Vaalco seeks further support in proxy contest; Nanes Delorme pushes for new directors

By Jennifer Chiou

New York, May 22 - Vaalco Energy, Inc. announced that independent proxy advisory firm Glass Lewis & Co. recommends that stockholders vote on the company's white proxy card and refrain from voting for any of Nanes Delorme Partners I LP and Pilatus Energy SA's director nominees at the June 4 annual meeting.

Vaalco previously said it is locked in a proxy battle with New York-based hedge fund Nanes Delorme Partners.

As already reported, the company sent a letter on May 8 urging stockholders to vote for W. Russell Scheirman, Vaalco president and chief financial officer; Arne R. Nielsen, former president of Mobil Oil Canada; and William S. Farish, Vaalco director and former ambassador to Great Britain.

At the same time, Nanes Delorme announced that Glass Lewis has recommended that Vaalco stockholders withhold their votes on management nominees Nielsen and Scheirman in order to provide the opportunity for Nanes Delorme's independent directors to be elected to the company's board.

Nanes Delorme urged Vaalco stockholders to vote the gold proxy card to elect Julien Balkany, Leonard Toboroff and Clarence Cottman III to the board.

"We are very pleased that Glass Lewis, an independent proxy advisory service, supports immediate change to Vaalco's current board of directors and agrees with our position that new independent representation on the company's board is necessary," Balkany, a managing member of Nanes Balkany Partners LLC, the general partner of Nanes Delorme, stated.

"Moreover, we are astounded that Vaalco is attempting to mislead its stockholders by suggesting in today's press release that this is somehow a victory for the company - it's a clear recommendation for change at the board level."

According to Vaalco, Glass Lewis stated in the May 22 report that it is "concerned that the dissident's primary plan for improvement appears to be pursuing a sale of the company."

In its report, Glass Lewis noted that Vaalco had previously adopted a stockholder rights plan without putting the plan to a stockholder vote. However, Vaalco said its board will submit the company's stockholder rights plan for ratification at the 2009 annual meeting.

It was previously reported that Nanes Delorme has partnered with Pilatus Energy, an oil and gas company with headquarters in Zug, Switzerland.

Robert L. Gerry III, Vaalco's chairman and chief executive officer, already expressed concern that Nanes Delorme and Pilatus Energy's "short-term, self-serving agenda would threaten the company and our record of value creation."

In his latest letter, Gerry said, "Nanes Delorme Partners and its recently revealed secret partner, Pilatus Energy, have serious conflicts of interest."

In its analysis, Nanes Delorme announced that Glass Lewis said it is "concerned that the board recently adopted a shareholder rights plan, an action which we believe is clearly contrary to the interests of the shareholders."

In addition, Nanes Delorme's release quotes Glass Lewis as saying it finds "that the company's stock price has drastically underperformed its peers in recent years. During the one-year period prior to the announcement of the proxy contest, the company's stock price fell by approximately 11.2%, compared to the gains of approximately 12.6% and 46.8% by the peer composite and the S&P Mid Cap Oil & Gas Exploration & Production Index, respectively (source: FactSet)."

Further, Glass Lewis said that it believes "that withholding votes from Messrs. Nielsen and Scheirman may provide the opportunity for two dissident nominees to be elected to the board," according to the Nanes Delorme release.

Gerry previously said that public records make clear that Nanes Delorme and Pilatus "are conflicted and their ethics tainted by a scandal involving corruption, kickbacks, fraud and embezzlement."

The CEO cautioned shareholders in a previous letter that Nanes Delorme has a history of brokering the sale of oil and gas assets. In addition, the investor has said its nominees would seek to begin a sale of Vaalco, Gerry said.

As already noted, according to Gerry, Nanes Delorme only recently purchased its Vaalco shares, with the majority of them purchased by Pilatus, whose head was convicted and sentenced by a French court for fraud, embezzlement, bribery and kickbacks.

Contact D.F. King & Co., Inc. for proxy questions (800 901-0068 or call collect 212 269-5550).

Nanes Delorme Partners' proxy solicitor is MacKenzie Partners, Inc. (800 322-2885).

Vaalco Energy is a Houston-based independent energy company.

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