VOG.GB.PL Share Price (VOG.GB.PL)

stabilize and grow the company and restore investor confidence in VOG. We are confident that we have identified all the substantive issues that need to be tackled by the Board and will work methodically to resolve each of them. This process will take time and I will make a personal commitment to you our shareholders that we will remain transparent in our reporting as we progress. In our opinion VOG's share price is massively undervalued. We understand that to rebuild the trust of investors and the value of the company we will have to not only clear operational milestones in Cameroon, but successfully execute a strategic plan for growing the company outside of Cameroon in the long term. We thank our shareholders for their continued support and patience. Thanks are also given to the management and employees for their continued dedication, our independent Non-Executive Directors for their ongoing guidance, and our partners; RSM Productions Corporation ("RSM"), AFEX Global Ltd ("AFEX") and SNH.

Roger Kennedy

Executive Chairman

23 May 2019

VOG today is in a much improved financial and operational position. Q1 2019 results showed a strong set of production figures and we look to emulate and better those figures in the remaining quarters of 2019. Our goal is to make VOG profitable for full year 2019 and in the years to come. To assist in meeting this objective, as noted in our Q1 2019 operations update, the VOG Board has taken steps to review the CHL royalty and has suspended payments until such review is completed. The validity of this suspension is disputed by CHL.

The newly constituted VOG Board has further agreed that:

1. We cannot work under the historical assumption or expectation that the insurance claim relating the La-108 well incident will be paid. The insurance claim has been declined by the insurer based on their opinion that there was insufficient evidence of an underground blow-out as defined in the insurance policy. Expert technical advisors to the Company have produced information contrary to what the insurer has put forward and the Board proposes to pursue the claim through litigation in Cameroon; and

2. All costs relating to non-core assets, namely the West Medvezhye project in Russia, will be reduced solely to maintain the licenses and work towards achieving a sale or exit. A new realistic, focused sales process will be commenced and concluded as soon as practicable.

The Company is in ongoing negotiations with SNH regarding the mechanism for splitting the Logbaba activities into the upstream and downstream components to determine, amongst other items: the potential participation of SNH in the downstream activities; the allocation of assets, liabilities, revenues and costs; the associated transfer pricing mechanisms; and the net settlement required by SNH to take ownership of their entitlement.

First, GDC received on 17 December 2018 the Presidential Decree confirming the transfer of the interest in the Matanda Production Sharing Contract ("Matanda PSC") assigned from Glencore, securing GDC's 75% ownership and operatorship. Matanda is a large block adjacent to Logbaba, which at 1,235km2 ("Matanda"), is over 60 times the area of the Logbaba licence with significant prospectivity. Management has commenced planning to meet our obligations under the PSC, including reappraisal of historic seismic completed by Glencore and others and drilling of at least one well by end 2020.

At Logbaba, the planning for the remediation work on well La-108 has commenced, specifically the extraction of the perforating gun stuck in the production tubing, the remaining perforation and subsequent well testing. This work is projected to be completed in Q4 2019. Based on the successful completion of well La-108, we will seek to obtain an independent third party reserve and resource report. Simultaneously, management has initiated engineering works to commercially optimise the Logbaba processing facility.

The combined field work at Matanda and Logbaba will move VOG away from single asset risk and is expected to significantly increase our reserves and resources and position VOG to not only supply gas to existing industrial and grid power demand, but also to prospective Independent Power Producers ("IPPs") that have expressed interest in developing new, demand intensive power projects in the Douala area.

The Government of Cameroon ("Government") has stated that it requires additional grid power to meet the growing power demand in the Douala region. Several IPPs have contacted GDC for the purpose of supplying gas for power generation equipment. The Company has and will continue to actively engage with these IPPs to achieve gas sale agreements.

On existing and new clients, let me clarify one point and explain our strategy to mitigate our customer concentration risk. First, for the initial contract which ended 31 December 2017, ENEO has paid all of its invoices to GDC. It was clear to us, and power users in Douala throughout 2018, that the Government needed to add more grid power. After months of negotiations between the Government and ENEO, a new 10-year extension of its concession was signed by ENEO on 11 November 2018. Subsequently, ENEO recommenced acquiring gas from GDC on 22 December 2018 based on a binding term sheet executed between the parties, the terms of which we announced to the market. We are now in the process of completing a fully termed gas supply agreement with ENEO. Many of you have voiced doubts on ENEO paying us, particularly as they have yet to pay us for gas consumed in the first quarter of 2019. Let us remember that ENEO only had their concession extended at the end of 2018. They have in the past paid in full for the gas that was supplied to them by GDC. VOG and GDC have a firm expectation that ENEO will honour their contractual commit

The challenge has been and continues to be making the model sustainable. Historical mistakes at VOG have accentuated this challenge, and the impact on VOG's share price has been considerable. Let me highlight the larger issues and later in this letter provide you with an explanation of how we will address each of these issues:

1. Single Asset Risk: The Logbaba Project is the only operating field in our Company. As the gas from each well at Logbaba depletes, to maintain resources and reserves we have to drill new wells periodically. Drilling for gas in the Douala region is deep, the geology is challenging and the costs per well have proven to be high. Technical problems during our last drilling programme only served to highlight the risk.

