TIDMVOG
RNS Number : 5654N
Victoria Oil & Gas PLC
27 October 2016
27 October 2016
Victoria Oil & Gas Plc
("VOG" or "the Company")
Q3 2016 Operations Update
Victoria Oil & Gas Plc provides an update on the Group's
operations for the three-month period ended 30 September 2016 (the
"quarter" or "Q3").
Highlights
-- 7.14mmscf/d Q3 2016 average gas production (Q3 2015: 8.19 mmscf/d)
-- 12% decrease in gross Logbaba gas sales of 630mmscf (Q3 2015: 718mmscf)
-- Q3 unaudited financial highlights:
o $4.7 million revenue (Q2 2016: $10.8 million)
o $14.1 million cash position at quarter end (Q2 2016: $14.1 million)
o $2.3 million net cash position at quarter end (Q2 2016: $1.9 million) *
-- Logbaba drilling programme:
o Rig in final stages of commissioning and testing getting ready for spudding
-- 7.13km pipeline commissioned during the quarter as part of the Bonaberi expansion
-- Resolution of dispute over reserve bonus and extinguishing 1.2% royalty
*Net cash is defined as cash equivalents less borrowings, where
cash equivalents exceed borrowings
Operational update
The quarterly gross gas and condensate consumptions for the
Logbaba Project are as follows (amounts in brackets are gas and
condensate sales attributable to VOG*):
Q3 2016 Q2 2016 Q1 2016 Q4 2015 Q3 2015
--------------- ------------- --------------- -------- -------- --------
Gas sales
(mmscf)
--------------- ------------- --------------- -------- -------- --------
Thermal 290 (174) 214 (181) 250 236 267
--------------- ---- ------- ------ ------- -------- -------- --------
Retail power 31 (18) 27 (24) 37 79 83
--------------- ---- ------- ------ ------- -------- -------- --------
Grid power 309 (186) 910 (791) 844 311 368
--------------- ---- ------- ------ ------- -------- -------- --------
Total (mmscf) 630 (378) 1,151 (996) 1,131 626 718
--------------- ---- ------- ------ ------- -------- -------- --------
Average gas
production
(mmscf/d) 7.14 13.04 13.16 7.14 8.19
--------------- ------------- --------------- -------- -------- --------
Condensate 6,689 12,457
sold (bbl.) (4,013) (10,826) 13,591 8,608 10,878
--------------- ------------- --------------- -------- -------- --------
* After reaching a cost recovery milestone on the Logbaba Gas
and Condensate Project during Q2 2016, whereby revenues are shared
with VOG receiving 60% in accordance with its participating
interest, the sales metrics are presented on a gross basis, with
attributable gas sales shown in brackets. Prior to Q2 2016 gross
and attributable sales were the same. Going forward the Group will
report on an attributable basis.
Thermal sales generated good growth during the quarter from our
existing customer base. Progress on the pipeline extension,
discussed below, is expected to generate further sales growth in
the coming quarters as additional customers are added to the
network.
Grid power sales for the quarter were down on Q2 2016 due to the
onset of the wet season in Cameroon, at which point the ENEO
consumption levels reduce as hydro power becomes more readily
available. Whilst lower than Q3 2015, grid power sales are above
the contracted take-or-pay levels and are therefore in line with
expectations. The seasonal impact, in conjunction with the change
to earning revenues in accordance with participating interests
(i.e. revenues of 60% of the Logbaba Project's gas and condensate
sales to customers; previously 100%), has resulted in the decline
in revenue reported in the quarter.
The cash and net cash positions of the Group at the end of the
quarter are more favorable than at the end of the previous quarter.
This was due to outstanding receivables from the Logbaba concession
partner being received, offset by payments made regarding the
reserve bonus settlement agreement and the ongoing drilling
programme funding requirements.
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 programme
The Savannah drilling rig was delivered from Douala Port in July
and rig up commenced in August. However, two lightning strikes on
the derrick in August, within days of each other, caused
significant damage to electrical circuits, electronic components
and instrumentation and in some cases mechanical equipment. Some of
this damage was not readily apparent until various components were
tested individually and in-situ during commissioning. Almost all of
the lightning related damage to the rig electronics and mechanical
systems has now been repaired and replacement parts sourced and
installed, tested, commissioned and certified.
Key structural, mechanical and electrical components such as the
derrick and substructure, draw works and top drive, mud pumps,
generators, blow out preventer (BOP) and other critical components
have all been inspected, tested, commissioned and passed.
Savannah drilling contractor training, safety critical equipment
and management systems and work control processes are all in
place.
All of the well construction materials and all of the required
third party contractor equipment is in- country. Third party
contractor teams have been mobilised and are rigging up, and the
GDC rig supervisory personnel are in-country.
A comprehensive Control of Well Review was completed by an
independent engineer on behalf of the insurance underwriters and
re-insurers to assess the suitability of GDC's well design and the
drilling programme and Savannah's equipment and well control
policies; this review recommended the well to insurers.
In addition, a comprehensive Rig Audit and Rig Acceptance Test
has been conducted by an international independent global testing,
inspection and certification service provider and this process is
expected to be completed within 10 days. Following completion of
this test, it is expected that all equipment, procedures and
personnel will be certified as fit for purpose, the rig can then be
accepted by GDC to begin drilling.
The contractual arrangements on the drilling programme are such
that the Company only incurs major financial commitments once
drilling commences. Thus, whilst the delays in spudding have been
frustrating, the Company is not expecting to suffer any significant
cost increases.
Bonaberi shore pipeline extension
The 3.17km pipeline laid during the quarter, part of the
Bonaberi expansion, brings the total pipe laid in 2016 to 12.25km.
Of this pipe laid, 7.13km was commissioned by quarter end, bringing
GDC's total commissioned pipeline network to 40.05km. The remaining
5.12km was commissioned shortly after quarter end, bringing total
pipeline laid by GDC and commissioned to 45km. In Q4 2016 the team
will focus on the branch lines to customers and installation of the
PRMS units (pressure reducing/metering station) at customer sites,
with the aim of bringing new customers online with gas before the
end of the year.
Logbaba Gas Plant Capacity Expansion
Phase one of the gas plant expansion, which aims to increase the
plant's capacity from 20mmscf/d to 25mmscf/d, is progressing with
the preliminary engineering phase. Further phases of the gas plant
expansion will depend on the drilling programme results.
VOG CEO Ahmet Dik said: "In this quarter we continued to deliver
consistent gas sales to our customers while progressing the
Bonaberi thermal expansion programme. We will be soon approaching
50km of pipeline laid by GDC, which is a major milestone for our
company.
On the drill rig, all key assembly, testing and safety
inspections have been completed and final independent inspections
will be concluded next 10 days. Although the lightning strikes
delayed us about 6 weeks, we are now on schedule to commence
spudding in November 2016. We shall provide regular drilling
updates over the next months."
This 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
Strand Hanson Limited
Rory Murphy / Stuart Faulkner 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
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.
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.
The company news service from the London Stock Exchange
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