DEFA14A 1 ddefa14a.htm DEFINITIVE ADDITIONAL MATERIALS

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

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SCHEDULE 14A

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VAALCO ENERGY, INC.

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VAALCO Energy, Inc. May 2008

2 Safe Harbor Statement Important Information. VAALCO filed with the SEC definitive proxy materials (the “Proxy Materials”). The Proxy Materials contain important information about VAALCO, the 2008 Annual Stockholders Meeting and our nominees and other directors in the solicitation. VAALCO’s stockholders are urged to read the Proxy Materials carefully. Stockholders may obtain additional free copies of the Proxy Materials and other relevant documents filed with the SEC by VAALCO through the website maintained by the SEC at www.sec.gov. The Proxy Materials and other relevant documents may also be obtained free of charge from VAALCO at VAALCO Energy, Inc., 4600 Post Oak Place, Suite 309, Houston, Texas 77027; or by phone at (713) 623-0801. The Proxy Materials are also available on VAALCO’s website at www.vaalco.com. The contents of the websites referenced above are not deemed to be incorporated by reference into the Proxy Materials. Forward-Looking Statements. This document includes “forward-looking statements” as defined by the U.S. securities laws. Forward-looking statements are those concerning VAALCO’s plans, expectations, and objectives for future drilling, completion and other operations and activities. All statements included in this document that address activities, events or developments that VAALCO expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include future production rates, completion and production timetables and costs to complete well. These statements are based on assumptions made by VAALCO based on its experience perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond VAALCO’s control. These risks include, but are not limited to, inflation, lack of availability of goods, services and capital, environmental risks, drilling risks, foreign operational risks and regulatory changes. Investors are cautioned that forward-looking statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. These risks are further described in VAALCO’s annual report on Form 10-K for the year ended December 31, 2007 and other reports filed with the SEC which can be reviewed at http://www.sec.gov, or which can be received by contacting VAALCO at 4600 Post Oak Place, Suite 309, Houston, Texas 77027, (713) 623-0801. The Securities and Exchange Commission generally permits oil and gas companies, in filings with the SEC, to disclose only 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. In this document, we describe volumes of oil that we believe may be discovered in the future through our existing exploration program. These amounts are not proved reserves as defined by the SEC. 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. This presentation is being made on the afternoon of May 20, 2008. The content of this presentation contains time-sensitive information that is accurate only as of the time hereof. VAALCO will not be reviewing or updating the material contained herein.

3 Agenda I. Introduction and VAALCO Overview II. Superior Returns and Financial Performance III. VAALCO’s Board: Experienced, Proven and Committed to Maximizing Stockholder Value

4 Attendees • Robert H. Allen Independent Director Audit Committee † (Chairman) Compensation Committee (Chairman) • Robert L. Gerry Chairman and Chief Executive Officer • W. Russell Scheirman President, Chief Financial Officer and Director † Audit Committee Financial Expert as determined by the Board under SEC regulations

I. Introduction and VAALCO Overview

6 VAALCO’s Nominees Are the Right Choice • Independent and engaged Board made up of successful and experienced industry leaders – Responsible for successful implementation of corporate strategy and stock price appreciation – Broad and complementary expertise in areas critical to VAALCO’s business – 5 of 7 directors independent under NYSE listing requirements – All committees constituted solely of independent directors • Superior long-term value creation and financial performance – 503% cumulative stockholder return over the last 5 years – Outperformed peer group over each of the last 6-month, 1-year, 3-year and 5-year periods – 31% 5-year average ROIC (among top 5% of the oil & gas industry) – 66% revenue CAGR over the last 5 years – 81% EBITDA CAGR over the last 5 years • Track record of superior operating achievements – 82% success rate in exploration drilling since 1998, when Etame drilling began – 100% success rate in the drilling and completion of development wells since 1998 – 50% increase in production since 2002 • Strong growth expected to continue – Drilling program underway exposes VAALCO stockholders to 8x current reserves – 7 planned exploration wells, 2 development wells, arrangements in place to contract for rigs – Drilling to commence this summer 1. Unless otherwise indicated, figures in this presentation are as of the market close on May 16, 2008 2. The peer group is as defined by RiskMetrics (ISS); details slide 14 1 2

