UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C.
20549
SCHEDULE 14A
(Rule
14a-101)
INFORMATION
REQUIRED IN PROXY STATEMENT
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment
No. )
Filed by
the Registrant ¨
Filed by
a Party other than the Registrant x
Check the
appropriate box:
x Preliminary
Proxy Statement
¨ Confidential,
for Use of the Commission Only (as permitted by Rule14a-6(e)(2))
¨ Definitive
Proxy Statement
¨ Definitive
Additional Materials
¨ Soliciting
Material Under Rule 14a-12
|
VAALCO
ENERGY, INC.
|
|
(Name
of Registrant as Specified in Its Charter)
|
|
NANES
DELORME PARTNERS I LP
NANES
BALKANY PARTNERS LLC
NANES
BALKANY MANAGEMENT LLC
JULIEN
BALKANY
DARYL
NANES
LEONARD
TOBOROFF
CLARENCE
COTTMAN III
|
|
(Name
of Persons(s) Filing Proxy Statement, if Other Than the
Registrant)
|
Payment
of Filing Fee (Check the appropriate box):
x No
fee required.
¨ Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
|
(4) Proposed
maximum aggregate value of transaction:
(5) Total
fee paid:
¨ Fee
paid previously with preliminary materials:
¨ Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount
previously paid:
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
-2-
PRELIMINARY
COPY SUBJECT TO COMPLETION
DATED
MAY 5, 2008
NANES
DELORME PARTNERS I LP
May
[ ], 2008
Dear
Fellow Stockholder:
Nanes
Delorme Partners I LP (“Nanes Delorme Partners”) and the other participants in
this solicitation are the beneficial owners of an aggregate of 4,700,000 shares
of common stock of VAALCO Energy, Inc. (“VAALCO” or the “Company”), representing
approximately 8.0% of the outstanding shares of common stock of the
Company. For the reasons set forth in the attached Proxy Statement,
we do not believe that the Board of Directors of the Company is acting in the
best interests of its stockholders. We are therefore seeking your
support at the annual meeting of stockholders (the “Annual Meeting”) scheduled
to be held at the Holiday Inn Houston-Near the Galleria, 3131 West Loop South,
Houston, Texas 77027 on June 4, 2008 at 10:00 a.m. (local time) for the
following:
|
|
1.
|
To
elect our three nominees (the “Nominees”) to the Board of Directors to
serve as Class I directors in opposition to the Company’s three incumbent
Class I directors whose terms expire at the Annual
Meeting;
|
|
|
2.
|
To
ratify the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for 2008;
and
|
|
|
3.
|
To
transact any other business that may properly come before the Annual
Meeting or any adjournment(s) of such
meeting.
|
We are
not seeking control of the Board of Directors at the Annual Meeting and our
Nominees if elected would represent a minority of the members of the
Board. However, we hope that this election contest sends a strong
message to the remaining incumbent directors that stockholders are not satisfied
with the Company’s current performance, management and corporate
governance.
We
urge you to carefully consider the information contained in the attached Proxy
Statement and then support our efforts by signing, dating and returning the
enclosed GOLD proxy card today. The attached Proxy Statement and the
enclosed GOLD proxy card are first being furnished to the stockholders on or
about May [ ], 2008.
If you
have already voted for the incumbent management slate, you have every right to
change your vote by signing, dating and returning a later dated
proxy.
If you
have any questions or require any assistance with your vote, please contact
MacKenzie Partners, Inc., which is assisting us, at their address and toll-free
numbers listed on the following page.
|
Thank
you for your support.
|
|
|
/s/
Julien Balkany
|
|
|
Julien
Balkany
|
|
|
Nanes
Delorme Partners I LP
|
-3-
|
If
you have any questions, require assistance in voting your GOLD proxy
card,
or
need additional copies of our proxy materials, please call
MacKenzie
Partners, Inc. at the phone numbers listed below.
|
105
Madison Avenue
New York,
New York 10016
(212)
929-5500 (Call Collect)
proxy@mackenziepartners.com
or
CALL TOLL
FREE (800) 322-2885
-4-
2008
ANNUAL MEETING OF STOCKHOLDERS
OF
VAALCO
ENERGY, INC.
_________________________
PROXY
STATEMENT
OF
NANES
DELORME PARTNERS I LP
_________________________
PLEASE
SIGN, DATE AND MAIL THE ENCLOSED GOLD PROXY CARD TODAY
Nanes
Delorme Partners I LP (“Nanes Delorme Partners”) is the largest stockholder of
VAALCO Energy, Inc. (“VAALCO” or the “Company”). We do not believe
that the Board of Directors of the Company (the “Board”) is acting in the best
interests of its stockholders. We are therefore seeking your support
at the annual meeting of stockholders scheduled to be held at the Holiday Inn
Houston-Near the Galleria, 3131 West Loop South, Houston, Texas 77027 on June 4,
2008 at 10:00 a.m. (local time), including any adjournments or postponements
thereof and any meeting which may be called in lieu thereof (the “Annual
Meeting”), for the following:
|
|
1.
|
To
elect our three director nominees, Julien Balkany, Leonard Toboroff and
Clarence Cottman III (collectively, the “Nominees”) to serve as Class I
directors of the Company in opposition to the Company’s three incumbent
Class I directors whose terms expire at the Annual
Meeting;
|
|
|
2.
|
To
ratify the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for 2008;
and
|
|
|
3.
|
To
transact any other business that may properly come before the Annual
Meeting or any adjournment(s) of such
meeting.
|
This
Proxy Statement is soliciting proxies to elect only our
Nominees. Accordingly, the enclosed GOLD proxy card may only be voted
for our Nominees and does not confer voting power with respect to any of the
Company’s director nominees. Stockholders who return the GOLD proxy
card will only be able to vote for Nanes Delorme Partners’ three
nominees. See “Voting and Proxy Procedures” on page 16 for additional
information. You can only vote for the Company’s director nominees by
signing and returning a proxy card provided by the
Company. Stockholders should refer to the Company’s proxy statement
for the names, backgrounds, qualifications and other information concerning the
Company’s nominees. The participants in this solicitation intend to
vote all of their shares of common stock in favor of the Nominees and will not
vote their shares in favor of any of the Company’s nominees.
Nanes
Delorme Partners, Nanes Balkany Partners LLC, a Delaware limited liability
company (“Nanes Balkany Partners”), Nanes Balkany Management LLC, a Delaware
limited liability company (“Nanes Balkany Management”), Julien Balkany (“Mr.
Balkany”), Daryl Nanes (“Mr. Nanes” and, together with Nanes Delorme Partners,
Nanes Balkany Partners, Nanes Balkany Management and Mr. Balkany, the “Nanes
Balkany Group”), Leonard Toboroff (“Mr. Toboroff”) and Clarence Cottman III
(“Mr. Cottman”) are members of a group formed in connection with this proxy
solicitation and are deemed participants in this proxy
solicitation.
As of
May [ ], 2008, the approximate date on which this Proxy
Statement is being mailed to stockholders, Nanes Delorme Partners, along with
the other participants in this solicitation, were the beneficial owners of an
aggregate of 4,700,000 shares of common stock of the Company, par value $0.10
per share (the “Shares”), which currently represent approximately 8.0% of the
issued and outstanding Shares, all of which are entitled to be voted at the
Annual Meeting.
VAALCO
has set the record date for determining stockholders entitled to notice of and
to vote at the Annual Meeting as April 14, 2008 (the “Record
Date”). The mailing address of the principal executive offices of
VAALCO is 4600 Post Oak Place, Suite 309, Houston, Texas
77027. Stockholders of record at the close of business on the Record
Date will be entitled to vote at the Annual Meeting. According to the
Company, as of the Record Date, there were 59,194,182 Shares outstanding and
entitled to vote at the Annual Meeting. The participants in this
solicitation intend to vote all of their Shares FOR the election of the
Nominees.
THIS
SOLICITATION IS BEING MADE BY NANES DELORME PARTNERS AND NOT ON BEHALF OF THE
BOARD OR MANAGEMENT OF THE COMPANY. NANES DELORME PARTNERS IS NOT
AWARE OF ANY OTHER MATTERS TO BE BROUGHT BEFORE THE ANNUAL
MEETING. SHOULD OTHER MATTERS, WHICH NANES DELORME PARTNERS IS NOT
AWARE OF A REASONABLE TIME BEFORE THIS SOLICITATION, BE BROUGHT BEFORE THE
ANNUAL MEETING, THE PERSONS NAMED AS PROXIES IN THE ENCLOSED GOLD PROXY CARD
WILL VOTE ON SUCH MATTERS IN THEIR DISCRETION.
NANES
DELORME PARTNERS URGES YOU TO SIGN, DATE AND RETURN THE GOLD PROXY CARD IN FAVOR
OF THE ELECTION OF THE NOMINEES.
