8-K: Current report filing

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report
April 21, 1998

VAALCO ENERGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 000-20928 76-0274813
(STATE OR OTHER JURISDICTION OF (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

4600 POST OAK PLACE, SUITE 309
HOUSTON, TEXAS 77027
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(713) 623-0801
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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THIS REPORT INCLUDES "FORWARD LOOKING STATEMENTS" WITHIN THE MEANING OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED ("EXCHANGE ACT"). ALL STATEMENTS
OTHER THAN STATEMENTS OF HISTORICAL FACT INCLUDED IN THIS REPORT (AND THE
EXHIBITS HERETO), INCLUDING WITHOUT LIMITATION, STATEMENTS REGARDING THE
COMPANY'S FINANCIAL POSITION AND ESTIMATED QUANTITIES AND NET PRESENT VALUES OF
RESERVES, ARE FORWARD LOOKING STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UPON WHICH SUCH FORWARD-LOOKING STATEMENTS ARE BASED ARE REASONABLE,
IT CAN GIVE NO ASSURANCES THAT SUCH ASSUMPTIONS WILL PROVE TO HAVE BEEN CORRECT.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE
COMPANY'S EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED IN THE SECTION
"RISK FACTORS" INCLUDED HEREIN AND IN THE COMPANY'S FORMS 10-KSB AND OTHER
PERIODIC REPORTS FILED UNDER THE EXCHANGE ACT, WHICH ARE HEREIN INCORPORATED BY
REFERENCE. ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS
ATTRIBUTABLE TO THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY
QUALIFIED BY THE CAUTIONARY STATEMENTS.

ITEM 1. CHANGES IN CONTROL OF REGISTRANT

See response to Item 2, which is incorporated herein by reference.

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

On April 21, 1998, VAALCO Energy, Inc. ("VAALCO") consummated the
acquisition (the "Acquisition") of 1818 Oil Corp. ("1818 Corp.") from The 1818
Fund II, L.P. (the "Fund") in exchange for 10,000 shares of its Convertible
Preferred Stock, Series A ("Preferred Stock"). The Preferred Stock is
convertible into 27.5 million shares (57% following such conversion) of common
stock, $0.01 par value per share ("Common Stock") of VAALCO. In addition, the
Fund simultaneously acquired 3,763,441 shares of Common Stock for $7 million in
cash. Prior to conversion, the holder of the Preferred Stock votes on an as
converted basis with the Common Stock and is entitled to receive any dividends
declared with respect to the Common Stock on an as converted basis. Taken
together with the Common Stock acquired by the Fund, the Fund will be entitled
to vote 31,263,441 shares (65%) of Common Stock on all matters submitted to
holders of Common Stock.

The principal asset of 1818 Corp. is a 7.5% limited partner interest in
Hunt Overseas Exploration Company, L.P., ("Hunt") which has exploration
prospects in a number of international areas. The general partner of Hunt is
Hunt Overseas Operating Company ("HOOC"), a subsidiary of Hunt Oil Company,
which has extensive experience in international exploration and development
operations.

Under the partnership agreement of Hunt, 1818 Corp. has an obligation to
contribute $5.1 million to fund its share of the exploration costs of Hunt. In
addition, if Hunt discovers oil or gas deposits, 1818 Corp. will be required to
contribute an additional $7.5 million to fund appraisal costs. Immediately prior
to the closing of the Acquisition, 1818 Corp. deposited cash in the amount of
$12.6 million with a commercial bank that will hold such cash as collateral for
a letter of credit issued by the bank in favor of Hunt to secure the Company's
obligations to make future capital contributions. If Hunt does not

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call such capital contributions as provided in the partnership agreement of
Hunt, the cash collateral will be released to the Company.

The Fund, as the holder of the Preferred Stock, has the right to vote as
a class with the holders of Common Stock on all matters submitted to a vote of
the holders of Common Stock on an "as converted basis." Following the Offering,
the Fund will own Common Stock and Preferred Stock which will in the aggregate
represent approximately 65% of the outstanding voting power of the Company on an
as converted basis (excluding options and warrants), and will therefore have the
ability to control the vote on all matters submitted to a vote of the holders of
the Common Stock, including the election of directors.

