Victoria Oil & Gas: Fundamentals & Valuation Summary

A summary of the too many post over the past few days, mainly about the problem between Russia and Ukraine regarding gas prices.

theBuddha - 1 Jan'06 - 22:12 - 17879 of 18055

A couple of great sites worth taking a look at concerning the alternative pipeline through the Baltic:




rlam - 1 Jan'06 - 22:37 - 17880 of 18055


Stumbled across another broker note on VOG (see page 17). It's a couple of weeks old now, but still relevant.


ZENGAS - 1 Jan'06 - 13:12 - 17828 of 18055


Hectorp agreed.

The west have long said Gazprom must increase its pricing at home and stop subsidising its home market so can't really say anything about this dispute whether seemimgly unfair or not to the Ukrainians.

Gazprom is now a major company to compete with the biggest majors in the world. It can't do this if it continues to subsidise or sell cheap gas - even to Ukraine who want to become part of the west market economy.

Gazprom are pilloried if they put prices up or if they don't. This is something the west themselves have been saying for ages that Gazprom/Russia must do - free market. OK so it's a two edged sword to Ukraine, but i guess this is the first step and other countries that are alligned to Russia will eventually have their prices steadily increased at some stage after this 'test'.

Most of the western countries have sufficient gas supplies in storage for at least 3 months and by that time we are hitting the spring when demand would slip back anyway coming into the milder weather. I think Gazprom/Russia has timed this well so that there will be no impact on the west. Gazprom and for that matter Russia will not want to damage it's image as being unreliable and they will know this.

I see this as short term and is something that is ultimately beneficial as Gazprom is being shown to get prices up at home meaning ultimately that VOG do benefit much greater when they eventually come to sell the gas - which at the least must be a year away yet. Irrespective of that, the hunt for, and eventual production of highly valuable and much in demand condensate, from West Med will add to the s/p performance including the imminent oil production from Kemerkol in Kahzakstan.


theBuddha - 1 Jan'06 - 17:58 - 17856 of 18055


I read Zengas, Kiwis and Hectorps valuations quite regularly, and they all produce some pretty convincing reading. Thank you guys for your factual analyses.

I get the impression that the company's current assets are worth a sp of about £2.50-£3.00. This is factoring in all uncertainties. If and when removed, will take the sp through the proverbial stratosphere.
One thing I have noticed is that ramping and deramping has only short term fluctuations on the sp movement, but real value can never be denied in the mid and long term.

What must also be underlined, is that most of the hype so far concerns one well in West Med.
There is not going to be a shortage of news over the next month or two.
More results from other wells in West Med and Kermerkol to name a couple.

There are a few factors that make VOG such an exciting prospect:

(1) They own 100% of the West Med field (Equivalent of 13% of North Sea production).
(2) The company are very ambitious. Foo openly states that he wishes to become a Mid Cap company, and those are claims that wouldn't be openly aired unless he believed that they could come true.
(3) Gas is the new gold. It's turning from something that we all take for granted, to a commodity that we treasure.
(4) The ex Yukos boys know the territory. They know how to deal with the locals and how to make things work.
(5) The directors are investing their own money in buying VOG shares. This is close to insider knowledge as the normal PI can get. Nobody would invest in their own business if they couldn't perceive growth in returns.
(6) VOG are actively seeking new licenses in the former Soviet Union.
(7) I see Russia and Kazakhstan as being the next generation of the oil and gas sector. The region is rapidly becoming as important as the Middle East, and will no doubt become even more important as it is a relatively new focus area.
Despite there being talk of it being an unstable area, I consider it to be much more stable in the long term than the Middle East. No sizeable war or fundamentalist religion in the area.

As far as the current spat with Ukraine is concerned, I believe this will have an upward effect on the SP in the short term. It will highlight the importance of the gas commodity, and will give all PIs the need to be invested in this area.
It will also raise the price of gas and mean that it is bought at full cost.
The dispute will have no negative effect on VOG for a number of reasons:

(1) Gazprom and Russia do not want to been seen as an unreliable source, as no country will want to rely on an unreliable source for gas.
(2) Gazprom will do its part in making Russia a much wealthier country. They know that they have to participate in a capitalist manner.
(3) Although West Med is an enormous find, it is a drop in the ocean to Gazprom's overall picture. Even 2.3trillion cubic metres of gas does not make an enormous impact on a company that produces 500 trillion, and they certainly aren't going to fall out with the West over it.
(4) Gas isn't to come out of West Med for over a year. By that time, the argument with Ukraine will be a distant memory.
(5) The flows WILL come to Europe regardless. Money talks at the end of the day.


Just a few of my thoughts anyway. Best off in than out for a good while I reckon.

theBuddha - 2 Jan'06 - 11:57 - 17924 of 18055


The Ukraine issue has 2 sides:

On the negative side, PIs who are not aware of Gazprom may worry because of the news.
On the positive side, PIs will want to get a chunk of Soviet O+G.

These should balance. Could call it yin and yang if you wish.

Yes, Russia is flexing its muscles with Ukraine. But, hey, I'm afraid they are able too.
Russia is the place where a large percentage of the World's commodities are, and we are all going to have no choice but to depend upon them.

North Sea gas is rapidly diminishing. A new line to Norway is going to provide 30% of the UK requirement. That leaves us with a great big hole that is going to have to be filled.
The Baltic line straight from Russia to the UK via Denmark is going to be the route of the remainder of our requirement, in my opinion.
Naturally, this is focussed on the UK issue. Every country will have their own issues, and the World is not that plentiful, that it can turn down Russian gas.

Beggars can not be choosers. All the calcs that I have seen are for VOG selling gas to Gazprom for $40. They in turn are going to be selling it for $230-240*, without lifting a finger. Great deal for VOG and her shareholders. Fantastic deal for Gazprom.

The only losers are the poor consumers who have no choice.

*These prices are likely to rise dramatically over the next year.
DYOR.