IF YOU
HAVE ALREADY SENT A PROXY CARD FURNISHED BY VAALCO MANAGEMENT TO THE COMPANY,
YOU MAY REVOKE THAT PROXY AND VOTE FOR THE ELECTION OF THE NOMINEES BY SIGNING,
DATING AND RETURNING THE ENCLOSED GOLD PROXY CARD. THE LATEST DATED
PROXY IS THE ONLY ONE THAT COUNTS. ANY PROXY MAY BE REVOKED AT ANY
TIME PRIOR TO THE ANNUAL MEETING BY DELIVERING A WRITTEN NOTICE OF REVOCATION OR
A LATER DATED PROXY FOR THE ANNUAL MEETING TO NANES DELORME PARTNERS, C/O
MACKENZIE PARTNERS, INC., WHICH IS ASSISTING IN THIS SOLICITATION, OR TO THE
SECRETARY OF VAALCO, OR BY VOTING IN PERSON AT THE ANNUAL MEETING.
-2-
IMPORTANT
Your
vote is important, no matter how few Shares you own. Nanes Delorme
Partners urges you to sign, date, and return the enclosed GOLD proxy card today
to vote FOR the election of the Nominees.
|
·
|
If
your Shares are registered in your own name, please sign and date the
enclosed GOLD
proxy card and return it to Nanes Delorme Partners, c/o MacKenzie
Partners, Inc. in the enclosed envelope
today.
|
|
·
|
If
your Shares are held in a brokerage account or bank, you are considered
the beneficial owner of the Shares, and these proxy materials, together
with a GOLD voting
form, are being forwarded to you by your broker or bank. As a
beneficial owner, you must instruct your broker, trustee or other
representative how to vote. Your broker cannot vote your Shares
on your behalf without your instructions. You may also request
a proxy from your broker, trustee or other representative for your Shares
in order to vote your Shares in person at the Annual
Meeting.
|
|
·
|
Depending
upon your broker or custodian, you may be able to vote either by toll-free
telephone or by the Internet. Please refer to the enclosed
voting form for instructions on how to vote electronically. You
may also vote by signing, dating and returning the enclosed voting
form.
|
Since
only your latest dated proxy card will count, we urge you not to return any
proxy card you receive from the Company. Even if you return the
management proxy card marked “withhold” as a protest against the incumbent
directors, it will revoke any proxy card you may have previously sent to Nanes
Delorme Partners. Remember, you can vote for our three nominees only
on our GOLD proxy
card. So please make certain that the latest dated proxy card you
return is the GOLD proxy
card.
If you
have any questions regarding your proxy,
or need
assistance in voting your Shares, please call:
105
Madison Avenue
New York,
New York 10016
(212)
929-5500 (Call Collect)
proxy@mackenziepartners.com
or
CALL TOLL
FREE (800) 322-2885
-3-
BACKGROUND
TO OUR SOLICITATION
Nanes
Delorme Partners is currently the beneficial owner of 4,700,000 Shares,
representing approximately 8.0% of the issued and outstanding voting securities
of VAALCO.
On March
11, 2008, Nanes Delorme Partners sent a letter to the Board describing numerous
concerns it had with the Company’s management and operations and proposing,
among other things, that the Company could maximize value by evaluating a range
of strategic alternatives, including the possible sale of the entire Company or
the divestiture of its valuable West African portfolio.
On
April 11, 2008, we delivered a second letter to the Company nominating the
Nominees for election to the Board at the Annual Meeting (the “Nomination
Letter”). On April 15, 2008, certain representatives of Nanes Delorme
Partners met with Robert L. Gerry, III, the Company’s Chairman and Chief
Executive Officer and W. Russell Scheirman, II, the Company’s President and
Chief Financial Officer, to discuss the Nomination Letter and to discuss our
principal concerns regarding the Company.
On April
18, 2008, certain representatives of Nanes Delorme Partners had a conference
call with Messrs. Gerry and Scheirman to further discuss our concerns and a
possible resolution to our nominations without the need for a proxy
contest.
On April
21, 2008, we received an unsolicited settlement agreement from the Company’s
counsel whereby the Company agreed to increase the size of the Board from seven
(7) to eight (8) directors and take all necessary action to appoint Julien
Balkany to the Board, provided, among other
things, that Nanes Delorme Partners (i) agrees to vote all shares owned by it in
favor of the Board’s nominees for director during the entire time Mr. Balkany
would serve on the Board, and for six months thereafter, (ii) withdraws the
Nomination Letter and ceases the solicitation of proxies or written consents of
stockholders with respect to the election of directors of the Company and (iii)
continues to own at least 5% of the outstanding stock of the Company for such
period of time that our nominee serves on the Board.
On April
22, 2008, we notified the Company of our intention not to proceed with the
Company’s settlement offer because it failed to address several material terms
that we would require as part of any settlement including, the addition of all
three of our nominees to the Board, the creation of an independent special
committee to explore all strategic alternatives, the appointment of a first tier
investment bank to advise such committee, a public announcement that the Company
will discontinue expansion of operations in the UK North Sea region and refocus
its efforts and resources on the Company’s core geographic area in West Africa,
the commencement of a process to identify and appoint a qualified Chief
Operating Officer, and numerous corporate governance issues such as the
declassification of the staggered board, separation of the role of Chairman and
Chief Executive Officer, termination of the supermajority voting provisions,
redemption of the poison pill and elimination of VAALCO’s anti-takeover
provisions. We invited the Company to contact us to discuss these
points further.
-4-
On April
23, 2008, the Company’s counsel notified our counsel that they would discuss our
terms with the Company. The following day, the Company filed their
proxy statement with the Securities and Exchange
Commission. Accordingly, we decided to proceed with this
solicitation.
-5-
REASONS
FOR OUR SOLICITATION
We are
the largest stockholder of the Company. Nanes Delorme Partners and
the other participants in this solicitation collectively own in the aggregate a
total of 4,700,000 Shares, representing approximately 8.0% of the issued and
outstanding common stock of the Company, which Shares were purchased in the open
market, except as otherwise noted on Schedule I. We have one simple
goal – to maximize the value of
the Shares for all stockholders.
Our
Nominees will attempt to work with other members of the Board to actually pursue
options that we believe are in the best interests of all stockholders and which
have the ability to maximize stockholder value. Nanes Delorme
Partners is not attempting to take control of the Company. If our
Nominees are elected to the Board, they will comprise a minority of the
Board.
We do not
believe that the incumbent Board has served the best interests of the Company’s
stockholders. We question the ability of the incumbent Board to
improve the Company’s operating performance, corporate governance structure,
future strategic direction and enhance stockholder value. Without
change to the current Board, we also fear that the Company’s intrinsic value may
continue to erode under the continued unchecked stewardship of current senior
management.
Specifically,
our concerns include the following:
|
|
·
|
VAALCO’s disappointing stock
performance;
|
|
|
·
|
Management’s ill-advised oil
exploration diversification in the UK North
Sea;
|
|
|
·
|
Management’s failure to retain
an investment banker and consider a sale of the Company and other
strategic options; and
|
|
|
·
|
VAALCO’s stockholder unfriendly
corporate governance.
|
We
believe VAALCO’s stock price is significantly undervalued due to management and
the Board’s continued poor decisions. We do not believe that VAALCO
should remain a public company listed on the NYSE.
We
established an ownership position in VAALCO based on the belief that VAALCO is a
company which has first class oil and gas properties, with a balanced portfolio
of assets and substantial exploration upside in Angola and Gabon, which
generates significant cash flow. However, despite these positive
factors, we believe VAALCO is significantly
undervalued. Responsibility lies with existing management and the
current Board’s operational missteps. For example, we estimate the
total net asset value (“NAV”) of the Company at approximately $420 million,
which translates into approximately $7.12 per share (the table below describes
the basis for our estimate of NAV). Yet, since January 1, 2008,
VAALCO’s shares have traded as low as $3.99 and have only begun to trade higher
since we publicized our concerns in early March. Since we have
publicly disclosed our investment in VAALCO on March 11, 2008 through April 24,
2008, VAALCO’s stock has increased by 33%, illustrating the strong expectation
by stockholders and investors of immediate and substantial
changes. We believe VAALCO should refocus its efforts and resources
on the Company’s core geographical area in West Africa and significantly reduce
spending and management’s efforts in the UK North Sea.
-6-
The
estimate of NAV is based on the following calculation:
|
Est.
Value ($MM)
|
Est.
