TIDMVOG
RNS Number : 1518F
Victoria Oil & Gas PLC
16 February 2018
VOG advises that the following replaces the Q4 2017 Operations
Update and 2018 Outlook announcement released on 16 February 2018
at 7.00 a.m. under RNS number 0723F.
An amendment has been made to the quote from Ahmet Dik which
incorrectly stated that, without ENEO consumption, the Company had
set a target of 10mmscf/d production to be achieved by year end.
This target is incorrect and has been re-stated as 9mmscf/d, as
mentioned earlier in the announcement.
All other information remains the same. The full amended text is
shown below.
16 February 2018
Victoria Oil & Gas Plc
("VOG" or "the Company")
Q4 2017 Operations Update and 2018 Outlook
Victoria Oil & Gas Plc, a Cameroon based gas and condensate
producer and distributor, is pleased to provide an update on the
Group's Q4 operations for the three months ended 31 December 2017
("Q4" or "the Period").
Q4 2017 saw strong gas and condensate consumption levels from
Gaz du Cameroun S. A's ("GDC") Logbaba Project in Douala, Cameroon,
especially during December, with the addition of 3 new thermal
customers during the quarter. Wells La-107 and La-108 were
completed during the quarter with initial flow rates ahead of
expectations.
Q4 2017 Highlights - Record Gross Gas Sold
-- Q4 Gross Gas Sold 726mmscf (18.56% increase on Q317, 11.04% increase on Q416)
-- Average daily gas production for Q4 7.94mmscf/d (Q317: 6.96mmscf/d, Q416: 7.64mmscf/d)
-- YE2017 Gross Gas Sold 3,684mmscf (3.29% increase on YE2016)
-- YE2017 average daily gas production of 10.98mmscf/d was a record (YE2016: 10.23mmscf/d)
-- Wells La-107 and La-108 completed and rig stacked
-- Cash and cash equivalents at 31 December 2017 $10.4 million,
net receivables $6.1m and net debt $14.0 million (31 December 2016:
Net cash of $1.8 million)
2018 Outlook - Revised Production Targets and Alternative Gas
Sales Initiatives
-- Previously announced supply projections will be significantly
impacted if ENEO Cameroon S.A. ("ENEO"), Cameroon's national
electricity generating company, does not place its Logbaba and
Bassa power stations back online during 2018.
-- Revised year end production targets of 13mmscf/d set if
Logbaba and Bassa back online by Q2 and 9mmscf/d if they remain
offline
-- GDC progressing bespoke gas to power initiative with
industrial customers with third-party gas to power generation
-- Negotiations continue with other grid power suppliers Dibamba
and Grenor who confirm commitment to building power supply in
Douala
-- Fast track development of 2mmscf/d Compressed Natural Gas ("CNG") plant planned
Quarterly Production Update
The Q4 gross and net gas and condensate sales for Logbaba and
GDC, are as follows; amounts in bold are gas and condensate sales
attributable to GDC*:
Q4 2017 Q3 2017 Q2 2017 Q1 2017 Q4 2016
--------------- -------------- -------------- -------------- -------------- --------------
Gas sales
(mmscf)
--------------- -------------- -------------- -------------- -------------- --------------
Thermal 177 312 157 276 191 322 204 340 175 292
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Retail power 10 18 12 20 9 15 7 12 10 16
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Grid power 226 396 180 317 508 855 481 801 207 346
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total (mmscf) 413 726 349 613 708 1,192 692 1,153 392 654
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Average gas
production
(mmscfd) 7.94 6.96 14.59 14.57 7.64
--------------- -------------- -------------- -------------- -------------- --------------
Condensate
sold (bbl.) 3,951 6,931 2,538 4,452 5,437 9,147 5,290 8,816 4,207 7,011
--------------- ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
* After reaching a cost recovery milestone on Logbaba during Q2
2016, GDC received 60% of revenue from Logbaba in accordance with
its participating interest. Prior to this date GDC received 100% of
revenues as a recovery of exploration costs. In June 2017, Société
Nationale des Hydrocarbures ("SNH") executed its right to a 5%
participation in Logbaba resulting in GDC's participating interest
decreasing to 57% and the figures from the effective date onwards
have been adjusted accordingly.
Drilling Update
Wells La-107 and La-108 were successfully completed and the rig
stacked in December.