7 VAALCO Overview • Houston-based independent exploration and production company (“E&P”) • Exploration activities primarily in West Africa – offshore Gabon, onshore Gabon, offshore Angola – Opportunistic minority participations in UK North Sea exploration • Production (100% oil) located offshore Gabon • 26 full-time employees: Houston (9), Gabon (10) and Angola (7) • 20-30 contractors worldwide depending on activity level VAALCO is an Important Presence and a Valued Long-Term Partner in Gabon and Angola Gabon Angola

8 Exceptional West African Opportunity • Africa holds a significant and growing portion of world oil reserves • By 2010, West Africa is expected to account for 1 of 3 new barrels pumped worldwide and by 2015, the U.S. is projected to import 25% of all its oil from Africa, up from 15% in 2007 – 8% of global proved reserves – High proportion of new field discoveries – Strong reserve growth of discovered fields • Gabon – Long history of energy production under stable contract terms – Former French colony independent since 1960 under French civil law – Population 1.3 MM (about size of Colorado) • Angola – Oil sales and related activities constitute approximately one-half of GDP and 90% of exports – Has emerged as a major African oil producer following the end of the country’s civil war in 2002 – One of the world’s fastest growing economies because of strong production growth – Population 15.5 MM West Central Africa Oil Endowment Produced 13% Reserves 18% Mean Undiscover ed 69% West Central Africa Reserves Angola 61% Congo 12% Equatorial Guinea 12% Gabon 15%

9 Focused and Disciplined Business Strategy • Seek exploration opportunities in proven hydrocarbon basins where modern technology has the potential to unlock previously hidden reserves – In areas with acceptable political risk where positive market conditions provide niche opportunities • Increase reserves primarily through the drill-bit while continually reviewing potential property and corporate acquisitions at reasonable prices • Focused primarily on West Africa asset base • Maintain financial discipline to support growth • Optimize cash flows from producing assets – Etame Marin Concession Efficient, Low Cost Operator with Exceptional Exploration and Production Track Record

10 Exceptional Track Record and Expertise • 82% success rate in exploration drilling since 1998, when Etame drilling began • 100% success rate in the drilling and completion of development wells • Industry-wide, success rates are approximately 1 in 3 for exploration drilling VAALCO’s Drilling Success Rates are Among the Best in the Industry 1. Source: U.S. Energy Information Administration (EIA) VAALCO Drilling History (1998 to date) Exploration & Appraisal Wells Development Wells Well Date Field Type Result Well Date Field Type Result ET-1V '98 Etame Expl. Success ET-3H '02 Etame Devel. Success ET-2V '99 Etame App. Success ET-4H '02 Etame Devel. Success ET-3V '01 Etame App. Success ET-5H '04 Etame Devel. Success ET-4V '01 Etame App. Success ET-6H '05 Etame Devel. Success EBO-1 '03 Ebouri Expl. Success ET-6HST '05 Etame Devel. Success ET-5HP '04 Etame Pilot Success ETBSM-1 '06 Etame Devel. Success EAVOM-1 '04 Avouma Expl. Success EAVOM-2H '06 Avouma Devel. Success EAVSM-1 '05 Avouma Expl. Dry Hole (1) EBO-1 ST1 Ebouri App. Success EBO-1 ST2 Ebouri App. Success UKCS 9/28b '07 na Expl. Non-Commercial (1) Although dry, effectively proved-up additional Avouma reserves 1

