Document:

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                                                                     EXHIBIT 4.1

                                                                  EXECUTION COPY

THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR FOREIGN JURISDICTION.
NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS.

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                               VAALCO ENERGY, INC.
                          COMMON STOCK PURCHASE WARRANT

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          This certifies that, for good and valuable consideration, VAALCO
Energy, Inc., a Delaware corporation (the "Company"), grants to Nissho Iwai
Corporation, a corporation organized under the laws of Japan, (the
"Warrantholder"), the right to subscribe for and purchase from the Company,
during the Exercise Period (as hereinafter defined), two million two hundred
fifty thousand (2,250,000) validly issued, fully paid and nonassessable shares,
par value $.10, of Common Stock of the Company (the "Warrant Shares"), at the
exercise price per share of $.50 (the "Exercise Price"), all subject to the
terms, conditions and adjustments herein set forth. Capitalized terms used
herein shall have the meanings ascribed to such terms in Section 11 below.

          1. Warrant. This Warrant is issued pursuant to, and in accordance with
the Stock Purchase Agreement, dated August   , 2002 between the Company, the
                                           --
Warrantholder and Vaalco International, Inc., a Delaware corporation, (the
"Stock Purchase Agreement") and is subject to the terms thereof and hereof.

          2. Exercise of Warrant; Payment of Taxes.

               2.1 Exercise of Warrant. Subject to the terms and conditions set
forth herein, this Warrant may be exercised at any time, in whole or in part, by
the Warrantholder during the Exercise Period by:

                    (a) the surrender of this Warrant to the Company, with a
duly executed Exercise Form, and

                    (b) subject to Section 2.2 below, the delivery of payment to
the Company, for the account of the Company, by cash, wire transfer, certified
or official bank check or any other means approved by the Company, of the
aggregate Exercise Price in lawful money of the United States of America.

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The Company agrees that the Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made of the Exercise Price as aforesaid.

               2.2 Conversion Right.

                    (a) In lieu of the payment of the aggregate Exercise Price,
the Warrantholder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or in part, into shares of Common
Stock (the "Conversion Right") as provided for in this Section 2.2. Upon
exercise of the Conversion Right, the Company shall deliver to the Warrantholder
(without payment by the Warrantholder of any of the Exercise Price) in
accordance with Section 2.2(b) that number of shares of Common Stock equal to
the quotient obtained by dividing (i) the value of the Warrant or portion
thereof at the time the Conversion Right is exercised (determined by subtracting
the aggregate Exercise Price at the time of the exercise of the Conversion Right
for the number of shares of Common Stock for which the Warrant is being
exercised from the aggregate Current Market Price for the shares of Common Stock
issuable upon exercise of the Warrant at the time of the exercise of the
Conversion Right for the number of shares of Common Stock for which the Warrant
is being exercised) by (ii) the Current Market Price of one share of Common
Stock at the time of the exercise of the Conversion Right.

                    (b) The Conversion Right may be exercised by the
Warrantholder on any Business Day prior to the end of the Exercise Period by
surrender of this Warrant to the Company, with a duly executed Exercise Form
with the conversion section completed, exercising the Conversion Right and
specifying the total number of shares of Common Stock that the Warrantholder
will be issued pursuant to such conversion.

               2.3 Warrant Shares Certificate. A stock certificate or
certificates for the Warrant Shares specified in the Exercise Form shall be
delivered to the Warrantholder within five (5) Business Days after receipt of
the Exercise Form by the Company and, if the Conversion Right is not exercised,
the payment by the Warrantholder of the aggregate Exercise Price. If this
Warrant shall have been exercised only in part, the Company shall, at the time
of delivery of the stock certificate or certificates, deliver to the
Warrantholder a new Warrant evidencing the right to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical with
this Warrant.

               2.4 Payment of Taxes. The Company will pay all documentary stamp
or other issuance taxes, if any, attributable to the issuance of Warrant Shares
upon the exercise of this Warrant; provided, however, that the Company shall not
be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue or delivery of any Warrants or Warrant
certificates or Warrant Shares in a name other than that of the then
Warrantholder as reflected upon the books of the Company.

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          3. Restrictions on Transfer; Restrictive Legends.

               3.1 Transfer. At no time may this Warrant or the Warrant Shares

be offered, sold, transferred, pledged or otherwise disposed of, in whole or in
part, except in accordance with applicable federal and state securities laws.

               3.2 Legends.

                    (a) Except as otherwise permitted by this Section 3, each
Warrant (including each Warrant issued upon the transfer of any Warrant) shall
be stamped or otherwise imprinted with a legend in substantially the following
form:

                    "This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act of 1933, as
amended (the "Act"), or the securities laws of any state of the United States or
foreign jurisdiction. Neither this Warrant, such securities nor any interest
therein may be transferred except pursuant to an effective registration
statement under such Act and applicable state and foreign securities laws or
pursuant to an applicable exemption from the registration requirements of such
Act and such laws."

                    (b) Except as otherwise permitted by this Section 3, each
certificate for Common Stock (or Other Securities) issued upon the exercise of
any Warrant, and each certificate issued upon the transfer of any such Common
Stock (or Other Securities), shall be stamped or otherwise imprinted with a
legend in substantially the following form:

                    "The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred in the
absence of such registration or an exemption therefrom under such Act."

          4. Reservation and Registration of Shares. The Company covenants and
agrees as follows:

                    (a) All Warrant Shares that are issued upon the exercise of
this Warrant shall, upon issuance, be validly issued, not subject to any
preemptive rights, and, be free from all taxes, liens, security interests,
charges, and other encumbrances with respect to the issuance thereof, other than
taxes in respect of any transfer occurring contemporaneously with such issue.

                    (b) The Company shall at all times have authorized and
reserved, and shall keep available and free from preemptive rights, a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant.

                    (c) The Company shall not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets, spin-off,
consolidation, merger, dissolution, issue or sale of securities or any other
action or

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inaction, seek to avoid the observance or performance of any of the terms of
this Warrant, and shall at all times in good faith assist in performing and
giving effect to the terms hereof and in the taking of all such actions as may
be necessary or appropriate in order to protect the rights of the Warrantholder
against dilution or other impairment.

          5. Anti-dilution and Other Adjustments. The Exercise Price and the
number of Warrant Shares to be received upon exercise of this Warrant shall be
subject to adjustment as follows:

               5.1 Dividend, Subdivision, Combination or Reclassification of
Common Stock. In the event that the Company shall at any time or from time to
time, after the issuance of this Warrant but prior to the exercise hereof, (w)
make a dividend or distribution on the outstanding shares of Common Stock
payable in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock (other than any such event for
which an adjustment is made pursuant to another clause of this Section 5), then,
and in each such case, (A) the aggregate number of Warrant Shares for which this
Warrant is exercisable (the "Warrant Share Number") immediately prior to such
event shall be adjusted (and any other appropriate actions shall be taken by the
Company) so that the Warrantholder shall be entitled to receive upon exercise of
this Warrant the number of shares of Common Stock or other securities of the
Company that it would have owned or would have been entitled to receive upon or
by reason of any of the events described above, had this Warrant been exercised
immediately prior to the occurrence of such event and (B) the Exercise Price
payable upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, the numerator
of which shall be the number of Warrant Shares issuable upon the exercise of
this Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares issuable immediately thereafter. An
adjustment made pursuant to this Section 5.1 shall become effective
retroactively (x) in the case of any such dividend or distribution, to a date
immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution or (y) in the case of any such subdivision, combination
or reclassification, to the close of business on the day upon which such
corporate action becomes effective.

