Statement: re RSM Production Corporation
Victoria Oil and Gas (“VOG” or the “Company”), the AIM quoted emerging market natural gas utility and independent oil and gas exploration and production company with producing assets in Africa and exploration assets in the Former Soviet Union, notes the press release issued today by RSM Production Corporation (“RSM”) in relation to the Company’s interest in the Logbaba gas and gas condensate field in Douala, Cameroon (“Logbaba Field”).
Overview of VOG’s previous Communications
As announced on 19 July 2011, VOG increased its effective working interest in the Logbaba Field to 95%, following the serving of a Notice of Forfeiture (“Notice”) on RSM, which previously had held a 38% interest in the Logbaba Field. This course of action followed RSM’s repeated failure to pay cash calls pursuant to the terms of the operating agreement between the parties. The forfeiture of RSM’s interest in the Logbaba Field is subject to Texas law and operates automatically on service of Notice following RSM’s failure to rectify this default within the default period prescribed by the operating agreement.
As further announced on 25 October 2012, in the Company’s results for the year ended 31 May 2012, arbitration proceedings have been initiated by RSM in relation to the forfeiture of RSM’s interest and will take place in June 2013 (the “Arbitration”).
Clarification of the 2012 Presidential Decree
On 3 December 2012, a Presidential Decree (the “2012 Presidential Decree”) referred to by RSM was executed in order to correct the 29 April 2011 Presidential Decree (the “2011 Presidential Decree”) which erroneously stated that VOG and not its subsidiary Rodeo Development Limited (“RDL”) held the participating interest in the Logbaba Field. The 2012 Presidential Decree was therefore concerned to rectify an administrative error in the 2011 Presidential Decree and in doing so simply restated the participating interests of the parties as at 29 April 2011 which was before the Notice which led to the forfeiture of RSM’s participating interest in the Logbaba Field.
Response to the Claims Made by RSM
The Company categorically rejects any assertion by RSM that the 2012 Presidential Decree has any bearing on the forfeiture of RSM’s interest in the Logbaba Field pursuant to Texas law. The Republic of Cameroon are fully aware of the issues to be determined in the Arbitration and VOG and RDL have agreed not to request the Republic of Cameroon to formally record the forfeiture of RSM’s interest in a further Presidential Decree, pending publication of an Award in the Arbitration. This pragmatic approach is obviously correct in the circumstances where the dispute does not involve the Republic of Cameroon but in no way validates RSM’s claims in its press release.
VOG intends for these matters to be dealt with by the proper arbitral forum and anticipates that the Republic of Cameroon will formally record the forfeiture of RSM’s participating interest in the Logbaba Field following the publication of an Award in VOG’s favour on this issue at the conclusion of the arbitration proceedings.
Accordingly, VOG strongly rejects the claims made by RSM that it has failed to keep the markets properly informed in respect of this matter and can only assume that RSM is motivated to try to damage the Company in respect of its recent fundraising and in order to gain some advantage in the Arbitration.
VOG will continue to keep its shareholders informed of any material development, and a further announcement will be made in due course as approporiate.
About Victoria Oil & Gas
Victoria Oil & Gas Plc is an emerging market natural gas utility and independent oil and gas exploration and production company with producing assets in Africa and exploration assets in the Former Soviet Union. The Company’s principal assets are the Logbaba gas and condensate project in Cameroon and the West Medvezhye project in Siberia, Russia. Logbaba is located in Douala, the largest city and industrial capital of Cameroon. The field was discovered in the 1950s when all four exploration wells drilled at the time encountered gas. The Company drilled two successful development wells in 2009/10 and was awarded an Exploitation Licence in April 2011.
The Company’s Logbaba natural gas and condensate field is estimated to hold sufficient proven and probable reserves to supply an average of 30 mmscf/d for the next 20 years to industrial customers. Under current management projections, the Company forecasts industrial gas demand to rise to 44 mmscf/d along the current and planned pipeline expansion route. In the next 18-24 months, the Company will continue meeting the known demand of contracted customers and connecting them to the Company’s infrastructure to generate increased sales and revenues. The Company has signed gas sales agreements with industrial customers to serve their energy requirements and anticipates in excess of 40 customers over the medium term. In the longer term, the Company will investigate the potential opportunity to supply natural gas to large gas-fired power stations connected to the grid, with either VOG investing in an independent power producer joint-venture or selling the gas to third parties.
West Medvezhye is situated in the prolific Yamal-Nenetsk hydrocarbon region in Siberia. An independent audit, carried out by Mineral LLC in 2011, estimated prospective resources for the area of over 1.4 billion barrels of oil equivalent (‘boe’). The Company also has a discovery well, 103, with C1 and C2 reserves, independently assessed under the Russian classification convention of 14.4 million boe as approved by the Russian Ministry of Natural Resources.
Development studies are in progress to commercialise the Well-103 discovery and prospective resources and a detailed well design study for the upcoming drilling campaign has commenced. The Company is currently investigating potential a farm-out or a joint-venture or alternative options relating to West Medvezhye ahead of the upcoming drilling programme.