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    EGY
    Earnings call· Jun 2026(Q2 FY26)

    VAALCO ENERGY INC /DE/ Q2 FY26 earnings call EGY

    Aug 7, 2026 Source

    Executive summary

    VAALCO Q2 FY26 — Strong Operational Performance Drives Financial Growth and Reaffirmed Full-Year Guidance

    VAALCO Energy delivered strong Q2 FY26 results, driven by the successful restart of Baobab production, increased Gabon volumes, and an expanded Egypt drilling program. The company reaffirmed its full-year production and sales guidance without increasing capital expenditures, demonstrating efficient execution despite some operational challenges and market volatility. Management highlighted a diversified portfolio and a clear path to future growth.

    Highlights

    5

    • Net income reached $42.4 million, with adjusted EBITDAX of $54.8 million in Q2 FY26.

    • Gabon working interest production increased to over 9,300 barrels of oil equivalent per day in Q2 FY26.

    • Baobab FPSO refurbishment completed on schedule, with production resuming in June 2026 slightly above pre-start-up forecast.

    • Egypt drilling program expanded to 10-15 wells for the year, with no overall increase in projected capital spend.

    • Trade receivables reduced by approximately $11.5 million in Q2 FY26, with the balance falling to just under $30 million.

    Concerns

    3

    • Ebouri-5H well in Gabon experienced a faster-than-expected increase in water cut, requiring reservoir remodeling.

    • Q3 FY26 sales guidance is only slightly higher than Q2 actuals due to cargo sizes and mix across assets.

    • Inflationary pressures on costs, primarily fuel and freight, due to higher commodity pricing and the Iran conflict, impacted Q2 production costs.

    Guidance & targets

    19
    CategoryTargetConfidence
    Baobab drilling program first well on production
    At least 1 well on production
    medium materiality
    High
    CI-705 exploration phase 1 extension
    Extended into Q4 2026
    low materiality
    High
    CI-705 exploration phase 2 well commitment decision
    Decision later this year
    medium materiality
    Medium
    Gabon drilling rig release
    Release rig after current well, no further drilling/workovers in near term
    medium materiality
    High
    Gabon workover spend
    $0
    medium materiality
    High
    Egypt drilling program wells
    10 to 15 wells
    medium materiality
    High
    Venus FID
    Q4 2026
    high materiality
    High
    Q3 2026 Net Revenue Interest Sales Volumes
    17,200 and 18,900 barrels of oil per day
    high materiality
    High
    Q3 2026 Working Interest Production
    24,400 and 26,900 barrels of oil per day
    high materiality
    High
    Q3 2026 Net Revenue Interest Production
    19,600 and 21,600 barrels of oil per day
    high materiality
    High
    Full Year Production Guidance
    Reaffirmed
    high materiality
    High
    Q3 2026 Absolute Production Cost per NRI barrel
    $25 to $29
    medium materiality
    High
    Q3 2026 Exploration Expense
    $3 million and $4 million
    medium materiality
    High
    Q3 2026 Cash G&A
    $7 million to $9 million
    medium materiality
    High
    Q3 2026 Capital Spend
    $75 million and $115 million
    high materiality
    High
    Peak Debt
    Q1 2027
    high materiality
    Medium
    Gabon cost pool shield duration
    Right through 2027
    medium materiality
    Medium
    Cote d'Ivoire cost pool shield duration
    Multiple years' worth
    medium materiality
    High
    Company working interest production target
    North of 60,000 barrels per day
    high materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Cote d'Ivoire
    Baobab FPSO refurbishment completed on time, production resumed slightly above pre-start-up forecast. Kossipo field development plan being refined with new seismic data. CI-705 exploration showing encouraging prospectivity with a 6-month extension granted for Phase 1.
    Baobab production resumed: June 2026Baobab current gross production: 16,400-16,500 bbl/dBaobab pre-shutdown production: ~14,400 bbl/dFirst lifting expected: Late August 2026First lifting volume: ~950,000 gross barrelsWorking interest in first lifting: 27.4%Kossipo field gross 2C resources: ~102 million boeKossipo field gross oil equivalent in place: 293 million boeCI-705 working interest: 70%
    		————
    Gabon
    Production increased in Q2 due to the Phase 3 drilling campaign. Etame 14H performing well, but Ebouri-5H experienced faster-than-expected water cut increase, requiring reservoir remodeling. Gas well completed to improve field uptime and reduce diesel costs. Seismic survey completed for Niosi Marine and Guduma Marine blocks.
    Q2 working interest production: >9,300 boe/dQ1 working interest production: 7,516 boe/dQ4 2025 working interest production: 7,743 boe/dEtame 14H lateral net pay: 325 metersEtame 14H initial gross production: >4,800 bbl/dEtame 14H current gross production: ~3,000 bbl/dEbouri-5H lateral net pay: 300 metersEbouri-5H initial gross production: ~8,000 bbl/dEbouri-5H water cut: Approaching 75%-80% (field-wide average)ETBNM-3 gas well: Gas rates and volumes in line with pre-drill estimates
    		——10%—
    Egypt
    Drilling program resumed in May and expanded to 10-15 wells for the year, driving increased production rates into Q3. Strong operational performance and efficiency contributing to minimizing costs. Continued focus on optimizations, workovers, and recompletions.
    Sales volumes H1 2026 vs H1 2025: 7% higher
    		————

    Operational metrics

    27
    Net income
    $42.4 million
    Q2 FY26

    Strong earnings in the second quarter.

