TIDMVOG
RNS Number : 9714B
Victoria Oil & Gas PLC
05 February 2020
5 February 2020
Victoria Oil & Gas Plc
("VOG" or the "Company")
Operations Update
Victoria Oil & Gas Plc, whose wholly owned subsidiary, Gaz
du Cameroun S.A. ("GDC"), the onshore gas producer and distributor
with operations located in the port city of Douala, Cameroon, is
pleased to provide shareholders an operations update of the
Company.
Highlights
-- GDC has entered into a non-binding Letter of Intent ("LOI")
with New Age Cameroon Offshore Petroleum S.A. ("New Age" and
together with GDC, the "Parties") for the supply of a minimum of
25mmscfd of gas from the Etinde natural gas and condensate field
("Etinde");
-- To enable access to Etinde natural gas, additional downstream
pipeline infrastructure proposed to be developed by GDC to connect
this gas supply and be fully debt funded;
-- Non-binding term sheet for long term gas supply to satisfy
Aksa Energy Uretim A.S. ("Aksa") off-take agreement and other
future potential grid power contracts;
-- Altaaqa has suspended operations at ENEO's Logbaba site due
to non-payment. GDC continues to invoice ENEO based on take-or-pay
provisions; and
-- Remediation work to complete La-108 will recommence in early 2020.
Roger Kennedy, Chairman said:
"We have spent the past eight months addressing legacy issues,
cutting costs and exploring long-term strategies for the Company to
move away from its historical dilutive, capital intensive
programmes to a strategy that we believe should deliver sustained
profitability and generate shareholder value in the long term.
Demand for gas powered energy remains strong in Douala, with the
planned development by Aksa of a new 150 MW gas-fired power plant
being highly positive for the people and business community of
Douala and for our Company. The opportunity to secure the long-term
supply of gas from the Etinde license will be a major step for our
Company. Based on our review and work to date, we continue to
refine our long-term business plan and vision. We look forward to
making further announcements reflecting these changes throughout
2020."
Signed LOI for Long Term Gas Supply with New Age
The Company is pleased to report that it has entered into a
non-binding LOI with New Age for the supply of gas from Etinde,
which contains natural gas and condensate discoveries.
Under the LOI, the Parties will seek to negotiate and enter into
a gas supply agreement ("GSA"). The LOI envisages that under the
GSA, New Age will bring its gas from the offshore Etinde field to
onshore Cameroon for processing. GDC would then purchase processed
natural gas from the onshore New Age facilities and transport the
gas to Douala to supplement the current gas sales.
The LOI envisages that the GSA would be for a period of 20 years
during which New Age would supply a minimum of 25mmscfd of gas to
GDC for the first three years, followed by a minimum of 30mmscfd,
with the potential to increase in the future as demand in the
market increases. This would amount to a total gas supply in excess
of 200bcf of gas over the contract period. GDC would then seek to
distribute this gas to new independent power producers looking to
produce power for the energy deficient Douala market as well as to
existing and future thermal and retail power customers.
When combined with potential offtakes to be secured with long
term industrial thermal customers plus grid power contracts,
including with Aksa (subject to definitive agreements being entered
into), GDC should be well positioned to grow into being the natural
gas utility company leading the downstream gas distribution sector
in Cameroon. The proposed GSA with Aksa alone would consume in
excess of 20mmscfd for the initial 150MW power plant, with
potential expansion.
In order to access the gas production from Etinde, GDC will need
to install a 60km (approx.) high pressure gas pipeline from Limbe
to Bekoko where it would connect with the existing low-pressure
pipeline network which operates throughout Douala. The pipeline
would be designed to allow for future expansion in Douala and the
South-West region.
The installation of a major gas pipeline network from Limbe to
Bekoko will provide numerous additional opportunities, which would
have otherwise been deemed uneconomic, to supply gas into smaller
towns along the route into Douala, such regions/towns as Ombe,
Mutengene, Tiko and Buea, and provide much needed power using
smaller gas-fired power plants.
