Vaalco Energy (NYSE: EGY): Restart of CI in a few weeks. Focus on Kossipo

• The Baobab FPSO has arrived offshore South Africa and remains on schedule to reach Côte d’Ivoire in late March, keeping the planned 2Q26 restart on track. This milestone is critical to boost cash flow, particularly in the current high oil‑price environment.
• 2P reserves are estimated at 90.6 mmboe. Excluding the 13.7 mmboe associated with the Canadian assets sold in 1Q26, YE25 WI 2P reserves of 76.9 mmboe represent a slight increase versus YE24. With minimal exploration spend, Vaalco replaced 2.7 mmbbl of production in Gabon, 4.3 mmbbl in Egypt, and 0.3 mmbbl in Côte d’Ivoire.
• Vaalco expects 2026 production of 20.1–22.4 mbbl/d, as only one new Côte d’Ivoire well is anticipated to be onstream by YE26.
• FY26 capex is guided at US$268–336 mm (plus US$22–24 mm of RBL interest), comprising US$106–129 mm in Gabon, US$9–12 mm in Egypt, and US$152–193 mm in CI. While the overall budget is broadly in line with our US$280 mm expectation, CI spending is materially higher, and major expenditure in Equatorial Guinea is now deferred to 2027 as Vaalco evaluates options to enhance returns.
• The higher capex at CI reflects higher FPSO refurbishment costs (+US$30 mm net) and Vaalco’s strategy to partially drill most of the planned wells by YE26. We had assumed lower well costs (US$50 mm vs. US$60 mm), and the budget also includes US$15–20 mm for engineering and facility maintenance. Importantly, Vaalco recovers 1.25x its capex as cost oil, which mitigates the impact of higher spending. The plan also allocates US$5–10 mm to progress Kossipo toward FID.
• We forecast production to reach ~25 mbbl/d by YE26, increasing to ~28 mbbl/d in 2027. The investment case remains anchored in a fully funded doubling of production and a robust dividend (~5% yield).
• Incorporating FY26 guidance and the results of the Etame West ET‑14P exploration well, we revise our target price to US$10.5/sh.

Kossipo
With 24 mmbbl of WI 2P reserves and 82 mmboe of WI 2C resources, CI has become Vaalco’s most significant asset base. Sanctioning the Kossipo development could add up to ~60 mmboe to Vaalco’s 2P reserves. The FDP is expected to be submitted in 3Q26, and our production forecasts currently assume no contribution from Kossipo. The Kossipo‑2A well tested at over 7,000 boe/d, underscoring the quality of the discovery. Development options include either a stand‑alone platform or a tie‑back to Baobab.

Valuation
Our new ReNAV is US$10.40/sh including ~US$7.50/sh for CI. The value of Vaalco’s YE25 SEC proven reserves and WI 2P reserves is estimated at US$410 mm and US$859 mm, respectively, equivalent to approximately US$3.90/sh and US$8.15/sh. Vaalco ended YE25 with negligible net debt.