Vaalco Swings to Profit as Baobab Restart Lifts Output
Vaalco Energy posted net income of $42.4 million in the second quarter, reversing a $93.8 million first-quarter loss as sales volumes jumped 47% and its Côte d'Ivoire field came back online.
Vaalco Energy (EGY) reported a swing to profitability in the second quarter, with net income of $42.4 million, or $0.39 a diluted share, reversing a first-quarter net loss of $93.8 million, or $0.90 a share, and improving on the $8.4 million it earned in the same period last year. The independent oil and gas producer, which operates fields in Gabon, Egypt, Canada and Côte d'Ivoire, credited the turnaround to a combination of higher volumes, favorable pricing and the reversal of a derivative charge that had weighed on the prior quarter.
The defining event of the quarter was the restart of the Baobab field offshore Côte d'Ivoire in June, following roughly a year of dry-dock refurbishment work on its floating production, storage and offloading vessel. The first crude lifting from the field is scheduled for August, and the company is guiding for a full quarter of Côte d'Ivoire output in the third quarter. That timeline had previously been described only as targeted for the second quarter, making this the first disclosure of an actual restart and firm lifting date.
NRI sales volumes rose 47% sequentially to 17,812 barrels of oil equivalent per day, above the midpoint of Vaalco's guidance range, while production of 16,688 BOEPD rose about 10% from the first quarter though it remained 2% below the year-earlier level. Net revenue climbed 116% to $135.2 million from $62.6 million, aided by the timing of two Gabon liftings during the quarter versus none in the first quarter and an average realized price of $80.77 a barrel of oil equivalent, up 41% sequentially. Gabon alone generated $91.8 million in net revenue on sales priced at $94.79 a barrel, against $21.4 million in the first quarter.
The swing in earnings was reinforced by cost items that moved in Vaalco's favor. Exploration expense fell to just $0.1 million from $22.4 million in the first quarter, when the company absorbed costs from an unsuccessful West Etame well and Niosi/Guduma seismic work. The company also recorded a net gain on derivative instruments of $18.7 million, a reversal from a $94.2 million derivative loss in the first quarter that had driven that period's net loss. Those gains were partly offset by higher production expense, which rose 61% to $45.5 million as volumes increased, and by depreciation, depletion and amortization, which nearly doubled to $34.3 million.
Adjusted EBITDAX totaled $54.8 million, nearly five times the first quarter's $11.6 million and up 10% from $49.9 million a year earlier. For the first half of 2024, Vaalco posted a net loss of $51.3 million on sales of 2,715 thousand barrels of oil equivalent, down from net income of $16.1 million on 3,481 thousand barrels in the same period last year, a decline attributed to the February divestment of its Canadian assets, Côte d'Ivoire downtime and derivative losses. The Canada sale closed for roughly $25.5 million and removed about 1,850 BOEPD of production, with the segment showing zero volumes in the second quarter.
Vaalco guided for third-quarter sales of 17,200 to 18,900 NRI barrels of oil per day and production of 19,600 to 21,600 NRI barrels per day, the latter implying a 23% increase at the midpoint from second-quarter levels as Côte d'Ivoire output ramps for a full quarter. Full-year 2024 guidance was left unchanged from the increase issued in May, calling for production up 8% and sales up 12% at the midpoint, with the capital budget also held flat despite added drilling planned in Egypt. Second-quarter capital expenditures of $103.6 million rose from $78.1 million in the first quarter but came in below the low end of prior guidance of $110 million to $130 million.
Vaalco's balance sheet showed further improvement in Egypt, where trade receivables fell to $12.9 million at June 30 from $24.2 million at the end of the first quarter and $31.6 million at the end of 2023, extending a multi-quarter collection trend. Long-term debt stood at $177.0 million, with $123.0 million of liquidity remaining on a revolving credit facility that lenders expanded to a $300.0 million maximum commitment in April, up from $255 million at year-end. Cash and equivalents declined to $30.4 million from $58.9 million at the end of 2023.
The company declared a quarterly dividend of $0.0625 a share for the fourth consecutive quarter, holding the payout unchanged even as it directed cash toward the Baobab restart and Egypt drilling.