NEW YORK, Oct. 6, 2015 /PRNewswire/ - Bradley Radoff (and related entities) and Group
42, Inc., who together are the beneficial owners of approximately
11.1% of the outstanding shares of Common Stock of VAALCO Energy,
Inc. ("VAALCO" or the "Company") (NYSE: EGY), today delivered a
letter to the Board of Directors of VAALCO setting forth their
concerns regarding, among other things, the Company's corporate
governance, particularly the Board's recent adoption of a poison
pill, bloated G&A expenses, poor capital allocation, poor
decision making with respect to capital expenditures and the
renewal of the CEO's employment contract. The full text of the
letter is included below:
October 5, 2015
The Board of Directors
VAALCO Energy, Inc.
9800 Richmond Ave., Suite 700
Houston, TX 77042
Board members:
As you know, Bradley Radoff (and
related entities) and Group 42, Inc. (together the "Group")
collectively own 11.1% of the outstanding common stock of VAALCO
Energy (the "Company") in comparison to 1.9% of the Company's
outstanding common stock owned by the senior executive officers and
you.
Under your stewardship, VAALCO has seen significant shareholder
value destruction – a 77% drop in the share price in the past
twelve months that exceeds the decline in the price of oil as well
as the market price of the Company's peer group. This
precipitous and disproportionate decline in stockholder value is an
alarming fact that has the Group very concerned as well as
determined to take all necessary actions to protect the value of
all stockholders' investment in the Company.
Specifically, the Board is accountable for the following:
- Abysmal corporate governance. Immediately after we
disclosed the Group's 11% ownership stake, the Board rushed to
adopt a poison pill with a 10% ownership trigger, thereby blocking
the Group from acquiring additional shares and purporting to
restrict us from communicating with our fellow shareholders
regarding the best means to increase the value of our investment in
the Company. Given that in 2009 VAALCO's shareholders
overwhelmingly voted against the adoption of a poison pill, last
week's action by the Board is a blatant disregard of shareholders'
views on this topic. In a difficult business environment,
your decision to spend precious corporate resources to entrench
yourselves from the actual owners of the business will only serve
to perpetuate the Company's poor performance without
accountability.
- Bloated G&A expenses. The Company's last twelve
months of cash G&A is approximately 20% of the Company's
enterprise value. Despite industry wide layoffs and G&A
reductions, the Company has failed to announce any specific cuts to
G&A and has offered shareholders nothing but vague promises of
"G&A cost review and rationalization."
- Poor capital allocation. The Company has engaged in
inadequate risk management with no hedging, excessive exploration
risk and exploration commitments, including most damagingly,
recklessly risking and losing almost $30
million in a failed high risk exploratory well in
Angola.
- Rampant capital expenditures. Despite industry wide
cutting of capital expenditures, VAALCO's management has increased
the Company's top-range capex guidance for 2015 from $75 million to $80
million. In the last twelve months the Company's capex has
been an astounding 150% of the Company's current enterprise
value.
- Renewal of CEO contract. Despite a clear public record
of value destruction during his tenure as CEO, the Board renewed
Mr. Guidry's contract while providing him with significant
additional compensation in the event that he is terminated
following a "change in control"—which includes a change in the
majority of the Board as a result of a proxy contest initiated by
the Company's stockholders. Mr. Guidry's large-company
background has proved to be ill-suited for VAALCO as demonstrated
by his failure to quickly and appropriately respond to a
challenging commodity environment and his inability to manage with
limited resources. The Board's renewal of Mr. Guidry's
contract took place despite a letter from Group 42 three weeks
earlier requesting consultation regarding the hiring of a
CEO. The Board did not provide us with the courtesy of a
response to this letter and instead ignored our input as well as
our invitation to discuss this important management issue with a
significant shareholder.
In summary, shareholders deserve better. Unlike senior
management and yourselves, the Group has made a significant
investment in VAALCO. We are deeply troubled by the Board's
recent actions, and we are prepared to take all actions necessary
to ensure that the Board is composed of individuals committed to
act in the stockholders' – as opposed to their own – best
interests.
Sincerely yours,
/s/ Bradley L. Radoff
Bradley L. Radoff
/s/ Paul A. Bell
Paul A. Bell
Chief Executive Officer and President
Group 42, Inc.
About Bradley L.
Radoff:
Bradley L. Radoff is a private
investor based in Houston,
Texas. Mr. Radoff is the sole shareholder and sole director
of the general partner of Fondren Management, LP.
About Group 42, Inc.:
Group 42 is a U.S.-based holding company that delivers
innovative energy services to customers around the globe. Through
its subsidiaries and international joint ventures, it partners with
other multinational energy companies that have expertise in
applying technology-oriented solutions. Group 42 operates in
North America, Asia Pacific, the Arabian Gulf, West Africa and the North Sea.
Investor Contacts
Amy Miller
Group 42, Inc.
210-863-1921
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/bradley-radoff-and-group-42-deliver-letter-to-vaalcos-board-300155059.html
SOURCE Group 42