VOG.L Regulatory News (VOG)

5 February 2020

Victoria Oil & Gas Plc

("VOG" or the "Company")

Operations Update

Victoria Oil & Gas Plc, whose wholly owned subsidiary, Gaz du Cameroun S.A. ("GDC"), the onshore gas producer and distributor with operations located in the port city of Douala, Cameroon, is pleased to provide shareholders an operations update of the Company.

Highlights

·; GDC has entered into a non-binding Letter of Intent ("LOI") with New Age Cameroon Offshore Petroleum S.A. ("New Age" and together with GDC, the "Parties") for the supply of a minimum of 25mmscfd of gas from the Etinde natural gas and condensate field ("Etinde");

·; To enable access to Etinde natural gas, additional downstream pipeline infrastructure proposed to be developed by GDC to connect this gas supply and be fully debt funded;

·; Non-binding term sheet for long term gas supply to satisfy Aksa Energy Uretim A.S. ("Aksa") off-take agreement and other future potential grid power contracts;

·; Altaaqa has suspended operations at ENEO's Logbaba site due to non-payment. GDC continues to invoice ENEO based on take-or-pay provisions; and

·; Remediation work to complete La-108 will recommence in early 2020.

Roger Kennedy, Chairman said:

"We have spent the past eight months addressing legacy issues, cutting costs and exploring long-term strategies for the Company to move away from its historical dilutive, capital intensive programmes to a strategy that we believe should deliver sustained profitability and generate shareholder value in the long term. Demand for gas powered energy remains strong in Douala, with the planned development by Aksa of a new 150 MW gas-fired power plant being highly positive for the people and business community of Douala and for our Company. The opportunity to secure the long-term supply of gas from the Etinde license will be a major step for our Company. Based on our review and work to date, we continue to refine our long-term business plan and vision. We look forward to making further announcements reflecting these changes throughout 2020."

Signed LOI for Long Term Gas Supply with New Age

The Company is pleased to report that it has entered into a non-binding LOI with New Age for the supply of gas from Etinde, which contains natural gas and condensate discoveries.

Under the LOI, the Parties will seek to negotiate and enter into a gas supply agreement ("GSA"). The LOI envisages that under the GSA, New Age will bring its gas from the offshore Etinde field to onshore Cameroon for processing. GDC would then purchase processed natural gas from the onshore New Age facilities and transport the gas to Douala to supplement the current gas sales. 

The LOI envisages that the GSA would be for a period of 20 years during which New Age would supply a minimum of 25mmscfd of gas to GDC for the first three years, followed by a minimum of 30mmscfd, with the potential to increase in the future as demand in the market increases. This would amount to a total gas supply in excess of 200bcf of gas over the contract period. GDC would then seek to distribute this gas to new independent power producers looking to produce power for the energy deficient Douala market as well as to existing and future thermal and retail power customers.

When combined with potential offtakes to be secured with long term industrial thermal customers plus grid power contracts, including with Aksa (subject to definitive agreements being entered into), GDC should be well positioned to grow into being the natural gas utility company leading the downstream gas distribution sector in Cameroon. The proposed GSA with Aksa alone would consume in excess of 20mmscfd for the initial 150MW power plant, with potential expansion.

In order to access the gas production from Etinde, GDC will need to install a 60km (approx.) high pressure gas pipeline from Limbe to Bekoko where it would connect with the existing low-pressure pipeline network which operates throughout Douala. The pipeline would be designed to allow for future expansion in Douala and the South-West region.

The installation of a major gas pipeline network from Limbe to Bekoko will provide numerous additional opportunities, which would have otherwise been deemed uneconomic, to supply gas into smaller towns along the route into Douala, such regions/towns as Ombe, Mutengene, Tiko and Buea, and provide much needed power using smaller gas-fired power plants.

GDC has commenced negotiations with multilateral and export credit agencies to fully debt finance this new pipeline project. The Parties are currently negotiating a fully termed GSA and subject to signing, anticipate a Final Investment Decision by the Parties on the project during H2 2020.

Further announcements will be made in due course.

LOGBABA UPDATE

Quarterly Production

Quarterly gross and net gas and condensate sales at Logbaba are as follows (amounts in bold are gas and condensate sales attributable to GDC (57%)):

Grid Power - ENEO

On 14 September 2019, Altaaqa, the generator supplier to ENEO, suspended operations at ENEO's Logbaba site due to non-payment of invoices by ENEO. Consequently, GDC has not provided gas to ENEO since that date, but has continued to invoice ENEO based on take-or-pay provisions agreed to in the binding term sheet and therefore projected revenue from gas sales is not expected to be affected in 2019.

The gross amount outstanding from ENEO as at 31 December 2019 was $10.5 million (net $6.0 million). Despite being outside of agreed payment terms, the Company expects to receive payment of these amounts in due course and is actively working with the Government of Cameroon and ENEO to recover these payables.

Furthermore, whilst GDC continues to operate under a legally binding term sheet with ENEO, the completion of the fully termed agreement and payment guarantee, the terms of which have been finalised, remains subject to signature.

La-108 Remediation

The wireline tool string and 130m of wire has been recovered. A clean out assembly was run to recover the remaining 50m of wire and clean the hole, but this became stuck in the tubing at approximately 900m. Operations were suspended at the end of October 2019 to mobilise additional equipment to complete the remediation programme. Prior to suspending operations, GDC used the available equipment on site to successfully perform additional perforations in well La-107. The additional equipment is on route to Douala. The remediation work to complete La-108 will recommence upon its arrival.

CORPORATE UPDATE

Cameroon Holdings Limited ("CHL") Royalty Agreement

GDC has ceased to make payments to CHL under the Royalty Agreement. As a result, in June 2019, CHL commenced proceedings against both GDC and the Company with regard to payments CHL believes it is entitled to under the Royalty Agreement including potential damages. The Company has vigorously defended such claim and litigation is ongoing. There is no definitive timetable for such litigation proceedings.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.

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

Victoria Oil & Gas Plc

Ahmet Dik Tel: +44 (0) 20 7921 8820

Kate Baldwin

Strand Hanson Limited (Nominated and Financial Adviser)

Rory Murphy / James Dance / Jack Botros Tel: +44 (0) 20 7409 3494

Shore Capital Stockbrokers Limited (Broker)

Mark Percy / Toby Gibbs (corporate finance) Tel: +44 (0) 20 7408 4090

Jerry Keen (corporate broking)

Camarco (Financial PR)

Billy Clegg Tel: +44 (0) 20 3757 4983

Nick Hennis Tel: +44 (0) 20 3781 8330