Victoria Oil & Gas PLC (LON:VOG) financial results for 2018 show the company at a low point, as a hiatus in supply to its largest customer caused sharply lower production volumes, though its new chairman stressed that the firm is on "the right track".
The AIM-listed group's output was down through most of the year until the company reached an agreement in December with Cameroon power firm ENEO to restart gas supply.
WATCH: Victoria Oil & Gas 'positioned for growth' as it focuses on reducing costs and hitting profitability
More recently, in March, VOG made significant changes to its management team and raised £13.5mln of new equity.
Before these ‘transformational’ changes, the company saw a 62% reduction in gas sales for 2018. At the same time there was a 66% decline in production, to 3.75mln cubic feet per day from 10.98mln cubic feet per day.
The group's attributed revenue for 2018 amounted to US$10.8mln, down from US$23.5mln the year before, while underlying earnings (EBITDA) was reported at a US$530,000 loss versus positive earnings of US$4.59mln in 2017. VOG reported an US$8.3mln loss before tax, compared to a US$10.7mln loss in 2017.
Whilst gas sales were down the company focused on cutting costs, with a programme reducing its outgoings by 24%. It also expanded its client book, adding 8 additional customers - taking its tally to 39 customers.
This year, the company appears to be getting back on track with ENEO now consistently taking more than 5.5mln cubic feet of gas per day – in the first quarter of 2019 the average group production rate was up 127% to 10.10mln cubic feet per day.
Roger Kennedy, who earlier this year replaced Kevin Foo as VOG chairman, commented: "The company is for the first time in many years on the right track with lower costs, a better defined strategy, and the leadership to deliver value to shareholders.
“2018 was a difficult year accentuated by past mistakes; however, the events since the year end, with the injection of new capital by significant shareholders backing our business model, board and management changes, production levels increasing, and a strengthened financial position, ensures that the future looks brighter for shareholders."
VOG now enjoys a 'very solid platform' - analyst
Shore Capital analyst Craig Howie, in a note, highlighted: “Today’s results follow VOG’s recent first quarter operations update, which confirmed that average gross daily production increased by an impressive 127% (versus the prior quarter) to 10.1mmcfd in Q1.”
“Our forecasts assume 10.5mmcfd for the full year, so the company appears nicely on track to meet these expectations, with the large uplift in first quarter consumption driven by the resumption of supplies to ENEO at the end of last year.”
Howie added: “With a reinvigorated board in place (led by Executive Chairman Roger Kennedy) and VOG’s financial position in rude health following its £13.6mln equity fundraising in March, we expect FY2019 revenues to almost double year-on-year, with further sales growth and a healthy bottom-line profit forecast in FY2020.
“In our opinion, VOG’s strong funding position now provides a very solid platform for future share price upside as the company capitalises on its dominant position in the Douala region, where we see a significant market opportunity.”
VOG shares were changing hands at 12.42p, up 0.38%.
-- Updated to include analyst comments --