               5.2 Issuance of Common Stock or Common Stock Equivalents Below
Exercise Price.

                    (a) If the Company shall at any time or from time to time,
after the issuance of this Warrant but prior to the exercise hereof, issue or
sell (such issuance or sale, a "New Issuance") any shares of Common Stock or
Common Stock Equivalents at a price per share of Common Stock (the "New Issue
Price") that is less than the Exercise Price then in effect as of the record
date or Issue Date (as defined below), as the case may be (the "Relevant Date')
(treating the price per share of Common Stock, in the case of the issuance of
any Common Stock Equivalent, as equal to (x) the

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sum of the price for such Common Stock Equivalent plus any additional
consideration payable (without regard to any anti-dilution adjustments) upon the
conversion, exchange or exercise of such Common Stock Equivalent divided by (y)
the number of shares of Common Stock initially underlying such Common Stock
Equivalent), other than (i) issuances or sales for which an adjustment is made
pursuant to another subsection of this Section 5 and (ii) issuances in
connection with an Excluded Transaction, then, and in each such case, (A) the
Exercise Price then in effect shall be adjusted to equal the New Issue Price and
(B) the Warrant Share Number immediately prior to such adjustment shall be
increased to equal the product of (i) the aggregate number of Warrant Shares for
which this Warrant is exercisable immediately prior to the New Issuance
multiplied by (ii) a fraction, the numerator of which shall be the Exercise
Price in effect on the day immediately prior to the Relevant Date and the
denominator of which shall be the Exercise Price in effect immediately after
such adjustment.

Such adjustment shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued, and shall become effective retroactively (x) in
the case of an issuance to the stockholders of the Company, as such, to a date
immediately following the close of business on the record date for the
determination of shareholders entitled to receive such shares of Common Stock or
Common Stock Equivalents and (y) in all other cases, on the date (the "Issue
Date") of such issuance; provided, however, that the determination as to whether
an adjustment is required to be made pursuant to this Section 5.2 shall be made
only upon the issuance of such shares of Common Stock or Common Stock
Equivalents, and not upon the issuance of any security into which the Common
Stock Equivalents convert, exchange or may be exercised.

                    (b) In case at any time any shares of Common Stock or Common
Stock Equivalents or any rights or options to purchase any shares of Common
Stock or Common Stock Equivalents shall be issued or sold for consideration
other than cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Company in connection therewith, as determined mutually
by the Board of Directors and the Majority Warrantholders or, if the Board of
Directors and the Majority Warrantholders shall fail to agree, at the Company's
expense by an appraiser chosen by the Board of Directors and reasonably
acceptable to the Majority Warrantholders.

               5.3 Certain Distributions. In case the Company shall at any time
or from time to time, after the issuance of this Warrant but prior to the
exercise hereof, distribute to all holders of shares of Common Stock (including
any such distribution made in connection with a merger or consolidation in which
the Company is the resulting or surviving Person and shares of Common Stock are
not changed or exchanged) cash, evidences of indebtedness of the Company or
another issuer, securities of the Company or another issuer or other assets
(excluding dividends or distributions payable in shares of Common Stock for
which adjustment is made under Section 5.1 and any distribution in connection
with an Excluded Transaction) or rights or warrants to subscribe for or purchase
any of the foregoing, then, and in each such case, (A) the

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Exercise Price in effect immediately prior to the date of distribution shall be
adjusted (and any other appropriate actions shall be taken by the Company) by
being multiplied by a fraction (i) the numerator of which shall be such Current
Market Price of Common Stock immediately prior to the date of distribution less
the then fair market value (as determined by the Board of Directors in the
exercise of their fiduciary duties) of the portion of the cash, evidences of
indebtedness, securities or other assets so distributed or of such rights or
warrants applicable to one share of Common Stock and (ii) the denominator of
which shall be the Current Market Price of the Common Stock immediately prior to
the date of distribution (but such fraction shall not be greater than one) and
(B) the Warrant Share Number shall be increased by being multiplied by a
fraction (i) the numerator of which shall be the Current Market Price of one
share of Common Stock immediately prior to the record date for the distribution
of such cash, evidences of indebtedness, securities, other assets or rights or
warrants and (ii) the denominator of which shall be the Current Market Price of
one share of Common Stock immediately prior to such record date less the fair
market value (as determined by the Board of Directors in the exercise of their
fiduciary duties) of the portion of such cash, evidences of indebtedness,
securities, other assets or rights or warrants so distributed applicable to one
share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective retroactively to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such distribution.

               5.4 Credit Agreement Adjustments.

                    (a) In the event that the Obligations of the Company to the
Warrantholder have not been satisfied in full on or before the earlier of (i)
nine (9) months from the First Sale of Production and (ii) eighteen (18) months
from the Original Issue Date, then on the last day of such ninth (9th) month or
eighteenth (18th) month, as the case may be, and on the last day of each
succeeding month until the Obligations of the Company to the Warrantholder have
been satisfied in full, the Exercise Price in effect on each such date shall be
reduced (and any other appropriate actions shall be taken by the Company) by
subtracting from the Exercise Price in effect immediately prior to such
adjustment an amount equal to the Exercise Price in effect immediately prior to
such adjustment multiplied by a fraction (i) the numerator of which shall be ten
percent (10%) of the average daily principal balance outstanding under the Note
during such month and (ii) the denominator of which shall be ten million dollars
($10,000,000). In the event that the Exercise Price is required to be adjusted
pursuant to this Section 5.4(a) and at the same time an adjustment is required
to be made pursuant to Section 5.4(b), then the adjustment required to be made
under this Section 5.4(a) shall be made after giving effect to the adjustment
required under Section 5.4(b).

                    (b) If, on the date that is eighteen (18) months from the
Original Issue Date, (i) the Obligations of the Company to the Warrantholder
have not been satisfied in full and the Market Price on such date (or if such
date is not a Business Day, on the immediately preceding Business Day) is less
than the Exercise Price then in effect (determined without regard to any
adjustments made pursuant to Section 5.4(a)),

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then on such date, the Exercise Price then in effect shall be reduced (and any
other appropriate actions shall be taken by the Company) to an amount that is
equal to eighty percent (80%) of the Current Market Price; provided, however,
that in no event, shall any adjustment be made pursuant to this Section 5.4(b)
if such adjustment would result in an increase to the Exercise Price in effect
immediately prior to such adjustment. In the event that the Exercise Price is
required to be adjusted pursuant to this Section 5.4(b) and at the same time an
adjustment is required to be made pursuant to Section 5.4(a), then the
adjustment required to be made under this Section 5.4(b) shall be made before
giving effect to the adjustment required under Section 5.4(a).

               5.5 Other Changes. In case the Company at any time or from time
to time, after the issuance of this Warrant but prior to the exercise hereof,
shall take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in any of Sections 5.1 or 5.4 (but not
including any action described in any such Section) and the Board of Directors
in good faith determines that it would be equitable in the circumstances to
adjust the Exercise Price and Warrant Share Number as a result of such action,
then, and in each such case, the Exercise Price and Warrant Share Number shall
be adjusted in such manner and at such time as the Board of Directors in good
faith determines would be equitable in the circumstances (such determination to
be evidenced in a resolution, a certified copy of which shall be mailed to the
Warrantholder).

               5.6 No Adjustment; Par Value Minimum. Notwithstanding anything
herein to the contrary, no adjustment under this Section 5 need be made to the
Exercise Price or Warrant Share Number if the company receives written notice
from the Warrantholder that no such adjustment is required. Notwithstanding any
other provision of this Warrant, the Exercise Price shall not be adjusted below
the par value of a share of Common Stock.; provided, however, that the written
consent of the Majority Warrantholders shall be required prior to any increase
in the par value of the shares of Common Stock.

