TIDMVOG
RNS Number : 1674F
Victoria Oil & Gas PLC
26 July 2016
26 July 2016
Victoria Oil & Gas Plc
("VOG" or "the Company")
Q2 2016 Operations Update
Victoria Oil & Gas Plc provides an update on the Group's
operations for the three-month period ended 30 June 2016 (the
"quarter" or "Q2").
Overview
The quarter produced a strong gas sales performance from the
Logbaba gas project, along with the completion of major
work-streams within Cameroon that the Board believes will support
the Company's ability to expand customer supply and meet robust
demand for its gas.
Phase II Bonaberi pipe-laying to the Maya Oil factory is now
over 75% complete. The 5.5km Phase III pipeline to Bekoko junction
has also commenced. Both Phase II and Phase III pipeline extensions
will connect twelve new customers in Q4 2016.
The Logbaba drilling programme has progressed during Q2 with the
completion of major site preparation work and the arrival of the
drill rig in Douala, together with most of the long lead materials
and equipment. The drill rig has been cleared through customs,
transported to site and assembly is now underway. Drilling
operations are expected to begin by end August 2016.
Highlights
-- 13.04mmscf/d Q2 2016 average gas production (Q2 2015: 9.91 mmscf/d)
-- 3% increase in gas sales to 1,151mmscf compared to Q2 2015 (1,120mmscf)
-- Initial Logbaba exploration investment recouped by the
Company's subsidiary, Gaz du Cameroun S.A. ("GDC") from 100%
receipt of total revenues
o Logbaba's concession partner, RSM Production Corporation
("RSM"), will now receive 40% of revenue after netting off its 40%
of ongoing development costs and operational expenses
-- Q2 unaudited financial highlights:
o $12.5m revenue (Q1 2016: $12.8m)
o $13.9m cash position at quarter end (Q1 2016: $11.5m)
o $1.7m net cash position at quarter end (Q1 2016: $4.6m) *
-- Logbaba Drilling Programme
o Site preparation completed
o 3 conductors driven
o Long lead items, including wellheads, casing, consumables and
other equipment have arrived
o Drill rig arrived and offloaded at Douala port
o Assembly of the rig and camp at site underway
-- Pipeline expansion progressing with 7km laid in the quarter
*Net cash is defined as cash equivalents less borrowings, where
cash equivalents exceed borrowings.
Operational update
The quarterly gas and condensate consumption is as follows:
Q2 Q1 Q4 Q3 Q2
2016 2016 2015 2015 2015
------------------------ -------- -------- ------ ------- --------
Gas sales (mmscf)
------------------------ -------- -------- ------ ------- --------
Thermal 213.5 250.6 236.3 266.7 209.5
------------------------ -------- -------- ------ ------- --------
Retail Power 27.8 37.0 79.0 83.3 94.0
------------------------ -------- -------- ------ ------- --------
Grid Power 909.9 843.6 310.4 367.6 816.5
------------------------ -------- -------- ------ ------- --------
Total (mmscf) 1,151.2 1,131.2 625.7 717.6 1,120.0
------------------------ -------- -------- ------ ------- --------
Average gas production
(mmscf/d) 13.04 13.16 7.14 8.19 9.91
------------------------ -------- -------- ------ ------- --------
Condensate sold
(bbls) 12,457 13,591 8,608 10,878 13,467
------------------------ -------- -------- ------ ------- --------
The sales figures are in line with internal expectations as the
quarter covered the second half of the dry season, where gas
consumption by grid power is higher due to lower availability of
hydroelectric power.
GDC achieves Payout with RSM Production Corporation
During the period, the Logbaba gas project reached a significant
milestone in its development. GDC, which has a 60% participating
interest in, and operates, the Logbaba gas project, agreed to fund
the initial exploration costs at the time of the 2005 farm-in to
the Logbaba Concession Agreement with its partner RSM.
To enable recovery of the initial exploration costs by GDC, the
parties agreed that GDC would be entitled to and has to date
received 100% of the revenue from the Logbaba project ("Payout")
whilst contributing 60% to operating and capital costs.
As of 1 June 2016 Payout has been achieved. RSM will now receive
40% of Logbaba revenues, which will be net of RSM's 40%
contribution to all operational and capital expenses. Operational
and capital expenses include well drilling, pipeline construction,
gas delivery and operating expenses. Throughout 2016 it is expected
that, together with partner contributions, all revenues from the
Logbaba Project will be expended on operational and capital
expenses, including the drilling program.
