Company's Q3 2025: Contradictions Emerge on Gabon Drilling Delays, FPSO Timelines, and Egypt Efficiency

Date of Call: November 11, 2025

Financials Results

• EPS: $0.01 per share (Q3 2025); first 9 months 2025 net income $17.2M or $0.0016 per share

Guidance:

• Q4 2025 production: 20,300–22,200 WI BOE/day and 15,600–17,300 NRI BOE/day (up vs Q3).
• Q4 sales expected higher vs Q3; absolute operating costs higher but flat on a per-BOE basis.
• Q4 CapEx forecast: $90M–$110M; full-year CapEx midpoint lowered ~ $60M to ~ $240M (≈20% reduction vs prior).
• Full-year production midpoint raised ~5% on strong YTD performance.
• Hedging: ~500k barrels of 2025 hedged (~$61 floor) and ~800k barrels H1 2026 hedged (~$62 floor), targeting ~40% H1 2026 coverage.

Business Commentary:

• Production and Sales Performance:
• VAALCO Energy reported NRI production of 15,405 BOE per day and working interest production of 19,887 BOE, exceeding guidance for Q3 2025.
• The company raised the midpoint of its full-year production and sales guidance by 5% while reducing capital guidance by almost 20%.

• This strong performance is attributed to operational excellence and consistent production across its portfolio.

• CAPEX Reduction and Efficiency:

• VAALCO lowered its full-year capital midpoint guidance to around $240 million, a decrease of almost $60 million from the previous guidance.

• The reduction is due to discretionary cuts and a shift in Gabon's drilling campaign from 2025 to 2026, along with increased efficiency in Egypt's drilling program.

• Impact of Senegal Exploration:

• VAALCO announced a farm-in agreement for the CI-705 block in Senegal, with a 70% working interest.

• This agreement is part of VAALCO's strategy to acquire, develop, and enhance value through accretive acquisitions in a proven hydrocarbon system.

• Egyptian Operations and Efficiency:

• The company completed eight additional wells in Egypt for the same capital expenditure as initially guided, demonstrating significant efficiency gains.
• This efficiency is attributed to reduced drilling times and lower costs per well compared to initial expectations.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted NRI production and sales at the high end of guidance, raised the full-year production midpoint ~5%, cut full-year CapEx midpoint ~20%, and reported $130.5M adjusted EBITDAX through the first 9 months. They reiterated projects (Baobab FPSO, Gabon drilling) remain on track and emphasized cost control and dividend returns (~7% yield).

Q&A:

• Question from Stephane Guy Foucaud (Auctus Advisors LLP, Research Division): So two questions. The first one is around CapEx. So reduction of CapEx in 2025. I was wondering what would be broadly the CapEx mix across the asset in 2025? And what it means the CapEx reduction in 2025 for 2026? In other words, how would 2026 CapEx compare broadly to 2025? So that's my first question. The second question is about South Ghazalat. In your view, in a success case, how big could be South Ghazalat or what this result means in terms of -- compared to the existing reserve in Egypt?
  Response: CapEx midpoint moved ~ $60M: ~$20M permanent discretionary cuts, ~$10M reallocated to CI (MV-10), remainder reflects Gabon drilling shifted from 2025 into 2026; Egyptian CapEx unchanged but achieved material drilling/completion efficiencies (more wells for same capital). South Ghazalat: results show oil and gas zones; further technical mapping and commercial work required before sizing potential.

• Question from Jeffrey Robertson (Water Tower Research LLC): Ron, just to clarify on the CapEx, did I hear you right that about $20 million of the reduced guidance is permanent reduction, in other words, getting -- either doing things at lower cost than budgeted or getting more done with the same amount of dollars?
  Response: $20M reflects permanent reductions—roughly half was removing the Canadian drilling program earlier and the other half discretionary cuts realized vs prior guidance.

• Question from Jeffrey Robertson (Water Tower Research LLC): Are the efficiency gains that have helped in Egypt, are those sticky? In other words, does that -- you would retain those types of efficiencies if you look at a CapEx program in Egypt in 2026?
  Response: Yes — faster spud-to-online cycle times and lower drill/complete days are real and expected to persist into 2026, reducing drilling AFE costs in Egypt.

• Question from Jeffrey Robertson (Water Tower Research LLC): Okay. And on the RBL Ron, I believe the electric commitments is going to go up to $240 million in January. Is that a reflection of asset performance?
  Response: The higher availability/commitment reflects market and liquidity planning rather than a direct one-off asset performance metric; management prefers to secure capacity from a position of strength.

• Question from Christopher Wheaton (Stifel, Nicolaus & Company, Incorporated, Research Division): Firstly, on Gabon production. You've not -- as you said, George, you've not drilled any wells for two years now on Gabon. I'm interested, is the geology better? Are there particular wells performing better than you expected? I'm interested in what's been driving that production uptime. And then second question about 2026 CapEx and your ability to flex that as you've got more of the Gabon drilling campaign falling into '26... are we going to see much CapEx flex below, say, 2025 levels that we might see for 2026 CapEx guidance?
  Response: Gabon outperformance is driven by reduced back pressure after reconfiguration, bringing wells like 4H online with manageable H2S, and production now sitting above prior 1P decline curves—implying higher recovery; 2026 CapEx has some flexibility but limited because Gabon drilling and Cote d'Ivoire projects are high-return, so spend may not be much below 2025 levels given anticipated production uplifts.

