VAALCO Energy, Inc.

VAALCO reported Q2 2026 net income of $42.4 million, or $0.39 per diluted share, and adjusted EBITDAX of $54.8 million. Net revenue more than doubled versus Q1, with revenue up $72.6 million quarter over quarter. Q2 production was 16,688 NRI BOPD, or 21,796 working interest BOPD, up about 10% from Q1, and sales were 17,812 NRI BOPD, up 47% from Q1 and above the midpoint of guidance. Production costs were slightly above the midpoint of guidance, cash G&A was $9.6 million, and the company recorded $16.8 million of income tax expense. Net capital expenditures were $103.6 million cash basis and $98.9 million accrual basis, both below the low end of guidance. Unrestricted cash was $30.4 million, debt drawn on the RBL was $177 million, and net debt was $147 million. For Q3, the company expects sales of 17,200 to 18,900 NRI BOPD, total production of 24,400 to 26,900 WI BOPD and 19,600 to 21,600 NRI BOPD, production costs of $25 to $29 per NRI barrel, exploration expense of $3 million to $4 million, cash G&A of $7 million to $9 million, and CapEx of $75 million to $115 million. Full-year production guidance was reaffirmed with higher Egypt and Cote d'Ivoire output offset by slight declines in Gabon.

George Maxwell framed the quarter as evidence that VAALCO’s portfolio reshaping is working, highlighting the Canadian divestiture, increased Cote d’Ivoire exposure, and the company’s new role as operator of Kossipo with a 60% working interest. He emphasized that Baobab, Gabon drilling, and Egypt activity are setting up stronger production and sales in the second half of 2026 and beyond. His tone was confident and upbeat, repeatedly pointing to a diversified portfolio, disciplined execution, and a path toward meaningful long-term production growth.

Ronald Bain focused on the financial lift from stronger sales, lower exploration expense, and a large swing in derivatives, noting Q2 adjusted EBITDAX of $54.8 million and net income of $42.4 million. He said exploration expense was virtually zero in Q2 versus a nearly $23 million difference from Q1, and that the quarter also benefited from an unrealized gain of about $40 million on derivatives as prices fell from March to June. He highlighted $103.6 million of cash CapEx, $30.4 million of unrestricted cash, $177 million drawn on the RBL, and $147 million of net debt, while noting that Egyptian receivables improved by about $11.5 million. Bain also said the company is reducing offshore workover spend to zero for the rest of 2026, expanding Egyptian drilling without increasing full-year CapEx, and seeing lower diesel usage after switching the Gabon operation to gas.

Analysts pressed on the new gas well, asking whether shallower hydrocarbon shows could be commercial; management said they were observed but the well design does not allow production there, though the zone could potentially be recompleted in the future. Questions also focused on how quickly gas would lower operating costs, and Bain quantified expected gross diesel savings at about $500,000 to $600,000 per month from August onward, while Maxwell said the gas also improves gas lift, compressor reliability, and ultimately oil recovery. On Gabon, management explained that Ebouri-5H declined faster than modeled because water cut rose sooner than expected, which is why Gabon guidance is lower than earlier expectations. On Kossipo timing, Maxwell said the FDP has been pushed out because the company won a six-month extension from the DGH to produce a higher-quality submission, with updated timing now into 2027.