Robert L. Gerry III, widely known as Bobby, has been the chairman emeritus of Vaalco Energy Inc. since he retired in June 2014. He had served as chairman and CEO of the Houston E&P company from August 1997 to October 2013. Vaalco has focused on offshore concessions in three countries—Gabon, Angola and Equatorial Guinea—since its founding in 1985. Today it has production offshore Gabon to the tune of about 18,000 barrels per day gross, with partners Sinopec and Sasol, while Total is its partner for an onshore discovery currently being evaluated.

Before joining Vaalco, Gerry was president and COO of Nuevo Energy Co. from March 1990 to 1994, and vice chairman until 1997. It was eventually sold to Plains Exploration & Production Co., where he served as a director. Nuevo was mainly active in California onshore and offshore on properties it acquired from Unocal. Since January 1989, Gerry was also senior vice president of Energy Assets International Corp.

Gerry also served as a trustee of Texas Children’s Hospital in Houston for 15 years. Still advising Vaalco today, he is primarily involved in searching for new opportunities to further its growth.

Robert L. Gerry III

Investor: Your job since “retirement” is to advise companies and consult for Vaalco. How do you look for what comes next?

Gerry: We’re still focused on West Africa and internationally, but we agree I should see what else is out there. Africa is still relatively underexplored when compared to North America, but it’s also a good time to expand our horizons. You know, in a crisis along comes opportunity. For example, where could we find a small company to acquire or merge with? Since we have no infrastructure in the U.S., one way to capture that would be to buy or merge with another company. The rule of thumb is when oil prices are low, you go buy reserves, and when oil prices are high, you drill.

Since I no longer have to concentrate solely on West Africa, it has been quite interesting evaluating the various plays in North America, to see if there could be an entry point for another company.

But, it would take a sizeable transformation for us to be active in the U.S. With the demise of stock prices in all the small caps, are there opportunities? Maybe, but there is a lot of competition for good properties, especially from the private-equity sector with their large war chests.

Keep in mind we have no land department either, because we only have to deal with three landowners now: Angola, Gabon and Equatorial Guinea. West Africa is dominated by long-serving regimes, and that’s good, because you really get to know the officials over time, but it’s also sometimes difficult, especially in a low-price environment.

Investor: What do you make of the current oil price?

Gerry: What has surprised me, going back several years, is the continual expenditure of money exceeding cash flow in the unconventional plays. It has been mentioned some ... but I think today we’re recognizing the fallacy of that excess spending. I criticize the easy flow of money from Wall Street. Where it’s going to end I don’t know. I think low oil prices will be with us for a couple years. There’s just too much supply out there. Even if supply stays flat at 2014 levels, that’s a lot of oil and gas.

The other thing is, if we approve Keystone XL or oil exports, now we’re competing with Saudi Arabia and others for customers … doesn’t that add to additional price competition?

Investor: How does this affect Vaalco’s activity offshore Africa?

Gerry: We can drill development wells within cash flow but we can’t simultaneously explore, build platforms and infrastructure without tapping into our bank account. At the end of 2014 we had $93 million in cash, and we’ve had as much as $130 million in the past. Steve Guidry, our chairman and CEO, who came to Vaalco from Marathon, is well aware of our situation and is pursuing innovative solutions alongside growth opportunities.

Investor: Does Gabon control your oil price?

Gerry: No. The production is bid every year by buyers and normally we get about $3 to $5 below Brent. It’s light oil—36 degrees—so it’s in demand.

Investor: Do you plan to go into deeper water?

Gerry: We don’t, although it’s by necessity. The deep waters are expensive and we’re not that big a company. That’s really for the big boys. Having said that, we do have some fascinating pre-salt prospects in Angola, but because we need a semi, a well will cost around $80 million. The Angola government, which is our sole partner, is most interested in pursuing the pre-salt, so more than likely, we’ll be looking for an additional partner to assist Vaalco later this year.

Investor: What kind of advice would you give to dealmakers in the industry?

Gerry: Listen to a lot of people. Meet a lot of people. Quiz them on what their ideas are, and listen to their response. Stay entrepreneurial and don’t get trapped into doing something the way you’ve always done it before. And get outside the box and take a chance. We all should exchange more information, because it benefits everybody. What are you going to do, take my leases? No. So exchange ideas and information.