GDC has also secured a debt facility with BGFI Bank of up to
US$26.0m which it can draw upon at any time, to fund ongoing
operations.
Uninterrupted Supply of Gas and Safety
Our operations maintained a 100% safety record and ensured an
uninterrupted gas supply through our integrated network to all
customers across thermal, power and condensate markets.
Logbaba drilling campaign
As previously reported, GDC will be drilling two wells to move
some of our 2P (Proven plus Probable) reserves into the 1P (Proven)
reserve category. One of the wells to be drilled will twin the
La-104 well drilled in 1957; the other well will be a 'step-out'
well that will be drilled into a target that is intended to prove
up more of our Probable reserves.
Both wells are intended to be production wells from the Logbaba
Formation at depths of up to 3,200m. A detailed budget for the two
well drilling programme has been completed and is less than
$40.0m.
Details of the Logbaba Drilling Campaign can be found here:
http://www.victoriaoilandgas.com/investors/news/drilling-rig-arrival-douala-port-cameroon
The following is a specific update on the Logbaba Drill
Program:
(i) Drill Rig - the rail mounted drilling platform has arrived
in Douala and has been offloaded, cleared through customs,
transported to site and assembly is now underway
(ii) Slope Stabilisation Project - a major task to remove the
cliff at the end of the drill pad and stabilise the surface was
completed at the drill site
(iii) Drill Pad, Cellars and Conductors - drill pad levelling
and preparation was completed together with three cellars, one for
each of the two wells plus a spare and conductors were also driven
in preparation for spudding
(iv) Mud Storage and Cuttings Tanks -all storage tanks for mud
and cuttings were established together with treatment pits
(v) Camp Areas - fly camp and main camp areas have been prepared
and both camps were delivered to site and installation has been
completed.
(vi) Additional Infrastructure - new warehouse facilities,
secure perimeter fencing and upgraded access controls for site have
all been installed and completed.
The schedule for the two well full drill programme (including an
optional 1,000m exploration tail) is expected to be 187 days from
spudding.
Bonaberi shore pipeline extension
Significant progress was made on the 8.0km Phase II Bonaberi
pipeline extension during the quarter, adding to the 2.1km of pipe
laid in Q1 2016. This follows successful commissioning of the Phase
I expansion last year that currently supplies gas to three thermal
customers. During the period, the Phase II pipeline was extended
with a further 4.7km trench completed and pipe laid by SATOM.
Simultaneous to the Phase II pipeline extension, GDC has
commenced the Phase III pipeline extension. Phase III Bonaberi
pipeline is a 5.5km extension reaching out to Bekoko junction.
During the period 2.3km of trench was completed and pipe laid by
SATOM for the Phase III Bonaberi pipeline extension.
Phase II and Phase III pipeline extensions are on target for
commissioning by the end of 2016 and expected to connect a total of
twelve additional customers who have already signed gas sales
agreements.
VOG Chief Executive Officer Ahmet Dik said: "The period saw GDC
complete a series of major workstreams that underpin our ability to
expand our gas production and supply to the Cameroon energy market.
All site preparations for the well drilling campaign were completed
within the period and the new train rig is through customs and now
being assembled on site for drilling operations to begin shortly.
Whilst we are setting up for the drilling campaign, the pipeline
extension into Bonaberi area progressed as planned and connection
of the twelve new customers will be achieved in 2016 as previously
announced. With another quarter of strong gas supply reported, and
in line with our internal expectations, we now look forward to
expanding our supply capability to the next level to meet the
ongoing strong demand for gas we are experiencing in Douala."
This Regulatory News Announcement contains inside
information.
For further information, please visit www.victoriaoilandgas.com
or contact:
Victoria Oil & Gas Plc
Kevin Foo / Laurence Read Tel: +44 (0) 20 7921 8820
Numis Securities
John Prior / Ben Stoop Tel: +44 (0) 20 7260 1000
Strand Hanson Limited
Angela Hallett / Rory Murphy Tel: +44 (0) 20 7409 3494
Bell Pottinger
Daniel Thöle / Charles Stewart / Zara de Belder Tel: +44 (0) 20
3772 2499
Notes to Editors
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 has recently been assigned
a 75% participating interest in the Matanda block, which neighbours
the Logbaba block. The remaining 25% participating interest is held
by AFEX.
VOG also holds 100% of the West Medvezhye oil and gas
exploration project near Nadym, Russia. Given the challenging
economic environment in Russia, the Group has fully impaired the
West Medvezhye assets.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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