EGY · VAALCO Energy, Inc.

Results of Operations

Revenue for Q1 FY2026 was $62.6M, down 43.3% from $110.3M in Q1 FY2025. As stated in Item 2 — Management Discussion, this decrease was primarily due to the Canada Assets Divestment. That transaction removed the company’s only non-African operations and corresponding revenue stream, resulting in a material year-over-year reduction. Operating income declined to -$16.1M from $26.2M, producing an operating margin of -25.8%. This reflects not only lower revenue but also the impact of derivative losses, which increased significantly due to a higher volume of outstanding derivative contracts entered into during Q1 FY2026 relative to the prior year period. The Company notes that commodity price hedging remains central to its risk management, given that crude oil prices directly influence revenue, profitability, liquidity, and access to capital.

Net Income and Earnings Per Share

Net income was -$93.8M for Q1 FY2026, compared to $7.7M in Q1 FY2025 — a decline of 1313.0% on a percentage basis. Diluted earnings per share were -$0.90, versus $0.07 in the prior-year quarter. These results reflect the combined effect of lower revenue, negative operating income, and non-operating items including derivative losses. The magnitude of the net loss underscores the financial impact of both the strategic portfolio simplification and the accounting effects of active hedging in a volatile forward oil price environment.

Cash Flow from Operating Activities

Strategic Context

The Canada divestment aligns with VAALCO’s stated objective to focus on Africa-based assets and simplify its operational footprint. Management continues to emphasize disciplined capital allocation, cost control, and reserve recovery as levers to enhance shareholder value. The Company also reaffirms its commitment to monitoring evolving accounting standards and economic conditions to assess future reporting elections — underscoring ongoing attention to financial reporting integrity and adaptability.