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Results for the 7-month period ended 31 December 2015

31 May 2016
Preliminary Results for the seven-month period ended 31 December 2015

Comparative Periods

The audited financial amounts for the seven-month period ended 31 December 2015 (the “current period”, “period” or “reporting period”)are compared to the audited twelve-month period ended 31 May 2015 (“prior period”). Production statistics, which are subject to seasonal fluctuation, compare the seven-month period ended 31 December 2015 to the comparable seven month period ended 31 December 2014.

Operational Highlights

  • 8.57mmscf/d average gas production (3.95mmscf/d seven months to 31 December 2014)
  •  1,736mmscf total gas sold (846mmscf seven months to 31 December 2014)
  • Both ENEO power stations consuming gas for grid power for the whole period
  • Well design and drilling programme planning progressed for completion of one twin-well and one step-out well at Logbaba site
  • Phase 1 processing plant expansion to 25mmscf/d capacity designed with further phased expansion planned pending drilling results
  • Gas sales agreements signed with eleven new customers ahead of 13.5km, two phased expansion of the Bonaberi pipeline
  •  New seismic reprocessing project on Logbaba commenced to acquire and reinterpret historic data

Financial Highlights

  • $21.4 million revenue (prior period: $27.9 million)
  • $8.5 million adjusted EBITDA (prior period: $8.4 million)
  • $13.2 million cash balance at period end (prior period: $16.0 million)
  • $22.2 million Group liabilities (prior period: $34.2 million)
  •  $6.0 million net cash position at period end (prior period: $5.1 million)

Corporate Highlights

  • Ahmet Dik and Iain Patrick appointed to the Board of VOG as Directors
  • Change in accounting reference date to 31 December

Post Period

  • BGFIBank debt facility of $26.0 million put in place in April 2016 to support the Group’s expansion plans in 2016
  • Matanda licence assignment of 75% interest in 1,235km2 neighbouring block completed
  • Executive Director changes: Robert Palmer and Grant Manheim to retire from Board and Andrew Diamond appointed as Finance Director


Chairman’s Statement

Dear Shareholder,

I am very pleased to report to shareholders on the corporate and operational progress we have made during the period. This report and financial statements cover the seven-month period to 31 December 2015. This follows the change in our Company’s accounting reference date from 31 May to 31 December.

Strong revenues of $21 million lead to the Group recording its first profit for the period and a positive earnings per share. Operating cash flows were strong, which the Group has used to reduce debt.

During the period, our gas sales doubled when compared to the equivalent seven months in 2014. Our research shows that the demand for gas in Douala, Cameroon and the surrounding areas remains far in excess of our ability to supply. Our two-year gas supply agreement with ENEO, the local power grid operator has had a very positive impact on our business. The ENEO project has been the proof-of-concept for a gas- to-power solution in Cameroon. To build on this and sign up other grid power customers, we need to expand our reserves, produce greater volumes of gas and increase our process and delivery capacity.

The share price performance during the period was disappointing. However, when compared to the FTSE AIM Oil & Gas Index, VOG’s market valuation has generally tracked the global downturn in the sector. We believe that our business is unique and, as an integrated gas producing utility, we will continue to explain to the market why we are different and why we deserve a higher valuation than at present.

We have an ambitious plan for 2016 aimed at expanding our reserves and resources and significantly increasing our ability to deliver more gas to more customers. It remains our longer term plan to replicate this model in other African locations and we continue to look for the right opportunities.

The Report and Accounts to be published contains an Objectives and Performance table which demonstrates how the Group has delivered on the objectives set out in our Annual Report to 31 May 2015.

Our Company is an integrated gas producing utility and as such has a fundamental task to match demand with supply in a way that minimises risk, capital outlay and operating costs.

In Cameroon, we enjoy a unique position that has been created by our willingness to take measured risks to achieve great gains and we are now preparing to add significantly more reserves to Logbaba so that we can consider increases in production to thermal and grid power customers.

The acquisition of a 75% interest and operatorship of the highly prospective 1,235km2 Matanda Block (“Matanda”) post period will also help us feed this expansion potential and further strengthen our area of influence in Cameroon. Matanda, is over 60 times the current licence area of Logbaba and is estimated to hold P50 ‘gas-in-place’ volume of 1.8tcf and 136mmbbl of condensate in place. In addition, Matanda is adjacent to Logbaba and geologically very closely connected to it.

As for our drilling programme, by December 2015 SPD Petrofac, our drilling consultants and our internal team had delivered a drilling strategy for one twin-well and one step-out well at the Logbaba site, both to be completed during 2016. The tendering process and negotiations on all contracts including the main drilling contract have been successfully managed by the Company and we have taken full advantage of the downturn in the oil and gas field services sector to bring the total budget for the two- well programme to below $40 million.

