3 Jul 2020 12:36
3 July 2020
Victoria Oil & Gas Plc
("VOG" or the "Company")
Termination of Agreement to Supply Gas to ENEO
Victoria Oil & Gas Plc ("VOG" or "Company"), 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, provides an update on the gas sales agreement with ENEO Cameroon S.A. ("ENEO").
SUMMARY
· GDC has unerringly supplied natural gas to ENEO at its Logbaba power plant since 2015 despite ENEO's poor payment record
· GDC has made repeated requests in writing and in person to the senior management of ENEO to discuss a method of settlement of its burgeoning debt, which now stands at US$16 million receivables (US$9 million net to GDC) as at the end of June
· Furthermore, the fully termed agreement and payment guarantee that were due to quickly follow the binding December 2018 term sheet have not been forthcoming
· As a result of this untenable situation, GDC served a notice of Event of Default on ENEO pursuant to the signed binding term sheet on 2 June 2020, which included a 30-day remedy period
· As we have reached the expiry of this remedy period, GDC has no alternative but to terminate the gas supply agreement with immediate effect
· The Company will now rigorously pursue this unpaid debt via the legal channels available to it, including a penalty payment of three months' fees as a result of termination as per the signed term sheet
BACKGROUND
ENEO is majority owned by Actis LLP (51%), a London based investment company, with the Government of Cameroon owning 44%, and its employees owning the remaining 5%. The Logbaba power station was commissioned in April 2015, supplying 30 MW of electricity to the grid. The supply was interrupted in January 2018 as ENEO faced its own cashflow and debtor problems but restored in December 2018.
On 14 September 2019, the generator supplier suspended operations at ENEO's Logbaba site due to non-payment of invoices by ENEO. Consequently, GDC has not been required to supply gas to ENEO since that date but has continued to invoice ENEO based on Take-or-Pay provisions as per the binding term sheet.
GOING FORWARD
Whilst ENEO has been the highest offtaker by volume when it is online, it has been paying by far the lowest gas price amongst our large customer base. Replacing the revenue generated by ENEO sale will therefore require significantly lower sales volumes. The board of VOG has been reviewing strategy in light of the continued non-payment by ENEO and possible termination. The Company's strategy going forward will be to seek out replacement revenue in two phases: connection to high value, privately-owned, credit-worthy customers, near our infrastructure in the first phase, followed by similar customers in clusters requiring more capital to tie-in. This strategy will be outlined in more detail in the near future.
The Company will continue to publish more comprehensive quarterly updates, the next of which will be published later this month.
Roy Kelly, Chief Executive of the Company, commented:
"Over the last few months, the management has conducted a thorough review of the business identifying key issues which need firm and decisive action. 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 cashflow under pressure."
For further information, please visit www.victoriaoilandgas.com or contact:
Victoria Oil & Gas Plc
Roy Kelly 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 advisory) 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