TIDMVOG
RNS Number : 5450Y
Victoria Oil & Gas PLC
06 March 2017
6 March 2017
Bowleven plc ('Bowleven') and Victoria Oil & Gas plc
('VOG')
Bomono farm-out transaction agreed between Bowleven and Victoria
Oil & Gas
Bowleven plc, the Africa focused oil and gas exploration group
and Victoria Oil & Gas Plc, an integrated energy company with
operations in Cameroon, both trading on AIM, are pleased to
announce that they have signed a farm-out agreement ("the
Agreement") relating to the Bomono production sharing contract
("Bomono PSC").
Gas produced from the Bomono PSC will be fed into the customer
distribution network owned and operated by Gaz du Cameroun S.A.
("GDC"), a wholly owned subsidiary of VOG.
First gas supply to the GDC network is anticipated to start
following granting of a Provisional Exploitation Authorisation
("PEA") and other approvals.
Strategic rationale:
This Agreement, which has been negotiated by the parties over
several months, aligns Bowleven's intention of realising near term
value from Bomono through commercial production of its Bomono gas
deposit with VOG's business of commercialising local onshore gas
deposits using its established gas infrastructure and customer
network.
The transaction provides the ability to minimise the timescale
to first production and optimises the proven advantages of
Bowleven's upstream expertise and VOG's established gas supply
business that feeds a diverse range of industries and the local
power grid.
The initial plan is that gas currently suspended at Moambe be
brought onstream and that further drilling be considered to supply
the growing domestic market in and around the Douala area.
Farm Out Highlights
-- On completion, EurOil Limited ("EurOil"), a Bowleven
subsidiary, will have a 20% working interest in the Bomono PSC and
GDC Bomono S.A. ("GDC Bomono"), a wholly owned VOG subsidiary, will
have an 80% working interest.
-- Bowleven will remain as operator of the project.
-- Gas from Bomono PSC will be sold to GDC less a tolling fee.
The gas price paid will be a weighted average received by GDC for
its total domestic sales less a tolling fee for use of the pipeline
network.
-- The pipeline connection from the Bomono PSC to the main
network will be managed and funded by GDC. GDC Bomono will complete
the civil engineering works necessary for the gas processing plant
installation at the Bomono site. The estimated capital cost for
these works is US$6 million.
-- Bowleven has agreed to pay GDC Bomono 50% of any deficit,
limited to a maximum payment of US$2 million, if the first 3 years
of net income received by GDC Bomono is less than the development
expenditure incurred.
-- EurOil will receive a 3.5% royalty from GDC Bomono's
production share of hydrocarbons, with an aggregate cap limiting
the total royalty payments to US$20 million.
-- Bowleven will, on completion, also receive GBP100,000 worth
of new ordinary shares in VOG based on the volume weighted average
share price 10 days preceding the date of the Agreement, being
69.23 pence per share. It is the intention of Bowleven to retain
these shares initially, but keep that decision under regular review
as there are no restrictions on their disposal.
Asset Details:
The farm-out transaction relates to the Bomono PSC, onshore
Cameroon. EurOil is operator of the Bomono PSC.
Bowleven completed extended well flow tests on the Moambe well
that exceeded 7mmscf/d. The Moambe and Zingana exploration wells
drilled at Bomono were then suspended as future producers.
As previously announced by Bowleven, the detailed prospect
inventory prepared indicates there is 146bcf and 263bcf of mean
un-risked GIIP in the Tertiary and deeper Cretaceous reservoir
intervals respectively.
Additional Transaction Details:
-- The economic effective date of the transaction is 1 January 2017.
-- The above interests are expressed prior to the exercise of
any back-in rights by the Cameroon State. Under the terms of the
Bomono PSC, the Cameroon State has the right to take a 10%
participating interest in development activity undertaken under an
exploitation authorisation.
-- Completion is subject to, amongst other things:
Ø The grant of a PEA over the Bomono PSC. The PEA application
was submitted by Bowleven to the Cameroon authorities as requested
following Ministerial approval for the award of a two-year
extension to the Bomono PSC (to 12 December 2018);
Ø The approval by the Cameroon Government of the assignment of
the equity interest from EurOil to GDC Bomono; and
Ø Should these conditions precedent not be satisfied by 30 June
2017, both Bowleven and VOG have the right to terminate the
Agreement.
-- In the event that any of the resolutions requisitioned by
Crown Ocean Capital P1 Limited at the forthcoming Bowleven General
Meeting on 14 March 2017 are passed, VOG has the right to terminate
the Agreement.
Kevin Hart, Chief Executive Officer of Bowleven plc,
commented:
"We are delighted to be working together with VOG to unlock the
potential of Bomono by accelerating the monetisation of the
existing resources, whilst gaining access to VOG's extensive
infrastructure and gas marketing experience. This deal offers
shareholders the opportunity to access VOG's robust commodity
pricing framework, which offers attractive returns relative to a
gas to power option, and requires minimal further investment by
Bowleven to reach first production. Retaining a 20% interest allows
Bowleven to participate in the further upside potential identified
on the acreage with a clear evacuation route to the attractive
growing local gas market.
We are pleased to have reached this mile-stone for Bomono and
look forward to working together with both VOG and the Cameroon
authorities to realise the maximum potential this asset has to
offer."
Ahmet Dik, Chief Executive Officer of Victoria Oil & Gas
plc, commented:
"This is a mutually beneficial deal, which provides additional
gas sources to our pipeline and considerable exploration upside,
some 146 bcf and 263 bcf of un-risked GIIP. It also delivers an
additional 2,327km(2) of onshore license area and early production
potential from the Moambe well that will help meet the expanding
gas market in Douala. Our gas infrastructure pipeline is only 9.5km
from Moambe well and on the Bonaberi side of Douala where we see
considerable industrial growth potential. VOG's commitment to
building and expanding further Cameroon gas infrastructure is being
cemented and we are grateful for the support from SNH and the
Government with our continued contribution to the growth of the
Cameroon economy".
