VOG.L Regulatory News (VOG)

19 Oct 2005 07:00

Victoria Oil & Gas PLC19 October 2005 19 October 2005 Victoria Oil & Gas Plc Preliminary Announcement of Results for year ended 31st May, 2005 Highlights • Total attributable reserve base of 8.7 million barrels of oil equivalent C1 category reserves, 26.3 million barrels of C2 and 874.5 million barrels of C3/D1 • Acquisition of 74.8 per cent of the West Medvezhye gas and condensate project in Russia, 100 per cent of the Kemerkol oil project in Kazakhstan and the oil and gas assets of Celtic Resources Holdings Plc • Drilling of first exploration wells at West Medvezhye and Tamdykol. Further exploratory drilling planned on both these assets and operations at Kemerkol are planned to commence in the new year Commenting on this, Chairman Kevin Foo said, "We are rightfully very proud of our achievements in our first year ofoperation. We have made three major acquisitions in the Former Soviet Union andbuilt a reserve base matching proven reserves with significant resourcepotential. We are well positioned for our next year, with production anticipatedfrom Kemerkol at the start of the year and further drilling operations for WestMedvezhye and Tamdykol. Looking back we are delighted with our progress in ourfirst year and looking forward we are greatly excited by the prospects for thefuture". For further information please contact:Kevin Foo / George Donne Jamie Cumming / Tracy MackenzieVictoria Oil & Gas Plc Bell Lawrie+44 (0)207 921 8820 +44 (0)141 314 8103 +44 (0)141 314 8220Leesa Peters/ Laurence ReadConduit PR+44 (0)207 618 8760+44 (0)7979 955 923 or visit our website at www.victoriaoilandgas.com Chairman's Statement I am pleased to report outstanding progress for Victoria Oil & Gas in its firstyear. I would like to review with you the Company's objectives at inception, ourprogress in realising these goals and our plans for the future. Our objectives are to utilise the experience and relationships of our senior andtechnical personnel to identify, evaluate and acquire oil and gas assets in theFormer Soviet Union and to build an established oil and gas producer. To achievethis we have put together a suite of exploration assets across the riskspectrum, from near-term production plays to the larger exploration projectswith material upside potential: • Acquisition of 74.8% of ZAO SeverGas-Invest (SGI), holder of the West Medvezhye gas and gas condensate project in theYamal-Nenets region of Western Siberia, Russia for $11 million. The 1,224 square kilometre licence area is believed to hold potential recoverable C3/D1 resources of 183 billion cubic metres of gas and 201 million barrels of gas condensate • In February 2005, we announced the acquisition of 100% of the Kemerkol oil licence in Kazakhstan from Saga Creek Gold Limited. The project has proven reserves and shut-in production of up to 200 barrels per day. In October, the Company announced that it had succeeded in completing the transaction and increasing the C1 and C2 reserves to 35 million barrels within a greatly extended licence area • Acquisition of the oil and gas assets of Celtic Resources Holdings Plc for £2 million and £0.3 million in assumed debt. The assets include the Tamdykol oil project with total potential recoverable C3/D1 category resources estimated at approximately 34 million barrels of oil • Our IPO in July 2004 raised almost £10 million and was followed in February 2005 by a further capital raising of £5.6 million through the placing of 10.1 million shares Development West Medvezhye The West Medvezhye gas and condensate project is one of our great successes andunquestionably a potential company-maker. Having acquired 74.8% and operationalcontrol of the licence in late 2004, we completed drilling operations on thefirst exploration well in August and we were delighted to report hydrocarbonshows in two horizons. Preliminary results from the well log interpretation from the first wellindicate potential recoverable resources of 10 - 16 billion cubic feet of gas,as approved by independent reservoir auditors DeGolyer & MacNaughton (D&M). We believe that these preliminary resources will be significantly increasedfollowing a vertical seismic profile (VSP), which will be used to improve thequality and resolution of the seismic data used in determining these resourcesand we will seek further verification of the revised results from D&M. As well as the VSP, we are also awaiting final results of advanced well flowtesting to give us a more comprehensive understanding of the potential resourcesfor West Medvezhye. We expect these results to be ready before the end of theyear, during which time we will have begun mobilisation for the drilling of twofurther exploration wells in different locations of the licence block. Kemerkol The agreement to acquire 100% of the Kemerkol oil subsoil rights contract inKazakhstan marked a significant step for Victoria and exemplifies our strategyof matching the development of sizable, unproven projects with short-term cashflow from smaller assets. Kemerkol has shut-in production of up to 200 barrelsper day, which the Company believes