               5.7 Abandonment. If the Company shall take a record of the
holders of shares of its Common Stock for the purpose of entitling them to
receive a dividend or other distribution, and shall thereafter and before the
distribution to stockholders thereof legally abandon its plan to pay or deliver
such dividend or distribution, then no adjustment in the Exercise Price or
Warrant Share Number shall be required by reason of the taking of such record.

               5.8 Certificate as to Adjustments. Upon any adjustment in the
Exercise Price or Warrant Share Number, the Company shall within a reasonable
period (not to exceed ten (10) days) following any of the foregoing transactions
deliver to the Warrantholder a certificate, signed by (i) the Chief Executive
Officer of the Company and (ii) the Chief Financial Officer of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the adjusted
Exercise Price and Warrant Share Number then in effect following such
adjustment.

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               5.9 Reorganization, Reclassification, Merger or Sale Transaction.
In case of any capital reorganization, reclassification, Sale Transaction,
merger or consolidation (other than a Sale Transaction or a merger or
consolidation of the Company in which the Company is the surviving corporation)
of the Company or other change of outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value) (each, a "Transaction") at any time after the issuance of this
Warrant but prior to the exercise hereof, the Company shall execute and deliver
to the Warrantholder at least twenty (20) Business Days prior to effecting such
Transaction a certificate stating that the Warrantholder shall have the right
thereafter to exercise this Warrant for the kind and amount of shares of stock
or other securities, property or cash receivable upon such Transaction by a
holder of the number of shares of Common Stock into which this Warrant could
have been exercised immediately prior to such Transaction, and provision shall
be made therefor in the agreement, if any, relating to such Transaction. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 5 and shall
contain other terms substantially identical to the terms hereof. If, in the case
of any such Transaction, the stock, other securities, cash or property
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities of a Person other than the successor or purchasing Persons and
other than the Company, which controls or is controlled by the successor or
purchasing Person or which, in connection with such Transaction, issues stock,
securities, other property or cash to holders of Common Stock, then such
certificate also shall be executed by such Person, and such Person shall, in
such certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon exercise
thereof as provided above. The provisions of this Section 5.9 and any equivalent
thereof in any such certificate similarly shall apply to successive
transactions.

               5.10 Notices. In case at any time or from time to time:

                    (a) the Company shall declare a divided (or any other
distribution) on its shares of Common Stock;

                    (b) the Company shall authorize the granting to the holders
of shares of its Common Stock rights or warrants to subscribe for or purchase
any shares of Capital Stock or any other rights or warrants;

                    (c) there shall occur a Transaction; or

                    (d) the Company shall take any other action that would
require a vote of the Company's stockholders;

then the Company shall mail to the Warrantholder, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend,

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distribution or granting of rights or warrants are to be determined, or (B) the
date on which such Transaction is expected to become effective and the date as
of which it is expected that holders of Common Stock of record shall be entitled
to exchange their Common Stock for shares of stock or other securities or
property or cash deliverable upon such Transaction. Notwithstanding the
foregoing, in the case of any event to which Section 5.9 is applicable, the
Company shall also deliver the certificate described in such Section 5.9 to the
Warrantholder at least ten (10) Business Days prior to effecting such
reorganization or reclassification as aforesaid.

          6. Registration Rights. The Warrant Shares are subject to the terms

and conditions of the Amended and Restated Registration Rights Agreement, dated
August   , 2002, by and among the Company, the Warrantholder and The 1818 Fund
       --
II, L.P., a Delaware limited partnership.

          7. Loss or Destruction of Warrant. Subject to the terms and conditions
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor.

          8. Ownership of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of
transfer.

          9. Amendments. Any provision of this Warrant may be amended and the
observance thereof waived only with the written consent of the Company and the
Warrantholder.

          10. No Impairment. The Company (i) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (ii) will take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock on the
exercise of the Warrant from time to time outstanding, and (iii) will not take
any action which results in any adjustment of the Exercise Price if the total
number of shares of Common Stock (or Other Securities) issuable after the action
upon the exercise of the Warrant would exceed the total number of shares of
Common Stock (or Other Securities) then authorized by the Company's Certificate
of Incorporation and available for the purpose of issuance upon such exercise.

          11. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:

          "Affiliate" shall mean any Person who is an "affiliate" as defined in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

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          "Board of Directors" means the Board of Directors of the Company.

          "Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.

          "Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock (but excluding any debt security whether or not it is exchangeable for or
convertible into such capital stock).

          "Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.

          "Common Stock" means the Common Stock, par value $.10 per share, of
the Company.

          "Common Stock Equivalent" means any security or obligation which is by
its terms convertible into or exercisable into shares of Common Stock,
including, without limitation, any option, warrant or other subscription or
purchase right with respect to Common Stock.

          "Company" has the meaning set forth in the first paragraph of this
Warrant.

          "Conversion Right" has the meaning set forth in Section 2.2(a) of this
Warrant.

          "Credit Agreement" means the Amended and Restated Subordinated Credit
Agreement, dated as of August   , 2002, by and among the Company, the
                              --
Warrantholder and the 1818 Fund II, L.P., a Delaware limited partnership.

          "Current Market Price" means, as of the date of determination, (a) the
average of the daily Market Price under clause (a), (b) or (c) of the definition
thereof of the Common Stock during the immediately preceding thirty (30) trading
days ending on such date, and (b) if the Common Stock is not then listed or
admitted to trading on any national securities exchange or quoted in the
over-the-counter market, then the Market Price under clause (d) of the
definition thereof on such date.

          "Excluded Transaction" means (a) any issuance of up to an aggregate of
two million (2,000,000) shares of restricted stock or options to purchase shares
of Common Stock (subject to adjustment in the event of stock splits,
combinations or similar occurrences) to employees, officers or directors of the
Company pursuant to a stock option plan or other employee benefit arrangement
approved by the Board of Directors and (b) any issuance of Common Stock upon
conversion or exercise of any Common Stock Equivalents and/or (c) any issuance
of Warrant Shares.

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          "Exercise Form" means an Exercise Form in the form annexed hereto as
Exhibit A.

          "Exercise Period" means the period beginning on the Original Issue
Date and ending on the fifth (5th) anniversary of the Original Issue Date.

          "Exercise Price" has the meaning set forth in the first paragraph of
this Warrant.

          "First Sale of Production" has the meaning set forth in the Loan
Agreement between VAALCO Gabon (Etame), Inc. and the International Finance
Corporation dated April 19, 2002.

          "Issue Date" has the meaning set forth in Section 5.2 of this Warrant.

          "Market Price" means, as of the date of determination, (a) if the
Common Stock is listed on a national securities exchange, the closing price per
share of Common Stock on such date published in The Wall Street Journal
(National Edition) or, if no such closing price on such date is published in The
Wall Street Journal (National Edition), the average of the closing bid and asked
prices on such date, as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading; or (b)
if the Common Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the National Association of Securities Dealers, Inc., the last trading price of
the Common Stock on such date; or (c) if there shall have been no trading on
such date or if the Common Stock is not designated as a national market system
security by the National Association or Securities Dealers, Inc., the average of
the reported closing bid and asked prices of the Common Stock on such date as
shown by the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotations System and reported by any member firm of the
New York Stock Exchange selected by the Company; or (d) if none of (a), (b) or
(c) is applicable, a market price per share determined mutually by the Board of
Directors and the Majority Warrantholders or, if the Board of Directors and the
Majority Warrantholders shall fail to agree, at the Company's expense by an
appraiser chosen by the Board of Directors and reasonably acceptable to the
Majority Warrantholders. Any determination of the Market Price by an appraiser
shall be based on a valuation of the Company as an entirety without regard to
any discount for minority interests or disparate voting rights among classes of
capital stock.