Value / Share
|
|||||||
|
Estimated
NPV for the Etame Permit ( Producing Assets Gabon) (1)
|
220 | $ | 3.73 | |||||
|
African
Exploration Assets (2)
|
110 | $ | 1.86 | |||||
|
North
Sea Interest (3)
|
(15 | ) | $ | (0.25 | ) | |||
|
Other
Assets (including Texas and Gulf of Mexico Properties)
|
5 | $ | 0.08 | |||||
|
Net
Debt
|
(5 | ) | $ | (0.08 | ) | |||
|
Cash
in Bank (4)
|
105 | $ | 1.78 | |||||
|
Implied
Total NAV for VAALCO Energy, Inc.
|
420 | $ | 7.12 | |||||
|
(1)
Discounted net present value at 10% (post-tax) of proved and probable (2P)
reserves for VAALCO in the Etame Permit, as of December 31, 2007 and using
a long term oil price of $75 per barrel. 2P reserves are based on the
information published on slide 25 of the Company Corporate Presentation at
Pritchard Energy Conference in January 20 and posted on the Company’s
website.
|
|
(2) Exploration
risked value for the Company’s 100% interest in the Mutumba field (Gabon)
and for its 40% working interest in the offshore Block 5
(Angola)
|
|
(3)
Future liability due to the payment of a significant portion of the well
cost on Block 48/25c
|
|
(4)
According to slide 24 of the Company Corporate Presentation at Pritchard
Energy Conference in January 2008
|
|
The
estimates and information shown above represent the opinions of Nanes
Delorme Partners I LP based on all publicly available information of which
it is aware and should not be regarded by any recipient as providing the
basis for any investment decision nor should it be interpreted as a
fairness opinion.
|
VAALCO’s
stock price has continued to trade at a substantial discount to VAALCO’s E&P
peers using virtually all relevant comparable valuation metrics. As illustrated
below, VAALCO recently has traded at a total enterprise value to 2008 estimated
EBITDA of approximately 3.1x, compared to recent multiples of approximately 8.0x
for its selected group of E&P peers which are all part of the small cap JP
Morgan E&P coverage universe (see below table). Moreover, while
the Company trades at a recent price to earnings ratio of approximately 9.5x,
its peers trade at significantly higher multiples of approximately 15.6x based
on the Bear Stearns E&P Index.
-7-
|
Summary
Small E&P comparable trading multiples (as of April 21,
2008)
|
|||||||||
|
Small
Cap Companies (< $2bn)
|
Ticker
|
EV/
EBITDA
|
|||||||
|
Selected
E&P Peer Group
(JP
Morgan E&P Coverage Universe)
|
2008E
|
2009E
|
|||||||
|
Approach
Resources
|
AREX
|
7.3 | x | 7.0 | x | ||||
|
Brigham
Exploration
|
BEXP
|
7.2 | x | 6.5 | x | ||||
|
Carrizo
Oil & Gas
|
CRZO
|
13.8 | x | 10.1 | x | ||||
|
Concho
Resources
|
CXO
|
8.4 | x | 7.2 | x | ||||
|
Delta
Petroleum
|
DPTR
|
25.0 | x | 15.7 | x | ||||
|
Edge
Petroleum
|
EPEX
|
5.1 | x | 6.2 | x | ||||
|
Encore
Acquisition Co.
|
EAC
|
6.9 | x | 7.2 | x | ||||
|
Endeavour
International
|
END
|
4.0 | x | 4.7 | x | ||||
|
Gasco
Energy
|
GSX
|
16.3 | x | 9.8 | x | ||||
|
Goodrich
Petroleum
|
GDP
|
11.8 | x | 7.0 | x | ||||
|
Mariner
Energy
|
ME
|
3.4 | x | 3.2 | x | ||||
|
McMoRan
Exploration
|
MMR
|
4.3 | x | 4.0 | x | ||||
|
Penn
Virginia
|
PVA
|
6.2 | x | 4.8 | x | ||||
|
PetroQuest
Energy
|
PQ
|
5.2 | x | 4.5 | x | ||||
|
Stone
Energy
|
SGY
|
3.1 | x | 3.0 | x | ||||
|
Swift
Energy
|
SFY
|
4.4 | x | 3.9 | x | ||||
|
Venoco
|
VQ
|
5.4 | x | 5.1 | x | ||||
|
Whiting
Petroleum
|
WLL
|
7.4 | x | 6.9 | x | ||||
|
Select
E&P Peer Group Average
|
8.0 | x | 6.5 | x | |||||
None
of the E&P peers are primarily focused on West Africa. To best of our
knowledge no other small E&P companies listed in the US are primarily
deriving their production and reserves from Africa.
| P / E |
EV/
EBITDA
|
|||||||||||||||
| 2008E | 2009E | 2007E | 2008E | |||||||||||||
|
Bear
Stearns E&P Index*
|
15.6 | x | 13.4 | x | 5.9 | x | 5.1 | x | ||||||||
|
VAALCO
Energy
|
9.5 | x | 8.7 | x | 3.1 | x | 2.8 | x | ||||||||
|
*
until April 21, 2008
|
||
|
Source:
Bloomberg, companies reports, Bear Stearns & Co. Inc. and JPMorgan
estimates
|
||
-8-
In
addition, VAALCO’s underperforming stock price is further illustrated when
taking into account the value of similar M&A transactions in Africa where
VAALCO’s core assets are located.
|
Date
|
Acquirer
|
Seller
|
Price
($MM)
|
Description
of the Transaction
|
2P Reserves(1)
|
$
/ 2P(1)
|
||||||||
|
Aug-06
|
Addax
|
PanOcean
|
1,400
|
Addax
acquired PanOcean Energy, a Canadian E&P company with all its assets
located in Gabon. Its core holding was its 31% interest in the Etame
Permit.
|
67MMBOE(2)
|
$21
|
||||||||
|
Nov-07
|
Oranje-Nassau
|
Devon
Energy
|
206
|
Devon
sold its 18.75% non-operated interest in the Kowe Block, offshore Gabon to
Oranje- Nassau.
|
10MMBOE(3)
|
$21
|
||||||||
|
This
implies a value of $221MM for VAALCO's 28% interest in the Etame
Permit
|
10.5MMBOE(4)
|
$21
|
||||||||||||
(1) Net
proved and probable reserves in million barrels of oil
equivalent
(2)
According to Addax public presentation of the transaction on July 20th,
2006
(3)
According to Devon introduction of the transaction and to John S. Herold,
Inc. estimates
(4)
According to slide 25 of the Company Corporate Presentation at Pritchard
Energy Conference in January 2008
Source:
Nanes Delorme Partners I LP and John S. Herold, Inc. estimates
The
Securities and Exchange Commission (SEC) only permits oil and gas companies, in
filings with the SEC, to disclose proved reserves that a company has
demonstrated by actual production or conclusive formation tests to be
economically and legally producible under existing economic and operating
conditions. We use certain terms in this filing, such as probable reserves, to
describe volumes of reserves potentially recoverable through additional drilling
or recovery techniques that are non-GAAP measures. These estimates are by their
nature more speculative than estimates of proved reserves and accordingly are
subject to substantially greater risk of being actually realized by
VAALCO.
In spite
of record oil prices and a portfolio of high quality oil and gas E&P
properties, the Company’s stock price remains depressed. In 2007 for
example, the share price fell approximately 30%, while the Standard & Poor's
Midcap Oil and Gas Exploration and Production Index (the “Index”) climbed nearly
45%. This underperformance has continued in the beginning of
2008. Although the share price of VAALCO has recently increased, we
believe the primary reason for this increase is due to our publicized concerns
in early March.
We
further believe that the NYSE is not the appropriate exchange to list a company
with core assets in West Africa. We believe listing on another
exchange could increase the trading volume and improve liquidity of the
Company.
Despite
this clear underperformance by the Company, we are unaware of any new or
promising initiatives commenced by management or the Board to address the
disappointing stock price. VAALCO needs directors who understand the
importance of maximizing stockholder value.
Management
has pursued an ill-advised oil exploration strategy in the UK North
Sea.
In our
opinion, VAALCO has been unwisely spending cash on acquiring and drilling minor
UK North Sea interests that have been total exploration failures. For
example, in January 2008, the Company revealed that it drilled a dry hole on the
9/28b-19A exploration well at a cost of $12 million, which includes $8.1 million
written down in the fourth quarter of 2008. The UK North Sea’s
production and reserves have been rapidly declining in recent years after
decades of exploration and is now widely known for not presenting nearly as much
upside as West Africa. The stock price of the only U.S. publicly
listed E&P company focused on the UK North Sea in 2007 has fallen by 41% in
that same year (Endeavour International Corp. – ticker: EAC). We feel this
illustrates the market’s current lack of interest and enthusiasm for this mature
petroleum region. Yet despite this trend, management continues
exploration in this area and plans to participate in another well exploration
during 2008, according to the Company’s 2007 annual report on Form
10-K. If elected, our Nominees would seek to convince the Board to
cease operations in the UK North Sea, close VAALCO’s office in Aberdeen, United
Kingdom and concentrate on the Company’s core geographical area in West
Africa.
-9-
We
believe the Board should evaluate a range of strategic alternatives, including
the possible sale of the entire Company.
We
believe VAALCO should immediately retain a top tier investment bank to review
all strategic alternatives. These strategic alternatives should
include, but not be limited to, the sale of the entire Company, the divesture of
certain assets, or to consider other ways to maximize the stock price such as
listing the shares on an alternative exchange. We believe, based on
conversations with numerous industry experts (including investment bankers who
specialize in the relevant industry), that an offer to sell the entire Company
through an auction process would likely attract several interested parties that
would offer a substantial premium to the current share price that we believe
stockholders of the Company would support.
