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Q2 2018 Operations Update

17 Aug 2018

 

Victoria Oil & Gas Plc, the Cameroon based gas and condensate producer and distributor, provides an update on the Group's operations for the three months ended 30 June 2018 (“Q2 18” or “the Quarter”).

Highlights:

  • Gaz du Cameroun S.A. (“GDC”) remains confident of a resolution with ENEO Cameroon SA (“ENEO”) with regards to the grid power supply issue
  • CNG agreement to partner with Naturelgaz Sanayi ve Ticaret A.S (“Naturelgaz”) announced on 26 June 2018 provides GDC with the opportunity to reach larger customers beyond the current pipeline infrastructure
  • GDC added two new customers during Q2 2018
  • Positive reserves update following the completion of the drilling campaign

GDC remains engaged with ENEO following the non-renewal of the grid power gas sale agreement at the end of December 2017, as announced on 5 January 2018. As a result of sales to ENEO not recommencing during Q2 18, the gas consumption levels from GDC’s 57% participating interest in the Logbaba Project in Douala, Cameroon, are at similar levels to those reported in Q1 18.

Logbaba - Quarterly production update

The Q2 18 gross and net gas and condensate sales for Logbaba and GDC, are as follows; amounts in bold are gas and condensate sales attributable to GDC (57%):

 

Q2 2018

Q1 2018

Q4 2017

Q3 2017

Q2 2017

Gas sales (mmscf)

 

 

 

 

 

Thermal

174

305

179

313

177

312

157

276

191

322

Retail power

9

15

10

17

10

18

12

20

9

15

Grid power

0

0

0

0

226

396

180

317

508

855

Total (mmscf)

183

320

189

330

413

726

349

613

708

1,192

Average gas production (mmscf/d)

3.30

3.50

7.94

6.96

14.59

Condensate sold (bbl.)

1,657

2,907

1,654

2,900

3,951

6,931

2,538

4,452

5,437

9,147

                           

ENEO update

The Government of Cameroon, ENEO, Altaaqa Global (“Altaaqa”), the genset providers to ENEO which consume GDC’s gas, and GDC continue to seek a resolution to the suspension of sales to the ENEO owned Logbaba and Bassa power stations in Douala. 

GDC remains confident that a solution will be found, and all parties are actively engaged in the process. The shortfalls in power supply in Cameroon continue, with hydroelectric schemes not meeting the current demand.

Customer developments

During the quarter, GDC commissioned one new thermal customer and one new retail power customer.  In addition, an existing thermal customer, Camlait, commissioned a retail power solution. Production levels have increased from 3.3mmscf/d during Q2 2018 to 4.4mmscf/d during August 2018.

Because of the current power shortages in Douala, several existing and new customers have expressed interest in the retail power solutions which GDC is offering and we expect to have several of these customers signed up by year end ready for consumption of gas for power generation.

GDC is expediting its support to manufacturers and producers in Douala who are facing regular power disruptions by providing bespoke gas fired power generation for individual customers or groups of customers. As most of these proposed power customers are already connected to the gas pipeline network, adding a gas to power generation solution would increase gas consumption with minimal capital costs for GDC.

On 26 June 2018 the Company announced an agreement to partner with Naturelgaz on CNG projects. Naturelgaz is Europe’s largest CNG supplier and distributor and brings valuable expertise within this field to support GDC.  The project will afford GDC the opportunity to reach larger customers beyond the pipeline infrastructure and aims to replace diesel and heavy fuel oils in a variety of applications. As part of a customer diversification strategy, active discussions are underway with a number of such potential customers.

Reserves update

On 4 June 2018, the Company announced that a full subsurface reinterpretation of the Logbaba Field had been completed following conclusion of the 2017 drilling campaign. This incorporated the reprocessed historic seismic data and the new well data as a basis for ongoing reservoir development, which led to a material upgrade in the reserves of the Logbaba Field as follows:

Basis

Field Position at 1/1/17

Field Position at 1/1/18

 

Initial Reserves

Cum Prod’n

Remaining reserves

Initial Reserves

Cum Prod’n

Remaining Reserves

VOG Net Reserves

Proved (1P)

49

9

40

82

13

69

40

Proved+ Probable (2P)

212

9

203

322

13

309

176

Proved+ Probable+ Possible (3P)

350

9

341

548

13

535

305

 

 

 

 

 

 

 

 

All volumes are bcf and do not include condensate volumes

Position at 1/1/17 based on Blackwatch report from August 2016

Position at 1/1/18 based on integrated reservoir study post La-107 and La-108 development drilling

The new proven + probable (2P) reserves level will support a production rate of 90mmscfd for 10 years; thereby enabling significant expansion of the business in support of the growing domestic gas market in Cameroon.

This evaluation supersedes the Blackwatch Report of August 2016 and is based on a new full field subsurface model incorporating interpretations from the reprocessed seismic together with the well data from La-107 and La-108. The work has been managed by VOG supported by external consultants who have provided subsurface expertise and modelling capability to produce the updated development plan for the field. This work will now enable selection of locations for future development wells, commencing with La-109, to continue development of the Logbaba Field in line with demand growth in Douala, Cameroon.

Competent Person Review

Sam Metcalfe, the Company's Subsurface Manager has reviewed and approved the technical information contained in this announcement in his capacity as a qualified person under the AIM Rules.  

This announcement contains inside information.

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