Increased revenues during the period enabled Gaz du Cameroun S.A. (“GDC”) to build on our relationship with BGFIBank and the $26 million debt facility for GDC announced post- period end is a result of this. This facility, coupled with GDC’s share of revenue generated and contributions from our 40% partner in the Logbaba project, is expected, at this stage, to enable GDC to complete the 2016 capital expansion programme without recourse to any equity funding.

What we have achieved in Cameroon is exceptional turning a small ‘stranded gas’ deposit in Douala into a significant gas utility business that is a key element of the local energy supply equation. We control the upstream, gas processing and gas distribution systems and operate in a lightly regulated environment which is supported by Government to ensure growth in industry.

Your Board feels that it is now appropriate to consider other opportunities within Africa that can be leveraged by our experience in Cameroon. We continue to assess projects that broadly meet our selection criteria. Our plan is to focus on the development phase of projects and enter at a point post discovery of gas and prior to development of the field. Our skills in executing field development plans and creating businesses that are profitable and meet local market energy needs can be used to unlock ‘stranded’ onshore gas reserves.

In Russia, we continue to seek a partner or purchaser of the West Medvezhye oil and gas project.

Corporately we saw a number of changes within the Company. Our quarterly operational updates were initiated within the period to provide shareholders with much more detail on our performance in terms of gas supply and unaudited financial statistics.

I was also delighted to see the appointment of Ahmet Dik to the Board of VOG, in addition to being made Chief Executive Officer of GDC. Ahmet has worked with us since late 2013 and was instrumental in concluding our agreements with ENEO for first grid supply. James McBurney left the Board and Iain Patrick was appointed as a Non-Executive Director. Iain has significant experience in the oil and gas industry and provides us with sound advice. These Board changes have also been reflected in the audit and remuneration committee compositions which are detailed later in this report.

Further changes to the Executive Directors of the Company will take place after the date of the Report and Accounts. Grant Manheim, Deputy Chairman, retires from the Board with effect from 31 May 2016. Robert Palmer, has been part-time Finance Director of the Company since it listed on AIM in 2004. The Board feels that it is now time that with increased activities within the Group that a full time position is required.  Robert is unable to take on this increased role given his commitments outside of VOG. He retires by rotation and will not be standing for re-election at the Company’s Annual General Meeting on 29 June 2016. Andrew Diamond, the Company’s Financial Controller, has been appointed as Finance Director of the Company  with effect from 30 June 2016.

Grant and Robert were foundation members of the Board since the start of the Company 12 years ago and on behalf of the Board, I would like to thank them for their unfailing dedication and valuable contribution to building the excellent Company we have.  Their departure is a natural evolution of a growing and maturing company. Andrew has been an outstanding addition to the team since he joined us last year and I am delighted that he has accepted the role of full time Finance Director.

During the period, PricewaterhouseCoopers LLP has continued to advise the Company in completing a peer review of executive remuneration and this will be detailed in the Directors’ Remuneration Report section of the Report and Accounts.

I would like to especially thank our partners RSM Production Corporation of Denver Colorado for their staunch financial support and sound guidance on the Logbaba project and The National Hydrocarbons Corporation of Cameroon (“SNH”) for their invaluable in-country support and counsel.

Finally, I should like to thank our Board and the operating teams in Cameroon, London and FSU for their tireless work in keeping our Company moving forward and building the business to where we are now.

I believe 2016 will be an outstanding year for VOG.


Kevin A. Foo

Executive Chairman

29 May 2016



Operations Report

Dear Shareholder,

I am pleased to report on operational matters at GDC, where focus during the period has progressed from delivery of grid power to planning for expansion. Our operations are both upstream and downstream, so obtaining the optimal expansion strategy requires us to balance reserves and processing capacity against demand for our gas in and around Douala and having the infrastructure in place to reach the market.

During the period, we sold 1,736mmscf of gas (846mmscf for the seven months to 31 December 2014). The average daily rate of gas production for the whole of the reporting period was 8.57mmscf/d (3.95mmscf/d for the seven months to 31 December 2014). Condensate offloaded during the period was 26,055bbls (13,598bbls for the seven months to 31 December 2014).

Thermal Gas Connections and Gas Sales Agreements (“GSAs”)

Dangote was commissioned in June 2015. Sic Cacaos and New Foods were both commissioned at the end of May 2015, and June 2015 was their first full month of consumption, and all three of the aforementioned have been consuming consistently ever since. New Foods and Sic Cacaos are consuming at their expected levels and Dangote continues to increase production at its new clinker plant.

Our newly established marketing and sales team is focused on increasing our reach into the Bonaberi area and during the period, eleven new GSAs were signed.


