VOG.L Regulatory News (VOG)

20 January 2016

Victoria Oil & Gas Plc

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

Q4 2015 Operations Update

Victoria Oil & Gas Plc provides this update on the Group's operations for the three month period ended 31 December 2015 (the "quarter" or "Q4"). The Company has changed its accounting reference date from 31 May to 31 December and will be presenting its next audited results for the seven month period ended 31 December 2015 by the end of May 2016. The change of accounting reference date will align the financial reporting calendar with future quarterly operational updates. Today's quarterly results contain an enhanced level of financial detail and operations analysis including unaudited revenue and net cash, and supply statistics.

Highlights

· 7.1mmscf/d Q4 average gas production (Q3 2015: 8.2mmscf/d)

· 73% increase in production average compared to Q4 2014 (4.1mmscf/d)

· Maintained customers and prices despite adverse market conditions

· 625.6mmscf gas sold Q4 2015 (Q3 2015 717.7mmscf)

· 2,867.7mmscf of gas sold for the 12 months to 31 December 2015 (1,271.7 mmscf for the 12 months to 31 December 2014)

· The 14 days to 17 January 2016 produced an average production of 15.3mmscf/d with a peak of 16.6mmscf/d

· Group Q4 unaudited financial highlights

o $7.6m revenue (Q3 2015: $9.0m)

o $13.1m cash position (Q3 2015: $12.8m)

o $5.9m net cash position (Q3 2015: $4.9m) *

*net cash is defined as cash equivalents less borrowings

Overview

The period marked the third quarter of supply to ENEO and overall production was in line with expectations based on known seasonal fluctuations in gas demand. The continual erosion of the global oil price however has had minimal effect on the Gaz du Cameroun SA ("GDC") business in terms of gas price changes or customers changing back to oil.

The quarter covered the second half of the wet season where gas consumption in the grid power sector is lower due to higher availability of hydroelectric power. Average daily production was 7.1mmscf/d during the quarter of which 3.4mmscf/d was attributable to grid power.

Importantly, GDC has maintained customers at their contracted prices and these prices, which are not tied to oil, distinguish us from other junior oil and gas companies. Despite the large drop in the oil price both internationally and locally, GDC maintained its selling price for gas. This ranged between $9 to $16 per mmbtu or a weighted average price of more than $60/BOE. Our customers have stayed with gas because it is a reliable, clean and conveniently available source of energy that leaves a much smaller carbon footprint than alternatives.

January marks the return to the dry season and associated higher gas utilization, with the grid power sector now recording consistent consumption in excess of 9.0mmscf/d. The increase in consumption is due to the take-or-pay terms with ENEO, the national power joint venture entity with Actis, whereby minimum consumption levels are split into six-month periods covering the dry (January- June) and wet (July - December) seasons.

Operational update

The quarterly gas and condensate consumption is as follows:

* Production rates are calculated from metering at the process plant. Sales figures are calculated from the individual PRMS units at customer sites. There is always a slight variation between the two figures due to gas in the pipeline, flaring and differing levels of metering accuracy.

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.

Grid power consumption is expected to increase significantly during the first half of 2016. The 14 days to 17 January 2016 produced an average total production of 15.3mmscf/d with a peak of 16.6mmscf/d.

Condensate sales are a by-product of the gas production process and volumes sold are expected to reflect the volumes of gas produced.

Our drive in 2016 is to ensure there is sufficient capacity to bring on major new customers by increasing reserves, plant capacity and pipeline reach. At present the production plant capacity is constrained at 20mmscf/d. In addition, finding flexible new applications such as CNG that can add capacity for our existing markets remains a priority.

GDC, as holder of the Group's 60% participating interest in the Logbaba concession, is currently entitled to 100% of the revenue generated by the Logbaba project. The concession agreement provides for this allocation of revenue to continue until gross revenues equal the initial exploration costs incurred in the drilling of the two operational wells. 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 GDC.

GDC Chief Executive Officer and VOG Director Ahmet Dik said:

"Our business continues to prove its resilience despite a challenging macro environment, delivering another strong production performance when set against the comparative period last year. Looking ahead to 2016, our focus is on increasing capacity to service a larger, more diversified customer base. We believe that through the continued delivery of safe, clean, reliable and accessible sources of energy from our gas, VOG can continue to strengthen its position as a provider of choice."

For further information, please visit www.victoriaoilandgas.com or contact: 

Victoria Oil & Gas Plc

Kevin Foo / Laurence Read Tel: +44 (0) 20 7921 8820

Numis Securities

John Prior / Ben Stoop Tel: +44 (0) 207 260 1000 

Strand Hanson Limited

Angela Hallett / Stuart Faulkner Tel: +44 (0) 20 7409 3494

Bell Pottinger

Daniel Thöle / Charles Stewart / Zara de Belder Tel: +44 (0) 20 3 772 2499

Notes to Editors

About Victoria Oil & Gas Plc

Victoria Oil & Gas (VOG.L) is a gas utility company with operations in the industrial port city of Douala in Cameroon, which is the business hub to Central Africa.

The Company's subsidiary, Gaz du Cameroun S.A. ("GDC"), supplies cost effective, clean and reliable gas to industries in the Douala region from its onshore Logbaba Gas Project. Industrial customers are supplied with gas through a 33km pipeline network built by GDC in Douala.

GDC's gas supply to the thermal, grid power and retail power markets in Douala, is helping to ensure that the Cameroon economy is underpinned with stable energy. By developing a full integrated gas supply network, connected to wells located within the city itself, GDC has established a new range of energy product types within Douala that are cost effective, reliable, safe and cleaner than liquid fuel alternatives.

The Company generates cash flow from the Logbaba Project which is 60% owned and managed by GDC, with RSM Production Corporation, an affiliate of Grynberg Petroleum Company of Denver, Colorado holding a 40% participating interest.

VOG also holds 100% of the West Medvezhye oil and gas exploration project near Nadym, Russia. The field has C1 plus C2 reserves of 14.4mmboe (under the Russian resource classification system, analogous to proven and probable reserves under Western conventions) in addition to best estimate prospective resources of 1.4bboe. Given the challenging economic environment in Russia, The Group has fully impaired the West Medvezhye assets.

Cameroon Energy Market

Cameroon is a developing economy serving most of Central Africa with goods and services. A power deficit remains a major hindrance to Cameroon's economic expansion. The power grid is reliant on hydroelectric dams to supply 75% of power and the shortfall is made up from heavy fuel oil and gas. Hydroelectric dams are highly seasonal, with stream rates significantly varying from 6,000m3 per second in the wet season to 50m3 per second in the dry season. As with many hydro electrical systems transmission loss is also a constant issue when balancing power loads across distances to different consuming regions. The port-city of Douala is the major industrial zone within Cameroon and it requires high levels of consistently delivered grid power all year round. Currently Cameroon's energy demand is growing at 7% annually and gas is seen as a key element to Cameroons national energy strategy.