can be rapidly increased. We were delighted to announce in October an increase in C1 and C2 oil reservesto around 35 million barrels following the expansion of the licence area by some53 square kilometres from the original 12 square kilometres. We anticipate firstproduction by the beginning of next year and are hopeful of achieving the 1,800barrels per day mark in during Q4 2006. Tamdykol In June we announced the farm-out agreement signed with Kazakh oil servicescompany NEK Service LLP for the development of the Tamdykol oil project. NEKwill fulfil the $1.25 million minimum work programme, including the drilling offour exploration wells, in return for a 70% split of profit in the event ofcommercial discovery until their expenses have been reimbursed and a bonuspayment of $625,000 has been paid. We believe that this is an excellent deal asVictoria is protected from exploration risk and retains ownership of the licencethroughout. Future Plans There is no doubt that our first year has been a successful one, but Victoriahas a number of important steps to take over the next twelve months if it is tobecome an established oil and gas company: • Further exploration of West Medvezhye: The initial results from our exploration drilling have been outstanding and confirmed the presence of hydrocarbons on the licence. Arrangements are underway for further drilling at two other prospective locations, as part of our Minimum Work Programme • Production from Kemerkol: Having closed the acquisition of the expanded Kemerkol licence area, re-entry of three of the existing wells at Kemerkol can commence, along with mobilisation for further drilling. Our operational team is targeting first production by the beginning of 2006 and our short-term goal is to increase flow-rates to 1,800 barrels per day before the end of 2006 • Further acquisitions: To balance the substantial C3 resource potential of West Medvezhye, Victoria is always engaged in the identification and evaluation of new projects in the FSU offering proven C1 reserves and near-term cash flows Victoria was founded in the belief that the FSU has the most potential of anyregion in the world for oil and gas exploration and that we have the technicaland business expertise to exploit that potential. We have demonstrated ourability not only to find and acquire exciting projects, but also to develop themand now we will look to build on this solid basis and unlock the Company'spotential. I would like to thank my fellow Directors and all employees for their tirelesswork so far. Kevin FooChairman Consolidated Profit & Loss AccountPeriod ended 31st May 2005 Period from incorporation on 27 May 2004 to 31 May 2005 $000 Cost of sales (104) Gross loss (104) Administrative expenses (1,026) Realised foreign exchange losses (412) Operating loss (1,542) Interest payable (1) Interest receivable 297 Loss on ordinary activities before taxation (1,246) Taxation - Loss on ordinary activities after taxation (1,246) Minority interest - Retained loss for the period (1,246) CentsGroup loss per share (in cents) (2.04) Group loss per share - diluted (in cents) (2.04) There were no recognised gains and losses other than those included in theprofit and loss account. The profit and loss account has been prepared on thebasis that all operations are continuing operations. Consolidated Balance SheetAs at 31st May, 2005 Group Company 2005 2005 $000 $000Fixed assetsIntangible fixed assets 21,730 -Tangible fixed assets 194 9Financial assets - 14,545 21,924 14,554 Current assetsStocks 18 -Debtors 842 8,232Cash at bank and in hand 11,484 11,258 12,344 19,490CreditorsAmounts falling due within one year (486) (165) Net current assets 11,858 19,325 Net assets 33,782 33,879 Capital and reserves Called up share capital 751 751Share premium account 34,268 34,268Profit and loss account (1,246) (1,140) Shareholders' funds - equity 33,773 33,879 Minority interests - equity 9 - 33,782 33,879 The financial statements were approved by the Board on 18 October, 2005 Consolidated Cash Flow StatementPeriod ended 31st May, 2005 2005 $000Cash flow from operating activitiesOperating loss (1,542)Depreciation 27Stocks decrease 309Debtors increase (429)Creditors decrease (2,535)Exchange movements -Minority interest 9Net cash outflow from operating activities (4,161) Returns on investments and debt service costsInterest received 297Interest paid (1)Net cash inflow from returns on investments and 296servicing of finance Tax paid - Capital expenditure and financial investmentAcquisition of intangible fixed assets (3,739)Acquisition of tangible fixed assets (138)Acquisition of subsidiaries (7,381)Net cash outflow from capital expenditure (11,258) Net cash outflow before financing (15,123) FinancingIssue of ordinary shares 27,855Repayment of borrowings (1,271)Net cash inflow from financing 26,584 Increase in cash in the period 11,461 Analysis of net cash Companies Cash 31 May acquired flow 2005 $000 $000 $000Cash at bank and in hand 23 11,461 11,484Borrowings (1,271) 1,271 - (1,248) 12,732 11,484 This information is provided by RNS The company news service from the London Stock Exchange