Q4 2015 Operations Update
Victoria Oil & Gas Plc provides this update on the Group’s operations for the three month period ended 31 December 2015 (the “quarter” or “Q4”). The Company has changed its accounting reference date from 31 May to 31 December and will be presenting its next audited results for the seven month period ended 31 December 2015 by the end of May 2016. The change of accounting reference date will align the financial reporting calendar with future quarterly operational updates. Today’s quarterly results contain an enhanced level of financial detail and operations analysis including unaudited revenue and net cash, and supply statistics.
- 7.1mmscf/d Q4 average gas production (Q3 2015: 8.2mmscf/d)
- 73% increase in production average compared to Q4 2014 (4.1mmscf/d)
- Maintained customers and prices despite adverse market conditions
- 625.6mmscf gas sold Q4 2015 (Q3 2015 717.7mmscf)
- 2,867.7mmscf of gas sold for the 12 months to 31 December 2015 (1,271.7 mmscf for the 12 months to 31 December 2014)
- The 14 days to 17 January 2016 produced an average production of 15.3mmscf/d with a peak of 16.6mmscf/d
- Group Q4 unaudited financial highlights
- $7.6m revenue (Q3 2015: $9.0m)
- $13.1m cash position (Q3 2015: $12.8m)
- $5.9m net cash position (Q3 2015: $4.9m) *
*net cash is defined as cash equivalents less borrowings
The period marked the third quarter of supply to ENEO and overall production was in line with expectations based on known seasonal fluctuations in gas demand. The continual erosion of the global oil price however has had minimal effect on the Gaz du Cameroun SA (“GDC”) business in terms of gas price changes or customers changing back to oil.
The quarter covered the second half of the wet season where gas consumption in the grid power sector is lower due to higher availability of hydroelectric power. Average daily production was 7.1mmscf/d during the quarter of which 3.4mmscf/d was attributable to grid power.
Importantly, GDC has maintained customers at their contracted prices and these prices, which are not tied to oil, distinguish us from other junior oil and gas companies. Despite the large drop in the oil price both internationally and locally, GDC maintained its selling price for gas. This ranged between $9 to $16 per mmbtu or a weighted average price of more than $60/BOE. Our customers have stayed with gas because it is a reliable, clean and conveniently available source of energy that leaves a much smaller carbon footprint than alternatives.
January marks the return to the dry season and associated higher gas utilization, with the grid power sector now recording consistent consumption in excess of 9.0mmscf/d. The increase in consumption is due to the take-or-pay terms with ENEO, the national power joint venture entity with Actis, whereby minimum consumption levels are split into six-month periods covering the dry (January- June) and wet (July – December) seasons.
The quarterly gas and condensate consumption is as follows:
|Q4 2015||Q3 2015||Q2 2015||Q1 2015||Q4 2014|
|Gas sales – Thermal and Retail Power (mmscf)||315.3||350.0||302.5||340.7||374.4|
|Gas sales – Grid Power (mmscf)||310.3||367.6||817.5||63.9||0.0|
|Gas sales – Total (mmscf)*||625.6||717.6||1120.1||404.5||374.4|
|Average daily gas production (mmscf/d)*||7.14||8.19||12.6||4.5||4.1|
|Condensate sold (bbls)||8,608||10, 878||13,445||6,345||2,265|
* Production rates are calculated from metering at the process plant. Sales figures are calculated from the individual PRMS units at customer sites. There is always a slight variation between the two figures due to gas in the pipeline, flaring and differing levels of metering accuracy.
Thermal gas sales remained reasonably consistent with previous quarters and management expects this to continue until the capital expansion projects described below are completed. These projects will allow for the addition of further thermal and retail power customers.
Grid power consumption is expected to increase significantly during the first half of 2016. The 14 days to 17 January 2016 produced an average total production of 15.3mmscf/d with a peak of 16.6mmscf/d.
Condensate sales are a by-product of the gas production process and volumes sold are expected to reflect the volumes of gas produced.
Our drive in 2016 is to ensure there is sufficient capacity to bring on major new customers by increasing reserves, plant capacity and pipeline reach. At present the production plant capacity is constrained at 20mmscf/d. In addition, finding flexible new applications such as CNG that can add capacity for our existing markets remains a priority.
GDC, as holder of the Group’s 60% participating interest in the Logbaba concession, is currently entitled to 100% of the revenue generated by the Logbaba project. The concession agreement provides for this allocation of revenue to continue until gross revenues equal the initial exploration costs incurred in the drilling of the two operational wells. Management expects that this point will be reached during the first half of 2016. Thereafter revenues will be split in accordance with the participating interests, which will impact the revenues and profitability attributable to GDC.
GDC Chief Executive Officer and VOG Director Ahmet Dik said:
“Our business continues to prove its resilience despite a challenging macro environment, delivering another strong production performance when set against the comparative period last year. Looking ahead to 2016, our focus is on increasing capacity to service a larger, more diversified customer base. We believe that through the continued delivery of safe, clean, reliable and accessible sources of energy from our gas, VOG can continue to strengthen its position as a provider of choice.”