GDC has commenced negotiations with multilateral and export
credit agencies to fully debt finance this new pipeline project.
The Parties are currently negotiating a fully termed GSA and
subject to signing, anticipate a Final Investment Decision by the
Parties on the project during H2 2020.
Further announcements will be made in due course.
LOGBABA UPDATE
Quarterly Production
Quarterly gross and net gas and condensate sales at Logbaba are
as follows (amounts in bold are gas and condensate sales
attributable to GDC (57%)):
Q4 2019 Q3 2019 Q2 2019 Q1 2019 Q4 2018
Gas sales (mmscf)
-------------- -------------- -------------- -------------- --------------
Thermal 230 405 211 369 206 361 211 370 200 352
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Industrial power 14 24 13 24 14 25 14 25 15 27
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Grid power 0 0 205 360 283 496 290 508 15 25
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total (mmscf) 244 429 429 753 503 882 515 903 230 404
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Average gas production
(mmscfd) 4.48 8.01 9.66 10.10 4.45
-------------- -------------- -------------- -------------- --------------
Condensate sold
(bbl.) 2,294 4,025 3,071 5,388 3,451 6,054 3,825 6,710 2,701 4,738
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Grid Power - ENEO
On 14 September 2019, Altaaqa, the generator supplier to ENEO,
suspended operations at ENEO's Logbaba site due to non-payment of
invoices by ENEO. Consequently, GDC has not provided gas to ENEO
since that date, but has continued to invoice ENEO based on
take-or-pay provisions agreed to in the binding term sheet and
therefore projected revenue from gas sales is not expected to be
affected in 2019.
The gross amount outstanding from ENEO as at 31 December 2019
was $10.5 million (net $6.0 million). Despite being outside of
agreed payment terms, the Company expects to receive payment of
these amounts in due course and is actively working with the
Government of Cameroon and ENEO to recover these payables.
Furthermore, whilst GDC continues to operate under a legally
binding term sheet with ENEO, the completion of the fully termed
agreement and payment guarantee, the terms of which have been
finalised, remains subject to signature.
La-108 Remediation
The wireline tool string and 130m of wire has been recovered. A
clean out assembly was run to recover the remaining 50m of wire and
clean the hole, but this became stuck in the tubing at
approximately 900m. Operations were suspended at the end of October
2019 to mobilise additional equipment to complete the remediation
programme. Prior to suspending operations, GDC used the available
equipment on site to successfully perform additional perforations
in well La-107. The additional equipment is on route to Douala. The
remediation work to complete La-108 will recommence upon its
arrival.
CORPORATE UPDATE
Cameroon Holdings Limited ("CHL") Royalty Agreement
GDC has ceased to make payments to CHL under the Royalty
Agreement. As a result, in June 2019, CHL commenced proceedings
against both GDC and the Company with regard to payments CHL
believes it is entitled to under the Royalty Agreement including
potential damages. The Company has vigorously defended such claim
and litigation is ongoing. There is no definitive timetable for
such litigation proceedings.
This announcement contains inside information for the purposes
of Article 7 of EU Regulation 596/2014.
For further information, please visit www.victoriaoilandgas.com
or contact:
Victoria Oil & Gas Plc
Ahmet Dik Tel: +44 (0) 20 7921 8820
Kate Baldwin
Strand Hanson Limited (Nominated and Financial Adviser)
Rory Murphy / James Dance / Jack Botros Tel: +44 (0) 20 7409 3494
Shore Capital Stockbrokers Limited (Broker)
Mark Percy / Toby Gibbs (corporate finance) Tel: +44 (0) 20 7408 4090
Jerry Keen (corporate broking)
Camarco (Financial PR)
Billy Clegg Tel: +44 (0) 20 3757 4983
Nick Hennis Tel: +44 (0) 20 3781 8330
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END
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