VAALCO Energy Looks Cheap

VAALCO Energy Inc. (EGY) Snapshot:

VAALCO is an interesting little E&P company operating almost entirely in Gabon.

• Probably grows production 20+% this year based on recent new field hookup. They have just under a 30% interest in two fields
• Etame --- established with current production of 15-16,000 bopd gross, and...
• Avouma -- just brought on line and ramping (6,000 bopd gross going to 10,000) on one block in Gabon they operate.
• My favorite Swiss E&P, AXC, has a slightly larger interest than EGY in the Etame field.
• Balance sheet looks good, lots of cash, little debt.
• The stock is cheap, trading at under 4x TEV/EBITDA.
• Reserve replacement has been negative, which, combined with 4Q down production, probably is what has been pressuring the stock.
• Production comes via tieback to an FPSO, so you have some lift-timing risk, which may provide good entries if they are late lifting for a quarter.
• Next big growth doesn't come until early 2008 (Ebouri discovery), but you may have some exploration catalyst off Gabon and Angola later this year.

It's interesting, I plan to do more work on it and will listen to their 1Q call this week (May 10).

The company has a few wells in Texas and in the GoM, which I assume are legacy assets, as there seems to be no plan for advancing activity in the States. I'd sell 'em -- but maybe they carry sentimental value or allow for some data access or some such.