Vaalco Energy, Inc. 2026 Q2 Earnings Call

Thank you, Landis. Good morning, everyone, welcome to our second quarter 2026 earnings conference call. Over the past two years, we have streamlined and expanded our portfolio while delivering consistently solid operational results. In the first half of 2026, we have made material changes to our growing and diversified portfolio. We divested all of our Canadian assets while increasing our Côte d'Ivoire position. We were named operator with a 60% working interest in the Kossipo field on the CI-40 block that had two discoveries drilled in the field and is located only eight kilometers from Baobab. We are actively evaluating and processing seismic with our partners in Niosi Marin and Guduma Marin blocks offshore Gabon and on our exploration block, CI-705 in Côte d'Ivoire. The Baobab FPSO successfully completed its refurbishment and the field resumed production in June as planned.

At Etame, we continued to execute on a drilling campaign. All of these events have led to improving financial results driven by increases in production and sales that we believe will continue into the second half of 2026. We delivered $42.4 million in net income and $54.8 million in adjusted EBITDAX in the second quarter. We continue to deliver our increased sales and production targets, all while maintaining our capital expenditures in line with guidance. We are confident in our ability to continue and consistently execute and deliver value to our shareholders. I would now like to go through and provide a quick update on our diverse portfolio of high-quality assets beginning with Côte d'Ivoire. We were excited to have production resume in Baobab in June 2026.

As you know, in line with the project timeline, the FPSO at Baobab ceased hydrocarbon operations in January 2025, spent a year being refurbished in Dubai and returned to Côte d'Ivoire in April 2026. We are very pleased how well the FPSO refurbishment went and that it was completed within the initial timeline expected. All producing wells are online and production is slightly above our pre-startup forecast with the first lifting expected later this month. The single Q3 lifting is expected to be about 950,000 gross barrels. Remember that we are a non-operator with a 27.4% ownership. The FPSO refurbishment was undertaken to extend the life of the vessel and to increase its capacity as we begin a significant development drilling program in Baobab in Q3.

This program includes four producers, two or three injectors, and two workovers, providing potential meaningful additions to production from the main Baobab field, where we have a 10-year extension to the license to 2038. The current drilling plan in Baobab is to begin drilling in the third quarter on a batch basis, the top hole sections of all wells first. The completions will then commence. We expect at least one well to be on production by year-end. With that said, production and sales uplift from the drilling program at Baobab will not make a significant impact until 2027. In February 2026, in accordance with the CI-40 PSC, VAALCO and Petroci elected to participate in the development of the Kossipo field. VAALCO was confirmed as operator with a 60% working interest in the Kossipo field on the CI-40 block, just eight kilometers from the Baobab field.

We are now working on a field development plan using new ocean bottom node seismic data that is expected to help de-risk and enhance our evaluation and development plan. Our current assessment has the field with an estimated gross 2C resources of approximately 102 million barrels of oil equivalent and 293 million barrels of oil equivalent in place. Also in Côte d'Ivoire, we continue to evaluate the subsurface potential of our new exploration block, CI-705, which we operate with a 70% working interest. We continue to see encouraging prospectivity on the block in play types proven throughout the Ivorian Basin, including both structural and stratigraphic traps in the Upper Cretaceous and Albian sections. We have met all current work commitments on the block and have been granted a six-month extension on the first exploration phase, which now extends this phase into Q4 2026.

Our subsurface work will continue to mature the encouraging prospectivity we see on block in preparation for a decision later this year to proceed to the second exploration phase, which carries a well commitment. I would like to remind you that we had no assets in Côte d'Ivoire prior to April 2024. In less than two years, we have established a sizable position in Côte d'Ivoire consisting of a producing asset with upside at Baobab, operatorship of a discovery at Kossipo with plans to develop and considerable upside potential on a prospective exploration block. We're excited about the prospects in Côte d'Ivoire and their ability to help us achieve our production growth target over the next several years. Moving to Gabon, in the fourth quarter of 2025, we began our Phase Three drilling program.

I would like to note that working interest production in Gabon in Q4 2025 was 7,743 barrels of oil equivalent per day and declining. This program was designed to reverse decline and increase production by accessing potential attic locations and less swept fault blocks across the Etame field, as well as access deeper potential in the Dentale and test an exploration prospect from the platform. The program began with the drilling of two pilot wells in the Etame field. One of these was sidetracked and completed as Etame-15-8 development well in the 1V fault block. Q1 production results had only one month of production from this well, which coupled with decline and some downtime resulted in Q1 working interest production of 7,516 barrels of oil equivalent per day.

The rig remained on the Etame platform to drill an exploration prospect in West Etame. While the well encountered 10 meters of high-quality Gamba sands, the target zone was water-bearing and not commercial. The lower portion of the well was plugged and abandoned, the wellbore was utilized and sidetracked in the upper portion of the well to drill the Etame-14H development well in the Main Fault Block of Etame that was de-risked from the results of the earlier pilot wells. In late April, the Etame-14H was brought online after encountering 325 meters of lateral net pay in high-quality Gamba sands in an attic position within the Main Fault Block at Etame. Initial rates exceeded 4,800 gross barrels of oil per day, the well continues to produce about 3,000 gross barrels of oil per day.

After completing our program at the Etame platform, we moved the rig to the Ebouri platform where we drilled the Ebouri-5-8 development well. This well had 300 meters of lateral net pay in Gamba sands at the crest of the structure and came online in late June with initial rates of about 8,000 gross barrels of oil per day with minimal water cut. While the total fluid rate has remained fairly consistent, the well has increased water production, approaching the field-wide average of about 75%-80% water cut. While we expected the water cut to ultimately rise to the field average, the rate at which it has increased was faster than we initially expected, implying more reservoir connectivity than we had originally modeled. We are currently evaluating this well performance with a view to remodeling the Ebouri structure, which should provide better predictability on 5-8 performance.

With that said, for Q2, we saw Gabon production increase to over 9,300 working interest barrels of oil equivalent per day with the additional well. We moved the rig to the SEENT platform and drilled the ETBNM-3 well, a high GOR gas supply well that was completed a few days ago. Gas rates and volumes are in line with pre-drill estimates and will be used to improve field uptime, reduce costs associated with using higher priced diesel, and potentially add production uplift to existing wells. The rig has now skidded over to another slot on the SEENT platform and is drilling the ETSEM-3 pilot hole. Pilot is designed to aid in landing the lateral producer, test the original field oil water contact, and also evaluate the potential of the underlying Dentale formation.

Once the pilot hole is completed, a horizontal development well is planned near the crest of the central fault block in southeast Etame into Gamba sands. Upon completion of this horizontal well, we are planning to release the rig and not perform any further drilling or workovers in Gabon in the near term. We have reduced the expected workover spend in the second half of 2026 from a range of up to $10 million to no spend due to excellent ESP life. This is because the wells in Ebouri continue to perform well with the chemical treatment, and we do not want to take these wells offline to perform maintenance workovers until it is necessary.