Vaalco Energy Q3 Earnings Call Highlights

Key Points

• Q3 results improved: Adjusted EBITDAX rose 30% sequentially to $71.1 million, while production increased more than 20% to 20,145 barrels of oil per day, supported by the Baobab restart and drilling in Gabon and Egypt.
• Q4 sales are forecast to rise: Vaalco expects sales of 21,000–22,800 barrels of oil equivalent per day, with production broadly in line with Q3 as expected gains in Gabon and Egypt are offset by temporary shut-ins in Côte d’Ivoire. Planned Q4 capital spending is $55 million–$75 million.
• Baobab’s longer-term uplift is expected from 2027: Its phase five program includes production wells, injectors and workovers, with the first new well expected online in early December. Vaalco reported $188 million in net debt and expects positive free cash flow later in 2027, assuming strong commodity prices.

Vaalco Energy NYSE: EGY reported higher third-quarter production and adjusted EBITDAX as the restart of its Baobab field in Côte d’Ivoire and drilling campaigns in Gabon and Egypt contributed to improved results.

Adjusted EBITDAX rose 30% from the second quarter to $71.1 million, exceeding the company’s total for the first half of 2026. Production increased more than 20% sequentially to 20,145 net revenue interest barrels of oil per day, while sales rose approximately 5% to 18,454 net revenue interest barrels per day.

Chief Financial Officer Ron Bain said net revenue increased by nearly $12 million from the second quarter, helped by higher sales and a roughly 4% increase in realized pricing. He also noted that the company recorded $22 million in realized hedging losses and $35 million in unrealized derivative losses during the quarter.

Fourth-quarter outlook

Vaalco forecast fourth-quarter sales of 21,000 to 22,800 net revenue interest barrels of oil equivalent per day. The midpoint would be about 18% above third-quarter sales, reflecting expected liftings and continued sales in Egypt, Bain said.

The company expects fourth-quarter production of 18,800 to 20,900 net revenue interest barrels of oil equivalent per day, broadly in line with the third quarter. Gains in Gabon and Egypt are expected to be offset by temporarily lower output in Côte d’Ivoire as drilling operations require parts of the field to be shut in.

Fourth-quarter capital spending is projected at $55 million to $75 million, primarily for Baobab drilling and continued work in Egypt. Bain said Vaalco expanded its Egypt drilling budget without increasing its overall annual capital expenditure guidance.

Baobab restart and drilling

Production at Baobab resumed in June after refurbishment of the field’s floating production, storage and offloading vessel. Vaalco’s first lifting from Côte d’Ivoire since February 2025 took place in August, and the field’s phase five drilling program began in September.

Chief Executive George Maxwell said the program calls for four production wells, two or three injectors and two workovers. He said the first well was expected to be completed and brought online in early December, with subsequent wells following every six to eight weeks. The program’s production and sales uplift is not expected to have a significant impact until 2027.

Asked about the new water injectors, Maxwell said they are intended to provide pressure support and maintain the expected production profiles of the new wells, rather than deliver a large immediate production increase.

At the nearby Kossipo field, Vaalco is developing a field plan it expects to complete in the first half of 2027. The company is operator with a 60% working interest and estimates gross contingent resources of approximately 100 million barrels of oil equivalent.

Gabon and Egypt campaigns

Vaalco completed its phase three drilling campaign in Gabon and released the rig in early October. The program brought four development oil wells and one gas well online, Maxwell said. Third-quarter working interest production in Gabon rose to 9,577 barrels per day from 7,118 barrels a year earlier.

The gas well is helping reduce reliance on higher-priced diesel, according to Maxwell. Vaalco is reviewing its operating model in Gabon for further savings and plans to limit 2027 capital spending there to essential maintenance while it evaluates future drilling.

In Egypt, Vaalco extended its continuous drilling program into the beginning of 2027. Chief Operating Officer Thor Pruckl said the company has identified a portfolio of opportunities for another three years that could maintain production and increase it slightly over time.

Cash flow and longer-term projects

Bain said Vaalco had $239 million drawn on its reserve-based lending facility and net debt of $188 million. The company expects a lower capital spending profile in 2027 and positive free cash flow later in the year, assuming continued strong commodity pricing. Phase five drilling at Baobab is expected to continue through the first half of 2027.

Vaalco expects to make a final investment decision on its Venus development in Equatorial Guinea before the end of 2026. Maxwell said the company is evaluating a subsea development in place of its original shelf concept. Execution would depend on government approval of an amended development plan, and he said Venus is expected to have minimal or no development spending impact in 2027.

For the CI-705 exploration block in Côte d’Ivoire, Maxwell said Vaalco has committed to drill a well during the next exploration phase but is still evaluating prospects at different water depths. He said he did not expect drilling to begin before well into 2028.

Vaalco paid a third-quarter dividend of $0.0625 per common share, totaling $6.7 million, and announced a fourth-quarter payment for December.

About Vaalco Energy (NYSE:EGY)

Vaalco Energy, Inc is an independent energy company engaged in the acquisition, exploration, development and production of crude oil, natural gas and natural gas liquids. The company focuses primarily on producing assets and development opportunities in Africa and other international markets.

Vaalco has historically operated offshore Gabon, where it developed and produced oil from the Etame Marin field. The company has also expanded its international portfolio through interests and operations in Egypt, Equatorial Guinea and Côte d'Ivoire.

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