          "Majority Warrantholders" means the holders of a majority of Warrant
Shares issuable upon exercise of all of the warrants issued pursuant to Section
1.02(b) of the Credit Agreement assuming the exercise of all such warrants.

          "New Issuance" has the meaning set forth in Section 5.2 of this
Warrant.

          "New Issue Price" has the meaning set forth in Section 5.2 of this
Warrant.

<PAGE>
                                                                              12

          "Note" has the meaning set forth in the Credit Agreement.

          "Obligations" means the obligations of the Company to the
Warrantholder for the prompt payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and performance of the
Note and the Credit Agreement and any premium and all interest and other sums in
respect thereof, whether now or hereafter owing or incurred.

          "Original Issue Date" means June 10, 2002.

          "Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received upon the exercise of the Warrant, in lieu of or in addition to Common
Stock.

          "Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.

          "Relevant Date" has the meaning set forth in Section 5.2 of this
Warrant.

          "Sale Transaction" shall mean (a) (i) the merger or consolidation of
the Company into or with one or more Persons, (ii) the merger or consolidation
of one or more Persons into or with the Company or (iii) a tender offer or other
business combination if, in the case of (i), (ii) or (iii), the stockholders of
the Company prior to such merger or consolidation do not retain at least a
majority of the voting power of the surviving Person or (b) the voluntary sale,
conveyance, exchange or transfer to another Person of (i) the voting Capital
Stock of the Company if, after such sale, conveyance, exchange or transfer, the
stockholders of the Company prior to such sale, conveyance, exchange or transfer
do not retain at least a majority of the voting power of the Company or (ii) all
or substantially all of the assets of the Company.

          "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.

          "Stock Purchase Agreement" has the meaning set forth in Section 1 of
this Warrant.

          "Transaction" has the meaning set forth in Section 5.9 of this
Warrant.

          "Warrant Share Number" has the meaning set forth in Section 5.1 of
this Warrant.

          "Warrant Shares" has the meaning set forth in the first paragraph of
this Warrant.

          "Warrantholder" has the meaning set forth in the first paragraph of
this Warrant.

<PAGE>
                                                                              13

          12. Miscellaneous.

               12.1 Entire Agreement. This Warrant, the Stock Purchase Agreement
and the Credit Agreement constitutes the entire agreement between the Company
and the Warrantholder with respect to the Warrant and supersedes all prior
agreements and understanding with respects to the subject matter of this
Warrant.

               12.2 Binding Effect; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and their
respective permitted successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company
and the Warrantholder, or their respective permitted successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this Warrant.

               12.3 Headings. The headings in this Warrant are for convenience
of reference only and shall not limit or otherwise affect the meaning of this
Warrant.

               12.4 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:

               (a)  if to the Company:
                    VAALCO Energy, Inc.
                    4600 Post Oak Place, Suite 309
                    Houston, TX 77027-0130
                    Attention: Russell Scheirman

               with a copy to:
                    Haynes and Boone, LLP
                    1000 Louisiana, Suite 4300
                    Houston, TX  77002
                    Telecopy:  (713) 547-2600
                    Attention: Guy Young

               (b)  if to the Warrantholder:
                    Nissho Iwai Corporation
                    3-1, Daiba 2-chome,
                    Minato-ku, Tokyo  135-8655
                    JAPAN
                    Telecopy:  81-3-5520-2964
                    Attention: Shinichi Teranishi,
                               General Manager, Energy Project Department

<PAGE>
                                                                              14

          All such notices, demands and other communications shall be deemed to
have been duly given when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is mechanically acknowledged, if telecopied. Any party may by
notice given in accordance with this Section 12.4 designate another address or
Person for receipt of notices hereunder.

               12.5 Severability. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.

               12.6 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF.

               12.7 No Rights or Liabilities as Stockholders. Nothing contained
in this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.

               12.8 Amendments and Waivers. Except as otherwise provided herein,
the provisions of this Warrant may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless consented to in writing by the Company and the Warrantholder.

                [Remainder of this page intentionally left blank]

<PAGE>
                                                                              15

          IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer.

                                              VAALCO ENERGY, INC.

                                              By:
                                                 -------------------------------
                                              Name: W. Russell Scheirman
                                              Title: President

Dated: August   , 2002
              --

<PAGE>
                                    Exhibit A

                                  EXERCISE FORM

                 (To be executed upon exercise of this Warrant)

          The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase [insert number] shares of Common Stock
and [herewith tenders payment for such shares to the order of the Company in the
amount of $[insert number] [hereby exercises its Conversion Right] in accordance
with the terms of this Warrant. The undersigned requests that a certificate for
such [Warrant Shares] [that number of Warrant Shares to which the undersigned is
entitled as calculated pursuant to Section 2.2] be registered in the name of the
undersigned and that such certificates be delivered to the undersigned's address
below.

          The undersigned represents that it is acquiring such shares for its
own account for investment and not with a view to or for sale in connection with
any distribution thereof (subject, however, to any requirement of law that the
disposition thereof shall at all times be within its control).

Dated:
      ---------------

                                     Signature

                                               ---------------------------------

                                               ---------------------------------
                                               (Print Name)

                                               ---------------------------------
                                               (Street Address)

                                               ---------------------------------
                                               (City)    (State)   (Zip Code)<PAGE>
                                                                     EXHIBIT 4.2

                                                                  EXECUTION COPY

                                                              [Clawback Warrant]

THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR FOREIGN JURISDICTION.
NEITHER THIS WARRANT, SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS.

                                   ----------

                               VAALCO ENERGY, INC.
                          COMMON STOCK PURCHASE WARRANT

                                   ----------

          This certifies that, for good and valuable consideration, VAALCO
Energy, Inc., a Delaware corporation (the "Company"), grants to Nissho Iwai
Corporation, a corporation organized under the laws of Japan, (the
"Warrantholder"), the right to subscribe for and purchase from the Company,
during the Exercise Period (as hereinafter defined), two million two hundred
fifty thousand (2,250,000) validly issued, fully paid and nonassessable shares,
par value $.10, of Common Stock of the Company (the "Warrant Shares"), at the
exercise price per share of $.50 (the "Exercise Price"), all subject to the
terms, conditions and adjustments herein set forth. Capitalized terms used
herein shall have the meanings ascribed to such terms in Section 11 below.

          1. Warrant. This Warrant is issued pursuant to, and in accordance with
the Stock Purchase Agreement, dated August   , 2002 between the Company, the
                                           --
Warrantholder and Vaalco International, Inc., a Delaware corporation, (the
"Stock Purchase Agreement") and is subject to the terms thereof and hereof.

          2. Exercise of Warrant; Payment of Taxes.

               2.1 Exercise of Warrant.

                    (a) Subject to Section 2.1(b), and the other terms and
conditions set forth herein, this Warrant may be exercised at any time, in whole
or in part, by the Warrantholder during the Exercise Period by:

                         (i) the surrender of this Warrant to the Company, with
a duly executed Exercise Form, and

                         (ii) subject to Section 2.2 below, the delivery of
payment to the Company, for the account of the Company, by cash, wire transfer,

<PAGE>
                                                                               2

certified or official bank check or any other means approved by the Company, of
the aggregate Exercise Price in lawful money of the United States of America.

The Company agrees that the Warrant Shares shall be deemed to be issued to the
Warrantholder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant shall have been surrendered and
payment made of the Exercise Price as aforesaid.