We
believe, based on conversations with numerous industry experts (including energy
and petroleum executives and investment bankers who specialize in the relevant
industry), that the Board and VAALCO’s current management may have rebuffed
private inquiries regarding a potential acquisition of the Company at a
significant premium to its current share price on several
occasions. If true, this deepens our concern that the Board has
failed to fully explore all options to maximum value for
stockholders. If elected, our Nominees would explore all strategic
alternatives to ensure the maximization of stockholder value.
We
believe VAALCO has maintained poor corporate governance practices and there is
an urgent need to improve Board accountability.
Nanes
Delorme Partners believes that VAALCO has maintained poor corporate governance
practices that inhibit the accountability of management and directors to
stockholders. The following are examples of what we believe to be the
sub-standard corporate governance practices of VAALCO:
|
Need
to Separate the Role of Chairman and CEO:
|
The
Company has consolidated power in combining the role of Chairman and Chief
Executive Officer, which we believe represents a choice by the Company to
meet only the minimum requirements of effective
governance.
|
|
|
Staggered Board to be
Declassified and Institute Annual Election of
Directors:
|
For
years, VAALCO has maintained a “staggered” or classified board — a policy
which a 2002 study by Harvard University professors found typically
results in an 8% to 10% loss of value in companies targeted for
acquisition by an uninvited
suitor.
|
-10-
|
Supermajority
Voting Provisions:
|
Under
the Company’s Restated Certificate of Incorporation, the affirmative vote
of at least 66⅔% of stockholders entitled to vote is required in order to
amend the Company’s Restated Certificate of Incorporation or Amended and
Restated Bylaws, including rescinding the classified
Board.
|
|
|
Anti-takeover
Provisions:
|
·
Under the Company’s Restated Certificate of Incorporation, certain
business combinations require the approval of at least 80% of the
outstanding voting shares, unless previously approved by the Continuing
Directors (as defined in the Company’s Restated Certificate of
Incorporation).
·
Under the Company’s Restated Certificate of Incorporation and
Amended and Restated Bylaws, directors may only be removed from office
for cause.
|
|
|
Redemption
of the Poison Pill:
|
The
Shareholders Rights Plan or “poison pill” adopted by the Board in
September 2007 should be immediately redeemed. In our opinion,
it serves no reasonable purpose other than for the entrenchment of
directors and management.
|
Governance
provisions such as these are contrary to the guidelines for corporate governance
best practices issued by leading advocates of stockholder democracy, such as
Institutional Shareholder Services (ISS) and Glass, Lewis & Co.
We are
also concerned that management and the Board has not hired a new Chief Operating
Officer since Virgil A. Walston, Jr., the former Chief Operating Officer of the
Company vacated the office approximately 5 years ago.
If
elected, the Nominees will, subject to their fiduciary duties, lobby the Board
to eliminate the Company’s anti-takeover provisions and use their best efforts
to cause the Board to terminate the poison pill and implement corporate
governance reform while establishing an independent special committee to
evaluate and explore all potential alternatives to maximize stockholder
value.
We
believe the Nominees have the experience necessary to oversee an effort to
maximize stockholder value through a change in strategic direction and corporate
governance reforms.
We, as
the largest collective stockholder of VAALCO, have a vested financial interest
in the maximization of the value of your Shares. Our interests are
aligned with the interests of all stockholders. The Nominees have
extensive expertise in oil and gas transactions as further discussed in their
biographical extracts below. In particular, Mr. Cottman has over
twenty-five years of experience in the oil and gas industry. If
elected to the Board, the Nominees will endeavor to use their collective
experience to oversee the Company with a goal of implementing the strategic and
operational changes espoused by the participants in this solicitation as well as
exploring other alternatives to maximize stockholder value. There can
be no assurance that these goals will be achieved if the Nominees are
elected.
-11-
The
Nominees, if elected, will represent a minority of the Board. Under
the Company’s Restated Certificate of Incorporation certain transactions,
including a sale of the Company, require that unless a sale of the Company is
first approved by a majority of “Continuing Directors,” then a sale of the
Company must be approved by the affirmative vote of the holders of at least 80%
of the Shares. The Nominees, if elected, would not be considered
“Continuing Directors” and will not be able to approve a sale as a “Continuing
director.” Accordingly, either a majority of the “Continuing
Directors” would need to approve a sale of the Company or it would be necessary
to obtain the affirmative vote of the holders of at least 80% of the
Shares. If elected, the Nominees will, subject to their fiduciary
duties as directors, work with the other members of the Board to take those
steps that they deem are necessary to maximize stockholder
value. Although the Nominees will not be able to adopt any measures
without the support of at least some members of the current Board, we believe
that the election of the Nominees will send a strong message to the
Board.
WE
BELIEVE THE ELECTION OF THE NOMINEES TO THE BOARD, TOGETHER
WITH THE
CHANGES THEY WILL TRY TO IMPLEMENT, WILL INCREASE MANAGEMENT AND DIRECTORS’
ACCOUNTABILITY, BETTER ALIGN THEM WITH VAALCO’S STOCKHOLDERS AND REPRESENT THE
BEST OPPORTUNITY FOR STOCKHOLDERS TO MAXIMIZE THE VALUE OF THEIR
SHARES.
-12-
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
The Board
is currently composed of seven directors divided into three classes serving
staggered three-year terms, with one class of directors elected by stockholders
annually. We believe three Class I directors’ terms expire at the
Annual Meeting. We are seeking your support at the Annual Meeting to
elect the Nominees as Class I directors in opposition to the three incumbent
Class I directors of VAALCO. If elected, the Nominees will represent
a minority of the members of the Board.
THE
NOMINEES
Set
forth below are the name, age, business address, present principal occupation,
and employment and material occupations, positions, offices, or employments for
the past five years of each of the Nominees. This information has
been furnished to Nanes Delorme Partners by the Nominees. Each of the
Nominees is independent accordance with Securities and Exchange Commission and
New York Stock Exchange rules on director independence. Each of the
Nominees is a citizen of the United States of America, except for Mr. Balkany
who is a citizen of France.
Julien Balkany (Age 27), a French citizen, has
been serving as a managing member of Nanes Balkany Partners, the general partner
of Nanes Delorme Partners, a U.S.-based hedge fund, since January
2008. Nanes Delorme Partners pursues active investments in publicly
traded oil and gas exploration and production
companies. Concomitantly, Mr. Balkany has been a Managing Director at
Nanes Delorme Capital Management LLC, a New York based financial advisory and
broker-dealer firm, managing its oil and gas investment banking business, since
2005. Mr. Balkany has executed several hundred million dollars worth
of oil & gas transactions on both the buy-side and sell-side. Mr.
Balkany’s most notable M&A assignments in Africa have included advising
Maurel & Prom, Heritage Oil Corp, Afren Plc, Perenco, Vitol, Candax Energy,
Carthago Oil, Range Energy and Surestream Petroleum. Before joining
Nanes Delorme Partners and Nanes Delorme Capital Management LLC, Mr. Balkany
worked at Pierson Capital, a U.S. private investment firm focused primarily on
emerging markets, from 2003 to 2005. Prior to that Mr. Balkany gained
significant expertise in the Latin America Debt Capital Markets Group of Bear
Stearns. Mr. Balkany studied Political Science at the Institute of
Political Studies (France) and Finance at UC Berkeley. Mr. Balkany is
also fluent in French and Spanish.
Leonard Toboroff (Age 75), a United States
citizen, has been serving as a director and Vice Chairman of the Board of
Allis-Chalmers Energy Inc., a provider of products and services to the oil and
gas industry listed on the NYSE, since May 1989, and served as Executive Vice
President from May 1989 until February 2002. Concurrently, Mr.
Toboroff has been an Executive Director of Corinthian Capital Group, LLC, a
private equity fund, since October 2005, a director of Engex Corp., a closed-end
mutual fund, and a director of NOVT Corporation, a former developer of advanced
medical treatments for coronary and vascular disease, since April
2006. Mr. Toboroff has also been a director of SP Acquisition
Holdings Inc., a blank check company managed by Warren G. Lichtenstein and other
officers and directors of Steel Partners II, L.P. and its affiliates, since June
2007. Mr. Toboroff served as a director and Vice President of Varsity
Brands, Inc. (formerly Riddell Sports Inc.), a provider of goods and services to
the school spirit industry, from April 1998 until it was sold in September 2003.
Mr. Toboroff has previously served as a director of American Bakeries Co.,
Ameriscribe Corporation and Saratoga Spring Water Co. and has been a practicing
attorney continuously since 1961. Mr. Toboroff is a graduate of
Syracuse University and the University of Michigan Law School.
-13-
Clarence Cottman III (Age 52),
a United States citizen, has over twenty-five years of experience in the oil and
gas industry. Currently, Mr. Cottman has been the President and
Founder of Legacy Energy, Inc., a U.S. private oil and gas exploration and
production company with assets in Louisiana and California, since 2006, Vice
Chairman of PetroFalcon Corp. (ticker: PFC CN), an oil and gas exploration and
production company focused on Venezuela and listed on the Toronto Stock
Exchange, since 2007, a consultant to Vantage Marketplace, a wholly
owned-subsidiary of Goldman Sachs, since 2007, and a private investor in
numerous energy ventures. Mr. Cottman has served as Chief Financial
Officer and Director of PetroFalcon Corporation from 1999 until
2006. From 1997 to 2000, Mr. Cottman was Managing Director of Pacific
Oil and Gas LLC. Prior to co-founding Pacific Oil and Gas LLC, Mr.
