Vaalco Energy's Strategic Drilling Momentum in Gabon and Côte d'Ivoire: A Catalyst for 2026 EBITDA and Production Growth

Vaalco Energy (EGY) is poised to capitalize on a transformative phase of operational execution and capital efficiency in 2026, driven by its aggressive drilling campaigns in Gabon and Côte d'Ivoire. With Phase Three drilling underway in Gabon and a pivotal FPSO refurbishment nearing completion in Côte d'Ivoire, the company is aligning its near-term activities with long-term value creation. These initiatives, combined with disciplined financial management and reserve expansion, position Vaalco as a compelling investment ahead of its 2026 production and EBITDA growth targets.

Phase Three Drilling in Gabon: Immediate Operational Catalyst

Vaalco's Phase Three drilling program in Gabon commenced in December 2025 with the spudding of the ET-15 infill well on the Etame platform, marking a critical step in its strategy to enhance production and reduce costs. The drilling rig, secured through an affiliate of Borr Drilling, is scheduled to move to the SEENT and Ebouri platforms for additional wells and workovers, targeting reserve additions and operational efficiency. This program builds on Vaalco's historical success in Gabon, where the Etame field has been a cornerstone of production. By focusing on infill drilling and workovers, the company aims to optimize existing assets while unlocking new reserves previously constrained by hydrogen sulfide challenges.

The timing of these activities is strategic. With the rig arriving in late November 2025, Vaalco has minimized downtime and capitalized on favorable market conditions. The company's ability to execute this phase without significant delays underscores its operational maturity and reinforces confidence in its 2026 production guidance.

Côte d'Ivoire: FPSO Refurbishment and Development Drilling

In Côte d'Ivoire, Vaalco's focus on the Baobab field in Block CI-40 is equally pivotal. The FPSO vessel, which temporarily halted production during Q1 2025 for refurbishment, is expected to return to service in early 2026. This refurbishment, conducted at a Dubai shipyard, is critical for extending the economic life of the Baobab field and enabling a 2026 drilling campaign to augment production. The company has already secured a rig for this campaign, which is anticipated to unlock additional reserves in the Kossipo field and drive a 50% production increase by the second half of 2026.

Complementing this, Vaalco's 70% working interest in Block CI-705-acquired in 2025-adds another layer of potential. Seismic reprocessing and exploration drilling in this block could yield significant discoveries, further diversifying the company's asset base in Côte d'Ivoire. The combination of near-term production uplifts and long-term exploration upside makes this region a key driver of EBITDA growth.

Financial Discipline and Capital Efficiency

Vaalco's operational momentum is underpinned by robust financial discipline. In Q3 2025, the company exceeded production guidance, reporting 15,405 net revenue interest barrels of oil equivalent per day (BOEPD), while reducing full-year capital guidance by 20% (or $58 million). This reduction, achieved without compromising production targets, highlights Vaalco's ability to allocate capital efficiently-a critical trait in a volatile energy market.

The company's capital efficiency is further evidenced by its ability to raise full-year 2025 production guidance by 5% despite the Côte d'Ivoire FPSO downtime. By prioritizing high-impact projects-such as infill drilling in Gabon and FPSO refurbishment in Côte d'Ivoire-Vaalco is maximizing returns on invested capital. This approach aligns with its broader strategy to generate shareholder value through organic growth, as opposed to costly acquisitions.

2026 EBITDA and Production Outlook

While Vaalco has not explicitly quantified 2026 EBITDA guidance by region, its operational plans and historical performance provide a clear trajectory. The company's 2024 adjusted EBITDA of $300 million, combined with its 2026 production growth targets, suggests a significant step-up in profitability. The anticipated 50% production increase by H2 2026, driven by Gabon and Côte d'Ivoire, is expected to translate into higher EBITDA margins, particularly as fixed costs are spread over a larger output.

Moreover, Vaalco's long-term goal of exceeding 50,000 barrels per day by 2030 indicates a compounding effect from its 2026 initiatives. The company's recent dividend declaration-marking its 16th consecutive quarterly payout-further underscores its confidence in cash flow sustainability, even as it invests in growth.

Conclusion: A Compelling Investment Thesis

Vaalco Energy's strategic drilling momentum in Gabon and Côte d'Ivoire, coupled with its disciplined capital allocation, presents a compelling case for investors. The commencement of Phase Three drilling in Gabon and the impending return of the Baobab FPSO in Côte d'Ivoire are immediate catalysts for production and EBITDA growth in 2026. With a clear focus on reserve expansion, operational efficiency, and shareholder returns, Vaalco is well-positioned to deliver value over the remainder of the decade. For investors seeking exposure to a midstream energy play with near-term execution risk and long-term upside, EGY offers an attractive opportunity ahead of its 2026 value realization.