VAALCO Energy, Inc. (EGY) is a Houston-based independent energy company principally engaged in the acquisition, exploration, development and production of crude oil and natural gas. They have interests in Texas but their main source of revenue is from activity in Angola and Gabon. EGY has also recently opened an office in Rwanda and has also acquired a 25% interest in drilling blocks in the UK North Sea. EGY is definately working to increase their value by taking on such rigorous operations in locations thousands of miles apart.

Vaalco's balance sheet is very satisfactory. Sitting as available cash is $72 million ready to be used for new ventures or cover any unexpected liabilities. Management has a very nice grip on cash flow. EGY performs well against its industry and the overall market for being the size that it is.

Owning this penny stock would be less risky than owning any random penny stock because managemant know what it is doing, and the balance sheet shows that. Gabon and Angola have stabilized, and allowed a flood of foreign investment into their emerging economies. Even though this stock and others like TransGlobe (TGA) have taken a beating this year, their balance indicate otherwise. These companies are good investments, and I would recommend them to anyone as good 3-5 year investment.

The stock is NASTILY undervalued. The companies valuation ratios are all under the averages of its industry and the overall market.

Price Ratios Company Industry S&P 500
Current P/E Ratio 7.4 17.7 21.6
Price/Sales Ratio 2.5 4.26 2.62
Price/Book Value 1.89 2.7 4.44
Price/Cash Flow 5 11.2 13.2

Here is what my valuation tells me...

Company: EGY
1-Year Target Date: Dec-07
Current Price: 4.05 (August 14, 2007)
Projection: 6.434854706 58.89%

5-Year Target Date: 2011
Current Price: 4.05
Projection: 10.04896008 148.12%