11 Current Exploration Program Represents the Highest Level of Exploration and Development in the Company’s History • Drilling 7 exploration and 2 development wells over the next 6 to 18 months • On an unrisked basis, this drilling program exposes VAALCO stockholders to > 50 MM net barrels (> 8x VAALCO’s current 6.2 MMbbl in reserves) – Even at modest success rates, potential for dramatic increases in stockholder value • Arrangements in place to contract for 2 offshore jackup drilling rigs for Gabon – Anticipate drilling at least 3 exploration wells and 1-2 development wells – In addition to 2 development wells already underway • 2 years of preparation and planning with partners and host governments During this time VAALCO acquired and interpreted seismic, contracted for its concession in Angola and constructed 2, $100 MM platforms for installation in Gabon 2008 is Expected to Be a Break-Out Year for Value Creation VAALCO Properties - Reserves and Resources Property Etame Marin Mutamba Iroru Angola Block 5 NW Vulcan Total Proved Reserves (net mmboe) 6.2 0.0 0.0 0.0 6.2 Potential of Leads in Drilling Program (unrisked mmboe) Gross 71.5 36.3 42.3 6.0 156.1 Net to VAALCO 17.6 15.7 16.9 1.5 51.7 Exploration Acerage (gross) Acres 759,040 270,333 1,410,478 12,000 2,451,851 GOM Blocks Equivalent 152 54 282 2 490

12 Focused, Stable and Professional Management Over the Lengthy E&P Business Cycle Stock Price Surges As We Move to the Drilling Phase – Precisely Where We are Now Relative Performance (%) . 1Q 223% YOY . Plan 6H after Eb seismic . Write off 2V 4Q affected by cost account, development spend for 05 8 Eb/Av dev plans, lower sales from missed lifting AMEX app . Angola PSA 2Q NI up Eb dev plan approved Et extension, Eb dev plan, Angola operator . FPSO contract Buyback & Pill UKCS farm-in Seismic expenses Cost acct benefit, reserve upgrade Av 1st oil Et 2 dev and 3 expl wells, Mut 2 wells 4Q, Angola seeking rig for wells 9/28b non-comm Av Eb dev plans complete, expl well . YE UKCS farm-in YE, reserve upgrade 6H 1st oil 5H 1st oil AMEX listing Eb disc Bl. 5 Award . Mut PSA IFC revolver 1818 Fund Exit 1. Russell 3000/2000 Listed NYSE, approved UKCS Fortune Cramer Business Week -100 0 100 200 300 400 500 600 700 800 900 05/19/03 10/20/03 03/15/04 08/16/04 01/18/05 06/20/05 11/21/05 04/24/06 09/25/06 02/26/07 07/30/07 12/31/07

II. Superior Returns and Financial Performance

14 Superior Stock Price Performance and Stockholder Returns • VAALCO’s stock price performance has exceed that of its peer group – and far exceeded the broader market – over all meaningful periods 1. The peer group is as defined by the independent governance and proxy advisory firm RiskMetrics (ISS): Brigham Exploration Co. (NasdaqNM:BEXP), Callon Petroleum Co. (NYSE:CPE), Carrizo Oil & Gas Inc. (NasdaqNM:CRZO), Delta Petroleum Corp. (NasdaqNM:DPTR), Edge Petroleum Corp. (NasdaqNM:EPEX), TXCO Resources, Inc. (NasdaqNM:TXCO), Goodrich Petroleum Corp. (NYSE:GDP), Harvest Natural Resources Inc. (NYSE:HNR), Pacific Ethanol, Inc. (NasdaqNM:PEIX), PrimeEnergy Corp. (NasdaqSC:PNRG), Quest Resource Corp. (NasdaqNM:QRCP); peer group companies are indexed on a market capitalization weighted basis; in this presentation, over the 5-year measurement period, the peer group index excludes Pacific Ethanol, Inc. (NasdaqNM:PEIX), which entered trading on the Nasdaq Global Market on March 24, 2005. 5-year and 3-year relative performance charts use weekly average prices Stockholder Returns 503% 143% 49% 61% -100% 0% 100% 200% 300% 400% 500% 600% VAALCO Peer Group S&P 500 Source: CapitalIQ 1

15 5-Year Average ROIC 31% 14% 10% 7% 7% 6% 5% 2% -1% -2% -5% 0% 5% 10% 15% 20% 25% 30% 35% #1 Among Peers on 5-Year Return on Invested Capital (ROIC) † † Using John S. Herold, Inc.’s methodology, 5-Year ROIC calculated as the 5-year weighted average of the sum of net income to common plus preferred dividends plus minority interest expense plus adj. net interest expense; over average capital employed (year-end + prior year-end / 2), calculated as the sum of: ST debt plus LT debt plus volumetric production payments plus book value of common plus book value of preferred plus minority Interest • 5-Year ROIC far in excess of peer group and among the highest in the industry Peer Group Average 5% Note: figures for Quest Resource Corporation are not available because of change in reporting periods Source: John S. Herold, Inc.

