Vaalco Posts $39.8M Q3 Loss on Hedging Hit
The oil producer's third-quarter loss came despite higher adjusted EBITDAX, as drilling in Egypt and Gabon continued through 2026.
Updated on Nov. 8, 2026 in Oil and Gas
Vaalco Energy reported a net loss of $39.8 million in the third quarter of 2026, after drilling and completing five development wells in Egypt during the period. The loss included $34.7 million in unrealized hedging losses.
Why it matters
Hedging losses and depletion expenses drove the swing from a $42.4 million net income in the second quarter, while higher realized commodity prices and sales volumes lifted adjusted EBITDAX. The results show how derivative positions can overwhelm operating gains for oil producers with active hedge books.
Vaalco's Q3 2026 net loss of $39.8 million compares with net income of $42.4 million in Q2 2026 and $1.1 million in Q3 2025. Adjusted EBITDAX rose 30% quarter-on-quarter to $71.1 million, while $34.7 million of unrealized hedging losses drove the reported result.
The players
Vaalco Energy
Vaalco Energy is an independent oil and gas company with production and exploration assets across West Africa and Egypt.
The details
Vaalco drilled and completed five development wells in Egypt during the third quarter and began drilling the HE-9 well in the Gulf of Suez in May 2026, completing it in early June. The company also finished its Gabon drilling campaign, released the rig in early October, and resumed production at the offshore Baobab field in Côte d'Ivoire in June.
Timeline
May 2026: Vaalco began drilling the HE-9 development well in the Gulf of Suez.
June 2026: The HE-9 well was completed and Baobab field production resumed in Côte d'Ivoire.
July 2026: Two additional development wells in Egypt were completed.
August 2026: First sales lifting at the Baobab field was completed.
October 2026: The Gabon drilling rig was released after the campaign concluded.
Market Landscape
Mark-to-market accounting for hedge books means oil producers can report large swings in net income driven by commodity price movements rather than operations. Vaalco's Q3 result follows that pattern, with operating metrics improving while unrealized hedging losses pushed the company into a reported loss.
For shareholders, the quarter shows how hedge positions can overwhelm operating gains in reported earnings. Investors tracking Vaalco should watch whether production growth from the Côte d'Ivoire wells translates into stronger net income in 2027.
The takeaway
Reported net income for oil producers can diverge sharply from operating performance when hedge books move. Readers evaluating energy stocks should look at adjusted measures alongside GAAP results.
What happens next
Vaalco's Phase Five drilling campaign in Côte d'Ivoire targets completion of the first well by the end of 2026, with additional wells expected to come online during the first half of 2027.
Further reading
For more on how producers manage price exposure, see the Oil and Gas section.
Source note: This article includes information reported by Egypt Oil & Gas | Connecting The Pieces.