                    (b) This Warrant shall automatically terminate and no longer
be exercisable in its entirety upon the satisfaction in full of the Obligations
of the Company to the Warrantholder; provided, that such Obligations are
satisfied in full on or before eighteen (18) months from the Original Issue
Date.

               2.2 Conversion Right.

                    (a) In lieu of the payment of the aggregate Exercise Price,
the Warrantholder shall have the right (but not the obligation), to require the
Company to convert this Warrant, in whole or in part, into shares of Common
Stock (the "Conversion Right") as provided for in this Section 2.2. Upon
exercise of the Conversion Right, the Company shall deliver to the Warrantholder
(without payment by the Warrantholder of any of the Exercise Price) in
accordance with Section 2.2(b) that number of shares of Common Stock equal to
the quotient obtained by dividing (i) the value of the Warrant or portion
thereof at the time the Conversion Right is exercised (determined by subtracting
the aggregate Exercise Price at the time of the exercise of the Conversion Right
for the number of shares of Common Stock for which the Warrant is being
exercised from the aggregate Current Market Price for the shares of Common Stock
issuable upon exercise of the Warrant at the time of the exercise of the
Conversion Right for the number of shares of Common Stock for which the Warrant
is being exercised) by (ii) the Current Market Price of one share of Common
Stock at the time of the exercise of the Conversion Right.

                    (b) The Conversion Right may be exercised by the
Warrantholder on any Business Day prior to the end of the Exercise Period by
surrender of this Warrant to the Company, with a duly executed Exercise Form
with the conversion section completed, exercising the Conversion Right and
specifying the total number of shares of Common Stock that the Warrantholder
will be issued pursuant to such conversion.

               2.3 Warrant Shares Certificate. A stock certificate or
certificates for the Warrant Shares specified in the Exercise Form shall be
delivered to the Warrantholder within five (5) Business Days after receipt of
the Exercise Form by the Company and, if the Conversion Right is not exercised,
the payment by the Warrantholder of the aggregate Exercise Price. If this
Warrant shall have been exercised only in part, the Company shall, at the time
of delivery of the stock certificate or certificates, deliver to the
Warrantholder a new Warrant evidencing the right to purchase the remaining
Warrant Shares, which new Warrant shall in all other respects be identical with
this Warrant.

<PAGE>
                                                                               3

               2.4 Payment of Taxes. The Company will pay all documentary stamp
or other issuance taxes, if any, attributable to the issuance of Warrant Shares
upon the exercise of this Warrant; provided, however, that the Company shall not
be required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issue or delivery of any Warrants or Warrant
certificates or Warrant Shares in a name other than that of the then
Warrantholder as reflected upon the books of the Company.

          3. Restrictions on Transfer; Restrictive Legends.

               3.1 Transfer. At no time may this Warrant or the Warrant Shares
be offered, sold, transferred, pledged or otherwise disposed of, in whole or in
part, except in accordance with applicable federal and state securities laws.

               3.2 Legends.

                    (a) Except as otherwise permitted by this Section 3, each
Warrant (including each Warrant issued upon the transfer of any Warrant) shall
be stamped or otherwise imprinted with a legend in substantially the following
form:

                    "This Warrant and any shares acquired upon the exercise of
this Warrant have not been registered under the Securities Act of 1933, as
amended (the "Act"), or the securities laws of any state of the United States or
foreign jurisdiction. Neither this Warrant, such securities nor any interest
therein may be transferred except pursuant to an effective registration
statement under such Act and applicable state and foreign securities laws or
pursuant to an applicable exemption from the registration requirements of such
Act and such laws."

                    (b) Except as otherwise permitted by this Section 3, each
certificate for Common Stock (or Other Securities) issued upon the exercise of
any Warrant, and each certificate issued upon the transfer of any such Common
Stock (or Other Securities), shall be stamped or otherwise imprinted with a
legend in substantially the following form:

                    "The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred in the
absence of such registration or an exemption therefrom under such Act."

          4. Reservation and Registration of Shares. The Company covenants and
agrees as follows:

                    (a) All Warrant Shares that are issued upon the exercise of
this Warrant shall, upon issuance, be validly issued, not subject to any
preemptive rights, and, be free from all taxes, liens, security interests,
charges, and other encumbrances with respect to the issuance thereof, other than
taxes in respect of any transfer occurring contemporaneously with such issue.

<PAGE>
                                                                               4

                    (b) The Company shall at all times have authorized and
reserved, and shall keep available and free from preemptive rights, a sufficient
number of shares of Common Stock to provide for the exercise of the rights
represented by this Warrant.

                    (c) The Company shall not, by amendment of its Certificate
of Incorporation or through any reorganization, transfer of assets, spin-off,
consolidation, merger, dissolution, issue or sale of securities or any other
action or inaction, seek to avoid the observance or performance of any of the
terms of this Warrant, and shall at all times in good faith assist in performing
and giving effect to the terms hereof and in the taking of all such actions as
may be necessary or appropriate in order to protect the rights of the
Warrantholder against dilution or other impairment.

          5. Anti-dilution and Other Adjustments. The Exercise Price and the
number of Warrant Shares to be received upon exercise of this Warrant shall be
subject to adjustment as follows:

               5.1 Dividend, Subdivision, Combination or Reclassification of
Common Stock. In the event that the Company shall at any time or from time to
time, after the issuance of this Warrant but prior to the exercise hereof, (w)
make a dividend or distribution on the outstanding shares of Common Stock
payable in Capital Stock, (x) subdivide the outstanding shares of Common Stock
into a larger number of shares, (y) combine the outstanding shares of Common
Stock into a smaller number of shares or (z) issue any shares of its Capital
Stock in a reclassification of the Common Stock (other than any such event for
which an adjustment is made pursuant to another clause of this Section 5), then,
and in each such case, (A) the aggregate number of Warrant Shares for which this
Warrant is exercisable (the "Warrant Share Number") immediately prior to such
event shall be adjusted (and any other appropriate actions shall be taken by the
Company) so that the Warrantholder shall be entitled to receive upon exercise of
this Warrant the number of shares of Common Stock or other securities of the
Company that it would have owned or would have been entitled to receive upon or
by reason of any of the events described above, had this Warrant been exercised
immediately prior to the occurrence of such event and (B) the Exercise Price
payable upon the exercise of this Warrant shall be adjusted by multiplying such
Exercise Price immediately prior to such adjustment by a fraction, the numerator
of which shall be the number of Warrant Shares issuable upon the exercise of
this Warrant immediately prior to such adjustment, and the denominator of which
shall be the number of Warrant Shares issuable immediately thereafter. An
adjustment made pursuant to this Section 5.1 shall become effective
retroactively (x) in the case of any such dividend or distribution, to a date
immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution or (y) in the case of any such subdivision, combination
or reclassification, to the close of business on the day upon which such
corporate action becomes effective.

               5.2 Issuance of Common Stock or Common Stock Equivalents Below
Exercise Price.

<PAGE>
                                                                               5

                    (a) If the Company shall at any time or from time to time,
after the issuance of this Warrant but prior to the exercise hereof, issue or
sell (such issuance or sale, a "New Issuance") any shares of Common Stock or
Common Stock Equivalents at a price per share of Common Stock (the "New Issue
Price") that is less than the Exercise Price then in effect as of the record
date or Issue Date (as defined below), as the case may be (the "Relevant Date')
(treating the price per share of Common Stock, in the case of the issuance of
any Common Stock Equivalent, as equal to (x) the sum of the price for such
Common Stock Equivalent plus any additional consideration payable (without
regard to any anti-dilution adjustments) upon the conversion, exchange or
exercise of such Common Stock Equivalent divided by (y) the number of shares of
Common Stock initially underlying such Common Stock Equivalent), other than (i)
issuances or sales for which an adjustment is made pursuant to another
subsection of this Section 5 and (ii) issuances in connection with an Excluded
Transaction, then, and in each such case, (A) the Exercise Price then in effect
shall be adjusted to equal the New Issue Price and (B) the Warrant Share Number
immediately prior to such adjustment shall be increased to equal the product of
(i) the aggregate number of Warrant Shares for which this Warrant is exercisable
immediately prior to the New Issuance multiplied by (ii) a fraction, the
numerator of which shall be the Exercise Price in effect on the day immediately
prior to the Relevant Date and the denominator of which shall be the Exercise
Price in effect immediately after such adjustment.

