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Victoria Oil & Gas plc: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Victoria Oil & Gas to build non-grid business as part of diversification plan

Decentralised power supply is the way forward for Africa believes VIctoria's Kevin Foo
Gas flare
INVESTMENT OVERVIEW: VOG The Big Picture
Small CNG plants are a potential blue print for Africa as well as Cameroon says VOG

An ‘imminent’ resumption of its gas supply contract with Cameroon power group ENEO will be a major lift to Victoria Oil & Gas plc (LON:VOG).

Kevin Foo, executive chairman, told Proactive in August a resolution of the issues that saw the contract suspended last December was close and gas supply was set to resume within weeks.

WATCH: Victoria Oil & Gas confident of resolving ENEO contract 'within weeks

Foo said it was a shock when the contract not renewed, but Victoria seems to have been collateral damage in what is a much larger issue of power supply in Cameroon.

Victoria, through its Gaz Du Cameroun subsidiary, was producing and supplying almost 15mmscf (million cubic feet) per day from the Logbaba field when the ENEO contract was at its height.

Second quarter 2018 sales however totalled 320mmscf (3.3mln per day), compared to 726mln seen in the fourth quarter of 2017

GDC has a 57% stake in the field so its net sales over the second quarter were 183mln cubic feet versus 413mln.

Results will be affected especially as Victoria has high fixed costs.

Losses in 2017 were US$10.7mln, after revenues dropped to US$23.5mln from US$32.8mln but since then production to ENEO stopped.

50Mw contract

Foo hopes production will be approaching previous levels by the end of the year, though that assumes ENEO supply will be back online.

“We are in discussions and my own view is that ENEO power will come back in a couple of weeks.

The contract was to generate 50Mw of electricty and Foo hopes to be back' firing up 30Mw' when supply resumes with the other 20Mw to follow shortly thereafter.

“It’s been a long seven months but we are really in the home straight.”

ENEO had been taking some 53% of the gas from VOG’s Logbaba field and its Cameroon-based subsidiary Gaz Du Cameroun has seen sales more than halve due to the hiatus.

Foo says even when supplies resume it will build a non-grid operation to reduce its reliance on large grid customers such as ENEO.

Decentralised power for Africa

A recent collaboration with Turkey’s NaturelGaz will be used to establish a compressed natural gas operation (CNG) that can supply businesses and customers without the need for an expensive grid connection.

The two companies will set up a joint venture that will distribute CNG and provide power in a decentralised manner throughout Cameroon.

Gensets (generators) at the base at mobile phone towers can be micro grids or energy wells for villages.

If that works, it might become a template for utilising stranded gas assets throughout Africa believes Foo.

“This model is going to work in Africa. Grid power is not going to.”

NaturelGaz will build the small compression plants, which can process 1-2mmcf (million cubic feet) per day, with the price of CNG expected to be much lower than diesel that powers generators used widely at present in Cameroon.

Foo said the first CNG plant might be in operation as early as the second quarter of next year.

Victoria Oil & Gas is valued at £50.4mln at 34.8p.

 

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