In addition, the holder of the Preferred Stock has the right to appoint
three directors of the Company, voting separately as a class. The Fund, as
holder of the Preferred Stock, has appointed Lawrence C. Tucker, T. Michael Long
and Walter W. Grist as directors of VAALCO pursuant to the provisions of the
Preferred Stock. The following is a description of the business history of
Messrs. Tucker, Long and Grist:

Lawrence C. Tucker - Mr. Tucker is a general partner of Brown
Brothers Harriman & Co. ("BBH&Co."), a private banking company, and has
been with BBH&Co. for 31 years. Mr. Tucker currently serves as a member
of the Steering Committee of BBH&Co. With T. Michael Long, Mr. Tucker is
responsible for the corporate finance activities of BBH&Co., including
management of the 1818 Funds, private equity investing partnerships with
committed capital exceeding $1 billion. Mr. Tucker is a director of
WorldCom, Inc., Riverwood International Corporation, National Healthcare
Corporation and WellCare Management Group, Inc. Mr. Tucker has a B.S.
degree from Georgia Institute of Technology and an MBA from the Wharton
School of the University of Pennsylvania.

T. Michael Long - Mr. Long is a general partner of BBH&Co. and
has been with BBH&Co. for 27 years. With Mr. Tucker, Mr. Long is
responsible for the corporate finance activities of BBH&Co., including
management of the 1818 Funds, private equity investing partnerships with
committed capital exceeding $1 billion. Mr. Long received a B.A. degree
from Harvard College in 1965 and he received an MBA from The Harvard
University Graduate School of Business in 1971. Mr. Long is a director
of Columbia/HCA Healthcare Corporation, Gulf Canada Resources Limited
and Gulf Indonesia Resources Limited.

Walter W. Grist - Mr. Grist has been with BBH&Co. for over 30
years. Mr. Grist is one of several managers of the 1818 Funds, private
equity investing partnerships with committed capital exceeding $1
billion. Mr. Grist received his B.S. degree is Business Administration
at New York University in 1965. Mr. Grist is a director of Computerized
Medical Systems, Inc., Steri-Oss, Inc., and WellCare Management Group,
Inc.

In connection with the consummation of the acquisition of Hunt, the
Company issued 5,183,441 shares of its Common Stock in a private placement for
aggregate gross

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proceeds of $9.8 million. Of these shares, 3,763,441 were acquired by the Fund.
VAALCO will use the proceeds of this offering to fund its capital budget,
including possible future acquisitions, and for general corporate purposes.

In addition, in connection with the consummation of the acquisition of
Hunt, the Company entered into an agreement with Paramount Petroleum Company and
its owner Robert Schneeflock to explore for oil and gas in the Gulf Coast area.
The Company has committed to fund up to $3.0 million to fund exploration
activities of the joint venture.

ADDITIONAL RISK FACTORS

In addition to the risk factors described in the Company's Forms 10-KSB
and elsewhere in its filings with the Securities and Exchange Commission,
investors should also consider the following risks associated with the
transactions described in this Report on Form 8-K:

CHANGE OF CONTROL

The Fund owns Common Stock and Preferred Stock which vote as a class
with the Common Stock on an as converted basis, and which will in the aggregate
represent approximately 65% of the outstanding voting power of the Company on an
as converted basis (excluding options and warrants). In addition, the terms of
the Preferred Stock provide that while the Preferred Stock is outstanding, the
holders of Preferred Stock voting together as a class will be entitled to elect
three directors of the Company. Accordingly, the Fund will be able to control
all matters submitted to a vote of the stockholders of the Company, including
the election of directors.

In connection with the Hunt Transaction, the Company made certain
changes to its bylaws which require that at least a majority of the directors
constituting the entire board of directors, which majority must include at least
one of the directors elected by the holders of Preferred Stock, approve each of
the following transactions effected by either the Company or, as applicable, any
subsidiary of the Company: any issuance of or agreement to issue any equity
securities, including securities convertible into or exchangeable for such
equity securities (other than issuances pursuant to an employee benefit plan);
the declaration of any dividend; the incurrence, assumption of or refinancing of
indebtedness; the adoption of any employee stock option or similar plan;
entering into employment or consulting agreements with annual compensation
exceeding $100,000; any merger or consolidation; the sale, conveyance, exchange
or transfer of the voting stock or all or substantially all of the assets; the
sale or other disposition to another person, or purchase, lease or other
acquisition from another person, of any material assets, rights or properties;
certain expenditures in excess of $300,000; the formation of any entity that is
not wholly-owned by the Company; material changes in accounting methods or
policies; any amendment, modification or restatement of the certificate of
incorporation or bylaws; the settlement of any claim or other action against the
Company or subsidiary in an amount in excess of $50,000; approval or amendment
of the annual operating budget; any other action which is not in the ordinary
course of business; and the