16 VAALCO 5-Year Revenue Growth $0 $20 $40 $60 $80 $100 $120 $140 2003 2004 2005 2006 2007 #1 Among Peers on 5-Year Revenue Growth 5-Year Revenue Growth (CAGR) 66% 59% 52% 43% 38% 36% 34% 28% 23% -38% -60% -40% -20% 0% 20% 40% 60% 80% Note: figures for Quest Resource Corporation are not available because of change in reporting periods Source: John S. Herold, Inc. Peer Group Average 31%

17 5-Year EBITDA Growth $0 $20 $40 $60 $80 $100 $120 2003 2004 2005 2006 2007 # 2 Among Peers on 5-Year EBITDA † Growth † Note: in order to adjust for differences between oil and gas companies that use “successful efforts” accounting and those that “full cost” accounting (see next slide for details), EBITDA is calculated before exploration costs (commonly known as EBITDAX) Note: figures for Quest Resource Corporation are not available because of change in reporting periods Source: John S. Herold, Inc., CapitalIQ Peer Group Average 38% 5-Year EBITDA Growth (CAGR) 186% 81% 73% 69% 60% 40% 36% 34% 24% -177% -200% -150% -100% -50% 0% 50% 100% 150% 200% 250%

18 Successful Efforts Accounting, “Liftings” and the “Cost Account” 1. Successful efforts 1 accounting is the SEC’s preferred method of accounting for exploration – use of the successful efforts convention results in unusually low net income in any period where there are exceptional exploration expenses, such as an unsuccessful well or large payments for the acquisition of seismic data – VAALCO uses the convention as we believe it is a more transparent way to report performance 2. Irregularity in the timing of crude oil sales (so-called “liftings”) results in unusually low net income in any period that a lifting is missed, and unusually high net income in periods where there are extra liftings to “catch-up” with inventory – VAALCO’s taxes are recognized based on barrels of oil produced per month 2 , but revenues are recognized only when oil is sold (lifted) – At any time VAALCO can have up to 1.1 MM gross barrels in inventory 3. In the Etame concession, VAALCO receives a form of tax deduction for capital spending (“costs”) and can carry-forward amounts not yet deducted in a “cost account” – VAALCO experiences higher taxes, and lower net income, in any period where there is limited capital spending and no balance in the Cost Account 1. Under the successful efforts convention, all exploration costs except those related to successful drilling are expensed in the period incurred; under the full cost convention, the cost of both successful and unsuccessful exploration efforts are fully capitalized 2. Under U.S. and Gabonese law and VAALCO’s production sharing agreement (PSA) with the government of Gabon All 3 of These Transitory Factors Impacted VAALCO’s Net Income in the First Quarter of 2008

19 Nanes Delorme Partners’ Arguments Rest on Incorrect Assertions • Assertion: VAALCO’s stock price has underperformed its peers – VAALCO’s stock price performance exceeds that of the ISS peer group over 6-month, 1-year, 3-year and 5-year lookbacks 5-Year Relative Performance -100 0 100 200 300 400 500 600 700 800 3-Year Relative Performance -50 0 50 100 150 200 250 1-Year Relative Performance -40 -30 -20 -10 0 10 20 30 40 50 60 VAALCO S&P 500 Index Peer Group

