Victoria Oil & Gas completes acquisition of royalty interest in Logbaba gas project

Victoria Oil & Gas (LON:VOG) has now completed the acquisition of one third of a 6.8 percent royalty interest in its 95 percent owned Logbaba gas and gas condensate project in Cameroon, initially announced in mid-August, by making a final cash payment of US$2.5 million.

The transaction is anticipated to increase the company’s operating income from the project by about 3 percent.

It bought the interest from PR Marriott Drilling Ltd (PRM), by the purchase of PRM's one third interest in Cameroon Holdings Limited (CHL), the company entitled to the royalty.

As announced in August, VOG purchased 58 percent of PRM's shares in CHL for US$2.5 million in cash and drilling equipment with an estimated value of US$1 million. The company has now completed the acquisition of the remaining 42 percent of PRM's interest in CHL for US$2.5 million in accordance with the terms of the sale agreement.

VOG chairman Kevin Foo said: "I am delighted that we have been able to reduce the long term cost of the royalty in this way. Independent analysts who have looked at the transaction believe it will prove to be worth several times the consideration paid."

The company received an exploitation licence for the development of the Logbaba field by presidential decree in April 2011. Logbaba is located in Douala, the economic capital of Cameroon.

Logbaba has proven and probable reserves of 212 billion cubic feet of gas (35.3 million barrels of oil equivalent) and the company expects gas sales of 8 million standard cubic feet per day (mmscf/d) in the first year of operations rising to 44 mmscf/d (7,300 barrels of oil a day equivalent) by the end of 2014.

VOG is currently in the final stage of installing production facilities and a pipeline to serve industrial consumers of gas in Douala, anticipated to be complete by the end of 2011.

The current proved and probable reserves are sufficient to supply an average of 30 mmscf/d for the next 20 years. In the longer term, as further reserves may be proven, gas may be supplied to large gas fired power stations connected to the grid, with Victoria either investing in an independent power producer joint venture or selling the gas to third parties.

Condensate separated from the gas at the process plant will be stabilised and stored for export to the Sonara refinery at Limbe. Condensate production is forecast at the rate of 20 barrels per million cubic feet of gas.

VOG’s other principal asset is the West Medvezhye project in the prolific Yamal-Nenetsk hydrocarbon region in Siberia, Russia.

An independent audit carried out in 2011 estimated prospective resources for the area of over 1.4 billion barrels of oil equivalent. The company also has a discovery well, 103, with C1 and C2 reserves, independently assessed under the Russian classification convention, of 14.4 million boe.

Reprocessing of 845 kilometres of 2D seismic has recently been completed and geophysical/geological modelling is currently underway. In addition, development studies are in progress to commercialise the Well-103 discovery and prospective resources.