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agreement to take any of the foregoing actions. Accordingly, none of the
foregoing actions can be taken by the Company without the approval of at least
one director designated by the holders of the Preferred Stock.

INVESTMENT IN HUNT

Upon consummation of the Hunt Transaction, the Company will be a limited
partner in Hunt. All decisions concerning the operations of Hunt will be made by
the general partner of Hunt without the consent of the limited partners.
Accordingly, the Company will not be able to control, and may not be able to
influence, decisions with respect to operations of Hunt, including decisions
regarding the purchase of concessions and other interests, exploration and
development operations (including the location, testing, completing or plugging
and abandoning of wells, as well as the gathering of seismic and other
geophysical data), farm out and other participation agreements, the acquisition
or sale of real and personal property, insurance coverage, bank and other
financings and other matters significant to the operations of Hunt.

The exploration activity of Hunt is ongoing. To date, Hunt's exploration
activities have not resulted in the discovery of any commercial oil or gas
reserves. No assurance can be given that Hunt's activities will ever result in
any commercial production or that the Company will realize a return on its
investment in Hunt. Hunt's operations are subject to risks applicable to the oil
and gas industry in general as well as to risks inherent in foreign operations,
and are subject to many of the risks described in the Company's Form 10-KSB.

RESALES OF COMMON STOCK OFFERED HEREBY, SHARES ELIGIBLE FOR FUTURE SALE

Commencing April 21, 1999, Rule 144 of the Securities Act will permit
the persons who purchased Common Stock in the Offering to sell, within any three
month period, a portion of the shares of Common Stock purchased by them not
exceeding the greater of 1% of the outstanding shares (approximately 207,500
shares upon consummation of the Offering and the Hunt Transaction) or the
average weekly trading volume in the Common Stock during the four calendar weeks
preceding such sale. Sales under Rule 144 also are subject to certain manner of
sale provisions, notice requirements and the availability of current public
information about the Company. A person who has not been an affiliate of the
Company at any time during the three months preceding a sale, and who has
beneficially owned shares for at least two years, is entitled to sell such
shares under Rule 144 without regard to the volume limitations, manner of sale
provisions or notice or current public information requirements. Affiliates of
the Company continue to be subject to the volume limitations and other
requirements of Rule 144, regardless of the period of time they have held their
shares.

The Company, the Fund and the purchasers of Common Stock in the Offering
have entered into a registration rights agreement under which the Fund and such
purchasers have the right to require the Company to register under the U.S.
securities laws any shares of Common Stock owned by the Fund or such purchasers.
The Fund and such purchasers

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also have the right to include shares of Common Stock owned by them in
registration statements filed by the Company. Sales or the possibility of sales
of such Common Stock in the public market could adversely affect the prevailing
market price of the Common Stock.

QUALIFICATION OF NET OPERATING LOSS CARRY FORWARD

As of December 31, 1996, VAALCO had a net operating loss carry forward
of $13.2 million for federal income tax purposes, and 1818 Corp. had a net
operating loss carry forward of from $10 million to $12 million. As a result of
the acquisition of the capital stock of 1818 Corp., the net operating loss of
the Company which otherwise could have been used to offset future taxable income
will be limited to $1.6 million during any year. The net operating losses of
1818 Corp. will not be affected by the transaction.

ITEM 3. BANKRUPTCY OR RECEIVERSHIP

Not applicable

ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS

Not applicable

ITEM 5. OTHER EVENTS

Not applicable

ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS

Not applicable

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements of Businesses Acquired

1. Financial Statements of 1818 Oil Corp.

It is impracticable to provide the required financial statements by the
date this Report is required to be filed with the Securities and Exchange
Commission (the "Commission") and the financial statements are currently not
available. The Company will provide such statments under cover of Form 8-K/A as
soon as practical, but in any event not later than 60 days after the date this
Report is required to be filed with the Commission.

