Vaalco Energy Q1 Earnings Call Highlights

Key Points

• Q1 results were weak due to $71 million in derivative losses and $22.4 million in exploration expense, leading to a net loss of $93.7 million. Still, production came in above guidance and management said Q2 should improve materially as more liftings occur.
• Baobab in Côte d'Ivoire is nearing restart after its FPSO refurbishment, with production expected to resume in June and sales beginning in the third quarter. Vaalco also highlighted Kossipo as a major growth opportunity, with the field potentially adding over 60 million barrels to 2P reserves if developed on schedule.
• Gabon drilling is driving momentum, especially after the Etame 14H well came online at about 4,850 gross barrels per day. The company raised full-year 2026 production and sales guidance, while keeping capital spending unchanged.

Vaalco Energy NYSE: EGY said its first quarter of 2026 marked an operational inflection point as the company prepared for higher production from offshore Gabon and the expected restart of the Baobab field in Côte d'Ivoire, even as quarterly earnings were weighed down by derivative losses and exploration expense.

CEO George Maxwell told investors that the company has “streamlined and expanded” its portfolio over the past two years, including the February sale of its Canadian assets and the addition of the Kossipo field on the CI-40 block in Côte d'Ivoire, where Vaalco was named operator with a 60% working interest.

“First quarter 2026 was a pivotal quarter operationally,” Maxwell said. “We are beginning to see the significant production uplift we are projecting from these major projects in Q2 2026 and expect it to continue into 2027.”

Quarter Weighed Down by Derivatives and Exploration Costs

CFO Ron Bain said the company reported a net loss of $93.7 million in the first quarter, driven largely by $71 million in derivative losses, including $56 million of unrealized mark-to-market losses, and $22.4 million in exploration expense.

The exploration expense was tied to an unsuccessful exploration well at West Etame offshore Gabon and seismic costs at the Niosi Marin and Guduma Marin blocks. Bain noted that the exploration expense came in below the company’s prior guidance range of $27 million to $32 million and represented “nearly all” of Vaalco’s expected annual exploration expense.

Adjusted EBITDAX was $11.6 million for the quarter. Bain said the figure reflected the absence of partner liftings in Gabon and no sales from Côte d'Ivoire while the Baobab FPSO remained offline for refurbishment.

First-quarter production was 15,110 net revenue interest barrels of oil equivalent per day, or 19,884 working interest barrels of oil equivalent per day, both above the midpoint of company guidance. Sales totaled 12,157 NRI barrels of oil equivalent per day, also slightly above the midpoint of guidance, though below production because of the timing of liftings.

Bain said Vaalco had warned previously that first-quarter Gabon sales volumes would be reduced because the sole lifting was a government lifting. He said the company expects two partner liftings in Gabon in the second quarter, which should significantly increase sales, revenue and Adjusted EBITDAX.

Côte d'Ivoire Restart Expected in June

Maxwell said the Baobab FPSO has completed its refurbishment in Dubai and returned to Côte d'Ivoire in April. The vessel is now moored in position, with four of seven risers and umbilicals connected. Vaalco expects production from Baobab to restart in June, with sales beginning from the FPSO in the third quarter.

The refurbishment was designed to extend the vessel’s life and increase capacity ahead of a development program at Baobab later this year. Maxwell said the planned program includes four producers, two or three water injectors and two workovers. The company expects at least one well to be on full production by year-end.

On Kossipo, Maxwell said Vaalco and Petroci elected in February to participate in development under the CI-40 production sharing contract. The field is about 8 kilometers from Baobab. Vaalco is working on a field development plan using new ocean bottom node seismic data.

Maxwell said Vaalco’s current assessment estimates Kossipo has gross 2C resources of about 102 million barrels of oil equivalent and 293 million barrels of oil equivalent in place. In response to an analyst question, Bain said that if the field development plan is in place before year-end, Kossipo’s classification could move from 2C resources to 2P reserves in the company’s year-end NSAI report, adding “just north of 60 million barrels” to 2P reserves.

