Victoria Oil & Gas Plc is pleased to announce that it has acquired one third of a 6.8 percent. royalty interest in its 95% owned Logbaba gas and gas condensate project in Cameroon (the 'Acquisition'.) This is anticipated to increase Company Operating Income from the Logbaba project by 2.9 per cent.
The royalty interest has been acquired from PR Marriott Drilling Limited ('PRM'), by the purchase of their one-third interest in Cameroon Holdings Limited, ('CHL.'). As disclosed in our RNS on 9 July 2009, Rodeo Development Limited, a wholly owned subsidiary of VOG entered into an agreement with CHL part of which provided for a royalty payment on production from the Logbaba gas and gas condensate project in Cameroon. The royalty is calculated on a sliding scale averaging 6.8 per cent. of project revenues over a 20 year anticipated project life.
Under the terms of the Acquisition, VOG has purchased 58 per cent. of PRM's shares in Cameroon Holdings Limited for a consideration of US$2.5 million in cash and drilling equipment to the value of $1 million. VOG has also agreed to purchase the remaining 42 per cent. of PRM's interest in CHL in 90 days for a cash consideration of US$2.5 million. The Company received an Exploitation Licence for the development of Logbaba Field by Presidential Decree on 29 April 2011.
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. The pipeline has a capacity of 60 mmscf/d, which is anticipated to be of sufficient size for the Douala industrial market over the medium term.
The Company's 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 VOG 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. The project is on schedule for delivery of first gas to customers in Q4 2011 and site preparation for the gas plant has begun and pipe laying to customers is also well underway.
Kevin Foo, Chairman of VOG commented, "This Acquisition is a value creative long term investment by the Company that should return multiples of the $6 million consideration over the project life and add considerably to project returns to shareholders."
