Victoria Oil & Gas Plc (AIM: VOG) – Chairman’s Letter to Shareholders

by Michael on September 9, 2011

A detailed and lengthy letter to the shareholders in Victoria Oil & Gas has been released today:


·    Logbaba development on schedule for Q4 2011

·    Logbaba participation increased to ninety-five per cent.

·    Acquired one third of Cameroon Holdings Limited adding substantial value to the Company

·    Logbaba internally estimated base case economic value increased by US$270m to US$676m

·    Prospective resources at West Medvezhye increased to 1.4 billion barrels of oil equivalent including increased oil prospectivity of 670 million barrels of oil

·    Early production scheme feasibility study for West Medvezhye commenced

 The Chairmans’ summary is included below:

In summary, despite the difficulties associated with construction operations during the Wet Season, we have made excellent progress on all fronts and we remain confident of delivering first gas sales on schedule.

The Company currently has 12 signed and executed gas sales agreements (‘GSAs’) and a further 10 GSAs which have been commercially agreed. All contracts will be signed at a price of US$16 per million British Thermal Units (‘mmbtu’), fixed for 5 years from the date of first gas delivery.

The existing proved and probable reserves of 212 billion cubic feet at Logbaba are sufficient to satisfy an average production of 30 mmscf/d for the next 20 years and are supported by the local supply contracts.

The market appetite for our gas is very strong and we believe will grow rapidly. The Board believes that we have substantial upside in reserves and resources and we are well on the way to delivering an integrated gas supply chain right from the well head to the burner tip. I am very excited about the future of the Logbaba project.

Logbaba Commercial Developments, Cameroon

In July 2011, the Company announced an increased share of RDL in the Logbaba project to 95 per cent. This was a result of RSM Production Corporation’s payment default under its cash call obligations leading to the forfeiture of its equity participation under the terms of the Joint Operating Agreement and other agreements with RDL.

In August 2011, the Company announced the acquisition from PR Marriott, our drilling contractor on wells LA105 and LA 106, of a one third interest in Cameroon Holdings Limited, (‘CHL’), for a total consideration, including cash and equipment, of US$6 million. CHL owns a royalty over the Logbaba field calculated on a sliding scale averaging 6.8 per cent. of project revenues over a 20 year anticipated project life.  The Board anticipates a significant return on this acquisition cost over the life of the project.

Further to these events, the Directors wish to report substantially improved internal forecast estimates of economic returns for the Logbaba project. The post tax net present value discounted at 10 per cent. (‘NPV10’) and 15 per cent. (‘NPV15’) net to VOG for various categories of reserves and resources at Logbaba are:


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