Cottman was at Benton Oil & Gas from 1989 to 1997 where he held various
senior positions including Vice President of Business
Development. Mr. Cottman has also worked for Sun Exploration &
Production Company. Mr. Cottman holds a BA from Rochester Institute
of Technology and an MBA from the University of Rhode Island.
The
Nominees will not receive any compensation from Nanes Delorme Partners or the
other participants in this solicitation for their services as directors of
VAALCO. However, Messrs. Toboroff and Cottman have each received
$25,000 in compensation from Nanes Delorme Partners upon submission of the
Nomination Letter and will each receive, solely in the event that Nanes Delorme
Partners withdraws its nomination of any such nominee prior to the Annual
Meeting, other than as a result of such nominee failing to provide Nanes Delorme
Partners with information which it reasonably requests, an additional $25,000
within ten business days following the date of such withdrawal. In
addition, Nanes Delorme Partners and certain of its affiliates, have signed a
letter agreement pursuant to which they agree to indemnify Messrs. Toboroff and
Cottman against claims arising from the solicitation of proxies from VAALCO’s
stockholders in connection with the Annual Meeting and any related
transactions. Other than as stated herein, there are no arrangements
or understandings between the other participants in this solicitation and any of
the Nominees or any other person or persons pursuant to which the nomination of
the Nominees described herein is to be made, other than the consent by each of
the Nominees to be named in this Proxy Statement and to serve as a director of
VAALCO if elected as such at the Annual Meeting. None of the Nominees
are a party adverse to VAALCO or any of its subsidiaries or has a material
interest adverse to VAALCO or any of its subsidiaries in any material pending
legal proceedings.
We do not
expect that the Nominees will be unable to stand for election, but, in the event
that such persons are unable to serve or for good cause will not serve, the
Shares represented by the enclosed GOLD proxy card will be voted for substitute
nominees. In addition, Nanes Delorme Partners reserves the right to
nominate substitute persons if VAALCO makes or announces any changes to its
Amended and Restated Bylaws or takes or announces any other action that has, or
if consummated would have, the effect of disqualifying the
Nominees. In any such case, Shares represented by the enclosed GOLD
proxy card will be voted for such substitute nominees. Nanes Delorme
Partners reserves the right to nominate additional persons if VAALCO increases
the size of the Board above its existing size or increases the number of
directors whose terms expire at the Annual Meeting. Additional
nominations made pursuant to the preceding sentence are without prejudice to the
position of Nanes Delorme Partners that any attempt to increase the size of the
current Board or to reconstitute or reconfigure the classes on which the current
directors serve constitutes an unlawful manipulation of the Company’s corporate
machinery.
-14-
YOU
ARE URGED TO VOTE FOR THE ELECTION OF THE NOMINEES ON THE ENCLOSED GOLD PROXY
CARD.
We are
not aware of any other proposals to be brought before the Annual Meeting.
However, we intend to bring before the Annual Meeting such business as may be
appropriate, including without limitation nominating additional persons for
directorships, or making any proposals as may be appropriate to address any
action of the Board not publicly disclosed prior to the date of this proxy
statement. Should other proposals be brought before the Annual Meeting, the
persons named as proxies in the enclosed GOLD proxy card will vote on such
matters in their discretion.
-15-
PROPOSAL
NO. 2
COMPANY
PROPOSAL TO RATIFY THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM FOR 2008
As
discussed in further detail in the Company’s proxy statement, prior to the
Annual Meeting, the Company’s Board, upon the recommendation of the Company’s
Audit Committee, selected Deloitte & Touche LLP to serve as the Company’s
independent registered public accounting firm for the fiscal year ending
December 31, 2008. The Company is asking stockholders to ratify the
selection of Deloitte & Touche LLP as the independent auditors of the
Company for fiscal 2008.
We do not
object to the ratification of the selection of Deloitte & Touche LLP as the
Company’s independent registered public accounting firm for fiscal
2008.
-16-
VOTING
AND PROXY PROCEDURES
Only
stockholders of record on the Record Date will be entitled to notice of and to
vote at the Annual Meeting. Each Share is entitled to one
vote. Stockholders who sell Shares before the Record Date (or acquire
them without voting rights after the Record Date) may not vote such
Shares. Stockholders of record on the Record Date will retain their
voting rights in connection with the Annual Meeting even if they sell such
Shares after the Record Date. Based on publicly available
information, we believe that the only outstanding class of securities of VAALCO
entitled to vote at the Annual Meeting is the Shares.
Shares
represented by properly executed GOLD proxy cards will be voted at the Annual
Meeting as marked and, in the absence of specific instructions, will be voted
FOR the election of the Nominees to the Board, FOR the ratification of the
appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm for 2008 and in the discretion of the persons named as
proxies on all other matters as may properly come before the Annual
Meeting.
We
believe the current Board intends to nominate three Class I directors at the
Annual Meeting. This Proxy Statement is soliciting proxies to elect
the three Nominees to replace the three incumbent Class I
directors. Accordingly, the enclosed GOLD proxy card may only be
voted for our Nominees and does not confer voting power with respect to any of
the Company’s director nominees. Under applicable proxy rules, we are
only permitted to solicit proxies for our Nominees. Therefore,
stockholders who return the GOLD proxy card will only be able to vote for our
Nominees. You can only vote for the Company’s director nominees by
signing and returning a proxy card provided by the
Company. Stockholders should refer to the Company’s proxy statement
for the names, backgrounds, qualifications and other information concerning the
Company’s nominees. The participants in this solicitation intend to
vote all of their Shares in favor of the Nominees.
QUORUM
In order
to conduct any business at the Annual Meeting, a quorum must be present in
person or represented by valid proxies. The holders of a majority of
the outstanding shares as of the Record Date will constitute a quorum for the
transaction of business. Broker non-votes and abstentions are counted
as present for purposes of determining whether a quorum is present at the
meeting.
VOTES
REQUIRED FOR APPROVAL
Vote required for the election of
directors. Each director must be elected by a plurality of the
votes cast at the Annual Meeting by the holders of shares entitled to vote. This
means that in the election of Class I directors the three nominees receiving the
highest number of “FOR” votes will be elected as Class I
directors. Stockholders may vote “for” all of the
director nominees, “withhold” authority to vote for all of the nominees or
“withhold” authority to vote for any individual nominee but vote for all other
nominees. Shares that are withheld from voting as to any nominee and broker
non-votes will not affect the outcome. Stockholders of record may appoint
proxies to vote their shares by signing, dating and mailing the GOLD proxy card
in the envelope provided.
-17-
Vote required to ratify the
appointment of Deloitte & Touche LLP. The proposal to
ratify the appointment of Deloitte & Touche LLP as the Company’s independent
registered public accounting firm for 2008 will require the affirmative vote of
a majority of the Shares entitled to vote present in person or represented by
proxy at the Annual Meeting and therefore an abstention will have the effect of
a vote cast against the proposal. Broker non-votes will not be
considered present at the Annual Meeting for this proposal, which in effect
means a broker non-vote will serve to reduce the number of affirmative votes
required to achieve a majority vote by reducing the total number of shares from
which a majority is calculated.
Each
Share entitles the holder thereof to one vote on all matters to come before the
Annual Meeting, including the election of directors. A stockholder
may cast votes for the Nominees either by so marking the ballot at the Annual
Meeting or by specific voting instructions sent with a signed proxy to either
Nanes Delorme Partners in care of MacKenzie Partners, Inc. at the address set
forth on the back cover of this Proxy Statement or to VAALCO at 4600 Post Oak
Place, Suite 309, Houston, Texas 77027, or any other address provided by
VAALCO.
DISCRETIONARY
VOTING
Shares
held in “street name” and held of record by banks, brokers or nominees may not
be voted by such banks, brokers or nominees unless the beneficial owners of such
Shares provide them with instructions on how to vote. You may also
request a proxy from your broker, trustee or other representative for your
Shares in order to vote your Shares in person at the Annual
Meeting.
REVOCATION
OF PROXIES
Stockholders
of VAALCO may revoke their proxies at any time prior to exercise by attending
the Annual Meeting and voting in person (although attendance at the Annual
Meeting will not in and of itself constitute revocation of a proxy) or by
delivering a written notice of revocation. The delivery of a
subsequently dated proxy which is properly completed will also constitute a
revocation of any earlier proxy. The revocation may be delivered either to Nanes
Delorme Partners in care of MacKenzie Partners, Inc. at the address set forth on
the back cover of this Proxy Statement or to VAALCO at 4600 Post Oak Place,
Suite 309, Houston, Texas 77027, or any other address provided by
VAALCO. Although a revocation is effective if delivered to VAALCO,
Nanes Delorme Partners requests that either the original or photostatic copies
of all revocations be mailed to Nanes Delorme Partners in care of MacKenzie
Partners, Inc. at the address set forth on the back cover of this Proxy
Statement so that we will be aware of all revocations and can more accurately
determine if and when proxies have been received from the holders of record on
the Record Date and the number of outstanding Shares represented
thereby. Additionally, MacKenzie Partners, Inc. may use this
information to contact stockholders who have revoked their proxies in order to
solicit later dated proxies for the election of the Nominees.
