TIDMVOG
RNS Number : 9220V
Victoria Oil & Gas PLC
03 February 2017
3rd February 2017
Victoria Oil & Gas Plc
("VOG" or "the Company")
Q4 2016 Operations Update
Victoria Oil & Gas Plc, a Cameroon energy utility, provides
an update on the Group's operations for the fourth quarter 2016;
ended 31 December 2016.
Highlights
-- Increase in average gas production to 7.64mmscf/d in Q4 2016 (Q4 2015: 7.14mmscf/d)
-- 4.5% increase in gross Logbaba gas sales of 654mmscf for the quarter (Q4 2015: 626mmscf)
-- 24% increase in gross Logbaba gas sales of 3,566mmscf for the year (FY 2015: 2,868mmscf)
-- Logbaba drilling programme progress to 31 December 2016:
o Rig spudded at both twin and step out wells
o La-107 at 1,618m; La-108 at 1,173m
o Deployment of Managed Pressure Drilling technology
-- 15km pipeline commissioned as part of the Bonaberi extension
-- Three new thermal customers on the new Bonaberi extension
were commissioned and consuming gas in Q4
-- Q4 (unaudited) financial highlights:
o $4.6 million revenue (Q3 2016: $4.7million)
o $15.8 million cash balance as at 31 December 2016 ($14.1
million as at 30 September 2016)
o Net cash position of $1.3 million ($2.3 million as at 30
September 2016)
o Current undrawn credit lines of approximately $16.0
million
Note: Net cash is defined as cash equivalents less borrowings,
where cash equivalents exceed borrowings
Ahmet Dik, Chief Executive Officer of VOG, commented:
"The Bonaberi pipeline extension provides gas to the western
industrial area of Douala, which is fast becoming a new hub for
future developments looking to access Douala's port, power and road
networks. We have established ourselves as a vital part of the
energy infrastructure for the city and the region. I am
particularly pleased that year on year gas sales for 2016 has
increased by 24% and a monthly production record has been set this
January. Our drilling programme has progressed well and we are
reaching an exciting phase as the wells descend into the Logbaba
Formation. We look forward to providing further updates in the
coming months."
Operational update
The quarterly gross gas and condensate consumptions for the
Logbaba Project are as follows (amounts in bold are gas and
condensate sales attributable to VOG*):
Q4 2016 Q3 2016 Q2 2016 Q1 Q4
2016 2015
--------------- ------------- -------------- ---------------- ------- ------
Gas sales
(mmscf)
--------------- ------------- -------------- ---------------- ------- ------
Thermal 292 175 290 174 214 181 250 236
--------------- ----- ------ ------ ------ ------- ------- ------- ------
Retail power 16 10 31 18 27 24 37 79
--------------- ----- ------ ------ ------ ------- ------- ------- ------
Grid power 346 208 309 186 910 791 844 311
--------------- ----- ------ ------ ------ ------- ------- ------- ------
Total (mmscf) 654 392 630 378 1,151 996 1,131 626
--------------- ----- ------ ------ ------ ------- ------- ------- ------
Average gas
production
(mmscf/d) 7.64 7.14 13.04 13.16 7.14
--------------- ------------- -------------- ---------------- ------- ------
Condensate
sold (bbl.) 7011 4,207 6,786 4,072 12,457 10,826 13,591 8,608
--------------- ----- ------ ------ ------ ------- ------- ------- ------
* 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 italics. Prior to Q2 2016 gross and
attributable sales were the same. Going forward the Group will
report on an attributable basis.
The annualised production results were:
FY2016 FY2015 % increase
------------------------ --------- --------- ----------
Gross Gas Sold (mmscf) 3,566.42 2,867.84 24.3
------------------------ --------- --------- ----------
Production Average
(mmscf/d) 10.23 8.13 25.8
------------------------ --------- --------- ----------
Customers and Pipeline
Thermal gas sales were in line with Q3 2016 and were a 24%
increase on Q4 2015. Phases II & III of the Bonaberi pipeline
extension programme were successfully completed, with 15km of new
pipeline commissioned during the quarter. Total commissioned
pipeline is now 49.6km across the entire network. Three new
customers began consuming GDC gas during December after the
Bonaberi extension. GDC has commissioned the pipeline extension up
to the Pressure Reduction Metering System at a several new
customers and is now waiting for these customers to connect to
their operations. The impact of the new gas supply and the
increased ENEO consumption, as the dry season starts, has already
been seen during January. GDC has set a record in monthly supply
figures averaging 14.5mmscf/d and peaking at 17.1mmscf/d up to 31
January 2017.
