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Vaalco Energy (NYSE: EGY) said first-quarter 2026 marked an operational inflection point as the company moved toward higher output from offshore Gabon and prepared for the expected restart of the Baobab field in Côte d’Ivoire. The quarter’s results were also pressured by derivative losses and exploration expense.
CEO George Maxwell said Vaalco 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. Vaalco was named operator with a 60% working interest.
Maxwell said the company is beginning to see the production uplift it projects from major projects in Q2 2026, with expectations that the gains continue into 2027.
CFO Ron Bain reported a net loss of $93.7 million for the first quarter. He attributed the loss largely to $71 million in derivative losses, including $56 million of unrealized mark-to-market losses, and $22.4 million in exploration expense.
The exploration expense included an unsuccessful exploration well at West Etame offshore Gabon and seismic costs at the Niosi Marin and Guduma Marin blocks. Bain said the exploration expense was 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. 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 totaled 15,110 net revenue interest barrels of oil equivalent per day (NRI boe/d) and 19,884 working interest boe/d, both above the midpoint of company guidance. Sales were 12,157 NRI boe/d, also slightly above the midpoint of guidance, but below production due to the timing of liftings.
Maxwell said the Baobab FPSO completed 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 Baobab production to restart in June, with sales beginning from the FPSO in the third quarter. Maxwell said the refurbishment is intended to extend the vessel’s life and increase capacity ahead of a development program later this year, including 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.
Maxwell said Vaalco and Petroci elected in February to participate in development under the CI-40 production sharing contract. The Kossipo field is about 8 kilometers from Baobab, and Vaalco is working on a field development plan using new ocean bottom node seismic data.
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. Bain said that if the 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.
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. Vaalco 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.
Maxwell said second-quarter production in Gabon should be enhanced by two months of production from the Etame 14H well. The rig has since moved to the Ebouri platform, where Vaalco is drilling a development well and planning a workover well, and it plans two wells at the SEENT platform after completing work at Ebouri.
Maxwell also said future Etame wells are likely to target “attic oil,” using long laterals placed near the top of structures to capture oil that previous wells have not swept.
Vaalco raised its full-year 2026 production and sales guidance. Bain said 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:
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 added a six-well drilling program in Egypt beginning in the second quarter after 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 reported $152 million drawn and net debt of $104 million.
Vaalco 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.
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. Bain confirmed 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 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.
Maxwell said the company expects ongoing projects to support “significant step ups in production” in early 2027.
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