# TO OUR FELLOW
SHAREHOLDERS

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-e-p/NYSE_EGY_2019/NYSE_EGY_2019.mmd` · pages 3-9_

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TO OUR FELLOW
SHAREHOLDERS

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VAALCO executed extremely well in 2019 and into the first quarter of 2020. Much of this success was made possible due to a number of accomplishments we achieved over the past several years that transformed VAALCO into a focused and financially strong company.

In 2018, we strengthened VAALCO's financial position by eliminating all outstanding debt and began building our cash position in anticipation of a future drilling campaign. Later that year, we were able to negotiate the extension of our Production Sharing Contract (PSC) at our Etaem Marin field offshore Gabon, which established a long-term time horizon for reserve growth and continued production for up to 20 more years. This provided VAALCO the runway necessary to maximize value, grow reserves and increase production from our world-class Etaem asset. In the first half of 2019, we were able to remove the $15 million obligation associated with our exit
CARY BOUNDS
Chief Executive Officer

of Angola by completing a settlement agreement for $4.5 million in cash and the elimination of the $3.3 million receivable from Sonangol. This agreement removes all outstanding liabilities and obligations for VAALCO related to Block 5 in Angola. On September 26, 2019, we began trading on the London Stock Exchange under the trading symbol "EGY" which complements our listing on the New York Stock Exchange by providing us the opportunity to diversify our shareholder base, attract additional research coverage and provide VAALCO with potential access to additional sources of capital to help fund future opportunities.

All of these accomplishments, the most important of which was the PSC extension in Gabon, paved the way for our highly successful Etaem field 2019/2020 offshore drilling and workover program that we began in September 2019. In conjunction with the PSC extension, we

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committed to drilling at least two development wells and two appraisal wellbores. In September 2019, we commenced the 2019/2020 drilling campaign and fulfilled the commitments under the PSC extension by drilling three development wells and two appraisal wellbores. The campaign was highly successful and details of the three development wells and two appraisal wellbores are included on page one of this report. In addition, we used the drilling rig to conduct two workovers during the campaign to save costs and efficiently bring production back online.

We were able to execute the entire drilling program on time, within our initial budget and with cash on hand and through operational cash flow. We expect our 2020 net revenue interest (NRI) production to be approximately 35% higher than our 2019 full year NRI average production of 3,476 BOPD. This has helped to improve our margins and drive our estimated operational breakeven for 2020 down to 31 per barrel of realized pricing. In addition to strong operational performance, we saw solid financial results for 2019 as well. We reported net income of 2.6 million, or 0.04 per diluted share and generated 26.5 million in cash flow from operations. Most importantly, we have a strong balance sheet that is debt free with 45.9 million of cash at year-end 2019.

With all of that said, the global pandemic and energy industry events that began in late February of 2020 have been unprecedented. The world is battling COVID-19 which has disrupted our everyday lives and negatively impacted the worldwide economy. In addition, we have seen severe supply and demand pressures that have driven prices sharply lower for Brent crude. We believe our low operational breakeven, strong hedge position and increased production has put us in a much stronger position versus previous years. This is a cyclical business and we are

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managing through this downturn by focusing on the matters we are able to control such as our operating and G&A expenses and our capital expenditures.

Thanks goes out to all of our employees for their hard work and dedication, our Board for their leadership and guidance, and you, our shareholders, for your continued support. In particular, we want to recognize outgoing Board members, John Knapp and Steve Pully, for their insight and dedication. Both have served on our Board for several years, but will not be standing for re-election in 2020. Our Board is in the process of seeking candidates to fill those vacancies.

We have a high performing operations and finance team with the experience to navigate through downward cycles and a strong track record of operating responsibly. The pillars to achieve success are rooted in stakeholder engagement, operational excellence, and maintaining strong financial flexibility to execute on our long-term strategic vision.

We remain focused on environmental, social and governance (ESG) and maintaining our high standards for health, safety, environmental and ethics while stressing operational excellence at all levels. Our ongoing commitment to ESG is discussed in more detail following this letter. We remain positive about the long-term future and believe that VAALCO has been positioned to succeed and capitalize on the opportunities that lie ahead.

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Cary Bounds
Chief Executive Officer
April 29, 2020