20 Nanes Delorme Partners’ Arguments Rest on Incorrect Assertions • Assertion: VAALCO is undervalued on the basis of two ratios: (a) Enterprise Value (EV) / EBITDA and (b) Price / Earnings (P/E) – Nanes states these ratios to be “virtually all relevant comparable valuation metrics”; however, Nanes knows – or should know as a self-described “specialist” in the oil and gas industry – that EV/EBITDA and P/E ratios mean very little in the context of small-cap E&Ps – EV / EBITDA: • “EBITDA multiples… are less useful for valuing oil and gas reserves, where depletion factors and exploration and development expenditures are difficult to incorporate in a single EBITDA multiple factor” – John S. Herold, Inc. Valuation Methodology – P/E Ratios: • “… oil industry earnings are frequently impacted by… fluctuations in commodity prices, the timing of exploration costs, income tax rates that vary with the geographic location of operations, and other accounting vagaries associated with capital intensive businesses. As a consequence, reported net income and, hence P/E ratios, are of limited utility in the valuation of an oil company.” – John S. Herold, Inc. Valuation Methodology E&Ps, and Smaller E&P’s in Particular, Are Not Valued on the Basis of Simplistic Multiples

III. VAALCO’s Board: Experienced, Proven and Committed to Maximizing Stockholder Value

22 VAALCO’s Board: Independent, Engaged and Experienced • More than 100 years of combined experience in the E&P industry, including international development • 4 of 7 directors current or former executive officers in the industry • 5 of 7 directors have served as directors of other public companies • Balanced portfolio of complementary experience: – International government relations and diplomacy – Geology and geophysics – Finance and accounting – Investment banking – Tax law In 2007: • 8 full board meetings • Quarterly sessions with only independent directors • 7 committee meetings – Audit (4) – Compensation (2) – Governance and Nominating (1) • Board closely monitors implementation of strategy and operational results – Board and all committee meetings conclude with an executive session of independent directors only • 5 of 7 directors are independent under NYSE listing requirements – The 2 others being the Company’s CEO and CFO • All committees are comprised solely of independent directors – Audit – Compensation – Governance and Nominating INDEPENDENT ENGAGED EXPERIENCED

23 Continuing Director Nominees Possess Critical Skills and Experience • President since 1992; designed and implemented all of VAALCO’s exploration, drilling and development campaigns since joining the Company in 1991 • 30+ years experience in the petroleum industry • Former petroleum reservoir engineer with Exxon, management consultant with McKinsey & Company and investment banker with Copeland, Wickersham and Wiley, a leading investment banking boutique specializing in the oil and gas industry • Member of the Audit Committee • Pioneer of Canadian oil and gas Industry; 50+ years of experience in the petroleum industry includes 10 years as President of Mobil Oil Canada Ltd. • Honors include: inductee into Petroleum Hall of Fame, Honorary Doctorate from the University of Alberta, named on Albertans who had an impact on the 20 th century • Current director of Softrock Minerals and Carma.; former Chairman of Shiningbank Energy Income Fund, Chairman of Serenpet, President, CEO and Chairman of Poco Petroleum Ltd., President and CEO of Bowtex Energy (Canada) and Chairman and CEO of Mobil Oil Canada • Member of the Nominating and Corporate Governance and Compensation committees • 35+ years of experience in the petroleum industry • Former Ambassador to Great Britain with long standing business connections in the oil and gas industry • Provides valuable perspectives on international relations in support of VAALCO’s West African exploration efforts Continuing Directors Have Been Central To Success Over The Long-Term E&P Cycle Their Experience And Leadership Are Central To Current Drilling Program William S. Farish Director since 2004 Arne R. Nielsen Director since 1989 W. Russell Scheirman President & CFO Director since 1991

