Vaalco Energy (NYSE:EGY) outlined its approach to investing in African oil and gas assets, emphasizing established infrastructure, production-sharing contracts and opportunities created as major energy companies divest mature positions in favor of ultra-deepwater projects.
Speaking with Water Tower Research analyst Jeff Robertson, VAALCO representative Ron said Africa offers underinvested basins, existing export routes and growing domestic energy demand. He said production-sharing contracts can align government and contractor interests while providing a framework for recovering capital investments through production barrels.
Portfolio spans Gabon, Egypt and Côte d’Ivoire
VAALCO’s core operated asset is the Etame field offshore Gabon, where the company has held an interest since 2002 and production began in 2004. Ron said Etame continues to produce approximately 17,000 barrels per day and has cumulatively produced about 150 million barrels of oil.
After Sasol elected to sell its working interest in the Etame license in 2021, VAALCO increased its position in the asset. Ron described Gabon as a prolific asset base for the company and said its experience operating offshore there has built capabilities across geology, reservoir management, engineering and operations.
Egypt became part of VAALCO’s portfolio through its 2022 acquisition of TransGlobe. Ron said the transaction added production, reserves and cash flow while creating savings from combining two public-company structures. He described Egypt as a stable cash-flow business with low onshore lifting and finding-and-development costs that can be scaled up or down depending on the economic environment.
VAALCO typically maintains Egyptian production between 10,000 and 12,000 barrels per day, according to Ron. He said the business performed particularly well in 2025.
In Côte d’Ivoire, VAALCO acquired Svenska’s interest in the Baobab field in 2024, partnering with operator Canadian Natural Resources. Ron said VAALCO paid approximately $42 million in net cash, or roughly $9,000 per fluid barrel at the time. He said the acquisition had paid itself back before the field’s floating production, storage and offloading vessel left for refurbishment in 2025. The vessel has since returned to production, contributing about 4,500 barrels per day to VAALCO.
Contract structures shape returns and investment decisions
Ron said VAALCO’s production-sharing contracts generally compensate the company through production barrels, allowing it to recover operating and capital costs up to specified ceilings before remaining “profit oil” is shared with the state.
In Gabon and Côte d’Ivoire, VAALCO has cost-recovery ceilings of 80%, he said. In Gabon, the company’s stated profit-oil share is 45%, compared with 55% for the state. In Côte d’Ivoire, VAALCO’s share is 53%, while the state receives 47%.
Côte d’Ivoire also provides capital-spending uplifts, Ron said. The Baobab CI-40 license provides a 25% uplift for each capital dollar spent, while the CI-705 block provides a 15% uplift. VAALCO secured the CI-705 license for $3 million after establishing local personnel and relationships following its Baobab entry, he said.
Egypt’s cost-recovery ceiling is lower, at 40%, Ron said. However, he said the country’s contract structure can shift more barrels to the contractor during lower commodity-price periods, while higher prices allocate more to the state. Ron also said VAALCO does not pay additional corporate cash taxes in Gabon, Côte d’Ivoire and Egypt because profit-oil barrels settle taxes in-country.
Higher oil prices can accelerate cost recovery, Ron said, citing VAALCO’s experience after the company accumulated a cost pool from its Gabon FPSO-to-FSO changeout and drilling activity. Following the Russia-Ukraine conflict and higher oil prices in 2022 and 2023, he said the company recovered that cost pool within approximately 12 months.
Development pipeline and capital priorities
Ron said VAALCO evaluates projects using a long-term Brent oil-price assumption of about $65 per barrel, alongside assessments of reservoir quality, drilling and subsurface risks, returns and government take over the life of a field.
The company is advancing several development opportunities, including the Venus development in Equatorial Guinea and the Kossipo project, where VAALCO is now operator with a 60% working interest. Ron said the company expects to pursue a sanctioned development plan for Kossipo in 2027. VAALCO also expects its Phase V drilling program in Côte d’Ivoire to continue through the first and second quarters of 2027.
Following its recent capital-intensive period, Ron said VAALCO expects to have more production, sellable barrels and free cash flow after 2027, creating opportunities to reinvest in its project portfolio.
The company also plans to maintain shareholder returns as part of its capital-allocation framework. Ron said VAALCO introduced a dividend in 2021, initially based on a roughly 4% to 5% yield and a $65 Brent price assumption, and doubled it in 2022. The company has also used share repurchases when commodity prices were high and capital-project competition was lower.
“Collectively we’ve returned over $130 million since 2021,” Ron said, adding that the dividend remains a recurring priority in VAALCO’s annual budgeting process.
About Vaalco Energy (NYSE:EGY)
VAALCO Energy, Inc is an independent energy company engaged in the acquisition, exploration, development and production of crude oil and natural gas. Headquartered in Houston, Texas, the company focuses primarily on international upstream oil and gas activities.
VAALCO’s operations have included offshore and onshore assets in Africa, with interests in the Etame Marin field offshore Gabon and producing properties in Egypt. The company has also held exploration and development interests in Equatorial Guinea and Canada.