Gabon Drilling Campaign Adds Momentum

In Gabon, Maxwell said the Etame 15H development well came online in late February at about 2,000 gross barrels of oil per day, contributing only one month of production to first-quarter results. A later exploration well at West Etame encountered 10 meters of high-quality Gamba sands, but the target zone was water-bearing and not commercial.

The company then sidetracked the wellbore to drill the Etame 14H development well, which came online in late April at an initial rate of about 4,850 gross barrels of oil per day. Maxwell said the well encountered 325 meters of lateral net pay in high-quality Gamba sands.

“Our second quarter production at Gabon should be enhanced by two months of production from this very successful well,” Maxwell said.

The rig has since moved to the Ebouri platform, where Vaalco is drilling a development well and planning a workover well. The company also plans two wells at the SEENT platform after completing work at Ebouri.

In the question-and-answer session, Maxwell said future Etame wells are likely to target “attic oil” with long laterals placed near the top of structures to capture oil that previous wells have not swept.

Guidance Raised as Capital Budget Holds

Vaalco raised its full-year 2026 production and sales guidance, with Bain saying NRI production volumes were increased by 8% and sales volumes by 12%. The company did not increase its full-year capital expenditure guidance.

For the second quarter, Vaalco expects:

• Working interest production of 21,600 to 23,800 barrels of oil equivalent per day;
• NRI production of 16,800 to 18,700 barrels of oil equivalent per day;
• NRI sales volumes of 16,800 to 18,300 barrels of oil equivalent per day;
• Production costs of $26 to $31 per NRI barrel of oil equivalent;
• Exploration expense of $2 million to $3 million;
• Cash G&A of $7 million to $9 million;
• Capital spending of $110 million to $130 million.

Bain said Vaalco expects “strong increases in production from Q1 levels moving forward,” citing Gabon drilling results, the Baobab restart and additional drilling in Egypt. The company has added a six-well drilling program in Egypt beginning in the second quarter, following what Maxwell described as strong results from the prior drilling campaign.

At quarter-end, unrestricted cash was $48 million. Vaalco drew $92 million on its reserve-based lending facility during the first quarter, and Bain said the borrowing base increased to $300 million in April. The company now has $152 million drawn and net debt of $104 million.

Vaalco also paid a quarterly cash dividend of $0.0625 per share, or $6.7 million, during the quarter and announced a second-quarter dividend payment scheduled for June.

Hedging, Liftings and Outlook

Bain said Vaalco’s hedging program is intended to protect cash flow needed for capital investments and shareholder distributions. He said the company had 56% of guided first-quarter barrels hedged with costless collars. In response to an analyst question, Bain confirmed that the hedges are based on Dated Brent, allowing Vaalco to capture premiums above that benchmark. He said April and May liftings were seeing about a $4 premium to Dated Brent for West African crude.

Looking ahead, Bain said Vaalco expects one Gabon partner lifting every other month through year-end and does not foresee another Gabon government lifting in 2026. He also said a Baobab lifting is likely around August.

Maxwell said the company is also evaluating seismic and exploration opportunities in Côte d'Ivoire and Gabon, while continuing work in Equatorial Guinea. He said Vaalco has completed an initial front-end engineering and design study for the Venus Block P development and is evaluating alternative technical solutions, with a final investment decision targeted in 2026.

“We’ve got a very, very busy year ahead,” Maxwell said in closing, adding that Vaalco expects ongoing projects to support “significant step ups in production” in early 2027.

About Vaalco Energy NYSE: EGY

Vaalco Energy, Inc is an independent energy company principally engaged in the exploration, development and production of crude oil and natural gas. Headquartered in Houston, Texas, Vaalco concentrates on offshore assets in West Africa, with a strategic emphasis on maintaining and optimizing cash-flow–generating properties. Founded in the mid-1980s, the company has built its reputation by focusing on high-impact drilling prospects and extending the productive life of its core fields through targeted infill wells and enhanced recovery techniques.

The company's primary producing asset is the Etame Marin block offshore Gabon, where Vaalco holds a majority interest and serves as operator.

This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.