(b) Pro forma Financial Information

1. Unaudited Pro Forma Financial Statements of VAALCO Energy, Inc.

The unaudited pro forma financial statements of VAALCO Energy,
Inc. are attached as Schedule A to this Form 8-K.

(c) Exhibits

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EXHIBIT
NUMBER DESCRIPTION

1. Underwriting Agreement*

2. Plan of acquisition, reorganization, arrangement,
liquidation or succession

2.1 Stock Acquisition Agreement and Plan of Reorganization,
dated February 17, 1998, by and among the Company and
the Fund**

2.2 First Amendment to Stock Acquisition Agreement and Plan
of Reorganization, dated April 21, 1998.

2.3 Registration Rights Agreement among the Company and The
1818 Fund II, L.P., dated April 21, 1998

2.4 Registration Rights Agreement among the Company and the
purchasers of Common Stock in a private placement dated
April 21, 1998

4. Instruments defining the rights of holders, including
indentures

4.1 Designation of Convertible Preferred Stock, Series A,
as filed with the Delaware Secretary of State

16. Letter re change in certifying accountant*

17. Letter on director resignation*

20. Other documents or statements to securityholders*

23. Consents of experts and counsel*

24. Power of attorney*

27. Financial Data Schedule*

99. Additional exhibits

99.1 Company's Press Release, dated February 17, 1998
pertaining to the Agreement**
99.2 Press Release dated April 23, 1998

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* Inapplicable to this filing
** Previously filed

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ITEM 8. CHANGE IN FISCAL YEAR

Not applicable

ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S

Not applicable

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

VAALCO ENERGY, INC.

May 6, 1998 By: /s/ W. RUSSELL SCHEIRMAN
W. Russell Scheirman
President & Chief Financial
Officer

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INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
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2.2 First Amendment to Stock Acquisition Agreement and Plan of
Reorganization, dated April 21, 1998.

2.3 Registration Rights Agreement among the Company and The 1818 Fund
II, L.P., dated April 21, 1998

2.4 Registration Rights Agreement among the Company and the purchasers
of Common Stock in a private placement dated April 21, 1998

4.1 Designation of Convertible Preferred Stock, Series A, as filed with
the Delaware Secretary of State

99.2 Press Release dated April 23, 1998

Schedule A

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The following unaudited pro forma consolidated financial statements have
been prepared based on historical financial statements of the Company and 1818
Corp. as of and for the year ended December 31, 1997. The pro forma financial
statements give effect to the Company's proposed Hunt Transaction and the
Offering (the "Transactions"). The Hunt Transaction will be accounted for as a
reverse acquisition and 1818 Corp. will be the acquiring entity for accounting
purposes.

The unaudited pro forma consolidated financial statements have been
prepared under the purchase method of accounting. Under this method of
accounting, based on a preliminary allocation of the purchase price of the
Company, its identifiable assets and liabilities have been adjusted to their
estimated fair values. The preliminary purchase price allocations are based upon
estimates and assumptions which are subject to subsequent determination and more
detailed analysis, receiving final detailed appraisals and evaluations of
specific assets and liabilities. The final allocation of the purchase price may
differ from the amounts contained in these unaudited pro forma consolidated
financial statements.

The unaudited pro forma condensed balance sheet was prepared assuming
the Transactions occurred on December 31, 1997 and gives effect to events
directly attributable to these Transactions. The unaudited pro forma income
statements were prepared as if the Transactions occurred at the beginning of
each period presented and give effect to events directly attributable to the
Transactions which are expected to have a continuing impact on the Company.

The unaudited pro forma consolidated financial statements have been
prepared based on the foregoing and on certain assumptions described in the
notes thereto. Such statements should be read in conjunction with the historical
financial statements of the Company including the notes thereto, included as
exhibits, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations," that are included elsewhere herein. The following
unaudited pro forma consolidated financial statements do not purport to be
indicative of the financial position or results of operations that would have
been reported had the Transactions been effected on the dates indicated, or that
may be reported in the future.
VAALCO ENERGY, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA BALANCE SHEET

DECEMBER 31, 1997

(IN THOUSANDS, EXCEPT PAR VALUE AMOUNTS)