VAALCO Energy Looks Cheap

| About: VAALCO Energy, (EGY)

VAALCO Energy Inc. (NYSE: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.

VAALCO Energy 08 05 2007

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