• Question from Charlie Sharp (Canaccord Genuity Corp., Research Division): The question really is regarding timetabling of events next year... I'm guessing from that, that you still expect to be back on stream there before the middle of the year... And then secondly, on Gabon, should we assume that you're drilling wells about one per quarter, in which case you'll probably be drilling into 2027? And will you be completing successful wells as you go or will you batch drill and batch complete?
  Response: Baobab FPSO sailaway scheduled end-January with hookup late March/early April and expected back on production end-April/early-May; Gabon plan starts with pilot holes on Etame and, if pilots succeed, they will drill-and-complete sequentially (not batch), with cadence contingent on results and options exercised.

• Question from William Dezellem (Tieton Capital Management, LLC): Relative to the Cote d'Ivoire drilling program... what's the swing factor that would drive the drilling earlier in the second half versus later in the second half? And relative to Equatorial Guinea, you mentioned subsea completion — was that part of the FEED or are you now needing to do essentially a sidebar FEED study?
  Response: The primary swing factor for CDI drilling timing is rig availability/move timing; FEED confirmed technical viability but highlighted shelf drilling risks, so they're evaluating vertical drillship/subsea and FPSO options (a supplemental evaluation) to de-risk drilling and optimize economics.

• Question from Jeffrey Robertson (Water Tower Research LLC): George, just a quick question in Cote d'Ivoire. When the FPSO gets back to Baobab, how long would it take do you anticipate for production in the field to go back to whatever the full rate will be?
  Response: Plan: ~6–8 weeks after vessel arrival for hookup/commissioning to reach full production rates; detailed start-up sequencing will be provided early 2026.

• Question from Jeffrey Robertson (Water Tower Research LLC): With the maintenance work that you did in July, what will that do to prepare the facilities, if anything, for the upcoming drilling campaign?
  Response: July shutdown upgraded Etame's power and water-handling systems and completed inspections—facilities are ready for the drilling campaign.

• Question from James Wilen (Wilen Investment Management Corp.): I wonder if you could refresh me on the H2S wells that were shut in a few years ago. How many there were? And what were their -- what was the volume per day? And what is your expectation moving forward?
  Response: Three Ebouri wells were shut in historically (Ebouri area had ~6k–8k bpd gross historically); current sidetrack 4H has flowed ~1,000 bpd gross in 2025 with H2S within manageable levels; management expects the upcoming 5H redrill (crestal sidetrack) could produce above the prior ~1,500–2,000 bpd gross historical level.

Contradiction Point 1

Gabon Drilling Campaign Timing

It involves a change in the expected timeline for the Gabon drilling campaign, which could impact production plans and investor expectations.

Could you clarify the RBL commitments and the schedule for the Gabon drilling campaign? - Jeffrey Robertson (Water Tower Research LLC)

2025Q3: The Gabon drilling campaign is delayed due to rig availability but is expected to begin in late Q4. The rig's release from existing commitments will drive the start date. - Ronald Bain(CFO)

What impact will the Gabon drilling program have on production? Are disruptions expected? - Jeffrey Woolf Robertson (Water Tower Research LLC)

2025Q2: We're now expecting to bring a rig in in Q3 to do that work, which we think is -- that is really what we believe will lead to more sustainable production going forward. - Thor Pruckl(COO)

Contradiction Point 2

Cote d'Ivoire FPSO Return Timeline

It involves the timeline for the return of the Cote d'Ivoire FPSO, which impacts production resumption and revenue expectations.

Can you confirm the schedule for the Cote d'Ivoire drilling program and the Gabon drilling plan? - Charlie Sharp (Canaccord Genuity Corp.)

2025Q3: The Cote d'Ivoire FPSO is expected back onstream by May, ready for drilling in the second half of 2026. - George Maxwell(CEO)

What's the update on the FPSO project in Côte d'Ivoire? Is it still ahead of schedule? - Stephane Guy Patrick Foucaud (Auctus Advisors LLP, Research Division)

2025Q2: The sale away time is projected to be as originally predicted in January 2026, and the vessel's return is expected in late March 2026. - George Maxwell(CEO)

Contradiction Point 3

Gabon Working Capital Swing and Tax Outflows

This contradiction pertains to the working capital swing and tax outflows in Gabon, which affects the company's financial management and cash flow.

Can you clarify the permanent CapEx reduction and how Egypt's efficiencies will affect future CapEx? - Jeffrey Robertson (Water Tower Research LLC)

2025Q3: Our original working capital estimate for 2025 was a $25 million cash inflow in Gabon. However, due to a combination of higher than expected government lifting and the recent increase in RBL commitments, Gabon will now have a cash outflow of approximately $45 million. - Ronald Bain(CFO)

Regarding Gabon, what will the working capital swing be later this year as government lifting is absorbed? How much of the outflow over the last two years was due to Gabon lifting? Is it structural or expected to return to the business within the next 9–12 months? - Chris Wheaton (Stifel)

2025Q1: The state lift in Gabon in Q1 was for $31 million. This represents the significant tax outflow for the year in Gabon. There will be no further state lifting taxes due until 2026, leading to an improvement in working capital as the year progresses. - Ronald Bain(CFO)

Contradiction Point 4

Egypt Cost Efficiency and CapEx Impact

This contradiction involves the efficiency gains in Egypt and their impact on future capital expenditure, which affects the company's cost management and investment strategies.

Can you explain the permanent CapEx reduction and how Egypt's efficiencies affect future CapEx? - Jeffrey Robertson (Water Tower Research LLC)

2025Q3: Efficiency gains in Egypt are real and expected to continue, leading to reduced drilling costs. - Ronald Bain(CFO)

Can you provide more details on the Egypt asset acquisition, including your plans for the asset and any current operational cost efficiencies? - Frank Mitsch (Wells Fargo Securities)

2025Q1: We are excited about the opportunity for these operations to operate at lower costs than when we first acquired them. - George Maxwell(CEO)