Victoria Oil & Gas Plc (LON:VOG) (“VOG” or “the Company”) provides an update on the Company’s operations for the three month period ended 31 March 2016 (the “quarter” or “Q1”).
Overview
Today’s update sees increased gas consumption as the first quarter of the dry season passes. The quarter also saw the provisional assignment of the Matanda block, located adjacent to existing Logbaba operations and commencement of work on the pipeline extension in Bonaberi. The Company also began engineering for the most important project for this year; the drilling of two wells at Logbaba.
Highlights
- 13.2mmscf/d Q1 2016 average gas production (Q1 2015: 4.5mmscf/d)
- 180% increase in gas sales to 1,131mmscf compared to Q1 2015 (404mmscf)
- Q1 unaudited financial highlights:
- $12.8m revenue (Q4 2015: $7.6m)
- $11.5m cash position at quarter end (Q4 2015: $13.1m)
- $4.6m net cash position at quarter end (Q4 2015: $5.9m)*
- Post quarter end
- Completion of the Matanda acquisition
- $26m debt facility with BGFIBank secured
- Drilling contract signed and rig loaded on vessel
*Net cash is defined as cash equivalents less borrowings, where cash equivalents exceed borrowings.
Operational update
The quarterly gas and condensate consumption is as follows:
These figures are in line with internal expectations as the quarter covered the first half of the dry season where gas consumption in the grid power sector is typically higher due to lower availability of hydroelectric power and the associated higher utilisation of gas.
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.
The Matanda block assignment and subsequent Government approval and the US$26m BGFIBank debt facility were announced in April. To deliver these results, the team at Gaz du Cameroun S.A. (“GDC”) worked closely throughout the period with various parties including the Government of Cameroon, Glencore, Afex Global Limited (“AFEX”) and BGFIBank. Our success in securing a major new field for potential source of additional gas and a debt facility from a local banking group is a significant step forward in our strategy of building a material gas supply business, within Cameroon. The securing of the Matanda block was very significant for our mid to long-term gas development plans. Following approval of the work programme at the forthcoming Operating Committee meeting, we would expect to begin first work on Matanda at the end of 2016, once we have completed the Logbaba Drilling Campaign. Similarly, obtaining the BGFIBank facility gives the Company adequate funding to support its share of the capital programme underway.
In our 28 January 2016 RNS outlining the 2016 strategy, we indicated that a major part of our work this year will concentrate on expanding our gas supply and extending our pipeline reach on the Bonaberi shore. The primary objectives of enhancing the Company’s production capabilities make up the supply expansion programme as follows:
- Drilling Campaign
- Staggered gas plant expansion for increased gas processing matched to well results
- Extension of pipeline on the Bonaberi shore to economic customer clusters with Gas Supply Agreements in place
Logbaba Drilling Campaign
GDC is preparing to drill two wells into the onshore Cameroon Logbaba Field to supplement the two existing Logbaba production wells. The new Logbaba wells are required to meet the growing market demand for Logbaba gas, to develop Logbaba reserves, and to move some of our 2P (Proven plus Probable) reserves into the 1P (Proven) reserve category. One of the wells will twin the La-104 well drilled in 1957; the other well will be a ‘step-out’ well that will be drilled into a target that is intended to prove up more of our Probable reserves. Both of the wells will be drilled directionally from a drilling pad adjacent to the Logbaba Gas Plant and they are to be tied into our production facilities immediately after they are drilled and completed. The La-104 twin well is almost vertical; the ‘step-out’ well will be drilled to intersect a target that is about 1,100m to the south-east of the Logbaba drilling pad.
Both wells are intended to be production wells from the 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, the La-104 twin, has an additional objective of an ‘exploration tail.’ This is to be drilled from the base of the Logbaba Formation down to 4,200m below the surface to test the hydrocarbon potential of the Mundeck Formation which had gas shows in La-104.
A contract has been signed with Savannah Oil Services Cameroon to provide the drilling rig for the project and the rig is currently on a ship to Cameroon. The rig will be mounted on tracks between the two well locations, allowing efficient drilling to be undertaken using a single unit. SPD Petrofac is providing well design and project management services and with their assistance we are now working on the detailed design and programme preparation.
Major site preparation work is underway including slope stabilisation, full security fence line, leveling for drilling rig track and drilling pad preparation. New warehousing for rig supplies, storage and camp civils are also under construction. Long-lead orders have been placed.
GDC remains on schedule to meet its objectives and the current plan is to commence drilling in late Q2 and completing by end of 2016.
A detailed budget for the two well drilling programme has been completed. The budget total is less than $40m, significantly lower than initial estimates made in 2015.
Commencement of this programme has resulted in some preliminary expenditure as we begin to invest in longer lead items. The cash position at the quarter end is commensurate with this planned expenditure.
Logbaba Gas Plant Capacity Expansion
The process plant expansion study has been completed. Stage one of gas plant expansion to 25mmscf/d capacity (from 20mmscf/d) is in the preliminary engineering phase. Further phases will commence to tie in with well results.
Bonaberi pipeline extension
An agreement was reached with SATOM, a road construction company, to lay GDC gas pipe and a bitumen road at the same time. 2.1Km of pipeline has been laid during the quarter to be commissioned in phases over the next quarter. New thermal customers are scheduled to come on line Q2 2016.
GDC Chief Executive Officer and VOG Director Ahmet Dik said: “The seasonal increase in our gas supply is in line with our internal expectations and demonstrates a level of sales stability. Selling to multiple customers and markets allows GDC to maximise the value from our fully integrated gas pipeline. However, both the average figures and daily supply peaks show we are very near comfortable production capacity.
With this in mind, I am extremely pleased with progress made on the gas expansion capital projects by GDC. This quarter was pivotal to staying on schedule and with the drilling rig in transit, key drill site preparation work and the BGFIBank facility secured, we have delivered on all the critical path items in our timetable.
Our collaborative approach to laying pipe in Bonaberi with the road construction company SATOM has also achieved fast, cost effective results. This has allowed us to control costs, minimise delays and the environmental impact on the local area, ensuring we remain on target to deliver the first phase of the 2016 Bonaberi pipeline extension.
For further information, please visit www.victoriaoilandgas.com or contact:
Victoria Oil & Gas Plc
Kevin Foo / Laurence Read Tel: +44 (0) 20 7921 8820
Numis Securities
John Prior / Ben Stoop Tel: +44 (0) 20 7260 1000
Strand Hanson Limited
Angela Hallett / Rory Murphy Tel: +44 (0) 20 7409 3494
Bell Pottinger
Daniel Thöle / Charles Stewart / Zara de Belder Tel: +44 (0) 20 3772 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.
SOURCE: Victoria Oil and Gas
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