24 VAALCO’s Other Directors Are Also Accomplished Leaders Areas of Expertise • 45+ years in petroleum industry • Chairman, CEO since 1997 Other Directorships Current • Plains Exploration and Production • Integrity Bank Former • Vice Chairman Nuevo Energy Executive Experience • Founder, President, COO of Nuevo Energy • SVP of Energy Assets International Other • Director, Texas Children’s Hospital • Member, University of Texas Advisory Council Areas of Expertise • Tax law for international corporations • Legislative/Regulatory affairs Other Directorships Former • American Exploration Company Executive Experience • Member of the Executive Committee, Breen Investors • Partner-in-Charge, Baker Botts, LLP Other • Former Assistant Secretary for Tax Policy at the U.S. Treasury Department • Nominated by President Reagan, confirmed by U.S. Senate and represented the Administration in presenting tax policy to U.S. Congress Areas of Expertise • 45+ years in petroleum industry • Geology and Geophysics • Operating and management experience in VAALCO’s core asset locations Other Directorships Former • Pan-Ocean Energy Executive Experience • MD, Chevron Africa & Mid-East MD, Chevron Africa • Deputy MD Europe, Chevron • VP of Geoman, a Gulf affiliate • GM, Gulf Exploration of UKCS • Assistant to VP, Chevron Overseas Exploration Other • Ph.D. Geology and Geophysics Areas of Expertise • 50+ years in petroleum industry • Accounting (CPA) • Investment/Finance Other Directorships Current • First City Bancorporation • American Mining Congress Former • Gulf Resources and Chemical Corporation • Gulf Canada Resources • Gulf Indonesia Resources • Federal Express • University of Texas Investment Management Company Executive Experience • Chairman, CEO of Gulf Resources • Chairman, CEO of Chemical Corporation Other • Managing Partner of Challenge Investment Partners • Regent Emeritus of Texas A&M • Board of Trustees of Baylor College of Medicine Robert H. Allen Luigi P. Caflisch O. Donaldson Chapoton Robert L. Gerry, III

25 Committed to Maximizing Stockholder Value • VAALCO’s Board is always open to considering bona fide offers that would provide stockholders with full and fair value for their shares – NO such offers have been received • VAALCO’s Board, with assistance of its financial and legal advisors, continuously reviews the Company’s business plans and other value creating opportunities / strategic options • Retained independent financial advisors over 1 year ago and have been evaluating: • Concessions, farm-ins and acquisitions • Acquisitions of additional working interests in the Etame concession • Growth capital financing structures including PIPEs (private investment public equity) • Other opportunities / strategic options • Now is not the right time to sell VAALCO • Stockholders are poised to benefit from the current drilling program • Selling now would transfer the value of a potential discovery to the acquiror • E&Ps do not receive full value on resources that have not been proved-out by drilling • Uncertain market conditions (including commodity price volatility and credit market instability) are likely to inhibit a robust sale process and the ability to obtain full and fair value for stockholders • After careful analysis and consideration, in September 2007 VAALCO’s Board – with the assistance of the Company’s financial and legal advisors – adopted a stockholders’ rights plan (“Poison Pill”), as an appropriate defense to prevent an opportunistic acquisition at prices below VAALCO’s intrinsic value

26 Why Even One Nanes Delorme / Pilatus Energy Nominee is Bad for Stockholders – Who Are They? Nanes Delorme • Proxy campaign led by Julien Balkany, a 27-year old French citizen • Formed 2000 by Daryl Nanes; based in New York – Suffered $323,510 net loss in 2007 • Broker and adviser on African oil & gas transactions including: – Surestream Petroleum’s “exclusive advisor” in a sale of up to 40% of its interests in the Ndunda Block, Democratic Republic of Congo – “Sole financial advisors” to Afren in its acquisition of oil & gas properties in Angola 2 – all of Afren’s oil & gas assets are located in West Africa – Advisor to Maurel & Prom, a company with extensive oil & gas operations in Gabon and Congo (Brazzaville), West Africa • Self-proclaimed hedge fund formed January 2008 • Affiliated with investment bank Bear Stearns Pilatus Energy • Founded in 2006; based in Zug, Switzerland • Purportedly led by Loik Le Floch-Prigent – “The name of the former Elf CEO doesn't appear on their list of executives but it is he who makes all of their investment decisions.” • Le Floch-Prigent was convicted by a French court in 2003, sentenced to 5-years in prison and fined €375,000 for fraud, embezzlement, bribery and a kickback scheme through his management of Elf Aquataine (known as “the Elf Affair”) 4,5 – “probably the biggest political and corporate sleaze scandal to hit a western democracy since the second world war” 6 – Used $145 MM of public funds used to buy influence and contacts in Africa 7 – Accused of embezzling millions from Elf and using company funds to obtain political influence 8 • Le Floch-Prigent was convicted again 1 year ago for misappropriating funds in connection with a bogus jobs scheme, receiving a 15-month suspended sentence and €60,000 fine 4 • Reported to have acquired oil and gas properties in Mali and Congo and to be pursuing assets in Cameroon, Guinea and the Ivory Coast 1. Africa Energy Intelligence (AEI), “The New African Oil Trail Blazers”, 2/20/08 2. AEI, “Abbas I. Yousef Al Yousef”, 12/19/07 3. AEI, “Le Floch-Prigent’s New Incarnation”, 12/5/07 4. Reuters News, “Curtain Comes Down on Final Elf Graft Trial”, 5/25/07 5. Associated Press, “Paris Court Orders Former Elf Chairman Freed From Prison on Medical Grounds”, 4/8/04 6. The Guardian, “Gigantic Sleaze Scandal Winds Up as Former Elf Oil Chiefs are Jailed”, 11/13/03 7. Associated Press, “Former French Oil Chief Testifies that Money Went to African Leaders”, 3/19/03 8. Reuters News, “Former Elf Head Blames Unhappy Marriage for Graft”, 4/14/03 3 3 2,3

