Victoria Oil & Gas Plc, whose wholly owned subsidiary, Gaz du Cameroun S.A. ("GDC"), the onshore gas producer and distributor with operations located in the port city of Douala, Cameroon, is pleased to provide shareholders an operations update of the Company. The Company intends to revert to the regular provision of quarterly updates to shareholders.
- New Chief Executive Officer, Non-Executive Director announced & now on board.
- A daily average of 5.1 mmscf/d of gas plus 1,656 bbls of condensate was produced safely and sold to industrial customers, resulting in net revenue to GDC of US$5.3 million for Q1 2020 (unaudited).
- Grid power customer ENEO has arranged payment of four invoices amounting to a net total of US$2.9 million to GDC via "promissory notes" in the quarter (as has been done before).
- We continue to pursue full and regular payments from ENEO.
- A number of expatriate crew were evacuated from Cameroon due to the COVID-19 lockdown and we await the return of the expatriate members of the rig crew required to continue the La-108 remediation work.
- We are proceeding with the facilities enhancement project to lower the surface pressure and thus reduce the backpressure on the reservoir, adding deliverability and reserves.
RESPONSE TO COVID-19
The health, safety & wellbeing of our employees are our top priorities. In response to COVID-19, we are complying with all the instructions and guidance issued by the authorities in each of the jurisdictions in which we operate.
The situation in Cameroon, as with many countries at present, is rapidly evolving. To date GDC is still able to operate the wells, processing plant and pipeline without disruption, however this situation is constantly monitored. The impact on our gas sales directly attributable to COVID-19 to date is not material, however we remain highly vigilant. GDC has an emergency response plan to protect its staff and the operations in the event of a required closure should the Government enforce further restrictive containment measures. Certain expatriate rig crew were evacuated from Cameroon in light of the COVID-19 situation, which has affected the La-108 remediation work as set out below.
The London headquarters staff of the Company have been instructed and continue to work from home in line with U.K. Government instructions. We will advise shareholders as events unfold.
NEW CEO & BOARD MEMBER
- We are pleased to announce that Roy Kelly commenced as the new CEO of the Company on 23 March 2020.
- We also welcomed Rob Collins to the Board this past quarter as a Non-Executive Director and Head of the Audit Committee.
- A complete strategic and operational review was commenced, including the decision to provide our shareholders and the market with regular operational updates on at least a quarterly basis.
Grid Power - ENEO
On 14 September 2019, Altaaqa, the generator supplier to ENEO, suspended operations at ENEO's Logbaba site due to non-payment of invoices by ENEO. Consequently, GDC has not provided gas to ENEO since that date, but has continued to invoice ENEO based on Take-or-Pay provisions as per the binding term sheet. The suspension at ENEO's Logbaba site continues but VOG is aware that talks between Altaaqa and ENEO are occurring and the Company is optimistic of a resolution, although no timing can be predicted.
ENEO has arranged payment of invoices in full for May, June, July and August 2019, totalling US$ 5.1 million. To make this payment, ENEO provided GDC in March with four promissory notes, which have been used as collateral for a bridging facility with BGFIBank Cameroon ("BGFI"). BGFI is the banker to both GDC and ENEO in Cameroon. The promissory notes mature in monthly intervals from May to August 2020, and as each promissory note matures the facility will be settled. Until the notes are settled, the outstanding facility will be reflected as current borrowings.
This is not the first time ENEO has settled invoices on this basis. In 2017 ENEO provided 10 promissory notes which were cashed with BGFI against a bridging facility and ENEO honoured each note.
The gross amount of receivables outstanding from ENEO to 31 March 2020 is $US9.1 million (US$5.2 million net to GDC ). The promissory notes are already offset on this ENEO balance as at 31 March 2020, and the gross value of promissory notes received from ENEO is US$5.1 million (US$2.9 million net to GDC) as at 31 March 2020.
While this invoice settlement structure is not ideal, ENEO is paying its invoices, albeit in arrears, and continues to acknowledge their contractual commitments under the Gas Supply Agreement. GDC is actively working with the Government of Cameroon and ENEO to bring their past and future monthly payments under contracted terms (14 days from receipt of invoice). GDC expects to receive full payment of all outstanding amounts in due course, to conclude the fully termed agreement with ENEO and to secure the agreed payment guarantees.
GDC continues to safely produce and sell natural gas to over 30 customers in the Douala area, most of whom were previously burning diesel or fuel oil. Quarterly gross and net gas and condensate sales at Logbaba.
The remediation work on well La-108 was expected to commence during April, upon the arrival of the additional equipment which was sourced to perform the project. The equipment is now on site, however, due to safety concerns related to measures taken in-country regarding COVID-19, the snubbing rig contractor has evacuated their personnel until further notice. GDC is in discussions with the contractor to agree when their team can return to site. Until then, work on this project is delayed until further notice.
GDC will proceed with the enhancements to the Logbaba processing plant. This project will reduce the required wellhead pressures for continued operability of the processing plant at lower pressures. These works, with a gross estimated cost of $1.5 million, will be completed during 2020 subject to project execution.
AGM AND ANNUAL REPORT
In light of current COVID-19 circumstances, the Company may face challenges having its Annual Report prepared in time, and further may be prohibited from holding an in-person AGM as is required. The Company is presently exploring the option of a virtual AGM. We will advise shareholders as events unfold.
Roy Kelly, Chief Executive of the Company, commented:
"Whilst this quarter saw the spread of COVID-19 and some inevitable impact on VOG, we are pleased to report a solid performance from our operating divisions, including continued revenue from the Logbaba project at previously reported levels, and ongoing cost reduction in the SGI project in Russia. Looking forward, we have two capital projects on the Logbaba project that will hopefully take place this year and potentially add deliverability & reserves."