By Beth Jinks and Joe Carroll
Vaalco Energy Inc., the oil explorer that has lost more than 70 percent of its value in the past year, is being targeted by a group of shareholders seeking to wrest control by replacing most of the company’s board.
Bradley Radoff and Group 42 Inc., who together own 11.1 percent of Vaalco’s shares, are asking other shareholders for written votes to replace four of its seven directors with their own candidates, without waiting for the company’s annual meeting -- a rare use of consent solicitation.
“Stockholders cannot afford to wait until the annual meeting to seek meaningful improvement on the board. Change is needed now,” the investor group wrote in a statement Friday.
“This process will provide a democratic pathway for the voices of stockholders to truly be heard, and hopefully will result in the significantly improved board that Vaalco desperately and urgently needs.”
Unlike most of the oil industry, Vaalco Chairman and Chief Executive Officer Steven Guidry hasn’t trimmed capital spending in response to the collapse in commodity markets. The Houston- based explorer, which rescheduled its third-quarter earnings release to Nov. 9 from Friday, has been plagued by surging costs, production hiccups and two straight years of cash shortfalls. The company has a market value of about $120 million, compared with more than $400 million a year ago.
The dissident nominees are Peter Dickerson, an upstream oil and gas professional who consults for Group 42 on West Africa; Michael Keane, an executive and banker; investor Joshua Schechter; and Radoff.
Radoff, a Houston-based investor who previously worked at sometimes-activist hedge fund Third Point LLC, and Group 42, an energy-focused holding company, on Sept. 25 filed as activist holders, seeking governance, strategic and operational changes.
The next day, Vaalco adopted a poison pill, preventing them from increasing their stakes.
The 58 percent plunge in US crude prices since late June 2014 has wiped out oil-company profits and more than 200,000 jobs as explorers, drillers and frackers scaled back capital budgets and braced for a multi-year slump in energy markets.
Bankruptcies among U.S. energy companies have so far tripled this year compared with all of 2014 and red ink is expected to continue flowing into next year at the very least.
Vaalco’s share plunge this year puts it on track for the worst annual performance since 1994, according to data compiled by Bloomberg.
Output from the company’s oil wells has fallen in six of the past eight quarters and Vaalco’s reserves of untapped crude and natural gas are little changed from what they were a decade ago. The company’s costs to pump crude from the ground more than doubled to $21.43 a barrel during the second quarter from a year earlier.
Vaalco forked over $41.2 million to rig owners, drilling- mud suppliers and other oilfield-service companies during the first half of this year, almost 1 percent more than the prior six-month period. During that same time, global crude prices tumbled 52 percent.
In an August conference call with analysts, Guidry pledged to eliminate jobs and streamline the company once a major expansion of one of the company’s West African oil projects is complete. He also said Vaalco would “improve the depth and breadth of information” provided about the company’s finances and operations to investors.