provided that the geological Gamba formation lay on at least 50 meters and beyond the depth planned in the contract.

If, beyond 2500 meters, the geological formation mentioned above is not met, the parties need to meet in order to deliberate together if it worth continuing drilling or not.

The drill tasks can be stopped at the depth inferior to that planned in the contract if, while accomplishing this, based on the principal generally admitted in the oil industry, it is proved that:

	
·
	
The Gamba formation is encountered at shallower depth to that planned in the contract. From that stand point, the parties need to meet in order to deliberate whether or not to pursue drill operations.

	
·
	
The base is encountered at shallower depth to that planned.

	
·
	
Pursuing drill operations means some how many dangers due to a pressure of an abnormal layer.

	
·
	
Hardness of rocky formation and difficulties met prevent the drilling operations from progressing with equipments commonly used in oil industries.

	
·
	
Crossing of oilfield formation requires, for its protection, the running of casing whose length is out of contract terms.

Based on the reasons mentioned above, if the operator stops The drill operations, the Administration in charge of hydrocarbon will approve the drilling operations; provided that it is informed on time and that reasons given be relevant.

5.4

The contractor has an obligation to accomplish all of the tasks planned during the exploration period, even thought this requires a budget beyond that planned.

In return, if the contractor perform all of the tasks planned during the exploration period with a budget less than that planned, it is considered that its has fulfilled to its contractual obligations.

The contractor can decide not to drill the wells of the 6th period, in this particular case, in turn he will have to pay 5 millions dollars of the United States of America.

5.5

If the Administration notices that the contractor did not fulfill its contractual obligations as planned during the exploration period, he will be given notice in writing and the procedure provided in the article 49.10 of “CEPP ETAME MARIN n°G4-160” will be executed, if necessary.

Article 6.

The Article 21.7 of the “EPC ETAME MARIN n° G4-160” replaced with Article 5 of the ADDENDUM n°1 is supplemented by the present ADDENDUM and is read as followed:

The contractor yearly contributes to Hydrocarbon support found for the prospecting and promotion of the local oil industry.

This contribution is paid as followed:

	
a)
	
Payment of 100,000 dollars of the United States of America the day the ADDENDUM is signed.

	
b)
	
Payment yearly, during the exploration period of 60,000 dollars of the United States of America.

The payments must be put into an account opened to this effect, and managed by a joint commission made of General Office of Hydrocarbon representatives (DGH) and that of the contractor and presided over by the Minister of Hydrocarbon.

This joint commission must think about relevant petroleum projects to execute and those projects must be elaborated by a technical committee in charge of petroleum operations presided over by General Office of Hydrocarbon (DGH) representatives who manages as well the Technical Secretary of the commission. This technical committee is in charge of submitting the dossiers to the commission for final deliberation.

This contribution needs to be included in the cost oil account.

	
c)
	
During the exploration period, the yearly payment of this is 75.000 dollars of the United States of America and 0.05 dollars of the United State of America per barrel, based on total available production.

This contribution is managed by the Minister in charge of hydrocarbon and is not included in cost oil.

Article 7.

Besides the obligations pointed out in the article 28 of the “EPC ETAME MARIN n° G4-160”, the contractor must contribute for a signature bonus. This contribution is 1,000,000 dollars of the United States of America and must be paid the day the present ADDENDUM is signed.

Article 8.

The Article 39 of the “EPC MARIN n°G4-160”, supplemented by Article 8 of the ADDENDUM n° 1, is completed and read from now on as followed:

39.1

Besides its contractual obligations mentioned in article 39, the contractor must contribute yearly for the training of local people appointed by the Administration, for the duration the contract:

	
a)
	
100,000 dollars of the United States Of America prior for the company goes on production;

	
b)
	
180,000 dollars of the Unite States of America prior for the company executes its development plan and goes on production.

The contribution stated above in paragraphs (a) and (b) are allocated as followed:

	
·
	
Part of this is used for local students education in famous Universities located out of the country. The Administration is in charge of précising the majors of students.

	
·
	
Part of this is used for training local people in the working places or in the main centers of the contractor activities; the condition of benefiting to this king of training is set based on an agreement between the contractor and the DGH Administration.

	
·
	
Part of this, is used for local people chosen by the DGH Administration for attending seminars or secondment in another company.

The training payment provided by the present article must be hold by the operator and must be used for local people training purposes, those people chosen by the Administration.

As soon as the Exclusive Exploration Authorization expires or Production Expire, or at the end of oilfield production, the contractor will pay the amount of money above endeavored based in proportion of time remaining.

39.2

The contribution stated in this present article needs to be included in the cost oil account.

Article 9.

All of the remaining articles included in the “EPC ETAME MARIN n°G4-160” and in the ADDENDUM n°1 not modified remain unchanged and still effective.

Article 10.

The present ADDENDUM of “CEPP ETAME MARIN n° G4-160” will come to effect from July the 7th 2006.

 

	
Republic of Gabon
	
 
	
VAALCO Gabon representative

	
 
	
 
	
 

	
Ministry of Mines, Energy
	
 
	
The President

	
Petroleum and Hydraulic
	
 
	
 

	
Resources

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