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Interim Financial Report for the Six Months Ended 30 November 2013

28 Feb 2014

Victoria Oil and Gas Plc (AIM: VOG), the emerging African energy utility company, is pleased to announce its unaudited interim results for the six months ended 30 November 2013.

Financial Highlights

  • Operating profit for the period of $3.7 million (2012: Loss $3.7 million)
  • Revenue for the period of $6.0 million (6 months to 30 November 2012: $1.7 million, 12 months to 31 May 2013: $6.9 million)
  • Revenue during the period comprised:
  • < >gas sales totalling $5.4 million at $16 per million British thermal units (6 months to 30 November 2012: $1.5 million, 12 months to 31 May 2013: $6.3 million)

    condensate sales totalling $0.6 million at an average price of $107.22 per barrel (6 months to 30 November 2012: $0.2 million, 12 months to 31 May 2013: $0.6 million)

  • Improvement in liquidity of the Group with Net Current Assets of $12.3 million (6 months to 30 November 2012: Net Current Liabilities $27.6 million, 12 months to 31 May 2013: Net Current Liabilities $1.7 million)

Operational Highlights

  • Inauguration of gas plant and pipeline by President Biya in November 2013
  • Production levels rose from 2.0mmscf/d in July 2013 to 3.2mmscf/d in February 2014 and Gaz du Cameroun operational break-even at these levels
  • Collaboration agreement with AES-Sonel to evaluate supply of gas for 45MW of power generation
  • All 1.5MW gensets cleared customs and at customer plants
  • BGFIBank loan for XAF 4,000,000,000 ($8.3 million) drawn down
  • Resolution of RDL- RSM arbitration
  • Permits for drilling under Wouri River to access Bonaberi market received


For further information, please visit or contact:


Victoria Oil & Gas Plc

Kevin Foo/Laurence Read




Tel: +44 (0) 20 7921 8820

Fox-Davies Capital

Daniel Fox-Davies



Tel: +44 (0) 20 3463 5010

Strand Hanson Limited

Simon Raggett/Stuart Faulkner/Angela Hallett



Tel: +44 (0) 20 7409 3494

Tavistock Communications

Ed Portman/Conrad Harrington/Simon Hudson



Tel: +44 (0) 20 7920 3150



Dear Shareholder,

I am pleased to present the Group’s unaudited interim results for the six months to 30 November 2013 and to update you on recent corporate and operational developments.

This reporting period was one of the most significant in the Group’s history. We faced serious challenges to operational delivery in Cameroon and the Board took comprehensive steps to address these issues.

Following the departure of John Scott, as announced at the end of September 2013, I assumed the role of interim Chief Executive. Since then we have provided comprehensive updates to the market on the Group’s strategy, operations and the changes that we were implementing. The business principles guiding these changes were to:

  • Quickly turn revenue into profits
  • Aggressively build our market share
  • Preserve the highest standards of safety, environmental compliance and corporate governance

These changes were undertaken at all levels of the Group, primarily at an expatriate level, with the senior management team in Douala being strengthened by way of new appointments in the operations, project management and sales & marketing departments. Internal systems were also overhauled with regard to the assessment of production forecasting and expansion of operations. Real production growth has been achieved.

Importantly, all changes have been successfully implemented with no further dilution to shareholders during this financial period.

We have recognised for some time that the Board of Directors needs to be substantially strengthened and with this in mind we are currently finalising the selection process for Non-Executive Directors. Announcements regarding such appointments will be made in due course.

Logbaba, Cameroon

A key event was the visit by the President of the Republic of Cameroon, His Excellency Paul Biya, to inaugurate our gas plant and pipeline on 15 November 2013. Not only did the President endorse our efforts and achievements, but he also emphasised the importance of gas as a cleaner and more efficient strategic energy source for the country. The visit attracted a lot of national press coverage and we have now earned recognition as an energy provider and growing utility company in Cameroon. This compliments our rebranding of Rodeo Development Ltd (“RDL”) to Gaz du Cameroun S.A. (“GDC”).

Our project teams are now focussed on:

  • Pursuing and delivering against realistic targets set for pipeline laying, connection of new customers to the pipeline network and installation and commissioning of gas fired generators (“gensets”)
  • Building robust project management skills, tools and procedures that will form a sustainable base for future growth
  • Re-emphasising the quality and health & safety elements of our business and the importance of community engagement and support