-18-
IF
YOU WISH TO VOTE FOR THE ELECTION OF THE NOMINEES TO THE BOARD OR FOR THE
RATIFICATION OF THE SELECTION OF DELOITTE & TOUCHE LLP, PLEASE SIGN, DATE
AND RETURN PROMPTLY THE ENCLOSED GOLD PROXY CARD IN THE POSTAGE-PAID ENVELOPE
PROVIDED.
-19-
SOLICITATION
OF PROXIES
The
solicitation of proxies pursuant to this Proxy Statement is being made by Nanes
Delorme Partners. Proxies may be solicited by mail, facsimile,
telephone, telegraph, Internet, in person and by advertisements.
Nanes
Delorme Partners has entered into an agreement with MacKenzie Partners, Inc. for
solicitation and advisory services in connection with this solicitation, for
which MacKenzie Partners, Inc. will receive a fee not to exceed $125,000,
together with reimbursement for its reasonable out-of-pocket expenses, and will
be indemnified against certain liabilities and expenses, including certain
liabilities under the federal securities laws. MacKenzie Partners,
Inc. will solicit proxies from individuals, brokers, banks, bank nominees and
other institutional holders. Nanes Delorme Partners has requested
banks, brokerage houses and other custodians, nominees and fiduciaries to
forward all solicitation materials to the beneficial owners of the Shares they
hold of record. Nanes Delorme Partners will reimburse these record
holders for their reasonable out-of-pocket expenses in so doing. It
is anticipated that MacKenzie Partners, Inc. will employ approximately 35
persons to solicit VAALCO’s stockholders for the Annual
Meeting.
The
entire expense of soliciting proxies is being borne by Nanes Delorme Partners.
Costs of this solicitation of proxies are currently estimated to be
approximately $275,000. Nanes Delorme Partners estimates that through
the date hereof its expenses in connection with this solicitation are
approximately $75,000.
OTHER
PARTICIPANT INFORMATION
The
participants in this solicitation are Nanes Delorme Partners, Nanes Balkany
Partners, Nanes Balkany Management, Julien Balkany, Daryl Nanes, Leonard
Toboroff and Clarence Cottman III. The principal business of Nanes
Delorme Partners is investing in securities. Nanes Delorme Partners
pursues primarily active investments in publicly traded oil and gas exploration
and production companies that it believes are trading at a significant discount
to their intrinsic values or where one or more potential catalysts exist that
could materially unlock the inherent value of those companies. The
principal business of Nanes Balkany Partners is acting as the general partner of
Nanes Delorme Partners. The principal business of Nanes Balkany
Management is acting as the investment manager of Nanes Delorme
Partners. The principal occupation of Mr. Balkany is serving as a
managing member of Nanes Balkany Partners and Nanes Balkany
Management. Concurrently, Mr. Balkany is a managing director of Nanes
Delorme Capital Management LLC, a Delaware limited liability company (“Nanes
Delorme Capital”), whose principal business is to provide financial advisory and
broker-dealer services. The principal occupation of Mr. Nanes is
serving as the managing partner of Nanes Delorme Capital and as a managing
member of Nanes Balkany Partners and Nanes Balkany Management. The
principal occupation of Mr. Toboroff is serving as a director and Vice Chairman
of the Board of Allis-Chalmers Energy Inc., a provider of products and services
to the oil and gas industry listed on the NYSE, and as an Executive Director of
Corinthian Capital Group, LLC, a private equity fund. The principal
occupation of Mr. Cottman is serving as President and Founder of Legacy Energy,
Inc., a U.S. private oil and gas exploration and production company with assets
in Louisiana and California, and as Vice Chairman of PetroFalcon Corp., an oil
and gas exploration and production company focused on Venezuela.
-20-
The
address of the principal office of each of Nanes Delorme Partners, Nanes Balkany
Partners, Nanes Balkany Management, Mr. Balkany and Mr. Nanes is 230 Park
Avenue, 7th Floor, New York, New York 10169. The address of the
principal office of Mr. Toboroff is c/o Corinthian Capital Group, LLC, 153 East
53rd Street, 59th Floor, New York, NY 10021. The address of the
principal office of Mr. Cottman is c/o Legacy Energy, Inc., 1135 Eugenia Place,
Suite C, Carpinteria, California 93013.
As of
the date hereof, Nanes Delorme Partners beneficially owns 4,700,000 Shares,
constituting approximately 8.0% of the Shares outstanding. As the
general partner of Nanes Delorme Partners, Nanes Balkany Partners may be deemed
to beneficially own the 4,700,000 Shares owned by Nanes Delorme Partners,
constituting approximately 8.0% of the Shares outstanding. As the
investment manager of Nanes Delorme Partners, Nanes Balkany Management may be
deemed to beneficially own the 4,700,000 Shares owned by Nanes Delorme Partners,
constituting approximately 8.0% of the Shares outstanding. As the
managing members of Nanes Balkany Partners and Nanes Balkany Management, Messrs.
Balkany and Nanes may be deemed to beneficially own the 4,700,000 Shares owned
by Nanes Delorme Partners, constituting approximately 8.0% of the Shares
outstanding. Messrs. Balkany and Nanes have sole voting and
dispositive power with respect to the 4,700,000 Shares owned by Nanes Delorme
Partners by virtue of their authority to vote and dispose of such
Shares. Messrs. Toboroff and Cottman do not directly own any
Shares. Messrs. Toboroff and Cottman, as members of a “group” for the
purposes of Rule 13d-5(b)(1) of the Exchange Act, may be deemed to beneficially
own the 4,700,000 Shares owned by Nanes Delorme Partners. Messrs.
Toboroff and Cottman disclaim beneficial ownership of such
Shares.
Pilatus
Energy S.A., a limited partner of Nanes Delorme Partners (the “Limited
Partner”), purchased 2,700,000 Shares between November 28, 2007 and January 30,
2008, and contributed such Shares to Nanes Delorme Partners on February 14,
2008, in order to subscribe for and purchase limited partnership interests in
Nanes Delorme Partners. The Limited Partner is a privately held Swiss
investment company headquartered in ZUG, Switzerland whose business is pursuing
either public or private investments directly or indirectly in oil and gas
companies, securities or properties. The primary business address of
the Limited Partner is Bohlstrasse 9a, 6301 Zug, Switzerland. The
directors and officers of the Limited Partner are Al Yousef Abbas Ibrahim
Yousef, Alexander Breuer and Luca Castellazi. Nanes Delorme Partners
is not now and has not been a party to any agreement with the Limited Partner
other than Nanes Delorme Partners standard agreement with each of its limited
partners. The information and disclosure relating to the Limited
Partner contained in this proxy statement is for information purposes only and
is not an admission that the Limited Partner is a participant, as such term is
defined in Schedule 14A of the Securities Exchange Act of 1934, as amended, for
purposes of the solicitation.
For
information regarding purchases and sales of securities of VAALCO during the
past two years by Nanes Delorme Partners and the other participants in this
solicitation, including the Nominees, see Schedule I.
-21-
Nanes
Delorme Partners intends to seek reimbursement from VAALCO of all expenses it
incurs in connection with this solicitation. Nanes Delorme Partners
does not intend to submit the question of such reimbursement to a vote of
security holders of the Company.
Except
as set forth in this Proxy Statement (including the Schedules hereto), (i)
during the past 10 years, no participant in this solicitation or the Limited
Partner has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors); (ii) no participant in this solicitation or
the Limited Partner directly or indirectly beneficially owns any securities of
VAALCO; (iii) no participant in this solicitation or the Limited Partner owns
any securities of VAALCO which are owned of record but not beneficially; (iv) no
participant in this solicitation or the Limited Partner has purchased or sold
any securities of VAALCO during the past two years; (v) no part of the purchase
price or market value of the securities of VAALCO owned by any participant in
this solicitation or the Limited Partner is represented by funds borrowed or
otherwise obtained for the purpose of acquiring or holding such securities; (vi)
no participant in this solicitation or the Limited Partner is, or within the
past year was, a party to any contract, arrangements or understandings with any
person with respect to any securities of VAALCO, including, but not limited to,
joint ventures, loan or option arrangements, puts or calls, guarantees against
loss or guarantees of profit, division of losses or profits, or the giving or
withholding of proxies; (vii) no associate of any participant in this
solicitation or the Limited Partner owns beneficially, directly or indirectly,
any securities of VAALCO; (viii) no participant in this solicitation or the
Limited Partner owns beneficially, directly or indirectly, any securities of any
parent or subsidiary of VAALCO; (ix) no participant in this solicitation, the
Limited Partner, or any of their associates was a party to any transaction, or
series of similar transactions, since the beginning of VAALCO last fiscal year,
or is a party to any currently proposed transaction, or series of similar
transactions, to which VAALCO or any of its subsidiaries was or is to be a
party, in which the amount involved exceeds $120,000; (x) no participant in this
solicitation, the Limited Partner, or any of their associates has any
arrangement or understanding with any person with respect to any future
employment by VAALCO or its affiliates, or with respect to any future
transactions to which VAALCO or any of its affiliates will or may be a party;
and (xi) no person, including the participants in this solicitation or the
Limited Partner, who is a party to an arrangement or understanding pursuant to
which the Nominees are proposed to be elected has a substantial interest, direct
or indirect, by security holdings or otherwise in any matter to be acted on at
the Annual Meeting.