27 Why Even One Nanes Delorme / Pilatus Energy Nominee is Bad for Stockholders – Significant Conflicts of Interest • The most competitive and important area of activity for E&P companies is the search for prospective drilling acreage and related information (such as whether properties are available and seismic data) • Protecting this sensitive, proprietary information is crucial to an E&P company’s success and a critical driver of value creation • We believe installing any competitor’s paid representatives onto VAALCO’s Board would inhibit discussion and create an untenable situation that limits meaningful review of VAALCO’s opportunities and prospects – In our view, this would be detrimental to stockholder value and the future of VAALCO Nanes Delorme Partners and Pilatus Energy Have Significant Conflicts of Interest – They Do Not Belong on VAALCO’s Board

28 Why Even One Nanes Delorme / Pilatus Energy Nominee is Bad for Stockholders – True Intentions Are Unknown • Pilatus acquired ~4.5% of VAALCO (just shy of SEC disclosure requirements) only recently, between November 30, 2007 and January 30, 2008; Nanes Delorme was not even formed until January 22, 2008 – Nanes told VAALCO on at least 3 occasions that its unnamed limited partner was not a competitor – Pilatus was only identified May 5, almost 2 months after the initial 13D, and an amended proxy • Pilatus’/Nanes’ goals are unclear; objectives do not seem aligned with other stockholders – Refused on at least 2 occasions to enter into a non-disclosure agreement – Refused an offer by VAALCO – made prior to VAALCO learning of Pilatus’ involvement – of 1 Board seat and membership on a committee to review alternatives – Demanded (although a 7.9% holder): 3 Board seats and formation of a “special committee”, controlled by Nanes, to review alternatives including a corporate sale Pilatus Nanes Delorme Nov. 28, 2007 – Jan. 16, 2008 Purchases 1.125 MM shares Jan. 18 & Jan. 22, 2008 formed: Nanes Balkany Partners I Nanes Balkany Management Nanes Delorme Partners I Jan. 30 Has 2.7 MM shares (~4.5%) Feb. 14 Transfers all to Nanes Feb. 22 – Mar. 3 Purchases 0.65 MM shares requiring 13D filing (~5.6%) Mar. 4 – Mar. 11 Purchases 1.35 MM shares for a total of 4.7 MM (~7.9%) Mar. 11 & Mar. 12 Sends letter to Board, then files 13D, 1 day before earn- ings; no mention of Pilatus Week of April 7 CEO & CFO agree to meet Nanes on April 15; prior to meeting, on April 11, Nanes notifies VAALCO it will seek its own directors April 15 - April 22 Balkany refuses to identify unnamed, secret limited partner; tells VAALCO its partner is not in the oil & gas business April 24 - VAALCO files Proxy April 25 - Nanes files preliminary proxy; does not identify Pilatus May 5 - Nanes files amended preliminary proxy revealing identity of limited partner as Pilatus Energy

