TIDMVOG
RNS Number : 6150E
Victoria Oil & Gas PLC
05 November 2015
5 November 2015
Victoria Oil & Gas Plc
("VOG" or "the Company")
Q3 2015 Operations Update
Victoria Oil & Gas Plc provides an update on the Company's
operations for the quarter ended 30 September 2015 ("the quarter"
or "Q3").
The third quarter was the first full period specifically
covering the wet season in Cameroon since VOG's operating
subsidiary Gaz du Cameroun S.A. ("GDC") started supplying gas to
ENEO, the key power provider to the Douala grid. Across all of the
GDC gas supply markets Q3 is the lowest demand period primarily due
to the seasonal increase in power output from Cameroon's
hydroelectric dams. GDC's existing take-or-pay terms in place with
ENEO, split minimum payment levels between distinct six month
demand periods covering higher dry (January-June) and lower wet
(July-December) seasons.
Highlights
-- 8.2mmscf/d Q3 average gas production (Q2: 12.6mmscf/d)
-- 105% increase in production compared to Q3 2014 (4.0mmscf/d)
-- $8.1m cash received from gas and condensate sales during Q3 (Q2: $9.8m)
-- 2,242mmscf of gas sold in nine months to 30 September 2015
(893mmscf for the nine months to 30 September 2014)
-- ENEO consumption 32% above minimum take-or-pay wet seasons levels
-- Well engineering underway for two wells scheduled for H2 2016
-- New seismic programme underway initially focused on
acquisition and reprocessing of historic data points
-- $12.8m Group cash balance Q3 (Q2: $14.2m)
-- $2.4m reduction of debt during the quarter
Operational update
Q3 2015 Q2 2015** Q1 2015 Q4 2014 Q3 2014
------------------------ -------- ---------- -------- -------- --------
Average daily gas
production(mmscf/d)* 8.2 12.6 4.5 4.1 4.0
------------------------ -------- ---------- -------- -------- --------
Total gas sold (mmscf) 718 1,120 405 374 368
------------------------ -------- ---------- -------- -------- --------
Condensate sold (bbls) 10, 878 13,445 6,345 2,265 5,667
------------------------ -------- ---------- -------- -------- --------
* Average production numbers are based on a 7-day week
** ENEO gas supply to Bassa and Logbaba power stations on line
during Q2 2015
Average daily gas production reduced by 35% for the period
compared to Q2, with an average of 8.2mmscf/d. Gas production
increased by 105% compared to Q3 2014. Production reached a peak of
15.2mmscf/d during the quarter, with an average 5-day working week
output of 8.72mmscf/d. As anticipated, the quarterly differential
is primarily due to the seasonal effects of increased hydroelectric
power being made available via the grid; reduced demand from ENEO
and other seasonal factors from some thermal and dedicated power
customers. Despite the seasonal impact, the 8.2mmscf/d average
production for Q3 is higher than expected because ENEO exceeded its
take-or-pay minimum quota for the period by 32%.
Gas sold in nine months to 30 September 2015 of 2,242mmscf
exceeds the 2014 full year gas sales of 1,273mmscf and the sales
for the nine months to 30 September 2014 of 893mmscf. The increase
was largely due to ENEO coming on line during 2015.
Group cash was $12.8m at quarter end, compared to $14.2m at the
end of the second quarter. The reduction in cash was largely due to
$2.4m of debt repayments made during the quarter.
In GDC, cash received from gas and condensate sales in Q3 was
$8.1m compared to cash received in Q2 of $9.8m, representing a 17%
reduction.
Operations
Having purchased the Logbaba gas production plant in the
previous quarter from Expro, GDC has agreed terms for the operation
and maintenance of the plant with Expro. GDC has also commissioned
a design study with Expro for the expansion of the gas production
plant from its existing 20mmscf/d level to up to 40mmscf/d.
During the quarter GDC continued to assess the investment case
for potential pipeline expansion into the Bonaberi area and
customer connections.
Sub-surface development
GDC has appointed SPD Ltd ("SPD"), a subsidiary of the Petrofac
Group, to undertake well planning and project management of the
upcoming Logbaba drilling campaign planned for 2016, which will
target two new wells. SPD is an independent well engineering
company with a wide range of experience in planning and managing
well operations worldwide.
The GDC and SPD project team is in place and the planning,
design, and procurement of services and materials for the next two
Logbaba wells, La-107 and La-108, is progressing on schedule.
