Vaalco urges shareholders to reject dissidents' nominees

Vaalco is suing New York hedge fund Nanes Delorme Partners I LP, its biggest shareholder, and Pilatus Energy SA of Zug, Switzerland. The company claims that the investors filed misleading documents as part of an effort to win three board seats.

Nanes Delorme urged Vaalco to put itself up for sale in March. In a letter to shareholders dated Monday, Vaalco Chairman and Chief Executive Robert L. Gerry III said the hedge fund and broker has represented Vaalco competitors in its core West African areas of operation. The company said Pilatus Energy is an active purchaser of oil and gas assets in West Africa and also competitive with Vaalco.

"Allowing Nanes Delorme Partners and Pilatus Energy to install even one of their paid representatives onto your board would enable parties with conflicting interests and different objectives to have unfettered access to Vaalco's confidential and proprietary information," said Chairman and Chief Executive Robert L. Gerry III.

The company said Nanes Delorme is paying two of its nominees to stand for election and another nominee is a paid employee of the firm.

Gerry said the company expects 2008 to be "a break-out year." He said Vaalco's exploration program will potentially expose the company to an eight-fold increase in net barrels of reserves.

Vaalco's board nominees are William S. Farish, Arne R. Nielsen and W. Russell Scheirman. The company's annual meeting is scheduled for June 4.

Vaalco shares gained 14 cents to $7.68 in morning trading.