    Adjusted EBITDAX
    $54.8 million
    Q2 FY26

    Generated in the second quarter.

    Adjusted EPS
    $0.39
    Q2 FY26

    Strong earnings in the second quarter.

    Revenue increase
    $72.6 millioncompared to Q1
    Q2 FY26

    Driven by higher realized pricing and higher sales volume.

    Exploration expense difference
    $23 million
    Q1 vs Q2 FY26

    Nearly $23 million difference between Q1 (with well costs and seismic) and Q2 (virtually none).

    Sales volume
    17,81247% higher than Q1
    Q2 FY26

    Above the midpoint of guidance.

    Production volume
    16,688
    Q2 FY26

    Overall production for the quarter.

    Production volume
    21,79610% increase compared to Q1 2026
    Q2 FY26

    Overall production for the quarter.

    Production costs
    slightly above midpoint of guidance
    Q2 FY26

    Driven by inflationary pressure on costs, primarily fuel and freight.

    Cash G&A
    $9.6 million
    Q2 FY26

    Increase primarily due to nonrecurring professional service and legal fees.

    Unrealized derivative gain
    $40 million
    Q2 FY26

    Resulted from pricing at June 30 declining materially from March 31.

    Income tax expense
    $16.8 million
    Q2 FY26

    Includes a favorable oil price adjustment due to change in value of Gabon's profit oil allocation.

    Net capital expenditures
    $103.6 million
    Q2 FY26

    Well below the low end of guidance range.

    Net capital expenditures
    $98.9 million
    Q2 FY26

    Well below the low end of guidance range.

    Unrestricted cash
    $30.4 million
    End Q2 FY26

    Cash balance at the end of the second quarter.

    RBL draw
    $25 million
    Q2 FY26

    Drawn against the company's RBL to help fund capital programs.

    RBL borrowing base
    $300 million
    April 2026

    Aggregate borrowing base under the 2025 RBL facility increased.

    Drawn on credit facility
    $177 million
    End Q2 FY26

    Current amount drawn.

    Net debt
    $147 million
    End Q2 FY26

    Current net debt position.

    Trade receivables reduction
    $11.5 million
    Q2 FY26

    Additional reduction in trade receivables.

    Trade receivables balance
    $30 milliondown from $24 million at Q1
    End Q2 FY26

    Balance at the end of the second quarter.

    Quarterly cash dividend
    $0.25
    Q2 FY26

    Paid in Q2 2026.

    Hedging coverage
    30% to 40%
    Rolling 12 months

    Generally maintained for production.

    Diesel usage volume
    300 to 350
    Monthly

    Volume of diesel used before switching to gas.

    Diesel cost per cube
    $1,500 to $1,55025% increase in July
    H1 FY26 average

    Average price for diesel fuel.

    Diesel cost savings
    $500,000 to $600,000
    From August onwards

    Expected savings from switching Teli FSO to gas.

    Brent price for cost pool recovery
    $100
    Future

    Accelerates recovery of the cost pool.

    Industry KPIs

    5
    MetricValueDetails
    D c efficiency rig activity—
    Realized price differential—
    Basin level production volume21,796working interest BOPD
    Cost of supply unit cash cost$25 to $29USD/NRI barrel
    FCF shareholder distributions$0.25USD/share

    Deals & partnerships

    2
    Canadian assetsSale of all Canadian assets

    Divested all Canadian assets in February 2026.

    PetroCIParticipation in Kossipo field development on CI40 block

    VAALCO and PetroCI elected to participate in the development of the Kossipo field in February 2026.

    Capital programs

    3
    Baobab Development Drilling Programunderway
    Start: Q3 2026

    Benefit: 4 producers, 2-3 injectors, 2 workovers

    Program includes multiple wells to add production from the main Baobab field. At least one well expected on production by year-end.

    Gabon Phase 3 Drilling Campaignnearing completion
    Start: Q4 2025

    Benefit: Increased production by accessing attic locations and less swept fault blocks, deeper potential in Dentale, exploration prospect

    Designed to reverse decline and increase production. Rig to be released after current horizontal well, no further drilling in near term.

    Egypt Drilling Programunderway
    Start: May 2026

    Benefit: 10 to 15 wells, increased production rates

    Expanded scope to include more wells without increasing overall CapEx guidance for the year.