Such adjustment shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued, and shall become effective retroactively (x) in
the case of an issuance to the stockholders of the Company, as such, to a date
immediately following the close of business on the record date for the
determination of shareholders entitled to receive such shares of Common Stock or
Common Stock Equivalents and (y) in all other cases, on the date (the "Issue
Date") of such issuance; provided, however, that the determination as to whether
an adjustment is required to be made pursuant to this Section 5.2 shall be made
only upon the issuance of such shares of Common Stock or Common Stock
Equivalents, and not upon the issuance of any security into which the Common
Stock Equivalents convert, exchange or may be exercised.

                    (b) In case at any time any shares of Common Stock or Common
Stock Equivalents or any rights or options to purchase any shares of Common
Stock or Common Stock Equivalents shall be issued or sold for consideration
other than cash, the consideration received therefor shall be deemed to be the
amount received by the Company therefor, without deduction therefrom of any
expenses incurred or any underwriting commissions or concessions or discounts
paid or allowed by the Company in connection therewith, as determined mutually
by the Board of Directors and the Majority Warrantholders or, if the Board of
Directors and the Majority Warrantholders shall fail to agree, at the Company's
expense by an appraiser chosen by the Board of Directors and reasonably
acceptable to the Majority Warrantholders.

               5.3 Certain Distributions. In case the Company shall at any time
or from time to time, after the issuance of this Warrant but prior to the
exercise hereof, distribute to all holders of shares of Common Stock (including
any such

<PAGE>
                                                                               6

distribution made in connection with a merger or consolidation in which the
Company is the resulting or surviving Person and shares of Common Stock are not
changed or exchanged) cash, evidences of indebtedness of the Company or another
issuer, securities of the Company or another issuer or other assets (excluding
dividends or distributions payable in shares of Common Stock for which
adjustment is made under Section 5.1 and any distribution in connection with an
Excluded Transaction) or rights or warrants to subscribe for or purchase any of
the foregoing, then, and in each such case, (A) the Exercise Price then in
effect shall be adjusted (and any other appropriate actions shall be taken by
the Company) by being multiplied by the Exercise Price in effect prior to the
date of distribution by a fraction (i) the numerator of which shall be such
Current Market Price of Common Stock immediately prior to the date of
distribution less the then fair market value (as determined by the Board of
Directors in the exercise of their fiduciary duties) of the portion of the cash,
evidences of indebtedness, securities or other assets so distributed or of such
rights or warrants applicable to one share of Common Stock and (ii) the
denominator of which shall be the Current Market Price of the Common Stock
immediately prior to the date of distribution (but such fraction shall not be
greater than one) and (B) the Warrant Share Number shall be increased by being
multiplied by a fraction (i) the numerator of which shall be the Current Market
Price of one share of Common Stock immediately prior to the record date for the
distribution of such cash, evidences of indebtedness, securities, other assets
or rights or warrants and (ii) the denominator of which shall be the Current
Market Price of one share of Common Stock immediately prior to such record date
less the fair market value (as determined by the Board of Directors in the
exercise of their fiduciary duties) of the portion of such cash, evidences of
indebtedness, securities, other assets or rights or warrants so distributed.
Such adjustment shall be made whenever any such distribution is made and shall
become effective retroactively to a date immediately following the close of
business on the record date for the determination of stockholders entitled to
receive such distribution.

               5.4 Credit Agreement Adjustments.

                    (a) In the event that the Obligations of the Company to the
Warrantholder have not been satisfied in full on or before the earlier of (i)
nine (9) months from the First Sale of Production and (ii) eighteen (18) months
from the Original Issue Date, then on the last day of such ninth (9th) month or
eighteenth (18th) month, as the case may be, and on the last day of each
succeeding month until the Obligations of the Company to the Warrantholder have
been satisfied in full, the Exercise Price in effect on each such date shall be
reduced (and any other appropriate actions shall be taken by the Company) by
subtracting from the Exercise Price in effect immediately prior to such
adjustment an amount equal to the Exercise Price in effect immediately prior to
such adjustment multiplied by a fraction (i) the numerator of which shall be ten
percent (10%) of the average principal balance outstanding under the Note during
such month and (ii) the denominator of which shall be ten million dollars
($10,000,000). In the event that the Exercise Price is required to be adjusted
pursuant to this Section 5.4(a) and at the same time an adjustment is required
to be made pursuant to Section 5.4(b), then the adjustment required to be made
under this Section 5.4(a) shall be made after giving effect to the adjustment
required under Section 5.4(b).

<PAGE>
                                                                               7

                    (b) If, on the date that is eighteen (18) months from the
Original Issue Date, (i) the Obligations of the Company to the Warrantholder
have not been satisfied in full and the Market Price on such date (or if such
date is not a Business Day, on the immediately preceding Business Day) is less
than the Exercise Price then in effect (determined without regard to any
adjustments made pursuant to Section 5.4(a)), then on such date, the Exercise
Price then in effect shall be reduced (and any other appropriate actions shall
be taken by the Company) to an amount that is equal to eighty percent (80%) of
the Current Market Price; provided, however, that in no event, shall any
adjustment be made pursuant to this Section 5.4(b) if such adjustment would
result in an increase to the Exercise Price in effect immediately prior to such
adjustment. In the event that the Exercise Price is required to be adjusted
pursuant to this Section 5.4(b) and at the same time an adjustment is required
to be made pursuant to Section 5.4(a), then the adjustment required to be made
under this Section 5.4(b) shall be made before giving effect to the adjustment
required under Section 5.4(a).

                    (c) On the first day of the Exercise Period, the number of
Warrant Shares shall be adjusted to a number equal to the product of the number
of Warrant Shares for which this Warrant is exercisable immediately prior to the
commencement of the Exercise Period multiplied by a fraction, the numerator of
which shall be the average daily principal balance outstanding under the Note
during the period beginning following the end of eighteen (18) months from the
date hereof and ending immediately prior to the commencement of the Exercise
Period, and the denominator of which shall be ten million (10,000,000).

               5.5 Other Changes. In case the Company at any time or from time
to time, after the issuance of this Warrant but prior to the exercise hereof,
shall take any action affecting its Common Stock similar to or having an effect
similar to any of the actions described in any of Sections 5.1 or 5.4 (but not
including any action described in any such Section) and the Board of Directors
in good faith determines that it would be equitable in the circumstances to
adjust the Exercise Price and Warrant Share Number as a result of such action,
then, and in each such case, the Exercise Price and Warrant Share Number shall
be adjusted in such manner and at such time as the Board of Directors in good
faith determines would be equitable in the circumstances (such determination to
be evidenced in a resolution, a certified copy of which shall be mailed to the
Warrantholder).

               5.6 No Adjustment; Par Value Minimum. Notwithstanding anything
herein to the contrary, no adjustment under this Section 5 need be made to the
Exercise Price or Warrant Share Number if the company receives written notice
from the Warrantholder that no such adjustment is required. Notwithstanding any
other provision of this Warrant, the Exercise Price shall not be adjusted below
the par value of a share of Common Stock.; provided, however, that the written
consent of the Majority Warrantholders shall be required prior to any increase
in the par value of the shares of Common Stock.

