2010 Annual Report - VAALCO Energy, Inc.

Controls Over Reserve EstimatesThe Company’s policies and practices regarding internal controls over the recording of reserves is structuredto objectively and accurately estimate our oil and gas reserves quantities and present values in compliance withthe SEC’s regulations and GAAP. Compliance in reserves bookings is the responsibility of the Company’s VicePresident-Production, who is the Company’s principal engineer. The Company’s principal engineer has over 20years of experience in the oil and gas industry, including over 10 years as a reserve evaluator, trainer or managerand is a qualified reserves estimator (QRE), as defined by the Society of Petroleum Engineers’ standards. Furtherprofessional qualifications include a degree in petroleum engineering, extensive internal and external reservetraining, and asset evaluation and management. In addition, the principal engineer is an active participant inindustry reserve seminars, professional industry groups and has been a member of the Society of PetroleumEngineers for over 20 years.The Company’s controls over reserve estimates included retaining Netherland Sewell & Associates, Inc.(“NSAI”) as our independent petroleum and geological firm. The Company provided information about theCompany’s oil and gas properties, including production profiles, prices and costs, to NSAI and they prepare theirown estimates of the reserves attributable to our properties. All of the information regarding reserves in thisannual report is derived from the report of NSAI. The report of NSAI is included as an exhibit to this annualreport.The reserves estimates shown herein have been independently evaluated by NSAI, a worldwide leader ofpetroleum property analysis for industry and financial organizations and government agencies. NSAI wasfounded in 1961 and performs consulting petroleum engineering services under Texas Board of ProfessionalEngineers Registration No. F-002699. Within NSAI, the technical persons primarily responsible for preparing theestimates set forth in the NSAI reserves report incorporated herein are Mr. Derek Newton and Mr. DavidNice. Derek Newton has been practicing consulting petroleum engineering at NSAI since 1997. Derek is aRegistered Professional Engineer in the State of Texas (License No. 97689) and has over 25 years of practicalexperience in petroleum engineering, with over 13 years experience in the estimation and evaluation ofreserves. He graduated from University College in Cardiff, Wales in 1983 with a Bachelor of Science Degree inMechanical Engineering and from Strathclyde University in Scotland in 1986 with a Master of Science Degree inPetroleum Engineering. David Nice has been practicing consulting petroleum geology at NSAI since1998. David is a Certified Petroleum Geologist and Geophysicist in the State of Texas (License No. 346) and hasover 25 years of practical experience in petroleum geosciences, with over 12 years experience in the estimationand evaluation of reserves. He graduated from University of Wyoming in 1982 with a Bachelor of ScienceDegree in Geology and in 1985 with a Master of Science Degree in Geophysics. Both technical principals meetor exceed the education, training, and experience requirements set forth in the Standards Pertaining to theEstimating and Auditing of Oil and Gas Reserves Information promulgated by the Society of PetroleumEngineers; both are proficient in judiciously applying industry standard practices to engineering and geoscienceevaluations as well as applying SEC and other industry reserves definitions and guidelines.The Audit Committee of the Board of Directors meets with management, including access to the Company’sprincipal engineer, to discuss matters and policies related to reserves.25