Vaalco Energy tops guidance in second quarter, net income hits $42.4 millionAnalysis

Vaalco Energy sold 17,812 net barrels of oil equivalent a day in the second quarter of 2026, above the midpoint of its guidance and up 47% from the first quarter. Net income came in at $42.4 million, or $0.39 per diluted share, and adjusted EBITDAX rose to $54.8 million from $11.6 million in the first quarter.

The company said the improvement was driven by higher sales, lower exploration expense and a non-cash gain on derivative instruments compared with the first quarter. Working interest production, which includes barrels tied to royalty volumes, reached 21,796 barrels of oil equivalent a day, or 16,688 net barrels, up about 10% from the first quarter. The second quarter included two crude liftings in Gabon and higher sales in Egypt.

Baobab restart in Cote d'Ivoire

Vaalco restarted production in June at the Baobab field offshore Cote d'Ivoire, as planned, after a major refurbishment of the field's floating production, storage and offloading vessel. The vessel's dry dock work finished in February, and it reconnected to field infrastructure in early April. Production resumed from all producing wells in June. Vaalco's first crude lifting from Baobab this year is scheduled for August, and a drilling program is expected to start in September.

In February, Vaalco became operator with a 60% working interest in the Kossipo field on the same CI-40 block, and a field development plan is progressing toward completion in the first half of 2027. The company also operates exploration license CI-705, holding a 70% working interest, and expects to decide by year-end whether to enter a second exploration phase.

Guidance

Vaalco is forecasting third-quarter sales of 17,200 to 18,900 net barrels of oil a day. Third-quarter production, including a full quarter from Cote d'Ivoire, is expected to reach 19,600 to 21,600 net barrels a day, a 23% increase from the second quarter at the midpoint. The company affirmed the full-year 2026 guidance it raised in May, by 8% for production and 12% for sales at the midpoint, and held its 2026 capital budget unchanged even after adding drilling in Egypt.

Capital expenditures for the quarter totaled $103.6 million, covering the start of the Gabon Phase Three drilling program, completion of the Cote d'Ivoire FPSO dry dock refurbishment and drilling materials and services for this year's Cote d'Ivoire campaign.

Gabon and Egypt operations

In Gabon, Vaalco drilled and completed the Ebouri-5H development well, which began producing in June as part of its Phase Three drilling program. The rig then moved to the SEENT platform to drill the ETBNM-3 gas-supply well, targeting the Dentale D15 reservoir. Gas from that well is now used in field operations to cut the cost of diesel that had been shipped in by vessel. On July 27 the rig moved to a new SEENT slot to drill the ETSEM-3PH pilot hole and development well, planned with a 300-meter completion length in the Gamba sands. The BWE Consortium finished a 3D seismic survey across the Niosi and Guduma blocks in January, and interpretation is continuing.

In Egypt, the 2026 drilling program began in May with the HE-9 development well, which came online in early June. Two more development wells started in June and were completed in July, with drilling continuing in the third quarter. Vaalco also ran workovers, well interventions and water shut-off treatments in Egypt. The company's Egyptian trade receivables fell to $12.9 million as of June 30, from $31.6 million at the end of 2025.

Other assets and dividend

Vaalco holds a 60% working interest in an undeveloped part of Block P offshore Equatorial Guinea, where it is designated operator of the Venus field discovery. The company has completed an initial front-end engineering and design study confirming the development concept and is evaluating alternative technical options, with a final investment decision expected in the fourth quarter.

On February 5, Vaalco agreed to sell all of its producing properties in Canada to a third party for about $25.5 million, in a deal that closed February 19.

The board declared a quarterly cash dividend of $0.0625 per share, payable September 22.

CEO George Maxwell said the first half of the year brought "material changes to Vaalco across our growing and diversified portfolio," citing the Kossipo operatorship and the Baobab restart.