VAALCO Energy’s Q2 Profit Jumps as Sales Volumes Rise 47% and Revenue Doubles

VAALCO Energy(NYSE: EGY) is heading into the back half of 2026 with a much stronger growth profile than it had a year ago, after second-quarter results showed the early benefit of a revamped West African portfolio. The company reported net income of $42.4 million, or $0.39 per diluted share, and adjusted EBITDAX of $54.8 million for the period.

Sales volumes jumped 47% sequentially to 17,812 barrels per day on a net revenue interest basis, while net revenue more than doubled and rose by $72.6 million from the first quarter. Total production averaged 16,688 barrels per day on an NRI basis and 21,796 barrels per day on a working interest basis, up about 10% from the first quarter. Management credited higher realized prices, improved Egyptian volumes and two partner liftings in Gabon.

A portfolio reshaped for growth

The results reflect a deliberate shift in strategy since VAALCO sold all of its Canadian assets and pivoted toward higher-growth opportunities in West Africa. The company now operates the Kossipo discovery on Côte d’Ivoire’s CI40 block with a 60% working interest, holds expansion acreage in Gabon, and continues to build production from existing fields. “We have streamlined and expanded our portfolio while delivering consistently solid operational results,” CEO George Maxwell said on the call.

The Kossipo field, located just 8 kilometers from VAALCO’s Baobab operation, holds an estimated 102 million barrels of oil equivalent of gross 2C resources. VAALCO received a six-month extension to file the field development plan and now expects to submit it in the first half of 2027, using new ocean-bottom node seismic data to refine the plan.

In Gabon, the company is processing 3D seismic over the Niosi Marin and Guduma Marin blocks, where it is working with partners to mature exploration prospects. On CI-705 in Côte d’Ivoire, VAALCO has extended the first exploration phase into the fourth quarter of 2026 and will decide whether to proceed to a phase that carries a well commitment. In Equatorial Guinea, FEED work on the Venus Block P discovery is complete, and the company is evaluating a subsea development option before targeting a final investment decision in Q4 2026.

Baobab restart is a key catalyst

The FPSO at Baobab returned to Côte d’Ivoire in April and resumed production in June after a year-long refurbishment in Dubai. All producing wells are online, and output is running slightly above pre-startup forecasts. VAALCO holds a 27.4% nonoperated interest. The first lifting, expected in August, is projected at about 950,000 gross barrels.

The FPSO work was designed to extend the vessel’s life and raise capacity ahead of a development drilling program scheduled to begin in the third quarter. The campaign includes four producers, two to three injectors and two workovers. Management expects at least one well to reach production by year-end but said the full uplift will likely show up in 2027.

Gabon volumes strong, but one well shifts the curve

Drilling in Gabon has been a major driver of 2026 growth. Wells including Etame 15-8, Etame 14H and Ebouri-5H were brought online during the first half, and the company has now moved the rig to drill a pilot at Southeast Etame before completing a horizontal production well near the crest of the central fault block.

Not all of the news was straightforward. Ebouri-5H came online at about 8,000 gross barrels per day with minimal water, but water cut rose faster than expected, suggesting more reservoir connectivity than originally modeled. Management is revising the reservoir model for the Ebouri structure and has not quantified the potential impact on future recovery. The well is still producing, but it will influence how VAALCO plans the next phase of Gabon activity.

The company also completed a gas supply well at SEENT that is expected to reduce diesel consumption and improve reliability. CFO Ron Bain said switching the Teli FSO back to field gas should save roughly $500,000 to $600,000 per month on a gross basis, with VAALCO’s share around 58%. The gas will also support gas lift and turbine reliability.

VAALCO cut planned offshore workover spending to zero for the rest of 2026, citing strong electrical submersible pump performance and the ability to defer maintenance until needed. It is also reviewing the broader operating model in Gabon to lower both capital and operating costs.

Egypt adds wells without raising capex

Egypt has quietly become a larger contributor to VAALCO’s production growth. After drilling more than 20 wells over the past two years, the company resumed activity in May and expanded the 2026 program to 10 to 15 wells. CFO Ron Bain said the added work is being funded by savings elsewhere, leaving full-year capital expenditure guidance unchanged while allowing Egypt to exit 2026 at a higher production rate than originally planned.

Financials, hedges and second-half guidance

Second-quarter exploration expense fell by nearly $23 million from the first quarter, when VAALCO booked costs from an unsuccessful West Etame well and seismic work in Gabon. Production costs came in slightly above the midpoint of guidance, largely because of elevated diesel and freight costs tied to the Iran conflict. Cash G&A totaled $9.6 million, including $1.9 million of nonrecurring professional and legal fees. The hedging book shifted from a mark-to-market loss in Q1 to an unrealized gain of about $40 million in Q2 as Brent prices moved lower from late-March levels.

VAALCO drew $25 million on its reserves-based credit facility in the quarter, bringing total drawn debt to $177 million and net debt to roughly $147 million. The borrowing base was increased to $300 million in April. Unrestricted cash stood at $30.4 million. The company also maintained its quarterly dividend at $0.25 per share and declared the next payment for September. Bain said Egyptian trade receivables fell by roughly $11.5 million in the quarter.

For the third quarter, VAALCO expects NRI sales volumes of 17,200 to 18,900 barrels per day. Total production is projected at 24,400 to 26,900 barrels per day on a working interest basis, a roughly 23% increase from Q2, reflecting the full quarter of Baobab output and ongoing drilling in Gabon and Egypt. Q3 sales volumes are expected to run only slightly above Q2 because of cargo timing and size, but management indicated Q4 should be stronger on liftings.

Management reaffirmed the increased full-year sales and production guidance provided last quarter, with higher expectations in Egypt and Côte d’Ivoire offset by slightly lower anticipated output in Gabon. Maxwell said the updated production and sales guidance is about 10% above original estimates, with no increase to planned capital spending. Third-quarter production costs are forecast at $25 to $29 per NRI barrel, down slightly from Q2.

Outlook

VAALCO’s growth story is increasingly tied to execution in Côte d’Ivoire. The Baobab restart, Kossipo development and exploration upside put the company in a position it did not hold two years ago. Maxwell said the current portfolio could take working interest production to more than 60,000 barrels per day by 2030.

Near-term attention will likely focus on Gabon’s production behavior, especially Ebouri-5H, and on the pace of Baobab drilling. With the balance sheet still relatively modest and Brent volatility tied to geopolitical headlines, keeping capital discipline will be just as important as adding barrels. VAALCO says it has the runway to do both.