GDC has a contract price bracket of $9 to $16/mmbtu for its gas sales and a sales price for its condensate based on the Brent oil price. The fall in the market price of alternate products to our gas has made them more price competitive than previously, resulting in a small number of customers switching to alternative fuels.

We market the benefits of using gas, including uninterrupted supply, time and effort saved on deliveries and logistics, no contamination of final products, cleanliness and environmental benefits and the vast majority of our customers recognise the strength of this argument.

Grid Power

The seasonal nature of our business has been demonstrated since the grid power customer ENEO started consuming gas in line with the wet/dry season and the take-or-pay conditions of their contract.

GDC has maintained continuous and uninterrupted gas supply to both the Bassa and Logbaba power stations and has proved its ability to deliver on supply commitments in accordance with the agreements we have signed.

During the period, the short-term Genset equipment rental contracts with our industrial power customers came to an end as did the related GDC contract with the provider of the Gensets. GDC remains a gas supplier to these customers under GSAs.

Bonaberi Pipeline Extension

Towards the end of 2014, GDC completed Phase I, approximately 2.2km, of the Bonaberi line to its pipeline network after successfully laying pipe and delivering gas under the Wouri River. During this reporting period, our sales team has identified new potential customers and has obtained signed commitments from a number of them to support a subsequent two-phase expansion of the pipeline.

Phase II Bonaberi line extends the existing pipeline from Magzi 2 Industrial Estate to Maya Oil factory, a distance of approximately 8km. The two material customer connections on this phase are Maya & Cie and SMS Shal. The larger of the two is Maya & Cie; a cooking oil and soap producing company located on the Bonaberi Road. Their initial estimated consumption is expected to be 380,000scf/d but we are factoring in a higher pipeline capacity in anticipation of increased demand from Maya.

The delivery of earthworks for this Phase II Bonaberi extension has been outsourced to and coordinated with SOGEA SATOM Succursale Cameroun, the company contracted by the Government of Cameroon to lay bitumen along the Bonaberi road. By contracting their services to carry out the trenching work simultaneously with the construction work on the major road, a significant cost and time saving has been achieved. At the time of approval of the financial statements 3.7km of pipe has been laid and commissioned and an additional 1.3km of pipe has been welded and is ready to be laid. The customers on Phase II Bonaberi are expected to come online during Q3 2016.

Bonaberi is a new and fast growing industrial area in Douala building out to the new Magzi 3 Industrial Estate. Bonaberi is a less densely populated area of Douala than the port side of the Wouri River, which makes the pipe laying and testing less complicated. With ease of access to Bonaberi through the new bitumen road and access to GDC’s gas distribution pipeline network we believe using our gas will be significantly more attractive for prospective industrial companies.

Beyond Maya Oil, upon completion of Phase II Bonaberi pipeline, the Phase III Bonaberi pipeline will commence. This is planned to add an additional 5.5km to five new customers with 130,000scf/d of expected consumption. These customers are anticipated to be online in late 2016.

Cost Reduction

Having gone through an initial production and sales growth phase, the Group aims to increase profitability in 2016, both through increased revenues and via operational and corporate cost reductions.

During the period, we have reduced our salary bill and renegotiated a number of supplier contracts, and expect further cost savings to materialise throughout 2016.

Drilling Programme

During the period, GDC has been preparing to drill two wells onshore at the Logbaba Field to supplement the two existing Logbaba production wells. The new wells are required to meet the demand for Logbaba gas, to develop Logbaba reserves and to move some of our 2P (Proven plus Probable) reserves into the 1P (Proven) reserve category. One of the wells will twin the La- 104 well drilled in 1957; the other well will be a ‘step-out’ well that will be drilled into a target that is intended to add to our Probable reserves. Both of the wells will be drilled directionally from the one drilling pad adjacent to the Logbaba gas plant and they are to be tied into our production facilities immediately after they are drilled and completed. The La-104 twin-well is almost vertical; the ‘step-out’ well will be drilled to intersect a target that is about 1,100m to the South-East of the Logbaba drilling pad.

Both wells are intended to be production wells from the Logbaba Formation, which is a thick sequence of interbedded sands and shales found at depths between 1,700m and 3,200m below the surface. In addition to developing the gas reserves in the Logbaba Formation, one of the wells, the La-104 twin, has an optional additional objective of an ‘exploration tail.’ This could be drilled from the base of the Logbaba Formation (approx. 3,200m) down to 4,200m below the surface to test the hydrocarbon potential of the Mundeck Formation which had gas shows in well La-104.

