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VAALCO ENERGY INC /DE/ (EGY)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $110.3M and diluted EPS of $0.07; revenue and EBITDA modestly beat S&P Global consensus while EPS matched; production and sales tracked at the high end of guidance .
  • Adjusted EBITDAX was $57.0M, down sequentially on lower liftings and higher production expense; NRI production was 17,764 BOEPD, above the high end of guidance .
  • Management reduced FY 2025 capex guidance ~10% to $250–$300M without changing production/sales guidance, and lowered FY DD&A per BOE guidance to $16–$20 from $18–$22, reflecting reserve adjustments and mix .
  • Near-term catalysts: three Gabon liftings in Q2 (sales > production), rig start for Gabon drilling in Q3, and the May 14 Capital Markets Day to detail multi-year growth plans .

What Went Well and What Went Wrong

What Went Well

  • Above-guidance operational execution: “NRI production was above the high end of guidance…NRI sales toward the high end” .
  • Strategic funding secured: Entered new RBL with $190M initial commitment (up to $300M) to fund organic projects across Gabon, Egypt, and Côte d’Ivoire .
  • Project milestones: Baobab FPSO safely disconnected, towing to Dubai for refurbishment; CI-40 license extended to 2038; farmed into CI‑705 with 70% WI for future exploration .

Quotes:

  • “We delivered another successful quarter, once again meeting or exceeding our guidance” .
  • “We believe that we are well positioned to fund meaningful growth…over the next few years” .

What Went Wrong

  • Margin pressure from higher costs: Production expense per BOE rose to $26.10 vs $19.57 in Q4, driven by Gabon government audit settlements (~$4.7M net) and H2S treatment chemicals .
  • Sequential decline in EBITDAX: Adjusted EBITDAX fell to $57.0M from $76.2M on lower liftings and higher production expense .
  • Working capital outflow: Unrestricted cash fell to $40.9M, working capital to $23.2M, largely from a ~$30M Gabon in‑kind tax state lifting; management expects improvement absent further 2025 state liftings .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Revenue (Total commodity sales, $USD MM)$140.3 $121.7 $110.3
Net Income ($USD MM)$11.0 $11.7 $7.7
Diluted EPS ($)$0.10 $0.11 $0.07
Adjusted EBITDAX ($USD MM)$92.8 $76.2 $57.0
NRI Production (BOEPD)21,770 20,775 17,764
NRI Sales (MBOE)2,134 1,872 1,717
Realized Commodity Price ($/BOE, NRI basis)$65.41 $64.77 $64.27
Production Expense per BOE ($)$19.80 $19.52 $26.10
DD&A per BOE ($)$22.04 $19.79 $17.65

Q1 2025 vs Wall Street Consensus (S&P Global):

MetricQ1 2025 ActualQ1 2025 ConsensusSurprise
Revenue ($USD MM)$110.329 $105.138*+$5.191 (+4.9%): bold revenue beat
EBITDA ($USD MM, vs Adjusted EBITDAX)$56.958 $53.688*+$3.270 (+6.1%): bold EBITDA beat
EPS (Primary, $)$0.07 $0.06*+$0.01: matched to slight beat

Values marked with * retrieved from S&P Global.

Segment Net Revenue ($000s):

SegmentQ4 2024Q1 2025
Gabon$47,167 $52,187
Egypt$38,981 $33,920
Canada$7,528 $6,180
Côte d’Ivoire$28,045 $18,042
Total$121,721 $110,329

Operational KPIs and Balance Sheet:

