Shareholders Urge Vaalco to Pursue 'Strategic Alternatives'

Nanes Delorme Partners I LP, with associated entities, has delivered a letter to VAALCO Energy, Inc. Board of Directors in which it expressed its belief that the Company is undervalued and believes that the best way to unlock shareholder value would be to immediately evaluate a range of strategic alternatives, including the pursuit of either a sale of the entire Company or the divestiture of its West African portfolio.

In addition, Nanes Delorme disclosed in a Schedule 13D filed with the Securities and Exchange Commission that it beneficially owns approximately 8% of the common stock of VAALCO, making Nanes Delorme the largest independent shareholder of VAALCO, based on publicly available information.

Nanes Delorme believes that VAALCO's stock has underperformed in the past year, in a period that has been extremely favorable to most exploration and production companies. In 2007, VAALCO's share price fell approximately 30%, while the Standard & Poor's Midcap Oil and Gas Exploration and Production Index climbed nearly 45%. In addition, the share price trades at a significant discount to its industry peers and doesn't seem to be appropriately valued by the public market.

In its letter to the Board of VAALCO, Nanes Delorme notes that a major disconnect exists between VAALCO's depressed stock price and the underlying value of its West African assets. Nanes Delorme estimates the total Net Asset Value of the Company at approximately $420 million, which translates into approximately $7.12 per share and as of March 6, 2008 the shares closed as low as $4.45. This valuation represents approximately a 60% premium to the current share price.

Furthermore, the Company has been unwisely spending capital on acquiring and drilling minor North Sea interests that have been total exploration failures. Nanes Delorme believes that the recent increase in capital expenditures to support the diversification in the UK North Sea an area that in total is over-explored and has seen production rapidly decline in recent years is a waste of shareholder capital and that activities in the region should cease immediately, including the closure of VAALCO's office in Aberdeen (UK).

Julien Balkany a Managing Member of the Fund's General Partner, Nanes Balkany Partners LLC said, "We believe that VAALCO is a company with great producing assets in Gabon and substantial exploration upside in Angola. However, we have serious concerns about the current strategic direction of the Company and the ability of the management and Board to eliminate the significant valuation gap that exists. As a result, we urge VAALCO's Board of Directors to immediately begin a review of strategic alternatives, including the sale of the entire Company."

Mr. Balkany continued, "We are confident that an auction process would attract numerous interested parties that would pay a substantial premium to the current share price. We strongly believe these proactive steps are unfortunately necessary to address the issues negatively affecting the stock price despite record oil prices, and will unlock value for all VAALCO shareholders."

Mr Balkany finally noted, "We are committed shareholders whose priority is to work in the best interest of all shareholders and we reserve all rights to take any and all action required to maximize value."


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