29 Why Even One Nanes Delorme / Pilatus Energy Nominee is Bad for Stockholders – No Substantive Ideas • Nanes other stated ideas for VAALCO make little sense: – Core asset divestitures – What assets, short of a sale of the entire company, does Nanes Delorme propose to divest? – Nanes Delorme itself states 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” – Alternative listings – Nanes Delorme provides no support whatsoever for its assertion that share performance would be affected by an alternative listing – Clear proof to the contrary – superior stockholder returns and operating performance – “Flowback” likely to lead to stock price declines – Cease North Sea activity – VAALCO’s North Sea activity is a small part of our overall business and is consistent with our strategy of obtaining new assets in politically stable regions where modern technology has the potential to unlock previously hidden reserves – 70 discoveries currently in the appraisal or development stage representing ~ 3 billion barrels of oil equivalent – new entrants are involved in 46 of these projects¹ – Well understood geology resulting in low exploration risk and high drilling success rates – Government policies encourage new entrants and accelerated E&P – Move headquarters to London, Paris or Geneva and close office in Aberdeen – – Houston is widely known as the oil capital of the world, with an unsurpassed pool of talent and a low cost of living (the same cannot be said for London, Paris or Geneva) – Aberdeen is where all of the drilling professionals for VAALCO's operations are based and is an established international center for drilling expertise 1. Hannon Westwood, May 2008

30 Nanes’ Nominees Add No Significant Skills or Experience Leonard Toboroff • Current director of Engex, a closed-end investment company focused on the biotechnology, technology, gaming and distribution industries (market capitalization of $9 MM), NOVT, a former developer of treatments for vascular diseases (no significant current operations) and SP Acquisition, a blank-check acquisition company (no significant operations) • Director and Vice-Chairman of Allis-Chalmers Energy, which provides drilling equipment to the onshore domestic energy industry W. Russell Scheirman • Designed and implemented all of VAALCO’s exploration, drilling and development campaigns since joining the Company in 1991 • 30+ years experience in the petroleum industry • Former petroleum reservoir engineer with Exxon, consultant with McKinsey & Company and investment banker Clarence Cottaman III • PetroFalcon Board member since June 2003; since 2005, stock has fallen from a high of C$5.90 to C$1.50; operating at a loss for the last 2 years • Expertise already well represented on VAALCO’s Board Arne R. Nielsen • 50+ years experience in the petroleum industry • Inductee into the Petroleum Hall of Fame • Extensive operating and Executive Management industry experience, including 10 years as President of Mobil Oil Canada Julian Balkany • Age 27 • Managing Director, Nanes Delorme, oil & gas M&A investment broker to VAALCO’s competitors • No public company executive or Board experience William S. Farish • Former Ambassador to Great Britain • Long standing industry business connections • 35+ years experience in the petroleum industry • Valuable perspectives on international relations in support of VAALCO’s West African efforts

31 VAALCO’s Nominees Are the Right Choice • Independent and engaged Board made up of successful and experienced industry leaders – Responsible for successful implementation of corporate strategy and stock price appreciation – Broad and complementary expertise in areas critical to VAALCO’s business – 5 of 7 directors independent under NYSE listing requirements – All committees constituted solely of independent directors • Superior long-term value creation and financial performance – 503% cumulative stockholder return over the last 5 years – Outperformed peer group over each of the last 6-month, 1-year, 3-year and 5-year periods – 31% 5-year average ROIC (among top 5% of the oil & gas industry) – 66% revenue CAGR over the last 5 years – 81% EBITDA CAGR over the last 5 years • Track record of superior operating achievements – 82% success rate in exploration drilling since 1998, when Etame drilling began – 100% success rate in the drilling and completion of development wells since 1998 – 50% increase in production since 2002 • Strong growth expected to continue – Drilling program underway exposes VAALCO stockholders to 8x current reserves – 7 planned exploration wells, 2 development wells, arrangements in place to contract for rigs – Drilling to commence this summer

32 VAALCO Energy, Inc. Exceptional Exploration Track Record Efficient, Low Cost Operator Large, High Prospectivity Exploration Portfolio Strong Cash Flow for Exploration, Production and Acquisitions