               5.7 Abandonment. If the Company shall take a record of the
holders of shares of its Common Stock for the purpose of entitling them to
receive a

<PAGE>
                                                                               8

dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then no adjustment in the Exercise Price or Warrant Share
Number shall be required by reason of the taking of such record.

               5.8 Certificate as to Adjustments. Upon any adjustment in the
Exercise Price or Warrant Share Number, the Company shall within a reasonable
period (not to exceed ten (10) days) following any of the foregoing transactions
deliver to the Warrantholder a certificate, signed by (i) the Chief Executive
Officer of the Company and (ii) the Chief Financial Officer of the Company,
setting forth in reasonable detail the event requiring the adjustment and the
method by which such adjustment was calculated and specifying the adjusted
Exercise Price and Warrant Share Number then in effect following such
adjustment.

               5.9 Reorganization, Reclassification, Merger or Sale Transaction.
In case of any capital reorganization, reclassification, Sale Transaction,
merger or consolidation (other than a Sale Transaction or a merger or
consolidation of the Company in which the Company is the surviving corporation)
of the Company or other change of outstanding shares of Common Stock (other than
a change in par value, or from par value to no par value, or from no par value
to par value) (each, a "Transaction") at any time after the issuance of this
Warrant but prior to the exercise hereof, the Company shall execute and deliver
to the Warrantholder at least twenty (20) Business Days prior to effecting such
Transaction a certificate stating that the Warrantholder shall have the right
thereafter to exercise this Warrant for the kind and amount of shares of stock
or other securities, property or cash receivable upon such Transaction by a
holder of the number of shares of Common Stock into which this Warrant could
have been exercised immediately prior to such Transaction, and provision shall
be made therefor in the agreement, if any, relating to such Transaction. Such
certificate shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 5 and shall
contain other terms substantially identical to the terms hereof. If, in the case
of any such Transaction, the stock, other securities, cash or property
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities of a Person other than the successor or purchasing Persons and
other than the Company, which controls or is controlled by the successor or
purchasing Person or which, in connection with such Transaction, issues stock,
securities, other property or cash to holders of Common Stock, then such
certificate also shall be executed by such Person, and such Person shall, in
such certificate, specifically assume the obligations of such successor or
purchasing Person and acknowledge its obligations to issue such stock,
securities, other property or cash to holders of the Warrants upon exercise
thereof as provided above. The provisions of this Section 5.9 and any equivalent
thereof in any such certificate similarly shall apply to successive
transactions.

               5.10 Notices. In case at any time or from time to time:

                    (a) the Company shall declare a divided (or any other
distribution) on its shares of Common Stock;

<PAGE>
                                                                               9

                    (b) the Company shall authorize the granting to the holders
of shares of its Common Stock rights or warrants to subscribe for or purchase
any shares of Capital Stock or any other rights or warrants;

                    (c) there shall occur a Transaction; or

                    (d) the Company shall take any other action that would
require a vote of the Company's stockholders;

then the Company shall mail to the Warrantholder, as promptly as possible but in
any event at least ten (10) days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants or,
if a record is not to be taken, the date as of which the holders of Common Stock
of record to be entitled to such dividend, distribution or granting of rights or
warrants are to be determined, or (B) the date on which such Transaction is
expected to become effective and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common
Stock for shares of stock or other securities or property or cash deliverable
upon such Transaction. Notwithstanding the foregoing, in the case of any event
to which Section 5.9 is applicable, the Company shall also deliver the
certificate described in such Section 5.9 to the Warrantholder at least ten (10)
Business Days prior to effecting such reorganization or reclassification as
aforesaid.

          6. Registration Rights. The Warrant Shares are subject to the terms
and conditions of the Amended and Restated Registration Rights Agreement, dated
August    , 2002, between the Company, the Warrantholder and The 1818 Fund II,
       ---
L.P., a Delaware limited partnership.

          7. Loss or Destruction of Warrant. Subject to the terms and conditions
hereof, upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
loss, theft or destruction, of such bond or indemnification as the Company may
reasonably require, and, in the case of such mutilation, upon surrender and
cancellation of this Warrant, the Company will execute and deliver a new Warrant
of like tenor.

          8. Ownership of Warrant. The Company may deem and treat the person in
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of
transfer.

          9. Amendments. Any provision of this Warrant may be amended and the
observance thereof waived only with the written consent of the Company and the
Warrantholder.

          10. No Impairment. The Company (i) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount

<PAGE>
                                                                              10

payable therefor upon such exercise, (ii) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock on the exercise of the
Warrant from time to time outstanding, and (iii) will not take any action which
results in any adjustment of the Exercise Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of the Warrant would exceed the total number of shares of Common Stock (or Other
Securities) then authorized by the Company's Certificate of Incorporation and
available for the purpose of issuance upon such exercise.

          11. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:

          "Affiliate" shall mean any Person who is an "affiliate" as defined in
Rule 12b-2 of the General Rules and Regulations under the Exchange Act.

          "Board of Directors" means the Board of Directors of the Company.

          "Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.

          "Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of such Person's capital stock and any and all
rights, warrants or options exchangeable for or convertible into such capital
stock (but excluding any debt security whether or not it is exchangeable for or
convertible into such capital stock).

          "Commission" means the Securities and Exchange Commission or any
similar agency then having jurisdiction to enforce the Securities Act.

          "Common Stock" means the Common Stock, par value $.10 per share, of
the Company.

          "Common Stock Equivalent" means any security or obligation which is by
its terms convertible into or exercisable into shares of Common Stock,
including, without limitation, any option, warrant or other subscription or
purchase right with respect to Common Stock. "Company" has the meaning set forth
in the first paragraph of this Warrant.

          "Conversion Right" has the meaning set forth in Section 2.2(a) of this
Warrant.

          "Credit Agreement" means the Amended and Restated Subordinated Credit
Agreement, dated as of August    , 2002, by and among the Company, the
                              ---
Warrantholder and the 1818 Fund II, L.P., a Delaware limited partnership.

<PAGE>
                                                                              11

          "Current Market Price" means, as of the date of determination, (a) the
average of the daily Market Price under clause (a), (b) or (c) of the definition
thereof of the Common Stock during the immediately preceding thirty (30) trading
days ending on such date, and (b) if the Common Stock is not then listed or
admitted to trading on any national securities exchange or quoted in the
over-the-counter market, then the Market Price under clause (d) of the
definition thereof on such date.

          "Excluded Transaction" means (a) any issuance of up to an aggregate of
two million (2,000,000) shares of restricted stock or options to purchase shares
of Common Stock (subject to adjustment in the event of stock splits,
combinations or similar occurrences) to employees, officers or directors of the
Company pursuant to a stock option plan or other employee benefit arrangement
approved by the Board of Directors and (b) any issuance of Common Stock upon
conversion or exercise of any Common Stock Equivalents and/or (c) any issuance
of Warrant Shares.

          "Exercise Form" means an Exercise Form in the form annexed hereto as
Exhibit A.

          "Exercise Period" means, subject to Sections 2.1(b), the period
beginning on the date that is twenty-four months from the Original Issue Date
and ending on the fifth (5th) anniversary of the Original Issue Date.

          "Exercise Price" has the meaning set forth in the first paragraph of
this Warrant.

          "First Sale of Production" has the meaning set forth in the Loan
Agreement between VAALCO Gabon (Etame), Inc. and the International Finance
Corporation dated April 19, 2002.