OTHER
MATTERS AND ADDITIONAL INFORMATION
Nanes
Delorme Partners is unaware of any other matters to be considered at the Annual
Meeting. However, should other matters, which Nanes Delorme Partners
is not aware of a reasonable time before this solicitation, be brought before
the Annual Meeting, the persons named as proxies on the enclosed GOLD proxy card
will vote on such matters in their discretion.
STOCKHOLDER
PROPOSALS
Proposals
of stockholders intended to be presented at VAALCO’s next annual meeting of
stockholders must be received by VAALCO for inclusion in its 2009 proxy
statement and form of proxy on or prior to December 22, 2008.
-22-
In
accordance with VAALCO’s Amended and Restated Bylaws, for a proposal to be
properly brought before the 2009 annual meeting of stockholders, the stockholder
must deliver written notice of the business the stockholder would like to
present, or the person or persons the stockholder would like to nominate as a
director, to the secretary of VAALCO at its principal executive offices not
later than the close of business on the 60th day nor earlier than the close of
business on the 90th day prior to the anniversary date of this year’s meeting
date. Therefore, any notice given by the stockholder pursuant to
these provisions of VAALCO’s Amended and Restated Bylaws must be received no
earlier than March 6, 2009 and no later than April 5, 2009 unless the date of
the 2009 annual meeting of stockholders is more than 30 days before or more than
60 days after the anniversary date, June 4, 2009. If the 2009 annual
meeting of stockholders is not held within 30 days before or 60 days after this
year’s meeting date, then notice must be received by VAALCO not earlier than the
close of business on the 90th day prior to the 2009 annual meeting and not later
than the close of business on the later of the 60th day prior to the 2009 annual
meeting or the 10th day following the day on which notice of the date of the
meeting or public disclosure of the date of the meeting was given or
made. Notices of intention to present proposals at the 2009 annual
meeting of stockholders should be addressed to Secretary, VAALCO Energy, Inc.,
4600 Post Oak Place, Suite 309, Houston, Texas 77027.
The
information set forth above regarding the procedures for submitting stockholder
proposals for consideration at VAALCO’s 2009 annual meeting of stockholders is
based on information contained in the Company’s proxy statement. The
incorporation of this information in this Proxy Statement should not be
construed as an admission by us that such procedures are legal, valid or
binding.
INCORPORATION
BY REFERENCE
NANES
DELORME PARTNERS HAS OMITTED FROM THIS PROXY STATEMENT CERTAIN DISCLOSURE
REQUIRED BY APPLICABLE LAW THAT IS EXPECTED TO BE INCLUDED IN VAALCO’S PROXY
STATEMENT RELATING TO THE ANNUAL MEETING. THIS DISCLOSURE IS EXPECTED
TO INCLUDE, AMONG OTHER THINGS, CURRENT BIOGRAPHICAL INFORMATION ON VAALCO’S
CURRENT DIRECTORS, INFORMATION CONCERNING EXECUTIVE COMPENSATION, AND OTHER
IMPORTANT INFORMATION. PLEASE NOTE THAT BECAUSE NANES DELORME
PARTNERS WAS NOT INVOLVED IN THE PREPARATION OF VAALCO’S PROXY STATEMENT, WE
CANNOT REASONABLY CONFIRM THE ACCURACY OR COMPLETENESS OF CERTAIN INFORMATION
CONTAINED THEREIN. SEE SCHEDULE II FOR INFORMATION REGARDING PERSONS
WHO BENEFICIALLY OWN MORE THAN 5% OF THE SHARES AND THE OWNERSHIP OF THE SHARES
BY THE DIRECTORS AND MANAGEMENT OF VAALCO.
The
information concerning VAALCO contained in this Proxy Statement and the
Schedules attached hereto has been taken from, or is based upon, publicly
available information.
|
NANES
DELORME PARTNERS I LP
|
|
|
MAY
[ ], 2008
|
-23-
SCHEDULE
I
TRANSACTIONS
IN SECURITIES OF VAALCO
DURING
THE PAST TWO YEARS
Except
as otherwise specified, all purchases and sales were made in the open
market.
|
Shares
of Common Stock
Purchased / (Sold)
|
Price
Per
Share($)
|
Date
of
Purchase /
Sale
|
NANES DELORME PARTNERS I
LP*
|
1,000
|
4.6300
|
11/28/2007
|
|
|
40,000
|
4.4432
|
12/05/2007
|
|
|
45,000
|
4.5998
|
12/14/2007
|
|
|
50,000
|
4.5940
|
12/17/2007
|
|
|
50,000
|
4.5948
|
12/18/2007
|
|
|
50,000
|
4.7314
|
12/19/2007
|
|
|
108,000
|
4.8648
|
12/20/2007
|
|
|
45,000
|
4.7796
|
12/27/2007
|
|
|
200,000
|
4.6887
|
12/31/2007
|
|
|
50,000
|
4.5871
|
01/02/2008
|
|
|
75,000
|
4.6810
|
01/04/2008
|
|
|
100,000
|
4.5602
|
01/07/2008
|
|
|
130,000
|
4.7468
|
01/08/2008
|
|
|
15,000
|
4.7434
|
01/09/2008
|
|
|
25,000
|
4.7654
|
01/10/2008
|
|
|
60,000
|
4.9277
|
01/11/2008
|
|
|
80,000
|
4.8779
|
01/15/2008
|
|
|
1,000
|
5.0430
|
01/16/2008
|
|
|
100,000
|
4.7917
|
01/18/2008
|
|
|
200,000
|
4.3459
|
01/22/2008
|
|
*
|
For
the period 11/28/07 through 1/30/08, Pilatus Energy S.A. a limited partner
of Nanes Delorme Partners I LP purchased 2,700,000 Shares of VAALCO
Energy, Inc. On 2/14/08, Pilatus Energy S.A. contributed such
Shares, with an aggregate purchase price of approximately $12,558,213, in
order to subscribe for and purchase interests in Nanes Delorme Partners I
LP. Nanes Delorme Partners I LP assumed the same cost
basis for the contributed shares and valued its contribution at Pilatus
Energy S.A.'s own cost.
|
I-1
|
200,000
|
4.1646
|
01/23/2008
|
|
|
150,000
|
4.4521
|
01/24/2008
|
|
|
183,000
|
4.4643
|
01/25/2008
|
|
|
325,000
|
4.6157
|
01/28/2008
|
|
|
221,000
|
4.6623
|
01/29/2008
|
|
|
196,000
|
4.7365
|
01/30/2008
|
|
|
20,000
|
4.3048
|
02/22/2008
|
|
|
130,000
|
4.4257
|
02/27/2008
|
|
|
61,000
|
4.4376
|
02/28/2008
|
|
|
39,000
|
4.4361
|
02/29/2008
|
|
|
400,000
|
4.5100
|
03/03/2008
|
|
|
490,000
|
4.5435
|
03/04/2008
|
|
|
230,000
|
4.5729
|
03/05/2008
|
|
|
131,000
|
4.5466
|
03/06/2008
|
|
|
248,000
|
4.5369
|
03/07/2008
|
|
|
55,000
|
4.6948
|
03/10/2008
|
|
|
196,000
|
4.7588
|
03/11/2008
|
NANES BALKANY PARTNERS
LLC
None
NANES BALKANY MANAGEMENT
LLC
None
JULIEN
BALKANY
None
DARYL
NANES
None
LEONARD
TOBOROFF
None
CLARENCE COTTMAN
III
None
I-2
The
following table is reprinted from VAALCO’s proxy statement filed with
th
Securities
and Exchange Commission on April 24, 2008
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN STOCKHOLDERS
The
following table provides information as to each person who is known to the
Company to be the beneficial owner of more than 5% of the Company’s voting
securities and of the Company’s directors and executive officers and all
directors and executive officers as a group as of April 14, 2008 (unless
otherwise indicated):
|
Name
of Beneficial Owner
|
Amount
and
Nature
of
Beneficial
Ownership
|
Percent
of
Common
Stock
Outstanding
|
||||||
|
Directors
and Officers:
|
||||||||
|
Robert
L. Gerry, III
|
2,846,165 | (1) | 4.6 | % | ||||
|
W.
