Vaalco Energy NYSE: EGY reported second-quarter net income of $42.4 million, or $0.39 per diluted share, and adjusted EBITDAX of $54.8 million as higher sales volumes, improved pricing and lower exploration expense lifted results from the prior quarter.
Chief Executive Officer George Maxwell said the company’s portfolio changes and operational programs in Côte d’Ivoire, Gabon and Egypt supported higher production and sales during the period. Net revenue more than doubled from the first quarter, according to Chief Financial Officer Ron Bain, driven by a $72.6 million increase in revenue from higher realized prices and sales volumes.
Second-quarter production totaled 21,796 working-interest barrels of oil per day, or 16,688 net-revenue-interest barrels per day, up about 10% from the first quarter. Sales averaged 17,812 net-revenue-interest barrels per day, up 47% sequentially and above the midpoint of company guidance.
Baobab Restarts Production
A key contributor to the company’s outlook is the June restart of production at the Baobab field offshore Côte d’Ivoire after its FPSO refurbishment. The vessel had ceased hydrocarbon operations in January 2025, underwent refurbishment in Dubai and returned to Côte d’Ivoire in April 2026.
Maxwell said all producing wells were online and output was slightly above the company’s pre-startup forecast. In response to an analyst question, he said gross production was running at roughly 16,400 to 16,500 barrels per day, about 2,000 barrels per day above the rate before the shutdown. The first lifting is expected later in August, with the single third-quarter lifting projected at about 950,000 gross barrels. VAALCO holds a 27.4% interest in Baobab.
The company expects to begin Baobab’s development drilling program in the third quarter. The program includes four producers, two or three injectors and two workovers. At least one well is expected to enter production by year-end, though Maxwell said the drilling program’s production and sales uplift is not expected to have a significant impact until 2027.
VAALCO also is advancing plans for the nearby Kossipo discovery on the CI-40 block, where it is operator with a 60% working interest. The company is using new ocean-bottom-node seismic data for field development planning. Maxwell said the gross 2C resource estimate is approximately 102 million barrels of oil equivalent, with 293 million barrels of oil equivalent in place. The company received a six-month extension for submitting its field development plan and now expects submission in the first half of 2027.
Gabon Drilling Lifts Output, Though Water Cut Rose
In Gabon, second-quarter working-interest production rose to more than 9,300 barrels of oil equivalent per day as wells from the Phase III drilling program came online. The Etame-14H development well began production in late April after encountering 325 meters of lateral net pay. Initial gross output exceeded 4,800 barrels per day, and the well was continuing to produce about 3,000 gross barrels per day, Maxwell said.
The Ebouri-5-8 development well came online in late June with initial production of about 8,000 gross barrels per day and minimal water cut. However, the well’s water production increased faster than expected and was approaching the field-wide average water cut of roughly 75% to 80%. Maxwell said the company is remodelling the Ebouri structure to improve predictability of the well’s future performance. That accelerated water-cut increase was the primary reason for slightly lower Gabon expectations.
VAALCO recently completed a gas-supply well at the SEENT platform. The gas is expected to improve field uptime, reduce diesel use and support gas lift operations. Bain said the switch from diesel to gas on the Teli FPSO could reduce diesel costs by roughly $500,000 to $600,000 per month on a gross basis, beginning in August. VAALCO holds about a 58% interest in those costs.
The company plans to finish the current Gabon drilling sequence with a pilot hole and a planned horizontal development well at southeast Etame. Afterward, it expects to release the rig and does not anticipate further near-term drilling or workovers in Gabon. It reduced second-half and full-year offshore workover spending guidance to zero, citing strong ESP performance and the availability of an in-country workover unit when maintenance is required.
Egypt Expansion and Financial Position
VAALCO resumed its Egypt drilling program in May and expanded the planned 2026 scope to 10 to 15 wells. Bain said cost savings and below-budget drilling performance in Gabon, along with deferred nonessential capital projects, enabled the additional Egyptian activity without raising full-year capital expenditure guidance.
Cash capital expenditures were $103.6 million in the second quarter, while accrued capital expenditures were $98.9 million, below the low end of the company’s guidance range. Unrestricted cash stood at $30.4 million at quarter-end. VAALCO drew $25 million on its reserves-based lending facility during the quarter, bringing borrowings to $177 million and net debt to $147 million. The borrowing base under the facility increased to $300 million in April.
Trade receivables in Egypt declined by about $11.5 million during the quarter to just under $13 million. The company also paid a quarterly cash dividend of $0.0625 per common share, totaling $6.7 million, and said its third-quarter dividend will be paid in September.
Third-Quarter Outlook
For the third quarter, VAALCO forecast working-interest production of 24,400 to 26,900 barrels of oil per day and net-revenue-interest production of 19,600 to 21,600 barrels per day. The company expects production to be about 23% higher than the second quarter, reflecting a full quarter from Baobab as well as additional output from Gabon and Egypt.
Third-quarter sales are expected to range from 17,200 to 18,900 net-revenue-interest barrels per day. Bain said sales will lag production in the quarter because of cargo timing, but added that the company currently expects three Gabon liftings and two Baobab liftings in the fourth quarter, making Q4 stronger than Q3 for sales.
VAALCO projected third-quarter capital spending of $75 million to $115 million, production costs of $25 to $29 per net-revenue-interest barrel, exploration expense of $3 million to $4 million and cash general and administrative expense of $7 million to $9 million.
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.
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