SEC Comment Letter for VAALCO ENERGY (EGY) — Nov 24, 2015
VAALCO ENERGY INC /DE/ (EGY) (CIK 0000894627)
Date: Nov. 24, 2015 · CIK: 0000894627 · Accession: 0000000000-15-055317
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 001-32167
Letter
November 24 , 2015 Via E-mail Mr. Paul A. Bell President and Chief Executive Officer Group 42, Inc. 312 Pearl Parkwa y, CIA Building II San Antonio, Texas 78215
Re: VAALCO Energy, Inc . Amended Preliminary Proxy Statement on Schedule 14A Filed November 20, 2015 by Group 42, Inc. et al. Definitive Additional Soliciting Materials Filed November 12, 2015 by Group 42, Inc. et al. File No. 001-32167
Dear Mr. Bell :
We have reviewed your filing s and have the following comments.
Amended Preliminary Proxy Statement on Schedule 14A
Letter
1. We note the statement that the poison pill adoption “disregarded a prior vote in 2009 in which shareholders voted down a poison pill .” Please modify this statement to address the fact that this vote was taken 6 years ago, under differing circumstances.
2. We note the statement that “members of the Board own very little VAALCO stock .” We continue to be lieve that disclosure should address how three out of four Group 42 -BLR Group nominees individually own no company stock.
How Many Consents Must Be Received in Order to Adopt the Proposals ?, page 8
3. Please clarify, if true, that a majority of outstanding voting securities must sign consent s to remove each director. In other words, please clarify that removal will be done on a director -by-director basis.
Mr. Paul A. Bell Group 42, Inc. November 24 , 2015 Page 2 The Company Maintains Excessive CAPEX Spending , page 12
4. We note the statement that management has failed to announce any specific plans to address capital expenditures. Please clarify your disclosure to address the fact that winding down of capital expenditures is constrained by prior commitments made by the company, if true. Please also address the three potential scenarios for the company’s 2016 capital expenditure budget described in the third quarter earnings conference call.
5. We note the statement that the com pany’s capital expenditures “ skyrocketed in Q3 2015 to $31 million .” Please clarify, if true, that this amount represents capital expenditures paid, not incurred.
VAALCO has a History of Failed Exploration Projects , page 13
6. We note disclosure that the company “ has a history of excessive exploration risk without proper hedging .” Please disclose what hedging would be proper under these circumstances, and disclose how you determined that this would be proper.
7. We note the statement that the company disclosed a cost estimate of $27.2 million for the exploration project in Angola. Please provide support for this assertion. We understand that the company’s cost estimate is $24.5 million.
The VAALCO Board Ignored Shareholder Input , page 15
8. Please provide support for the assertion that G&A expenses have nearly doubled since 2013.
Consent card
9. Please provide a means for security holders to vote against the removal of future directors .
Definitive Additional Soliciting Materials
Press Release
10. In future filing s, plea se qualify as your opinion such statements as “VAALCO’s cash G&A ex penses remain unacceptably high ” and “the Company’s culture of overspending and poor corporate governance .”
Mr. Paul A. Bell Group 42, Inc. November 24 , 2015 Page 3 You may contact me at (202) 551 -3503 if you have any questions regarding our comments .
Sincerely,
/s/ David L. Orlic
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November 24 , 2015 Via E-mail Mr. Paul A. Bell President and Chief Executive Officer Group 42, Inc. 312 Pearl Parkwa y, CIA Building II San Antonio, Texas 78215 Re: VAALCO Energy, Inc . Amended Preliminary Proxy Statement on Schedule 14A Filed November 20, 2015 by Group 42, Inc. et al. Definitive Additional Soliciting Materials Filed November 12, 2015 by Group 42, Inc. et al. File No. 001-32167 Dear Mr. Bell : We have reviewed your filing s and have the following comments. Amended Preliminary Proxy Statement on Schedule 14A Letter 1. We note the statement that the poison pill adoption “disregarded a prior vote in 2009 in which shareholders voted down a poison pill .” Please modify this statement to address the fact that this vote was taken 6 years ago, under differing circumstances. 2. We note the statement that “members of the Board own very little VAALCO stock .” We continue to be lieve that disclosure should address how three out of four Group 42 -BLR Group nominees individually own no company stock. How Many Consents Must Be Received in Order to Adopt the Proposals ?, page 8 3. Please clarify, if true, that a majority of outstanding voting securities must sign consent s to remove each director. In other words, please clarify that removal will be done on a director -by-director basis. Mr. Paul A. Bell Group 42, Inc. November 24 , 2015 Page 2 The Company Maintains Excessive CAPEX Spending , page 12 4. We note the statement that management has failed to announce any specific plans to address capital expenditures. Please clarify your disclosure to address the fact that winding down of capital expenditures is constrained by prior commitments made by the company, if true. Please also address the three potential scenarios for the company’s 2016 capital expenditure budget described in the third quarter earnings conference call. 5. We note the statement that the com pany’s capital expenditures “ skyrocketed in Q3 2015 to $31 million .” Please clarify, if true, that this amount represents capital expenditures paid, not incurred. VAALCO has a History of Failed Exploration Projects , page 13 6. We note disclosure that the company “ has a history of excessive exploration risk without proper hedging .” Please disclose what hedging would be proper under these circumstances, and disclose how you determined that this would be proper. 7. We note the statement that the company disclosed a cost estimate of $27.2 million for the exploration project in Angola. Please provide support for this assertion. We understand that the company’s cost estimate is $24.5 million. The VAALCO Board Ignored Shareholder Input , page 15 8. Please provide support for the assertion that G&A expenses have nearly doubled since 2013. Consent card 9. Please provide a means for security holders to vote against the removal of future directors . Definitive Additional Soliciting Materials Press Release 10. In future filing s, plea se qualify as your opinion such statements as “VAALCO’s cash G&A ex penses remain unacceptably high ” and “the Company’s culture of overspending and poor corporate governance .” Mr. Paul A. Bell Group 42, Inc. November 24 , 2015 Page 3 You may contact me at (202) 551 -3503 if you have any questions regarding our comments . Sincerely, /s/ David L. Orlic David L. Orlic Special Counsel Office of Mergers and Acquisitions cc: Via E-mail Aneliya S. Crawford , Esq. Olshan Frome Wolosky LLP