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Victoria Oil & Gas highlights demand and new deals but fresh ENEO downtime dented Q4 gas sales

The AIM share dropped over 20% in Wednesday’s early deals as investors react to the latest ENEO related disruption

Victoria Oil & Gas PLC - Victoria Oil & Gas highlights demand and new deals but fresh ENEO downtime dented Q4 gas sales

Victoria Oil & Gas PLC (LON:VOG), as part of a trading update, has highlighted the signing of a new agreement to potentially secure long term gas supplies from the Etinde field.

A non-binding letter of intent has been signed between the company’s Cameroon subsidiary Gaz du Cameroun (GDC) and New Age Cameroon Offshore Petroleum for some 25mln cubic feet of gas per day.

“The opportunity to secure the long-term supply of gas from the Etinde license will be a major step for our company,” said Roger Kennedy, VOG chairman.

GDC will access debt funding for the development of additional downstream pipeline infrastructure in order to unlock the Etinde gas.

Logbaba field impacted by ENEO downtime

Elsewhere, operations at the Logbaba gas field continue to be troubled by third-party factors tied to ENEO, which has been impacted due to Altaaqa - ENEO’s generator supplier - stopping operations at the Logbaba gas-fired power station because of non-payment.

The stop occurred on 14 September and GDC has not supplied gas to the ENEO station since then, but, the company has continued to invoice ENEO under ‘take or pay’ provisions. To date, these dues amount to US$10.5mln and VOG said it expects to receive these payments in due course, and, it is “actively working” with the government to recover these payables.

Gas supplies continued into other customers in the Duala region. VOG noted  that GDC’s 57% share of Logbaba amounted to 244mln cubic feet of gas sales in the fourth quarter of 2019 compared to 429mln in the preceding quarter.

Similarly, condensate sales totalled 2,294 barrels in the fourth quarter, down from 3,071 barrels in the third quarter.

VOG’s Duala operations were previously impacted due to a prior expiry of its supply deal and an extended pause in supply.

“Demand remains strong”

Outside of the ENEO issue, VOG’s Roger Kennedy emphasised that “demand for gas powered energy remains strong” in the Duala region, as evidenced by the Aksa Energy project.

Aksa’s planned development of a new 150 megawatt gas-fired plant is “highly positive for the people and business community of Douala and for our company”, Kennedy noted.

A non-binding term sheet has been signed with Aksa Energy which as a potential offtake partner would receive a long term gas supply from the company.

Legacy issues addressed

More broadly, Kennedy commented on the structural work that has been taking place within the VOG group.

“We have spent the past eight months addressing legacy issues, cutting costs and exploring long-term strategies for the company to move away from its historical dilutive, capital intensive programmes to a strategy that we believe should deliver sustained profitability and generate shareholder value in the long term,” he said.

Kennedy added: “Based on our review and work to date, we continue to refine our long-term business plan and vision. 

“We look forward to making further announcements reflecting these changes throughout 2020."

House broker Shore Capital, in a note, said: “we continue to see excellent potential for VOG as the company capitalises on its dominant position in the Douala region, where we see a significant market opportunity – more so than ever following today’s news of the letter of intent with New Age.”

Quick facts: Victoria Oil & Gas PLC

Price: 3.15 GBX

AIM:VOG
Market: AIM
Market Cap: £8.09 m
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