La-107 is now a production well and a well plan is being
finalised on La-108 to complete the clean-up and testing of the
Lower Logbaba Sands. This includes recovery of the spent
perforation gun. Once this is done, the Upper Logbaba Sands in
La-108 can be tested, if required, as gas flows from the Lower
Logbaba Sands were ahead of expectations. Preliminary internal
reserve estimates for La-107 and La-108 based on well logs and flow
tests are material and will be published in due course.
The final cost of the well programme was $87 million against an
original budget of $40 million. This overrun was the result of a
combination of many factors and a detailed analysis will be
completed. However, the well control event during the drilling of
La-108 was the main cause of the delay and cost overruns. An
insurance claim has been lodged with the Company's insurers to
cover the substantial and material costs associated with this event
and the consequential schedule and cost overrun. As is normal in
these situations, the outcome of our claim is not certain.
The rig was stacked in December, with the intention of retaining
it on site for the drilling of La-109. With the suspension of gas
consumption by ENEO, as announced in our 5 January 2018 RNS, the
Company decided to formally release the rig on 31 January 2018.
Matanda, Bomono and West Medvezhye Update
During the quarter the Group progressed with subsurface
evaluation work for the Matanda Block, which indicates the
potential for more than 1TCF of recoverable gas across onshore
sections of the block. The Company continues to work with the
Government of Cameroon to obtain the assignment of its
participating share in this block.
On 2 January 2018, we announced a further extension of
discussions with Bowleven Plc on the Bomono Project. This block is
yet to receive a Provisional Exploitation Licence, in advance of
any assignment of title from Bowleven Plc to the Company.
The Company is also remains engaged with potential buyers or
partners for the West Medvezhye Project in Russia.
ENEO Update
The Government of Cameroon, ENEO, Altaaqa Global ("Altaaqa"),
the genset providers to ENEO which consume GDC's gas, and GDC are
in ongoing discussions about future power supply plans and we
remain hopeful that a resolution will be found.
The Company believes that ENEO will resume gas consumption
relatively shortly because there are significant shortfalls in
power supply in Cameroon, with hydroelectric schemes not meeting
the current demand. The Company believes that gas fired power
remains an attractive solution because it is clean, cheap and
readily available.
In our update on 5 January 2018, we reported gross ENEO
receivables of $8.7 million. We are pleased to report that at the
time of this announcement this gross receivable has reduced to $5.0
million. The Company expects the balance to be paid off in due
course and at the latest by the end of Q2 2018.
Financial Update
Unaudited net revenue for Q4 was $4.4 million (Q4 2016: $4.6
million) and unaudited net revenue for 2017 was $23.9 million
(2016: $32.8 million). The loss of revenue from ENEO, which
accounted for approximately 53% of the Projects revenue in 2017,
should a resolution with the parties involved not be found, would
be significant for the Group in 2018.
Cash and cash equivalents at 31 December 2017 was $10.4 million
(31 December 2016: $16.3 million), net receivables were $6.1m and
net debt was $14.0 million (31 December 2016: Net cash of $1.8
million).
The Company had made application for an additional debt facility
with local banking institutions in Cameroon during the second half
of 2017. With ENEO suspending the consumption of gas, management
decided to place these applications on hold until the matter is
resolved.
In addition, the Company's previously announced capital
expenditure program for 2018 will be deferred until further clarity
is obtained on the ENEO situation.
Commentary and 2018 Outlook
GDC is the single onshore gas supplier in Cameroon; management
estimates that with Logbaba and Matanda, GDC has potentially
recoverable gas of at least 1.3 TCF and 50km of gas pipeline and
support infrastructure to deliver gas to customers. GDC has a
diverse customer base and whilst ENEO is our largest customer, we
are connected to over 30 customer sites and believe that there is
considerable expansion potential in Douala.
The Company is still in discussions with current and potential
power providers Dibamba Power Development Company ("DPDC") and
Grenor S.A. ("Grenor") aimed at concluding gas supply contracts
with these companies for future grid power. Given the current
environment, it is prudent to expect delays to the roll-out of
investment into power generation, and therefore the Company has
adopted a strategy of less reliance on grid power customers.
Management is expediting its support to manufacturers and
producers in Douala, which are facing regular power disruptions, by
providing bespoke gas fired power generation for individual
customers or groups of customers. As most of these proposed power
customers are already connected to the gas pipeline network, adding
a gas to power generation solution will increase gas consumption
with minimal additional capital costs for GDC. Furthermore, we are
actively pursuing a Compressed Natural Gas (CNG) solution which
will afford GDC the opportunity to reach some larger customers
beyond the current pipeline infrastructure.