La-107 is to be a twin of the La-104 well drilled in 1957. This
well's objectives include the development of the Upper Logbaba
reserves identified in La-104, and to prove the Lower Logbaba
resources that were found in La-104. The La-107 well design also
encompasses an option to drill an 'exploration tail' below the base
of the Logbaba Formation at about 3200m.
The second well being planned, La-108, is a step-out well into
the 2P (Proven plus Possible Reserves) area of the Logbaba Field.
The bottom hole location of La-108 will be about 1,100m to the
South East of the drilling pad surface location and is intended to
prove up our 2P Reserves in the vicinity of the well and to move
those 2P Reserves into the 1PD, Proven Developed category.
We intend to fund the wells from internal cash flow, bank
finance and partner contributions and at this stage do not expect
the need to seek shareholder funding.
Compressed Natural Gas ("CNG") update
VOG continues to look for opportunities to expand its
hydrocarbon sales, in and around Douala, and further afield. CNG
presents GDC with the opportunity to distribute gas from the
Logbaba gas production plant to a wider network than the gas
pipeline network currently offers. GDC is in discussions with a
preferred partner who will fulfil all of the capital and
operational requirements for the gas compression and distribution
of CNG. This model will suit GDC's strategy of concentrating on gas
sales rather than downstream development. The potential benefits of
CNG are:
-- Minimal GDC capital requirement;
-- Enables customers up to 250km from Douala to be provided with GDC gas;
-- High margin business for 'gas only' supply model allows focus on core competency;
-- No additional capacity pressure on pipeline network; and
-- CNG production can occur during off-peak periods to help maintain balanced gas production.
VOG Chairman Kevin Foo said: "The results from Q3 are notable as
the period typically represents our lowest production period during
the calendar year. Despite this we have still delivered an average
of 8.2mmscf/d, a 105% increase in production for the same wet
season period last year. If we look at the Q2 2015 average
production rates of 12.5mmscf/d with ENEO only being commissioned
part way through the period GDC is clearly delivering significant
production growth. The next quarter will see the tailing off of the
wet season in terms of production and expected increased
production."
GDC Chief Executive Officer and VOG Director Ahmet Dik said:
"The next phase of GDC's expansion involves us being able to supply
significantly more gas to major customers. In order to facilitate
this major production expansion strategy, 2016 will see us laying
new pipelines to large customers, drilling two wells, increasing
plant capacity and carefully selecting the best long term markets
for us to sell our gas into. This is a hugely exciting time for GDC
as we consolidate our first mover advantage and utilise our
existing infrastructure to rapidly deliver gas to an energy hungry
Cameroon market place."
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) 207 260 1000
Strand Hanson Limited
Angela Hallett / Stuart Faulkner Tel: +44 (0) 20 7409 3494
Bell Pottinger
Daniel Thöle / Charles Stewart / Zara de Belder Tel: +44 (0) 20
3 772 2499
Notes to Editors
About Victoria Oil & Gas Plc
Victoria Oil & Gas (VOG.L) is a gas utility company with
operations in the industrial port city of Douala in Cameroon, which
is the business hub to Central Africa.
The Company's subsidiary, Gaz du Cameroun S.A. ("GDC"), supplies
cost effective, clean and reliable gas to industries in the Douala
region from its onshore Logbaba Gas Project. Industrial customers
are supplied with gas through a 32km pipeline network built by GDC
in Douala.
GDC's gas supply to the thermal, grid power and retail power
markets in Douala, is helping to ensure that the Cameroon economy
is underpinned with stable energy. By developing a full integrated
gas supply network, connected to wells located within the city
itself, GDC has established a new range of energy product types
within Douala that are cost effective, reliable, safe and cleaner
than liquid fuel alternatives.
The Company generates cash flow from the Logbaba Project which
is 60% owned and managed by GDC, with RSM Production Corporation,
an affiliate of Grynberg Petroleum Company of Denver, Colorado
holding a 40% participating interest.
VOG also holds 100% of the West Medvezhye oil and gas
exploration project near Nadym, Russia. The field has C1 plus C2
reserves of 14.4mmboe (under the Russian resource classification
system, analogous to proven and probable reserves under Western
conventions) in addition to best estimate prospective resources of
1.4bboe. Given the challenging economic environment in Russia, The
Group has fully impaired the West Medvezhye assets.
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