LONDON (Alliance News) - Victoria Oil & Gas PLC Wednesday said revenue and profits from the Logbaba field in Cameroon will be damped in 2016 as revenue sharing under the concession agreement covering the project shifts away from 100% to Victoria Oil.
The company also said gas and condensate sales both fell quarter-on-quarter toward the end of 2015, but sales were still significantly up from a year earlier.
Victoria Oil sold a total of 625.6 million standard cubic feet of gas and 8,608 barrels of condensate in the fourth quarter, with gas production averaging 7.14 million standard cubic feet per day over the three-month period.
That is the lowest level of gas and condensate sales made in a three-month period since the first quarter of 2015.
In the third quarter of 2015, Victoria Oil sold 717.6 million standard cubic feet of gas and 10,878 barrels of condensate, with daily production also much higher at 8.19 million standard cubic feet.
However, the fourth quarter figures are significantly up compared to a year earlier when Victoria Oil sold 374.4 million standard cubic feet of gas and only 2,265 barrels of condensate and when production was around 50% less at 4.1 million standard cubic feet a day.
The main cause for the significant year-on-year rise in gas sales was the start of sales to the national grid in Cameroon, which only began in the first quarter of 2015. To put that into some perspective, gas sales to the grid made up just under half of total gas sales in the fourth quarter, with rest being sold as thermal or retail power.
"Thermal gas sales remained reasonably consistent with previous quarters and management expects this to continue until the capital expansion projects described below are completed. These projects will allow for the addition of further thermal and retail power customers," Victoria Oil said.
"Grid power consumption is expected to increase significantly during the first half of 2016. The 14 days to January 17, 2016, produced an average total production of 15.3 million standard cubic feet per day with a peak of 16.6 million standard cubic feet per day," it added.
Condensate sales are a by-product of the gas production process, and volumes sold are expected to reflect the volumes of gas produced.
Victoria Oil will in 2016 aim to ensure there is sufficient capacity to bring on major new customers by increasing reserves, plant capacity and pipeline reach. The current plant capacity stands at 20.0 million standard cubic feet per day - leaving it with some headroom moving forward.
Production comes from the Logbaba project, where Victoria holds a 60% stake. However, the company is entitled to 100% of the revenue generated from Logbaba until gross revenues exceed the initial exploration costs incurred by Victoria.
"Management expects that this point will be reached during the first half of 2016. Thereafter revenues will be split in accordance with the participating interests, which will impact the revenues and profitability attributable to [the subsidiary that holds the stake]," it said.
Victoria shares were trading down 2.3% to 28.10 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
Copyright 2016 Alliance News Limited. All Rights Reserved.