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Victoria Oil emerges as major Cameroonian presence

The North Matanda field is estimated to hold 1.8Tcf of gas and 136mln barrels of condensate on a p50 basis.
Victoria Oil emerges as major Cameroonian presence
GDC is currently the only supplier of natural gas to Douala, Cameroon’s rapidly growing second city

-- updated for 2016 interim results --

Victoria Oil & Gas’s (LON:VOG) latest expansion move in Cameroon leaves it with substantial gas assets in a country crying out for power.

By taking a 75% stake in the Matanda block, Victoria Oil acquires an asset 60 times larger than its existing Logbaba concession.

The North Matanda field is estimated to hold 1.8 trillipon cubic feet (Tcf) of gas and 136mln barrels of condensate on a p50 (50% probability) basis.

That compares with 208bcf of gas and 3.1mmbls of condensate at Logbaba as of last October.

Mining titan Glencore is currently Matanda’s operator, but the agreement will see it assign its 75% interest and responsibilities in the block to Victoria.

In return, Victoria will undertake a work programme to be agreed by the Cameroon government. AFEX, a Bermuda-based resource group, will retain its 25% participating interest. 

The work programme plan initially is to explore onshore licence areas within a few kilometres of Logbaba and send any discoveries through the pipeline network operated by Gaz Du Cameroun or GDC, Victoria’s Cameroon subsidiary. 

At present, GDC estimates demand for gas in Cameroon for thermal and power generation is estimated be in excess of 150mmscf (millions of standard cubic feet) per day and one of its stated ambitions is to grow production to meet this demand.

Matanda will certainly do that. GDC is currently the only supplier of natural gas to Douala, Cameroon’s rapidly growing second city.

In GDC's own words, it manages the whole value chain from the wellhead to customer connection.

Long-term supply contracts have been established with customers at prices from $9/mmbtu (millions of British thermal unit) to $16/mmbtu and with prices not subject to regulation.

Just from Logbaba, where it has a 60% stake, production is currently running at 15mmscf/d and a 'primary objective' in 2016 is to exceed 3.7 Bcf of annual production, a 30% increase over 2015.

Two new wells on the Logbaba field are also planned.

Infrastructure plans include designs for the gas treatment plant capacity to rise to 40mmscf/d, adding 13km to the pipeline network and to develop new product areas such as compressed natural gas (CNG). 

Kevin Foo, chairman, said: "In 2015, VOG came of age in terms of operational and financial performance.

He added the Matanda deal was a very exciting and fulfilling acquisition for the company.

“We believe the assignment and operatorship of the Matanda block  is a major step towards allowing the group to meet the growing energy needs of the Cameroonian economy.

The North Matanda Field is an extension of the Logbaba structure, he added, and three wells drilled in the North Matanda Field and the extensive 2D and 3D seismic data shows a strong geological continuation between the two.

Victoria's share price picked up smartly on the deal, adding to strong gains year-to-date as its smooth move from developer to producer has been more widely recognised.

Revenues in the half year to November 2015 jumped by 63% to $18.9mln with underlying profits [EBITDA] over 400% better at US$9mln.

After one-offs, there was a pre-tax profit of US$215,000, while net cash rose to US$6.3mln (US$5. 1mln).

The results confirmed the fully integrated gas utility business in Cameroon works well and has insulated Victoria from low oil prices and extremely challenging markets, said Foo.

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