LONDON (Alliance News) - Victoria Oil and Gas PLC Wednesday reported a huge pretax loss in the last financial year after booking a substantial impairment against its Russian asset despite reporting a large rise in revenue.
It also said it has appointed Ahmet Dik, the man responsible for striking two all-important deals for the company during the year, as the new chief executive of its operating subsidiary in Cameroon.
The oil producer based in Cameroon reported a rise in revenue to USD27.9 million in the year ended May 31 from only USD14.7 million a year earlier. However, a USD49.8 million impairment against its Russian asset offset that revenue rise, leading its pretax loss to widen to USD52.2 million from a USD4.7 million loss.
The impairment was made against the West Medvezhye field in Russia, and excluding that impairment its Cameroon subsidiary, which operates its operations, made a USD5.4 million profit after tax.
"The directors continue to pursue ways to derive value from the (Russian) asset through farm-out, joint venture or sale, however this has been challenging due to the state of relations between Russia and the West, combined with the low oil price, and so the asset continues to be carried fully impaired," it said.
The large rise in revenue was caused by its production from its operations in Cameroon more than trebling to 12.39 million standard cubic feet of gas in May 2015 from 2.72 million standard cubic feet in May 2014.
In a separate statement Wednesday, Victoria said it has appointed Ahmet Dik as a director of the company and as the new chief executive of its subsidiary, Gaz du Cameroun SA, which operates and holds the companies producing operations in the country.
Victoria said Dik has "been involved" with the company for the past two years and was "instrumental" in concluding the important deal with the national Cameroonian electricity company during the financial year and was responsible for securing the company;s first take-or-pay agreement.
Victoria reached an agreement with ENEO Cameroon SA, the country's national electricity company, to provide gas to the Bassa and Logbaba power stations in Douala through a take-or-pay contract that secures revenue for at least the next two years, and since then Victoria has delivered around 50 megawatts of capacity to the Cameroonian grid through ENEO.
It also completed the Douala pipeline network which has given it the option to begin selling gas into new markets in a "growing area". The pipeline has successfully crossed the Wouri River to the Bonaberi shore.
It also purchased the Logbaba gas processing plant in the year, where it plans to expand its capacity by double to around 40.0 million standard cubic feet of gas per day.
"The Logbaba gas and condensate project is a rare and successful example of profitable onshore gas monetisation in Sub-Saharan Africa. Demand for gas in Cameroon for thermal and power generation is estimated by (the Cameroonian subsidiary) to be in excess of 150 million standard cubic feet per day. We need to grow production to meet this demand," said the company.
"As a gas production utility supplying energy to the industrial port city of Douala, our core business has been somewhat insulated from the effects of the major shift in oil pricing, which has seen one of the worst downturns in twenty years,"the company added. "The oil downturn has affected us in equity markets, where Victoria's share price has suffered somewhat, in line with its peer group in the exploration and production sector."
In response to the oil market downturn, Victoria said it has been increasing its cashflow through rises in production whilst trying to improve its margins. It stressed that it is working hard to "ensure that the market recognises the distinction between our cash generating assets and riskier exploration and production companies."
It has also begun looking for new projects in Cameroon and said it has been in discussions with "several participants" in the gas sector about possible joint ventures and farm-in deals.
Victoria Oil shares were up 0.4% to 59.75 pence per share on Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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