Russell Scheirman
|
399,861 | (2) | * | |||||
|
Gayla
M. Cutrer
|
156,510 | (3) | * | |||||
|
Robert
H. Allen
|
25,000 | (4) | * | |||||
|
Arne
R. Nielsen
|
101,000 | (5) | * | |||||
|
William
S. Farish
|
500,000 | (6) | * | |||||
|
Luigi
P. Caflisch
|
25,000 | (7) | * | |||||
|
O.
Donald Chapoton
|
125,000 | (8) | * | |||||
|
Common
Stock owned by all directors and executive officers as a group (7
persons)
|
4,178,536 | 6.7 | % | |||||
|
5%
Stockholders:
|
||||||||
|
Columbia
Wagner Asset
Management
L.P.
|
3,650,000 | (9) | 6.0 | % | ||||
|
WAM
Acquisition G.P. Inc.
227
West Monroe Street, Suite 300
Chicago,
Illinois 60606
|
||||||||
|
Nanes
Delorme Partners I LP
|
4,700,000 | (10) | 7.7 | % | ||||
|
Nanes
Balkany Partners LLC
|
||||||||
|
Nanes
Balkany Management LLC
|
||||||||
|
Daryl
Nanes
|
||||||||
|
Julien
Balkany
230
Park Avenue, 7th Floor
New
York, New York 10169
|
||||||||
|
|
||||||||
1. Includes
620,167 shares that may be acquired subject to options exercisable within 60
days of which 120,167 are exercisable at $7.97 per share and 500,000 shares are
exercisable at $3.85 per share. Also includes 750,000 shares held in a trust of
which Mr. Gerry is a trustee and beneficiary.
2. Includes
399,167 shares that may be acquired subject to options exercisable within 60
days of which 99,167 are exercisable at $7.97 per share and 300,000 are
exercisable at $3.85 per share.
3. Includes
139,000 shares that may be acquired subject to options exercisable within 60
days of which 57,000 are exercisable at $7.97 per share and 82,000 are
exercisable at $3.85 per share.
II-1
4. Includes
25,000 shares that may be acquired subject to options exercisable within 60 days
exercisable at $7.97.
5. Includes
100,000 shares that may be acquired subject to options exercisable within 60
days of which 25,000 are exercisable at $1.04 per share and 50,000 are
exercisable at $3.85 per share and 25,000 of which are exercisable at $7.97 per
share.
6. Includes
175,000 shares that may be acquired subject to options exercisable within 60
days of which 100,000 are exercisable at $4.26 per share, 50,000 are exercisable
at $3.85 per share and 25,000 are exercisable at $7.97 per share.
7. Includes
25,000 shares that may be acquired subject to options exercisable within 60 days
exercisable at $7.97.
8. Includes
125,000 shares that may be acquired subject to options exercisable within 60
days of which 100,000 are exercisable at $6.20 per share and 25,000 of which are
exercisable at $7.97 per share.
9. Based
on Form 13G/A filed with the SEC on January 29, 2008. Based on the 13G/A, WAM
Acquisition G. P., Inc. acts as general partner of Columbia Wagner Asset
Management L.P. and has shared voting and disposition control over the shares.
In addition, this 13G/A includes shares held by Columbia Alcorn Trust, for which
WAM Acquisition G.P., Inc. acts as investment adviser.
10. Based
on Form 13D filed with the SEC on March 12, 2008. Based on this Form 13D, Nanes
Balkany Partners LLC acts as general partner of Nanes Delorme Partners I LP and
Nanes Balkany Management LLC acts as the investment manager of Nanes Delorme
Partners I LP and have shared voting and disposition control over the shares. As
the managing members of Nanes Balkany Partners and Nanes Balkany Management,
Messrs. Balkany and Nanes may be deemed to beneficially own the shares. Messrs.
Balkany and Nanes have sole voting and dispositive power with respect to the
shares. Nanes Balkany Partners, Nanes Balkany Management and Messrs. Balkany and
Nanes disclaim beneficial ownership of the shares held by Nanes Delorme
Partners, except to the extent of their pecuniary interest therein.
II-2
IMPORTANT
Tell your
Board what you think! Your vote is important. No matter how many
Shares you own, please give Nanes Delorme Partners your proxy FOR the election
of the Nominees by taking three steps:
|
|
●
|
SIGNING
the enclosed GOLD proxy card,
|
|
|
●
|
DATING
the enclosed GOLD proxy card, and
|
|
|
●
|
MAILING
the enclosed GOLD proxy card TODAY in the envelope provided (no postage is
required if mailed in the United
States).
|
If any of
your Shares are held in the name of a brokerage firm, bank, bank nominee or
other institution, only it can vote such Shares and only upon receipt of your
specific instructions. Accordingly, please contact the person
responsible for your account and instruct that person to execute the GOLD proxy
card representing your Shares. We urge you to confirm in writing your
instructions to Nanes Delorme Partners in care of MacKenzie Partners, Inc. at
the address provided below so that we will be aware of all instructions given
and can attempt to ensure that such instructions are followed.
If you
have any questions or require any additional information concerning this Proxy
Statement, please contact MacKenzie Partners, Inc. at the address set forth
below.
105
Madison Avenue
New York,
New York 10016
(212)
929-5500 (Call Collect)
proxy@mackenziepartners.com
or
CALL TOLL
FREE (800) 322-2885
PRELIMINARY
COPY SUBJECT TO COMPLETION
DATED
MAY 5, 2008
VAALCO
ENERGY, INC.
2008
ANNUAL MEETING OF STOCKHOLDERS
THIS
PROXY IS SOLICITED ON BEHALF OF NANES DELORME
PARTNERS I LP
THE
BOARD OF DIRECTORS OF VAALCO ENERGY, INC.
IS
NOT SOLICITING THIS PROXY
P R O X Y
The
undersigned appoints Julien Balkany and Daryl Nanes and each of them, attorneys
and agents with full power of substitution to vote all shares of common stock of
the VAALCO Energy, Inc. (“VAALCO” or the “Company”) which the undersigned would
be entitled to vote if personally present at the 2008 Annual Meeting of
Stockholders of the Company scheduled to be held at the Holiday Inn Houston-Near
the Galleria, 3131 West Loop South, Houston, Texas 77027 on June 4, 2008 at
10:00 a.m. (local time), and including at any
adjournments or postponements thereof and at any meeting called in lieu thereof
(the “Annual Meeting”).
The
undersigned hereby revokes any other proxy or proxies heretofore given to vote
or act with respect to the shares of common stock of the Company held by the
undersigned, and hereby ratifies and confirms all action the herein named
attorneys and proxies, their substitutes, or any of them may lawfully take by
virtue hereof. If properly executed, this Proxy will be voted as
directed on the reverse and in the discretion of the herein named attorneys and
proxies or their substitutes with respect to any other matters as may properly
come before the Annual Meeting that are unknown to Nanes Delorme Partners I LP
(“Nanes Delorme Partners”) a reasonable time before this
solicitation.
IF
NO DIRECTION IS INDICATED WITH RESPECT TO THE PROPOSALS ON THE REVERSE, THIS
PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
This
Proxy will be valid until the sooner of one year from the date indicated on the
reverse side and the completion of the Annual Meeting.
IMPORTANT: PLEASE
SIGN, DATE AND MAIL THIS PROXY CARD PROMPTLY!
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
[X] Please mark vote as in this
example
NANES DELORME
PARTNERS STRONGLY RECOMMENDS THAT STOCKHOLDERS VOTE IN FAVOR OF THE
NOMINEES LISTED BELOW IN PROPOSAL NO. 1
Proposal
No. 1 – Nanes Delorme Partners’ Proposal to elect Julien Balkany, Leonard
Toboroff and Clarence Cottman III as Class I directors of the
Company.
|
FOR
ALL NOMINEES
|
WITHHOLD
AUTHORITY TO VOTE FOR ALL NOMINEES
|
FOR
ALL EXCEPT NOMINEE(S) WRITTEN BELOW
|
||
| Nominees to Class I: |
Julien
Balkany
|
[ ]
|
[ ]
|
[ ]
|
|
Leonard
Toboroff
|
||||
| Clarence Cottman III | ||||
Proposal
No. 2 – Approval of the Company’s Proposal to Ratify the Selection of Deloitte
& Touche LLP as the Company’s Independent Registered Public Accounting Firm
for 2008.
|
FOR
|
AGAINST
|
ABSTAIN
|
|
|
[ ]
|
[ ]
|
[ ]
|
IN
THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
DATED: ____________________________
____________________________________
(Signature)
____________________________________
(Signature,
if held jointly)
____________________________________
(Title)
WHEN
SHARES ARE HELD JOINTLY, JOINT OWNERS SHOULD EACH SIGN. EXECUTORS,
ADMINISTRATORS, TRUSTEES, ETC., SHOULD INDICATE THE CAPACITY IN WHICH
SIGNING. PLEASE SIGN EXACTLY AS NAME APPEARS ON THIS
PROXY.