    Risks & headwinds

    4
    Faster-than-expected water cut increase in Ebouri-5H wellQ2 FY26

    Water production approaching field-wide average of 75% to 80% water cut

    Mitigation: Evaluating well performance with a view to remodeling the Ebouri structure for better predictability.

    Inflationary pressure on costsQ2 FY26

    Production costs slightly above midpoint of guidance

    Mitigation: Focus on keeping costs low, but higher diesel and freight costs due to Iran conflict may lead to near-term expense increases. Gas well in Gabon expected to reduce fuel costs.

    Volatile crude market and cargo sizesQ3 FY26

    Q3 sales guidance only slightly higher than Q2 actuals

    Mitigation: Buyers and traders on the spot market are looking for smaller cargoes and deferring agreements due to uncertainty around war premium pricing.

    Baobab O&M change out delaysOngoing

    Taking longer than anticipated

    Mitigation: Expected savings from the change out will be seen in 2027. Q4 production costs in Cote d'Ivoire may spike due to ROV inspection work.

    What to watch in Q3 FY26

    5

    Ebouri-5H well performance and remodeling

    Next 4-5 months
    CurrentWater cut increased faster than expected, approaching 75%-80%
    TargetImproved predictability and performance stabilization

    Why it matters

    The well's performance significantly impacted Gabon's production outlook and requires a rework of the geo-model for future accuracy.

    We are currently evaluating this well performance with a view to remodeling the Ebouri structure, which should provide better predictability on 5-8 performance.

    Q&A highlights

    7

    What was seen in the shallower intervals of the recent gas well and are there any implications?

    The shallower intervals showed hydrocarbon shows as expected, but cannot be produced currently due to well design. They have been tagged for potential future recompletion as producers.

    “In the shallower intervals, we did see some shows on hydrocarbons. We did expect that. But unfortunately, we can't, at the moment, produce that because of the well design. The well design was purely designed to go down to that specific zone for the gas development. But it has been tagged and sometime in the future, that could be recompleted as a producer.”

    asked by David Round · answered by George Maxwell

    2 min read6 chapters

    Detailed Narrative

    01

    Portfolio Transformation and Strategic Growth

    VAALCO has significantly transformed its portfolio over the past two years, divesting Canadian assets and expanding its Cote d'Ivoire presence. This includes becoming operator of the Kossipo field on the CI40 block with a 60% working interest, which holds estimated gross 2C resources of 102 million barrels of oil equivalent. The company also operates the CI-705 exploration block with a 70% working interest, showing encouraging prospectivity.

    02

    Baobab FPSO Restart and Development Drilling

    The Baobab FPSO successfully completed its refurbishment and resumed production in June 2026, ahead of schedule, with initial production slightly above pre-start-up forecasts. The first lifting of approximately 950,000 gross barrels is expected later this month. A significant development drilling program is set to begin in Q3, including 4 producers, 2-3 injectors, and 2 workovers, with at least one well expected online by year-end, contributing meaningfully to production in 2027.

    03

    Gabon Drilling Campaign and Operational Adjustments

    The Phase 3 drilling program in Gabon led to Q2 production increasing to over 9,300 working interest barrels of oil equivalent per day. The Etame 14H well came online in late April with initial rates exceeding 4,800 gross barrels of oil per day. However, the Ebouri-5H well experienced a faster-than-expected increase in water cut, necessitating reservoir remodeling. The company completed a gas supply well (ETBNM-3) to improve field uptime and reduce diesel costs, and has reduced H2 2026 workover spend to zero due to excellent ESP life.

    04

    Egypt Drilling Expansion and Receivable Management

    VAALCO resumed its drilling program in Egypt in May 2026, expanding the scope to 10-15 wells for the year without increasing overall capital expenditure guidance. This expansion is expected to drive higher production rates into Q3 and for the year-end. The company also continued its strong performance in managing Egyptian receivables, reducing them by approximately $11.5 million in Q2, bringing the balance to just under $30 million.

    05

    Equatorial Guinea Venus Development Progress

    The initial FEED study for the Venus Block P plan of development in Equatorial Guinea is complete, confirming technical viability but highlighting risks. VAALCO is now exploring more efficient subsea development opportunities to simplify drilling and well design. The company is targeting a Final Investment Decision (FID) for Venus in Q4 2026, aiming to develop and operate the discovery.

    06

    Financial Performance and Hedging Strategy

    Q2 FY26 saw strong financial results with net income of $42.4 million and adjusted EBITDAX of $54.8 million. Revenue more than doubled compared to Q1, driven by higher realized pricing and sales volumes. The company's programmatic hedging strategy, required by its RBL facility, aims to safeguard cash flow and fund capital commitments, with 30-40% of production typically hedged up to 12 months out. A $40 million unrealized gain on derivatives was recorded in Q2 due to declining Brent prices.

    AI-generated summary of the company’s earnings call. Not investment advice.