Vaalco Energy - For Sale At The Worst Possible Time, Who Is Behind This Nonsense?

Summary

  • EGY is now exploring "a range of strategic alternatives to further enhance shareholder value".
  • EGY gave a production update from the Gabon prospect and particularly what has been done to the South Tchibala & Avouma sector.
  • The company indicated a 4Q'15 production of 4,859 net BOEPD, up 31% compared with 3,696 net BOEPD in the 4Q'2014.
  • The Constellation II will be terminated 6-month earlier at a cost of $30 million ($7.3 million net) and Etame Marin Crude Sweetening Project (CSP) is put on hold.
  • EGY is an excellent trading tool in the $1.10's as a strong proxy for oil price.

This article is following my preceding article on VAALCO Energy (NYSE:NYSE:EGY), published on Dec. 24, 2015, about the recent North Tchibala 2-H well.

VAALCO Energy was incorporated in 1985 and is headquartered in Houston, Texas. The company has 111 full-time employees (59 in Gabon).

Today, Vaalco Energy announced the following:

Its Board of Directors has formed a strategic committee to explore a range of strategic alternatives to further enhance shareholder value. The strategic alternatives process will explore options for the future of the Company including, but not limited to securing additional investment to support existing projects and growth opportunities, joint ventures, asset sales or farm-outs, the potential sale or merger of the Company, or continuing to pursue the Company's existing operating plan.

On December 24, 2015, Vaalco Energy announced the following:

It has entered into an agreement with Group 42, Inc., Bradley L. Radoff and certain other participants (collectively, the "Group 42-BLR Group"), which beneficially owns approximately 11.1% of the Company's outstanding stock, regarding the composition of the VAALCO Board of Directors and certain other positive changes. In connection with the agreement, the Group 42-BLR Group has withdrawn its consent solicitation to replace a majority of the directors of VAALCO, and the Company has cancelled its plans for a special meeting of stockholders on January 5, 2016.

Messrs. James B. Jennings and O. Donaldson Chapoton will retire from the Board, effective immediately. VAALCO will appoint the Chairman of Group 42, Mr. Michael Keane, to its Board and the Nominating and Corporate Governance and Compensation committees effective immediately.

Commentary:

Today's announcement took me by surprise, I must admit. I know for sure that selling the entire oil business -- or eventually monetize (farm out) part of the business -- is a good idea, solely based on a potentially favorable market, with strong revenues and a clear long-term growth visible. What I see

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Note: I am not a financial advisor. All articles are my honest opinion. It is your responsibility to conduct your own due diligence before investing or trading.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am trading EGY frequently now

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