(Sharecast News) - Victoria Oil & Gas updated the market on the gas sales agreement between its wholly-owned subsidiary Gaz du Cameroun (GDC), and ENEO Cameroon, on Friday, reporting its termination of the supply deal due to non-payment.
The AIM-traded firm said GDC had "unerringly supplied" natural gas to ENEO at its Logbaba power plant since 2015, despite ENEO's "poor payment record".
GDC had made "repeated requests" in writing and in person to the senior management of ENEO, to discuss settlement of its debt, which now stood at $16m (£12.84m) receivable, of which $9m was due to GDC, at the end of June.
Additionally, it said that the fully-termed agreement and payment guarantee that were due to quickly follow the binding December 2018 term sheet, had not been forthcoming.
As a result of the "untenable situation", GDC said it served a notice of event of default on ENEO under the signed binding term sheet on 2 June, which included a 30-day remedy period.
As it had reached the expiry of that period, Victoria said GDC had "no alternative" but to terminate the gas supply agreement "with immediate effect".
The company said it would now rigorously pursue the unpaid debt via the legal channels available to it, including a penalty payment of three months' fees, as a result of termination under the signed term sheet.
"Over the last few months, the management has conducted a thorough review of the business identifying key issues which need firm and decisive action," said chief executive officer Roy Kelly.
"It is nonetheless regrettable that the company has had to take this extreme action now, but all other approaches have failed to secure timely payment of aged debt, putting the company's cash flow under pressure."
At 1446 BST, shares in Victoria Oil & Gas were down 16.9% at 3.13p.
10 Nov 2015 09:56