Key Developments at Logbaba

  • Production levels have risen from an average of 2.0mmscf/d in July 2013 to 3.2mmscf/d in February 2014. At these current production levels we are now achieving operational break-even at Logbaba
  • Total Production for the project for 6 months to 31 December 2013 was 364.3mmscf (6 months to 30 November 2012: 89.8mmscf, 12 months to 31 May 2013: 367.7mmscf). To date we have shipped 14,453 bbls of condensate
  • At the period end we had made 19 gas thermal customer connections (currently 20, 31 May 2013: 19, 30 November 2012: 4) and one condensate customer.
  • We currently have 15 additional thermal gas  and 8 power agreements signed
  • Glass manufacturer SOCAVER, part of the SABC group, was brought online in February 2014, consuming an average of 0.3mmscf/d with a peak demand estimated at 0.7mmscf/d
  • GDC has also reached an agreement with Dangote, a major cement manufacturing company, to supply gas for its thermal energy requirements. GDC anticipates that the Dangote connection will be completed during Q2 2014 and it is anticipated that gas consumption will be in the order of  0.4mmscf/d
  • All six 1.5MW gensets have cleared customs and are being installed at customer plants
  • A collaboration agreement with AES-Sonel, the sole electric utility company in Cameroon, has been successfully negotiated. GDC and AES-Sonel will work on a technical and operational plan to progressively replace Heavy Fuel Oil and Light Fuel Oil power generation stations with gas-fired generation. It is currently intended that GDC will initially supply gas to temporary units with a combined generating capacity of 45MW. This first stage is targeted to be online by July 2014
  • Now that Phase I and Phase II trunk lines have been commissioned with gas, our teams are focussed on building spur connections to customers along the line
  • We have also received permits to enable us to drill under the Wouri River and lay pipe to access the gas market in Bonaberi
  • Draw down on the XAF 4,000,000,000 ($8.3 million) BGFIBank loan facility

Other News

Details of the Award of the ICC International Court of Arbitration were published on 11 December 2013. The Tribunal found that RSM Production Corporation (“RSM”) had not forfeited its interest in the Logbaba project but had a continuing obligation to pay the outstanding cash call to RDL (now GDC). As a result, from 30 November 2013 to date, the Group has received over $20 million from RSM and has reached an agreement to constructively work together to realise the full potential of the Logbaba Project.

The Group’s participating interest in Logbaba now stands at 60% through VOG’s wholly owned subsidiary, GDC, with 40% held by RSM. The Government owned Société Nationale des Hydrocarbures (“SNH”) is entitled to a 5% interest and we are working with them on a participation agreement.

At West Medvezhye, Russia, the Company is looking at a number of ways to derive value from West Medvezhye through farm-outs, joint ventures or mergers.

It is very pleasing to announce a profit for this period. However we acknowledge that this is essentially a reflection of the accounting adjustments made following the aforementioned ICC judgement. The full detail of the accounting treatment in this regard is set out in Note 3 of the unaudited interim condensed consolidated financial statements below.

In conclusion, 2013 was a very challenging one where hard decisions were needed and a strong refocus of the company on its core business which was to deliver a reliable gas energy source to customers.  We now have the financial resources and the management team to achieve this.


Kevin Foo



28th February 2014



Income Statement

Revenue from the Logbaba project was $6.0 million in the six months to 30 November 2013, compared to $1.7 million in the comparative six month period, reflecting the expansion of our customer network. All gas sales were at $16/mmbtu and condensate sales averaged $107.22 per barrel.

Production royalties were $1.9 million or approximately 32% of revenue, $1.4 million of which is payable to a company in which the Group holds a 35% interest. That royalty stream will decline based on achieving certain revenue milestones such that the long term cash cost of all royalties is expected to average 17% of revenue. The $2.9 million of ‘Other cost of sales’ relates to operation of the wells, processing facility and pipeline network and includes $2.0 million of depreciation. Gross profit was $1.2 million compared to $0.1 million in the comparative six month period.

An income statement adjustment of $5.2 million at 1 June 2013 was necessary to reflect the outcome of the ICC Arbitration between RSM and the Group (refer to Note 3 in the unaudited interim condensed consolidated financial statements for further details). Excluding this non-recurring item, EBITDA was $0.7 million.

The profit before and after taxation for the half year was $2.5 million. Excluding the aforementioned non-recurring income statement adjustment, the Group recorded a loss of $2.6 million for the period compared to a loss in the comparative period of $5.3 million, reflecting the increase in production and the reduction in administrative expenses.

Balance Sheet and Cash Flow

The Group continued its expansion of the pipeline in Cameroon, investing $9.0 million (six months to 30 November 2012: $5.2 million). In Russia, an investment of $0.4 million (six months to 30 November 2012: $0.6 million) was made to define drilling targets.

Excluding the impact of the ICC Arbitration adjustment, working capital increased by $1.8 million, reflecting an increase of $5.4 million in trade and other receivables and an increase of $3.6 million in trade and other payables.

Net cash decreased by $11.7 million in the six months to $1.4 million. Following the year end, the Group raised $8.3 million of debt financing and has received a total of $20.4 million to date from RSM, being a payment on account for its share of downstream development costs for the Logbaba project. The total of these costs is subject to an audit to be conducted within 90 days of 1 April 2014.

Going Concern

The Directors are satisfied that the Group has sufficient resources to continue operations for the foreseeable future, being a period of not less than twelve months from the date of this report. Accordingly, they continue to adopt the going concern basis in preparing the condensed financial information.


Our financial strategy continues to be to develop the Logbaba asset, financed by a mixture of debt and equity, into a significant cash-generating asset in order to support future growth of the Group.


Robert Palmer

Finance Director