On August 6, VAALCO Energy (NYSE:EGY) reported second-quarter 2026 results that mark a sharp reversal from the quarter before. Net income landed at $42.4 million, or $0.39 per diluted share, compared with a $93.76 million loss in the first quarter. Adjusted EBITDAX nearly quintupled to $54.8 million. Behind those numbers is a company juggling drilling programs across four countries, and this quarter is the clearest sign yet that several of them are starting to pay off.
Four Fields Hitting Their Stride
Sales volumes reached 17,812 net revenue interest barrels of oil equivalent per day, above the midpoint of the company’s own guidance and up 47% from the first quarter. Much of that increase traces back to the Baobab field offshore Côte d’Ivoire, where production resumed in June following a yearlong refurbishment of the floating production, storage and offloading vessel. VAALCO expects the momentum to continue, forecasting third-quarter production between 19,600 and 21,600 NRI barrels per day, a 23% increase at the midpoint once a full quarter of Côte d’Ivoire output is included. Realized pricing moved in the same direction. The average commodity price per barrel of oil equivalent climbed to $80.77 in the second quarter, up from $57.21 in the first quarter and $54.87 a year earlier, pushing total commodity sales to $135.2 million from $62.6 million.
Management affirmed the increased full-year 2026 production and sales guidance it raised in May, an 8% and 12% lift at the midpoint, without changing the capital budget even though additional Egypt drilling was added to the plan. Trade receivables in Egypt fell to $12.9 million at the end of June from $31.6 million at the end of December, freeing up cash that had been tied up for months. VAALCO also kept its quarterly dividend at $0.0625 per share, with the third quarter payment due to shareholders of record on September 22.
The Losses Behind The Headline
That second quarter turnaround does not erase the first half’s bottom line. VAALCO reported a net loss of $51.3 million for the six months ended June 30, compared with net income of $16.1 million over the same stretch in 2025, weighed down by losses on commodity derivative contracts, lower sales volumes and higher exploration and administrative costs. Even the second quarter’s own earnings carried a derivative swing inside them: an $18.7 million net gain that combined a $43.7 million unrealized gain on hedges with a $25 million realized loss on contracts that had already matured.
Costs are also climbing as production ramps up. Production expense per barrel of oil equivalent rose 23% from a year earlier to $28.06, and depreciation, depletion and amortization per barrel climbed 32% to $21.14, both driven by higher sales volumes and new wells coming online. General and administrative expense excluding stock compensation rose 35% year over year to $9.6 million, which the company attributed to non-recurring legal and professional fees. VAALCO is also carrying $177 million in long-term debt against $123 million of remaining liquidity on its reserves-based lending facility, one whose commitments begin stepping down in March 2027.
What The Market Is Pricing In
Hedge fund ownership of VAALCO fell from 20 funds to 15 in the most recent quarter, a pullback that suggests some institutional holders trimmed exposure even as operations improved. Short interest sits at 7.94% of the float, a level that points to a real but not overwhelming bear camp. At the same time, as of September 8, the stock trades at a forward price-to-earnings ratio of just 8.57, a multiple that assumes little of the production growth management is projecting for the second half of the year.
Trading The Rebound For Reality
VAALCO’s second quarter gave shareholders proof that its Baobab restart, Egypt drilling program and Gabon well campaign can all deliver in the same three months, and management backed that up by affirming higher full-year guidance without asking for more capital. But the first half’s net loss and a derivative-driven earnings swing are reminders that results at an operator running four active drilling programs at once can move sharply in either direction. For the bulls, the third quarter’s forecast production jump would need to show up in cash flow rather than just barrels produced.
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