EGY - Vaalco Energy: Fast Paybacks Are The Key Here

2024-06-03 05:49:52 ET

Summary

• Vaalco is diversifying its operations to reduce business risk.
• The company's offshore operations in Western Africa have limited exposure to the political instability in the region.
• Vaalco's operations in Alberta, Canada, are the most stable, with favorable government treatment and infrastructure support.
• The lack of competition keeps the acquisition purchase price down and ensures a very fast payback.
• The balance sheet is debt free with a large cash balance.

Vaalco Energy ( EGY ) recently a nnounced another acquisition, which I discussed previously, with which they will use cash to buy. Management spent less than a minute on this during the conference call (and then answered a few questions). But the larger concern is that management has r eally only made acquisitions with an extremely fast payback. The cash flow demonstrates a very high level of profitability that offsets at least some of the risk of where they do business. As management continues to diversify in this area, the strategy used for acquisitions should ensure some very generous cash flow growth in the future.

Map Of Operations

The company business in Western Africa is known for political instability. However, the offshore operations of the company have limited, if any, exposure to the onshore situation. So far, this idea is working much better than one would ordinarily think....

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