Grid power sales for the quarter were 12% up on Q4 2015
following increased usage by state power operator, ENEO, for
electricity generation supplying Douala. The ENEO contract is a
two-year gas supply agreement, which will expire during Q2 2017.
Negotiations are underway with ENEO and Altaaqa to renew the
contracts for the supply of gas to the electricity generation sets,
installed at the Logbaba and Bassa power stations in Douala.
The reduced consumption from GDC's Retail power consumers is a
result of the termination of the lease period of the generators
used by these customers to generate electrical power for their
operations. These generators were initially brought into the
country by GDC to prove the concept of gas-to-power, which resulted
in GDC being awarded the initial ENEO contract. The customers are
individually in the process of purchasing their own generators,
which are sized appropriately and significantly more energy
efficient, and we expect to have them consuming GDC gas again in
the future.
Logbaba Drilling Programme
Drilling operations on wells La-107 and La-108 in the Logbaba
Gas Field commenced on 1 November 2016. The Savannah Komako 1
drilling rig commissioning, inspection and certification programmes
were completed in October 2016. The independent rig audit was
performed by Bureau Veritas, who certified the rig as fit to
operate. GDC's internal rig acceptance criteria were met and signed
off on 1 November 2016, prior to well spud on the same day.
The Logbaba wells are intended to be production wells, completed
in the Upper Cretaceous (Campanian and Santonian) Logbaba
Formation, which is a thick sequence of interbedded sands and
shales found at depths between 1,700m and 3,200m below the surface.
In addition to developing the gas reserves in the Logbaba
Formation, one of the wells, La-107, has an additional contingent
objective of an 'exploration tail' with a terminal depth at 4,200m
to test the hydrocarbon potential of the Lower Cretaceous Mundeck
Formation. This horizon had gas shows and a significant gas kick in
La-104 (which is currently being twinned by La-107). Execution of
the exploration tail is dependent on well conditions, which will be
established during the drilling programme.
At the end of Q4, La-108 had been drilled and cased to 1,173m
where the 133/8" casing has been set. The 12 1/4 " hole section on
well La-107 has been drilled to its target depth of 1,618 m.
Since 1 January 2017, the 95/8" casing has been run and cemented
in La-107 in preparation to drill the 8 1/2 " hole section through
the objective Logbaba gas-bearing reservoir sections. The 95/8"
casing run into La-107 included a DDV (Downhole Deployment Valve),
which was successfully set with the casing to assist in the MPD
(Managed Pressure Drilling) technology that will be employed during
the drilling of the over-pressured Logbaba Formation. This is the
first time that a DDV has been deployed in sub-Saharan Africa.
After setting the 95/8" casing in La-107 the rig was skidded to
the La-108 well and has drilled the La-108 12 1/4 " hole section to
its target depth of 1,953m MD (measured depth). The 95/8" casing,
including the installation of a DDV as in La-107, has been run and
cemented. We are currently rigging up the MPD surface equipment in
preparation for drilling the La-108 8 1/2 " hole section to its
target depth of 3,563m.
MPD and the insertion of a DDV, both of which are expected to
produce higher quality wells and reduce failure risk in the high
pressure/high temperature environment under which these wells are
being drilled, has added to the initial estimated budget. In
addition, higher than expected Non-Productive Time (NPT) related to
various operational issues has increased the schedule. The revised
budget range for the two well programme, without the exploration
tail has now been increased by 10-20% above the previous estimate
of $40m to $44-48M.
Approximately $23m has been spent to date on the project, so the
balance of GDC's $13-15m share of the two well programme of will be
funded by cash generated from operations and existing debt
facilities. The net cash position of the Group at the end of the
quarter was $1.3m (cash position of $15.8m). The group has
remaining credit on its Cameroonian debt facility of $16m.
Process plant expansion
The gas processing plant expansion, which aims to increase the
plant's processing capacity from 20mmscf/d to 25mmscf/d, is
progressing with the preliminary engineering phase being worked
into the pending new flow line works to tie in the new wells.
Alternative scenarios for the gas plant expansion are also being
engineered to increase the processing capacity up to 40mmscf/d. A
final decision on this will be dependent on the drilling programme
results.
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/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
Bell Pottinger
Lorna Cobbett / 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 owns 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. The Group is actively
seeking partners to develop this field.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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