Q2 2017 Operations Update
Q2 2017 Operations Update
Victoria Oil & Gas Plc, a Cameroon based gas producer and distributor, is pleased to provide an update on the Group’s operations for the three months ended 30 June 2017.
- 9% increase in gross average gas production from Logbaba to 14.59mmscf/d (Q2 2016: 13.04mmscf/d)
- Gross Logbaba gas sales increased to 1,192mmscf for the quarter (Q2 2016: 1,151mmscf)
Drilling new wells
- Completion, flow testing and network supply input at well La-107 is scheduled for Q3 2017
- Well La-107, as of 30 July 2017, has been drilled to 2914m Measured Depth (“MD”), and 2901m Total Vertical Depth (“TVD”) and a 7” liner has been run to 2,440m (2,426m TVD) and cemented in place
- Well La-107 has, to date, encountered a net pay of 35m of high permeability, high porosity gas bearing sands in the Upper Logbaba Formation, slightly more than was expected, based on the La-104 logs. Preliminary results indicate that a further 15m of net gas sand has been encountered in La-107 in the Lower Logbaba Formation
- Engineering design work has been completed to allow La-108 to be side-tracked, through the Logbaba Formation, to access the 100m of gas sands found in the original La-108 wellbore. Drilling will commence after the completion of La-107
Q2 (unaudited) financial highlights:
- $7.8 million net revenue (Q1 2017: $8.1million)
- $7.6 million cash position at quarter end (Q1 2017: $10.5 million)
- $20.7 million net debt position at quarter end (Q1 2017: $10.7 million)
- 5% Cameroonian State participation in Logbaba; 3% relinquished by Gaz du Cameroun S.A. (“GDC”)
Ahmet Dik, Chief Executive Officer of VOG, commented:
“I am pleased that in this period we delivered further positive drilling results, particularly from La-107. The detection of an additional 15m of gas-bearing reservoir sands in the Lower Logbaba and the planned production flow testing at La-107 are encouraging signs as we take the first steps towards our longer-term objective of producing 100mmscf/d.
Once we flow test La-107, VOG plans to enter into long term gas supply agreements with large offtake customers.
The onshore field development programme at Matanda is progressing well, presenting VOG with an exciting opportunity to develop gas supply for sale from sources with low capex exposure.”
The quarterly gross and net gas and condensate consumptions, for Logbaba and GDC, are as follows; amounts in bold are gas and condensate sales attributable to GDC*:
|Q2 2017||Q1 2017||Q4 2016||Q3 2016||Q2 2016|
|Gas sales (mmscf)|
|Average gas production (mmscf/d)||14.59||14.57||7.64||7.14||13.04|
|Condensate sold (bbl.)||9,147||5,437||8,816||5,290||7011||4,207||6,786||4,072||12,457||10,826|
* After reaching a cost recovery milestone on Logbaba during Q2 2016, GDC received 60% of revenues from Logbaba in accordance with its participating interest. Prior to this date GDC received 100% of revenues as a recovery of exploration costs. In June 2017, Societe Nationale des Hydrocarbures (“SNH”) executed its right to a 5% participation in Logbaba resulting in GDC’s participating interest decreasing to 57% and the figures from the effective date onwards have been adjusted accordingly.
Gas sales from Logbaba of 1,192mmscf was the project’s highest quarter to date. GDC’s attributable gas sales volumes, whilst slightly higher than Q1 2017, are lower than Q2 2016 owing to the change in attributable revenues and the SNH participation mentioned above.
Logbaba Drilling Programme
At the end of Q2 2017, a 7” liner was run and cemented in well La-107 at 2,440m MD (2,426m TVD). Post period end, La-107 has continued drilling in a 6” hole from the 7” liner shoe to a current depth as of 30 July 2017 of 2914m MD.
As previously announced Well La-107 has, so far, encountered a net pay of 35m of high permeability, high porosity gas bearing sands in the Upper Logbaba Formation, slightly more than was expected based on the La-104 logs.
In the La-107 6” hole section that is currently being drilled through the Lower Logbaba Formation, preliminary LWD (Logging While Drilling) data indicates that approximately 15m of net gas sand has been encountered.
The drilling programme has taken longer than expected due to the problems encountered in well La-108. First well completion, at well La-107, is targeted for Q3 2017 with flow testing and tie in to the process plant scheduled at the same time.
Following commercial completion of La-107, sidetrack drilling will recommence at La-108 where approximately 100m of net gas-bearing sands have been encountered between the top of the Logbaba Formation at 1,670m TVD and at 2,702m TVD. This programme will allow the Company to bring gas online imminently for sale from La-107 and then develop further capacity from La-108.
ENEO and Power Consumer Update
During the quarter, the Company announced that it had extended the current gas supply agreement with ENEO Cameroon S.A. (“ENEO”), the Cameroon energy joint venture between UK Group Actis and the Cameroon Government, until 31 December 2017.
The parties are currently developing the technical and financial elements of a long-term gas supply arrangement aimed at increasing the current contractual power supply of 50MW to beyond 100MW.
The take-or-pay components will remain in place and until year end; an interim gas price of US$7.50/mmbtu has been agreed. GDC estimates demand for gas in Douala at around 150mmscf/d, and supply is limited to what GDC can produce. Once the La-107 flow test is complete, the Company is confident it will execute a number of long term- high volume gas supply agreements with local companies.
As announced on 4 July 2017, the Company entered into a Participation Agreement, enabling SNH to take up a 5% participating interest in the Logbaba Project.
As a result, with effect from 12 June 2017 the Group’s participating interest has reduced from 60% to 57% to accommodate SNH’s interest.
Matanda Exploration Update (75% participating interest and operator)
Work continues on definition and evaluation of the on-block prospect inventory. The work will form the basis of a drilling campaign, with an objective to commence drilling operations during Q4 2018 / Q1 2019.
Analyses conducted during the quarter have led the Subsurface Team, in conjunction with Management, to prioritise the drilling of shallower, lower pressure targets than those in Logbaba. The ability to unlock long term gas supply from this substantial block with reduced capital and operational expenditure is significant and an exciting prospect for the Company.
Sam Metcalfe, the Company’s Subsurface Manager has reviewed and approved the technical information contained in this announcement.