Victoria Oil & Gas PLC Q2 2018 Operations Update (0911Y)

TIDMVOG

RNS Number : 0911Y

Victoria Oil & Gas PLC

17 August 2018

17 August 2018

Victoria Oil & Gas Plc

("VOG" or "the Company")

Q2 2018 Operations Update

Victoria Oil & Gas Plc, the Cameroon based gas and condensate producer and distributor, provides an update on the Group's operations for the three months ended 30 June 2018 ("Q2 18" or "the Quarter").

Highlights:

-- Gaz du Cameroun S.A. ("GDC") remains confident of a resolution with ENEO Cameroon SA ("ENEO") with regards to the grid power supply issue

-- CNG agreement to partner with Naturelgaz Sanayi ve Ticaret A.S ("Naturelgaz") announced on 26 June 2018 provides GDC with the opportunity to reach larger customers beyond the current pipeline infrastructure

   --     GDC added two new customers during Q2 2018 
   --     Positive reserves update following the completion of the drilling campaign 

GDC remains engaged with ENEO following the non-renewal of the grid power gas sale agreement at the end of December 2017, as announced on 5 January 2018. As a result of sales to ENEO not recommencing during Q2 18, the gas consumption levels from GDC's 57% participating interest in the Logbaba Project in Douala, Cameroon, are at similar levels to those reported in Q1 18.

Logbaba - Quarterly production update

The Q2 18 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 (57%):

 
                              Q2 2018         Q1 2018         Q4 2017             Q3 2017          Q2 2017 
 Gas sales (mmscf) 
                          --------------  --------------  --------------  ----------------------  -------- 
 Thermal                     174     305     179     313     177     312     157     276     191       322 
                          ------  ------  ------  ------  ------  ------  ------  ------  ------  -------- 
 Retail power                  9      15      10      17      10      18      12      20       9        15 
                          ------  ------  ------  ------  ------  ------  ------  ------  ------  -------- 
 Grid power                    0       0       0       0     226     396     180     317     508       855 
                          ------  ------  ------  ------  ------  ------  ------  ------  ------  -------- 
 Total (mmscf)               183     320     189     330     413     726     349     613     708     1,192 
                          ------  ------  ------  ------  ------  ------  ------  ------  ------  -------- 
 Average gas production 
        (mmscf/d)              3.30            3.50            7.94                6.96             14.59 
                          --------------  --------------  --------------  ----------------------  -------- 
 Condensate sold 
  (bbl.)                   1,657   2,907   1,654   2,900   3,951   6,931   2,538   4,452   5,437     9,147 
                          ------  ------  ------  ------  ------  ------  ------  ------  ------  -------- 
 
 

ENEO update

The Government of Cameroon, ENEO, Altaaqa Global ("Altaaqa"), the genset providers to ENEO which consume GDC's gas, and GDC continue to seek a resolution to the suspension of sales to the ENEO owned Logbaba and Bassa power stations in Douala.

GDC remains confident that a solution will be found, and all parties are actively engaged in the process. The shortfalls in power supply in Cameroon continue, with hydroelectric schemes not meeting the current demand.

Customer developments

During the quarter, GDC commissioned one new thermal customer and one new retail power customer. In addition, an existing thermal customer, Camlait, commissioned a retail power solution. Production levels have increased from 3.3mmscf/d during Q2 2018 to 4.4mmscf/d during August 2018.

Because of the current power shortages in Douala, several existing and new customers have expressed interest in the retail power solutions which GDC is offering and we expect to have several of these customers signed up by year end ready for consumption of gas for power generation.

GDC is expediting its support to manufacturers and producers in Douala who 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 would increase gas consumption with minimal capital costs for GDC.

On 26 June 2018 the Company announced an agreement to partner with Naturelgaz on CNG projects. Naturelgaz is Europe's largest CNG supplier and distributor and brings valuable expertise within this field to support GDC. The project will afford GDC the opportunity to reach larger customers beyond the pipeline infrastructure and aims to replace diesel and heavy fuel oils in a variety of applications. As part of a customer diversification strategy, active discussions are underway with a number of such potential customers.

Reserves update

On 4 June 2018, the Company announced that a full subsurface reinterpretation of the Logbaba Field had been completed following conclusion of the 2017 drilling campaign. This incorporated the reprocessed historic seismic data and the new well data as a basis for ongoing reservoir development, which led to a material upgrade in the reserves of the Logbaba Field as follows:

 
 Basis                     Field Position at 1/1/17                   Field Position at 1/1/18 
                       Initial    Cum Prod'n   Remaining    Initial    Cum Prod'n   Remaining    VOG Net 
                       Reserves                 reserves    Reserves                 Reserves    Reserves 
                     ----------  -----------  ----------  ----------  -----------  ----------  ---------- 
 Proved (1P)             49           9           40          82           13          69          40 
                     ----------  -----------  ----------  ----------  -----------  ----------  ---------- 
 Proved+ Probable 
  (2P)                   212          9           203         322          13          309         176 
                     ----------  -----------  ----------  ----------  -----------  ----------  ---------- 
 Proved+ Probable+ 
  Possible 
  (3P)                   350          9           341         548          13          535         305 
                     ----------  -----------  ----------  ----------  -----------  ----------  ---------- 
 
 All volumes are bcf and do not include condensate volumes 
  Position at 1/1/17 based on Blackwatch report from August 2016 
  Position at 1/1/18 based on integrated reservoir study post La-107 
  and La-108 development drilling 
 

The new proven + probable (2P) reserves level will support a production rate of 90mmscfd for 10 years; thereby enabling significant expansion of the business in support of the growing domestic gas market in Cameroon.

This evaluation supersedes the Blackwatch Report of August 2016 and is based on a new full field subsurface model incorporating interpretations from the reprocessed seismic together with the well data from La-107 and La-108. The work has been managed by VOG supported by external consultants who have provided subsurface expertise and modelling capability to produce the updated development plan for the field. This work will now enable selection of locations for future development wells, commencing with La-109, to continue development of the Logbaba Field in line with demand growth in Douala, Cameroon.

Competent Person Review

Sam Metcalfe, the Company's Subsurface Manager has reviewed and approved the technical information contained in this announcement in his capacity as a qualified person under the AIM Rules.

This announcement contains inside information.

For further information, please visit www.victoriaoilandgas.com or contact:

Victoria Oil & Gas Plc

Kevin Foo / Ahmet Dik Tel: [phone]

Strand Hanson Limited (Nominated and Financial Adviser)

   Rory Murphy / Stuart Faulkner / Ritchie Balmer                      Tel: [phone] 

Shore Capital Stockbrokers Limited (Joint Broker)

   Mark Percy / Toby Gibbs (corporate finance)                           Tel: [phone] 

Jerry Keen (corporate broking)

FirstEnergy Capital LLP (Joint Broker)

Jonathan Wright / David van Erp Tel: [phone]

Camarco (Financial PR)

Billy Clegg Tel: [phone]

Nick Hennis Tel: [phone]

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August 17, 2018 02:00 ET (06:00 GMT)