          "Issue Date" has the meaning set forth in Section 5.2 of this Warrant.

          "Market Price" means, as of the date of determination, (a) if the
Common Stock is listed on a national securities exchange, the closing price per
share of Common Stock on such date published in The Wall Street Journal
(National Edition) or, if no such closing price on such date is published in The
Wall Street Journal (National Edition), the average of the closing bid and asked
prices on such date, as officially reported on the principal national securities
exchange on which the Common Stock is then listed or admitted to trading; or (b)
if the Common Stock is not then listed or admitted to trading on any national
securities exchange but is designated as a national market system security by
the National Association of Securities Dealers, Inc., the last trading price of
the Common Stock on such date; or (c) if there shall have been no trading on
such date or if the Common Stock is not designated as a national market system
security by the National Association or Securities Dealers, Inc., the average of
the reported closing bid and asked prices of the Common Stock on such date as
shown by the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotations System and reported by any member firm of the
New York Stock Exchange selected by the Company; or (d) if none of (a), (b) or
(c) is applicable, a market price per share

<PAGE>
                                                                              12

determined mutually by the Board of Directors and the Majority Warrantholders
or, if the Board of Directors and the Majority Warrantholders shall fail to
agree, at the Company's expense by an appraiser chosen by the Board of Directors
and reasonably acceptable to the Majority Warrantholders. Any determination of
the Market Price by an appraiser shall be based on a valuation of the Company as
an entirety without regard to any discount for minority interests or disparate
voting rights among classes of capital stock.

          "Majority Warrantholders" means the holders of a majority of Warrant
Shares issuable upon exercise of all of the warrants issued pursuant to Section
1.02(b) of the Credit Agreement assuming the exercise of all such warrants.

          "New Issuance" has the meaning set forth in Section 5.2 of this
Warrant.

          "New Issue Price" has the meaning set forth in Section 5.2 of this
Warrant.

          "Note" has the meaning set forth in the Credit Agreement.

          "Obligations" means the obligations of the Company to the
Warrantholder for the prompt payment when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and performance of the
Note and the Credit Agreement and any premium and all interest and other sums in
respect thereof, whether now or hereafter owing or incurred.

          "Original Issue Date" means June 10, 2002.

          "Other Securities" means any stock (other than Common Stock) and other
securities of the Company or any other Person (corporate or otherwise) which the
holder of the Warrant at any time shall be entitled to receive, or shall have
received upon the exercise of the Warrant, in lieu of or in addition to Common
Stock.

          "Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.

          "Relevant Date" has the meaning set forth in Section 5.2 of this
Warrant.

          "Sale Transaction" shall mean (a) (i) the merger or consolidation of
the Company into or with one or more Persons, (ii) the merger or consolidation
of one or more Persons into or with the Company or (iii) a tender offer or other
business combination if, in the case of (i), (ii) or (iii), the stockholders of
the Company prior to such merger or consolidation do not retain at least a
majority of the voting power of the surviving Person or (b) the voluntary sale,
conveyance, exchange or transfer to another Person of (i) the voting Capital
Stock of the Company if, after such sale, conveyance, exchange or transfer, the
stockholders of the Company prior to such sale, conveyance, exchange or transfer
do not retain at least a majority of the voting power of the Company or (ii) all
or substantially all of the assets of the Company.

<PAGE>
                                                                              13

          "Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.

          "Stock Purchase Agreement" has the meaning set forth in Section 1 of
this Warrant.

          "Transaction" has the meaning set forth in Section 5.9 of this
Warrant.

          "Warrant Share Number" has the meaning set forth in Section 5.1 of
this Warrant.

          "Warrant Shares" has the meaning set forth in the first paragraph of
this Warrant.

          "Warrantholder" has the meaning set forth in the first paragraph of
this Warrant.

          12. Miscellaneous.

               12.1 Entire Agreement. This Warrant and the Credit Agreement
constitutes the entire agreement between the Company and the Warrantholder with
respect to the Warrant and supersedes all prior agreements and understanding
with respects to the subject matter of this Warrant.

               12.2 Binding Effect; Benefits. This Warrant shall inure to the
benefit of and shall be binding upon the Company and the Warrantholder and their
respective permitted successors and assigns. Nothing in this Warrant, expressed
or implied, is intended to or shall confer on any person other than the Company
and the Warrantholder, or their respective permitted successors or assigns, any
rights, remedies, obligations or liabilities under or by reason of this Warrant.

               12.3 Headings. The headings in this Warrant are for convenience
of reference only and shall not limit or otherwise affect the meaning of this
Warrant.

               12.4 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:

               (a)  if to the Company:

                    VAALCO Energy, Inc.
                    4600 Post Oak Place, Suite 309
                    Houston, TX  77027-0130
                    Attention: Russell Scheirman

<PAGE>
                                                                              14

               with a copy to:

                    Haynes and Boone, LLP
                    1000 Louisiana, Suite 4300
                    Houston, TX  77002
                    Telecopy:  (713) 547-2600
                    Attention: Guy Young

               (b)  if to the Warrantholder:

                    Nissho Iwai Corporation
                    3-1, Daiba 2-chome,
                    Minato-ku, Tokyo 135-8655
                    JAPAN
                    Telecopy:  81-3-5520-2964
                    Attention: Shinichi Teranishi,
                               General Manager, Energy Project Department

          All such notices, demands and other communications shall be deemed to
have been duly given when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is mechanically acknowledged, if telecopied. Any party may by
notice given in accordance with this Section 12.4 designate another address or
Person for receipt of notices hereunder.

               12.5 Severability. Any term or provision of this Warrant which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the terms and provisions of this Warrant or
affecting the validity or enforceability of any of the terms or provisions of
this Warrant in any other jurisdiction.

               12.6 GOVERNING LAW. THIS WARRANT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO
THE CONFLICTS OF LAW PRINCIPLES THEREOF.

               12.7 No Rights or Liabilities as Stockholders. Nothing contained
in this Warrant shall be determined as conferring upon the Warrantholder any
rights as a stockholder of the Company or as imposing any liabilities on the
Warrantholder to purchase any securities whether such liabilities are asserted
by the Company or by creditors or stockholders of the Company or otherwise.

               12.8 Amendments and Waivers. Except as otherwise provided herein,
the provisions of this Warrant may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless consented to in writing by the Company and the Warrantholder.

<PAGE>
                                                                              15

               IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer.

                                                   VAALCO ENERGY, INC.

                                                   By:
                                                       -------------------------
                                                   Name:  W. Russell Scheirman
                                                   Title: President

Dated:  August    , 2002
               ---

<PAGE>
                                    Exhibit A

                                  EXERCISE FORM

                 (To be executed upon exercise of this Warrant)

               The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant, to purchase [insert number] shares of Common Stock
and [herewith tenders payment for such shares to the order of the Company in the
amount of $[insert number] [hereby exercises its Conversion Right] in accordance
with the terms of this Warrant. The undersigned requests that a certificate for
such [Warrant Shares] [that number of Warrant Shares to which the undersigned is
entitled as calculated pursuant to Section 2.2] be registered in the name of the
undersigned and that such certificates be delivered to the undersigned's address
below.

               The undersigned represents that it is acquiring such shares for
its own account for investment and not with a view to or for sale in connection
with any distribution thereof (subject, however, to any requirement of law that
the disposition thereof shall at all times be within its control).

Dated:
       ----------------

                                           Signature
                                                     ---------------------------

                                                     ---------------------------
                                                     (Print Name)

                                                     ---------------------------
                                                     (Street Address)

                                                     ---------------------------
                                                     (City)  (State)  (Zip Code)

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