BOWLEVEN ENQUIRIES
For further information, please visit www.bowleven.com or
contact:
Bowleven plc
Kevin Hart, Chief Executive 00 44 131 524 5678
Kerry Crawford, Finance Director
Brunswick Group LLP
Patrick Handley 00 44 207 404 5959
Will Rowberry
Cenkos Securities plc (NOMAD)
Derrick Lee 00 44 131 220 6939
Neil McDonald
VICTORIA OIL & GAS ENQUIRIES
For further information, please visit www.victoriaoilandgas.com
or contact:
Victoria Oil & Gas Plc
Kevin Foo / Laurence Read Tel: +44 (0) 20 7921 8820
Strand Hanson Limited (Nominated & Financial Adviser)
Rory Murphy / Stuart Faulkner / James Dance Tel: +44 (0) 20 7409
3494
Shore Capital Stockbrokers Limited (Joint Broker)
Mark Percy / Toby Gibbs (corporate finance) Tel: +44 (0) 207 408
4090
Jerry Keen (corporate broking)
FirstEnergy Capital LLP (Joint Broker)
Jonathan Wright / David van Erp Tel: +44 (0) 207 448 0200
Background on Bomono
The Bomono contract area at 2,327km(2) covers a significant
portion of the onshore extent of the Douala Basin, and lies
immediately to the north-east of the estuarine Matanda exploration
license. In the south-east, the permit captures three sides of the
Logbaba exploitation area. The contract area includes most of
Cameroon's energy hungry economic capital, and primary seaport;
Douala.
The relevant geographical area is shown via the link below:
http://www.rns-pdf.londonstockexchange.com/rns/5450Y_-2017-3-5.pdf
Exploration in the area dates to the 1950s with an extensive
shallow drilling campaign successfully exploring the southern
boundary of the permit discovering gas in wells drilled by Elf. In
recent times, EurOil has undertaken a comprehensive evaluation of
the prospectivity of the area, including geochemical, airborne
geophysical and 2D seismic programmes, culminating in the drilling
of two successful exploration wells in 2015.
EurOil focused exploration efforts on the shallow Paleogene
NW-SE trending structures found in the southern half of the block.
Two low risk, shallow prospects with stacked reservoir units were
targeted, with the Moambe-1 and Zingana-1 wells both successfully
tested and subsequently completed as future gas producers in early
2016. The shallow reservoir of the Moambe-1 well flowed on extended
test at over 7mmscf/d. The drilling campaign significantly
de-risked the remaining unexplored structures in the block, with a
post drilling, block-wide Tertiary prospect inventory of un-risked
in-place mean gas volumes of 146bcf, including the Zingana and
Moambe discoveries.
The Tertiary prospects are situated between 10 to 30 km from
Douala and are within proximity and immediately accessible to Gaz
du Cameroun S.A.'s gas distribution network. Additionally, revised
mapping highlighted deeper significantly larger Cretaceous
prospectivity totalling more than 263bcf, targeting potentially the
same reservoirs as the producing Logbaba field.
NOTES TO EDITORS:
About Bowleven plc
Bowleven (BLVN.L) is an African focused oil and gas exploration
group, based in Edinburgh and traded on AIM. Bowleven's vision is
to build an African focused exploration and production company
focused on creating and realising material value through
exploration-led organic growth and niche acquisitions. Bowleven
holds equity interests in three blocks in Cameroon, with one block
located offshore in shallow water (operated by New Age) and two
onshore (operated by Bowleven).
The technical information in this release has been reviewed by
David Clarkson, a qualified person for the purposes for the AIM
Guidance Note for Mining, Oil and Gas Companies. David Clarkson,
Chief Operating Officer of Bowleven plc, is a Chartered Engineer
and Fellow of the Institution of Mechanical Engineers with
extensive oil and gas industry experience.
The most recent published financial statements of the Bowleven
Group are contained within the 2016 Annual Report and accounts for
the year ended 30 June 2016 which were announced on the 8 November
2016. The carrying value of the Bomono PSC contained within the
balance sheet and classified as "intangible exploration assets" as
at that date was US$42 million.
About Victoria Oil & Gas plc
Victoria Oil & Gas (VOG.L) is a gas utility company.
The Company's subsidiary, Gaz du Cameroun S.A. ("GDC") owns a
60% participating interest and operates the onshore Logbaba Gas
Project. The Logbaba Gas Project supplies cost effective, clean and
reliable natural gas to industries in the Douala region of
Cameroon. RSM Production Corporation, an affiliate of Grynberg
Petroleum Company of Denver, Colorado holds the remaining 40%
participating interest. In addition, VOG owns a 75% participating
interest in the Matanda block, which neighbours the Logbaba block.
The remaining 25% participating interest is held by AFEX.
GDC is currently the only supplier of natural gas to Douala and
it owns and manages the whole supply chain from wellhead to
customer connection. Customers are supplied with gas through a 50km
pipeline network built by GDC in Douala. GDC has in place long-term
gas supply contracts with customers using gas for a range of
different applications, with prices ranging from $9/mmbtu to
$16/mmbtu.
VOG also holds 100% of the West Medvezhye oil and gas
exploration project near Nadym, Russia. The Group is actively
seeking partners to develop this field.
NOTES TO THE ANNOUNCEMENT:
This announcement contains inside information
This information is provided by RNS
The company news service from the London Stock Exchange
END
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