KPIQ4 2024Q1 2025
WI Production (BOEPD)25,300 22,402
NRI Production (BOEPD)20,775 17,764
Cash & Cash Equivalents ($USD MM)$82.650 $40.914
Working Capital ($USD MM)$56.199 $23.163
Adjusted Working Capital ($USD MM)$73.094 $40.412
Capex (cash basis, $USD MM)$41.466 $58.527
Dividend per share$0.0625 (paid Dec 20) $0.0625 (paid Mar 28)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
CAPEX excluding acquisitions ($MM)FY 2025$270–$330 $250–$300 Lowered ~10%
DD&A ($/BOE, NRI basis)FY 2025$18.00–$22.00 $16.00–$20.00 Lowered
Production (BOEPD, WI)FY 202519,250–22,310 19,250–22,310 Maintained
Production (BOEPD, NRI)FY 202514,500–16,710 14,500–16,710 Maintained
Cash G&A ($MM)FY 2025$25.0–$31.0 $25.0–$31.0 Maintained
Production Expense ($MM)FY 2025$148.5–$161.5 $148.5–$161.5 Maintained
Q2 2025 CAPEX excluding acquisitions ($MM)Q2 2025—$65–$85 New detail
Dividend per shareQ2 2025$0.0625 (Q1) $0.0625 (Q2 declared) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024)Previous Mentions (Q-1: Q4 2024)Current Period (Q1 2025)Trend
Capex disciplineHigh EBITDAX; preparing 2025 projects FY 2025 capex plan $270–$330M Capex cut ~10%; defer Canada drilling; maintain output More conservative near term
Côte d’Ivoire FPSOLiftings boosted sales; dry-dock planning FPSO ceased production 1/31/25; towing to Dubai Refurb underway; dev drilling expected mid-2026; CI‑40 license to 2038 On plan; extended license
Gabon drilling programRig secured planning for mid-2025 Rig contracted Dec-24; start Q3 2025 Q3 start; 5 firm + 5 optional wells; minimal downtime; slight Q4 uplift Execution approaching
Egypt program/receivablesWorkovers improving output Late-2024 wells online (Arta-92/93) 5 wells completed in Q1; average IP30 ~120–135 BOPD; receivables improved ~$8–$9M Continued operational progress
HedgingPut options in 2024 Collars into H1’25; AECO swap Added oil collars and July swap; gas swaps cover ~75% May–Oct Increased protection
Working capital/taxesTaxes settled in kind; YoY tax variability Q4 tax expense high, state mark-to-market effects ~$31M in-kind Gabon taxes drove WC outflow; no further state liftings expected in 2025 WC likely improves

Management Commentary

  • “We delivered net income of $7.7 million…Adjusted EBITDAX of $57.0 million…NRI production was above the high end of guidance” — George Maxwell (CEO) .
  • “We have decided to cut about 10% from our capital budget in 2025…without impacting production or sales forecasts for 2025” — George Maxwell .
  • “Extended flow test on Ebouri 4H…H2S concentration within modeling expectations…helped us to exceed guidance in Q1” — George Maxwell .
  • “We completed the first quarter bank debt-free with an undrawn $190 million credit facility available” — George Maxwell .

Q&A Highlights

  • Gabon production profile: No significant drilling-related downtime in 2025; planned maintenance ~7–10 days in July; first new well adds slightly in Q4; Q3 expected to be the lowest production quarter .
  • Côte d’Ivoire development: Phase 5 drilling scheduled mid-2026; operator working to secure rig .
  • Project prioritization in lower oil price environment: African PSCs cushion low prices via cost oil; EG project remains attractive even at lower price sensitivities; expect service cost softening if prices remain low .
  • Ebouri 4H significance: Test well provided reservoir/H2S data; production not included in guidance; supports chemical scavenging approach .
  • Working capital and taxes: ~$31M Gabon state lifting in Q1 likely covers 2025 taxes; WC expected to improve with foreign tax payable building until next state liftings in 2026 .

Estimates Context

  • Q1 2025 results vs consensus: Revenue beat by ~4.9%, EBITDA beat by ~6.1%, EPS matched/slightly above; estimates were sparse (1–2 estimates per line), highlighting limited coverage depth .
  • Implications: Modest beats anchored by strong liftings and above-guidance production; estimate models may need to reflect higher production expense per BOE and lowered DD&A trajectory given updated FY guidance .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Operational execution remains solid: Above-guidance production/sales and revenue/EBITDA beats despite higher operating costs; focus on high-confidence projects and disciplined capex .
  • Near-term trading setup: Q2 sales set to outpace production on three Gabon liftings; hedges support cash flow; watch for margin mix as chemical treatment and audit settlements normalize .
  • Medium-term growth visibility: Gabon rig program starts Q3 2025; Baobab FPSO returns mid-2026, CI‑40 license extended to 2038, CI‑705 exploration optionality; CMD (May 14) outlines scale-up path .
  • Cost/margin dynamics: Production expense per BOE elevated in Q1 due to one-offs (audit settles, chemicals); FY DD&A per BOE lowered to $16–$20, aiding reported net income profile .
  • Balance sheet flexibility: $190M RBL in place (up to $300M) and dividend maintained at $0.25 annualized; liquidity sufficient to bridge timing of liftings and project capex .
  • Egypt execution: Active drilling/workovers with improving receivables; continued contribution even in lower price environments per PSC construct .
  • Monitor Q3 as potential trough quarter due to maintenance and pre-drill phase; first Gabon well online late Q4 should begin inflecting volumes .