VOG has set an ambitious business strategy with gas sales
targets building up to 100mmsc/d by 2021. The Board still believes
that this target is achievable and that the demand for gas within
Cameroon remains robust, however this will require positive
resolution of the current problems.
The Company has revised its Operating Plan for 2018, of which
key elements are:
-- Renew the gas supply contract with ENEO as soon as
practicable and add further grid power, including new contracts
with DPDC and Grenor, but with greater price and payment
security
-- Sell more thermal gas to existing and new customers by
working closely with them to create cost effective energy
solutions
-- Work with existing and new customers to create bespoke gas to
power solutions with individual generator designs, mini grids and
shared power from centralised generators. These solutions will
allow customers to be less dependent on grid power
-- Maximise return from our high-grade gas condensate. Our
condensate is very high grade (47 API) and close in composition to
diesel. We currently sell condensate at near to crude oil prices,
which is about half the price of diesel
-- Actively develop the CNG and Natural Gas Vehicle (NGV)
markets. CNG would compete with diesel as a source of energy in the
more remote regions, it offers considerable uplift on current
margins and can be transported 250-300km
-- Sustain progress on the promising Matanda and Bomono opportunities
-- Review capital projects, operational and G&A expenditure rigorously to preserve cash
A provisional production target to be achieved, should ENEO not
resume gas consumption in 2018 and assuming increased thermal, gas
to power and CNG project implementations, has been set at 9mmscf/d
by year end 2018. Should ENEO resume full production in Q2 2018,
the end of year target would be 13mmscf/d.
Ahmet Dik, CEO said, "Annual gross production figures for 2017
were a record for the Company, with 3.65 BCF of gas sold compared
to 3.56 BCF in 2016. We estimate a considerable gross reserve base
200 BCF (2P) at Logbaba and over 1.3TCF of unrisked gas in place in
the onshore Matanda, which the Company intends to develop following
Government approval. We successfully completed two production wells
and secured over $23 million of new financing via a share
placing.
I believe that the ENEO issue will be solved as VOG management
has prioritised this matter and is focused on achieving a result in
the shortest possible timeframe. The Company now has the gas
reserves in place to meet industrial and grid power demand for
large quantities of gas and power from parties other than ENEO.
In parallel to efforts in resuming gas consumption by ENEO,
management is actively looking to place this newly available gas
with new and existing customers for power generation and new
thermal customers and we have set a target, without ENEO
consumption, of 9mmscf/d production to be achieved by year end.
I believe that despite the suspension of ENEO supply, the
Company will actually grow stronger and create a wider and more
diverse product base in 2018 and will continue to build the
outstanding business we have created in Cameroon."
Sam Metcalfe, the Company's Subsurface Manager, has reviewed and
approved the technical information contained in this announcement.
Mr. Metcalfe is a graduate in BA Geology, BSc Civil Engineering,
and MSc Petroleum Engineering.
This announcement contains inside information.
For further information, please visit www.victoriaoilandgas.com
or contact:
Victoria Oil & Gas Plc
Kevin Foo / Ahmet Dik / Laurence Read Tel: +44 (0) 20 7921 8820
Strand Hanson Limited (Nominated and Financial Adviser)
Rory Murphy / Angela Hallett / 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
Camarco (Financial PR)
Billy Clegg Tel: +44 (0) 203 757 4983
Nick Hennis Tel: +44 (0) 203 781 8330
NOTES TO EDITORS:
Victoria Oil & Gas Plc ("VOG" or "the Company") is a
fully-integrated onshore gas producer and distributor with
operations located in the port city of Douala, Cameroon. Through
the Company's wholly-owned subsidiary, Gaz du Cameroun S.A.
("GDC"), VOG delivers gas via a 50km gas distribution pipeline
network to a range of major industrial customers.
Since spudding its first wells in 2010, the Company has grown to
become the dominant player in the Cameroon onshore gas market,
primarily through the 57% owned Logbaba gas project. GDC is
partnered on this project with RSM Production Company ("RSM"), and
Société Nationale des Hydrocarbures ("SNH"), who have holdings of
38% and 5% respectively.
Subject to government approval VOG will extend it acreage over
3,500km(2) of the highly prospective Douala Basin with the addition
of the Matanda and Bomono license areas.
Victoria Oil & Gas is listed on the AIM market of the London
Stock Exchange under the ticker VOG.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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