GDC has sourced a drilling rig from Savannah Oil Services Cameroon S.A., an independent private Cameroon company and the rig is currently being shipped to Cameroon. Savannah has supplied a rig in accordance with the specifications determined by GDC subsurface team and SPD Petrofac, taking into consideration high pressure and high temperature drilling conditions. The rig will be mounted on rails between the two well locations, allowing efficient batch drilling to be undertaken using a single unit. SPD Petrofac is providing well design and project management services and with their assistance we are now working on the detailed design and programme preparation.

Major site preparation work is underway including slope stabilisation, leveling for drilling rig tracks and drilling pad preparation. New warehousing for rig supplies, storage and camp civils are also under construction. Long-lead orders have been placed.

During the period GDC carried out a security review on its operations in Douala. A number of the priority items have been implemented in order to be completed in time for the drilling programme such as improved security fencing, CCTV and lighting, improved access controls and new security offices.

The budget for the two-well drilling programme totals less than $40 million, excluding the optional exploration tail, and at the time of approval of the financial statements, GDC is still expected to remain within budget and on schedule.

Logbaba Gas Plant Capacity Expansion

Following the purchase of the gas processing plant in May 2015, Expro International BV has completed the process plant expansion study. Stage one of the gas plant expansion to 25mmscf/d capacity (from 20mmscf/d) is in the preliminary engineering phase. Further expansion phases will tie in with the well results.


Negotiations during the period resulted in the announcement of the assignment of a 75% interest in the Matanda Block, adjacent to current Logbaba gas production operations, and the subsequent Cameroon Government approval of the assignment. Matanda covers an area of approximately 1,235km2, over 60 times the area of the GDC Logbaba concession and is highly prospective for significant natural gas and gas condensate resources. The North Matanda Field is estimated to hold an estimated P50 ‘gas-in-place’ volume of 1.8tcf and ‘condensate- in-place’ of 136mmbbls.

Gaz du Cameroun Matanda S.A., a subsidiary of VOG, and AFEX, a Bahrain based company which has the remaining 25% interest, have submitted a new work programme to the Government of Cameroon for approval and expect to commence the first phase of seismic data acquisition in Q4 2016 after completion of the Logbaba drilling programme. The assignment of the Matanda Block complements the Group’s current plan to increase its operating footprint in Cameroon. The existing Logbaba gas network infrastructure will also allow for fast-track development of any new discoveries made on Matanda to deliver additional natural gas to local industrial users in Cameroon.

During the period, the Company undertook an initiative to collate all existing seismic data on the Logbaba Field in order to reprocess it using modern techniques. By coordinating with SNH, the Company succeeded in locating 152km of 2D seismic data from three separate surveys. Post period a reprocessing services tender was run and a successful bidder selected to commence test processing of three 10km segments. With the information attained from this newly reprocessed data, the Company will be able to define the parameters for any additional seismic (2D or 3D) acquisition programme in the urban areas of Logbaba with a much greater level of accuracy, as well as expanding the underlying data-set for future reserves calculations. The addition of new subsurface information will also assist in de-risking future wells beyond the 2016 two-well programme.

All of the achievements of GDC in recent months would not have been possible without the hard work, dedication and loyalty of the team on the ground in Douala and I want to express my sincere gratitude and thanks to each one of them for making GDC a success.


Ahmet Dik

Chief Executive Officer,

Gaz du Cameroun S.A.

29 May 2016


See attached for Financial Statements



1.    Publication of non-statutory accounts

The financial information, for the seven-month period ended 31 December 2015, set out in this preliminary announcement does not constitute statutory accounts. This information has been extracted from the Group's December 2015 statutory financial statements upon which the auditors' opinion is unqualified. However, the auditors’ report includes an emphasis of matter paragraph in relation to the recoverability of property, plant and equipment of $111 million included in the Consolidated Financial Statements.

2.    Basis of preparation

The financial information, for the seven-month period ended 31 December 2015, set out in this preliminary announcement, has been:

  •  computed in accordance with International Financial Reporting Standards (“IFRSs”), however this preliminary announcement does not contain sufficient information to comply with IFRSs. The IFRS compliant Consolidated Financial Statements will be published in the Report and Accounts for the seven-month period ended 31 December 2015;
  • prepared on the basis of the accounting policies as stated in the Annual Report for the year ended 31 May 2015, with the exception of those changes required in the application of new and revised IFRSs, none of which has a material impact on the Group.

3.    Annual Report

The Report and Accounts and the Notice of the Annual General Meeting for the seven-month period ended 31 December 2015 will be available on the Company's website at by no later than 06 June 2016. These documents will also be posted to those shareholders that requested it. The Annual General Meeting of the Company will be held on 29 June 2016 at the Coin Street Neighbourhood Centre, South Bank Room 1, 108 Stamford Street, South Bank, London SE1 9NH at 11.00am.