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Introduction & Market Context
VAALCO Energy Inc (NYSE:EGY) released its Q2 2025 supplemental information on August 8, 2025, highlighting production results that exceeded guidance while managing a declining EBITDAX trend. The company’s stock showed positive movement in premarket trading, up 3.31% to $3.678, following a 2.47% decline in the previous session.
The African-focused energy company continues to emphasize its diversified portfolio spanning Gabon, Egypt, Côte d’Ivoire, and Equatorial Guinea, complemented by Canadian assets. With a dividend yield of approximately 7%, VAALCO positions itself as an attractive income stock while working to convince investors of its undervaluation compared to peers.
Quarterly Performance Highlights
VAALCO reported strong operational results for Q2 2025, with net interest (NRI) production reaching 16,956 barrels of oil equivalent per day (BOEPD) and NRI sales hitting 19,393 BOEPD, both exceeding the company’s guidance. Working interest (WI) production stood at 21,654 BOEPD, with the company’s production mix heavily weighted toward oil at 93.2%, with natural gas liquids and gas each representing 3.4%.
As shown in the following Q2 highlights summary:
The company reported net income of $8.4 million ($0.08 per diluted share) and Adjusted EBITDAX of $49.9 million for the quarter. This represents an improvement from Q1 2025, when the company reported earnings per share of $0.06, missing analyst expectations of $0.08, according to the previous earnings report.
VAALCO’s global operations span multiple regions, with its diversified portfolio illustrated in the following map:
The company’s production by region for Q2 2025 included 8,563 BOEPD from Gabon (100% oil), 10,929 BOEPD from Egypt (100% oil), and 2,162 BOEPD from Canada (32% oil, 38% NGL, 30% gas). Côte d’Ivoire operations are currently offline as the FPSO undergoes refurbishment.
Financial Position and Shareholder Returns
Despite operational successes, VAALCO’s Adjusted EBITDAX has shown a declining trend from its peak of $95.9 million in Q1 2024 to $49.9 million in Q2 2025. Nevertheless, the company maintains a solid financial foundation with $68 million in cash and $127 million available under its credit facility as of June 30, 2025.
The company’s financial position and shareholder returns are illustrated in the following chart:
VAALCO reported a net cash position of $7.9 million at the end of Q2 2025, not including approximately $24.0 million of cash receipts received in July 2025. The company continues to emphasize its commitment to shareholder returns, highlighting approximately $100 million returned to shareholders since 2022 through dividends and share buybacks.
The company argues that its shares are undervalued compared to peers, pointing to its 6.8% dividend yield, which ranks in the top quartile of income stocks on the NYSE, and its enterprise value to 2025 estimated EBITDA multiple of 2.6x:
Strategic Initiatives and Growth Projects
VAALCO is advancing several strategic initiatives across its portfolio. In Côte d’Ivoire, the MV-10 FPSO refurbishment project is progressing ahead of schedule, with the vessel having arrived in Dubai for work. The company has secured a drilling rig for a development campaign following the FPSO’s return to service in 2026.
In Gabon, VAALCO has secured a rig contract for its 2025/2026 drilling campaign, which includes 5 firm wells and 5 option wells. The program will include a mix of development, exploration, and workover wells. The company has maintained strong operational production uptime of approximately 94% in the first half of 2025:
Egyptian operations continue to progress with 10 wells completed in the first half of 2025 and additional drilling and completion activity expected in the second half. The company has achieved an impressive safety record of 5.1 million man-hours without a lost time incident in Egypt:
The company has reduced its 2025 capital expenditure guidance from $270-$330 million to $250-$300 million, with the largest portion (45-50%) allocated to the Côte d’Ivoire FPSO refurbishment project:
Guidance and Outlook
VAALCO has reiterated its full-year 2025 production and sales guidance while implementing reductions through delaying Canada drilling and discretionary capital projects. For Q3 2025, the company expects total WI production of 18,900-20,800 BOEPD and NRI production of 14,400-15,600 BOEPD.
The company’s long-term growth trajectory is supported by significant increases in both production and reserves over recent years:
Looking ahead, VAALCO is focused on maximizing value from its diversified portfolio while maintaining its dividend yield and pursuing organic growth opportunities. The company expects significant projected growth in EBITDAX from 2026 onwards, driven by the return of Côte d’Ivoire production and development drilling across its asset base.
Management remains confident in the company’s strategy of operating efficiently, investing prudently, and maximizing its asset base while navigating commodity price uncertainty through strategic hedging and capital allocation.
Full presentation:
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