2. Customer Concentration: The Company had 39 customers at the end of 2018; however, one, ENEO Cameroon S.A. ("ENEO"), accounted for the majority of total revenue in the three years during which it consumed gas.

3. Inability to Manage Operating Margins: The Cameroon Holdings Limited ("CHL") royalty structure attached to Logbaba is more of a revenue sharing arrangement, not netting out costs of production and has paid out 15% of all revenue produced at Logbaba to third parties. The operating expenses in both London and Douala have scope for further reductions, which along with ENEO's postponement of the renewal of its contract in 2018, have made the operational results of VOG less than stable.

4. Not Separating Logbaba into Upstream and Downstream Businesses: The Government of Cameroon has historically requested the separation of our business to comply with the country's Petroleum and Gas Codes. This is a major task and management is working with Société Nationale Hydrocarbures ("SNH") to achieve this. Achieving compliance in this regard will deliver clarity on the downstream fiscal arrangements in Cameroon.

5. Establish Strategic Identity: VOG started off as an oil exploration company in Russia. Over the years it ventured into Kazakhstan and other countries. After it successfully developed the Logbaba project in Cameroon, VOG called itself an oil and gas exploration company when in fact it is both a successful upstream gas and a gas utility company. The vision of how to grow VOG outside of Logbaba and Cameroon, particularly after the setbacks of 2018, is a work in progress by both the new Board and management.

None of these matters have proven fatal. Thanks to you our shareholders, who have believed in our company's business model and have supported us, we have a chance to immediately address and remedy them. The new injection of capital and realignment of the Board and management completed on 3 April 2019 allows us to take decisive actions to develop VOG into a long-term, profitable and sustainable business. Let me outline how.

Preliminary Results
Fri, 24th May 2019 07:00

RNS Number : 0633A
Victoria Oil & Gas PLC
24 May 2019

24 May 2019

Victoria Oil & Gas Plc

("VOG", "Company" or the "Group")

Preliminary Results for the year ended 31 December 2018

The Company is pleased to announce the financial information for the year ended 31 December 2018.

Year in Review

· Grid Power customer, ENEO, ceased consumption in January 2018

· 62% decrease in annual gas sold - Gross 1,410 mmscf /Net 804 mmscf (2017: Gross 3,684 mmscf /Net 2,163 mmscf)

· 66% decrease in average daily gas production 3.75mmscfd (2017: 10.98mmscfd)

· Attributable revenue of $10.8 million (2017: 23.5 million), EBITDA a loss of $0.53 million, (2017: $4.59 million), Loss before tax $8.3 million, (2017: $10.7 million)

· Cost cutting programme commenced - 24% reduction year-on-year

· 8 additional customers consuming gas with 39 customers at year end

· On 21 December 2018, ENEO entered into a three-year binding term sheet with GDC for gas to power supply to 30MW Logbaba Power Station

o peak delivery of 6.1mmscfd on an 80% minimum Take or Pay basis - a minimum gas supply of 4.88mmscfd

o initial gas sale price of $6.75/MMBtu to increase over the three-year term of the agreement by $0.10/MMBtu annually

Post period-end Highlights

· Board strengthened:

o Roger Kennedy appointed Executive Chairman following the retirement of Kevin Foo

o John Knight and John Daniel appointed Independent Non-Executive Directors

· $17.7 million (gross) raised through the issuance of 104,357,488 new Ordinary Shares at 13 pence per share

· Board reviewing CHL Logbaba royalty and has suspended payments until review is completed

· Operating cost reduction programme continued to improve operating margins

· Q1 2019 average gas production rate increased by 127% during the period to 10.10mmscfd (Q4 2018: 4.45mmscfd)

· ENEO gas consumption consistently over 5.5mmscfd during the Quarter having recommenced on 22 December 2018

Roger Kennedy, Chairman, said:

"The Company is for the first time in many years on the right track with lower costs, a better defined strategy, and the leadership to deliver value to shareholders. 2018 was a difficult year accentuated by past mistakes; however, the events since the year end, with the injection of new capital by significant shareholders backing our business model, Board and Management changes, production levels increasing, and a strengthened financial position, ensures that the future looks brighter for shareholders."