Victoria Oil & Gas, whose wholly owned subsidiary, Gaz du Cameroun S.A., the onshore gas producer and distributor with operations located in the port city of Douala, Cameroon, provides a corporate and operational update on key matters.

HIGHLIGHTS

The Company experienced a small number of positive Covid-19 cases in the Douala office over the last few weeks; the office was immediately sanitised and remains open only to those employees with a negative Covid-19 test. The staff affected were asymptomatic and have thankfully started to recover quickly and operations have not been affected. The Yamalo-Nenets Autonomous Okrug region of Siberia in which our West Med asset is located remains locked down for now due to COVID-19.

Cameroon Operations.

Recent weekday production has been 5.5 to 6.0 MMscf/d gross gas, but with the usual daily and weekly fluctuations, with one customer returning having paid off aged debt, and one customer increasing its consumption for both power and thermal.

Early La-108 Performance.

 Well La-108 was brought online on 15 February. The well was initially producing on its own and more recently in combination with another well to ensure that operations could be managed given contrasting wellhead pressures. The well started producing significantly more water than the other wells, and above what might be expected as water of condensation. Analysis of this water suggests it is significantly fresher than formation water and thus likely composed of drilling and completions fluid lost from the drilling (which started in 2016), through to the attempted remediation in 2019 and then successful remediation in 2020. The water-gas-ratio stabilised at around 50 bbls/MMscf, and has fallen below this in the last week. This level of water production (up to 200 bbl/d) is being managed well by the operations team. We propose to produce a larger volume from the well and then carry out a pressure build-up test.

West Med.

We have signed a non-binding term sheet with a potential buyer of VOG’s wholly owned subsidiary, ZAO SeverGas-Invest (SGI), which owns the West Medvezhye (West Med) licence. This buyer has instructed recognised third-party specialist advisors to conduct what we hope will be final, confirmatory due diligence on the asset. This potential buyer has a period of exclusivity which runs to 31 May 2021. The asset was fully impaired in VOG’s accounts in 2014.

Kemerkol.

 At the end of December 2020, VOG notified the Republic of Kazakhstan of its intention, failing an amicable settlement with the Government, to commence an investment arbitration under the Energy Charter Treaty. VOG has retained counsel and the arbitration is fully funded by specialist disputes funder Therium. The dispute arises out of a series of actions and omissions by the Government and its courts which ultimately deprived VOG of the value of its investment in the Kemerkol oil field located in Atyrau Oblast. After investing over US$35 million into the Kemerkol Field, Kazakhstan invalidated VOG’s rights to the Kemerkol Field, seized assets on site, and VOG was forced to suspend oil production in June 2008.  In the event the Parties are unable to make concrete progress towards resolving their dispute amicably by the end of May 2021, VOG will commence proceedings. Kemerkol was fully impaired in VOG’s accounts in 2009.

Matanda.

 Well planning, procurement of long lead items and rig selection are underway, and the farmout process has been started with several parties registering interest. The Environmental and Social Impact Assessment (“ESIA”) has been delivered for the Ministry’s consideration. Follow up meetings have been held with the Ministry of Environment[1] to plan the second phase of public hearings which form part of the ESIA process.

New Age Letter of Intent (“LoI”).

The LoI with New Age, which was originally announced on 5 February 2020, expired on 31 March 2021.  In consultation with SNH, GDC and New Age agreed to let the LoI lapse and expedite discussions with SNH on the way forward on the project in line with the Gas Code of Cameroon and the Country’s Gas Master Plan. As part of the process, GDC has offered to offtake up to 25 MMscf/d from Etinde, subject to a number of conditions. The whole project still remains conditional upon securing Final Investment Decision (“FID”) on the upstream project and award of an Independent Power Producer licence among other things. Recent public statements suggest that the Etinde partners are now likely to secure FID in 2022, before which they will need to renew their Exclusive Exploitation Agreement (“EEA”) and seek approval for a revised development plan.

RSM Litigation.

An ICC Arbitration panel will hear the substantive matters raised by RSM (GDC’s joint venture partner in the Logbaba field), and GDC’s counterclaims, in the third week of April (rescheduled from January). The UNCITRAL arbitration will be heard in London under Cameroon Law and is scheduled for hearing at the end of September 2021. Arbitrations under ICC and UNCITRAL rules are confidential processes and the Company is not permitted to provide detailed comments on them, beyond saying that the amounts of claims and counterclaims are material to the Company and that it continues to vigorously defend the claims raised by RSM. Our expectation is that each panel would take several months to deliberate and issue their rulings.

“We are very pleased at the significant progress that we have made as a company over the course of the past few months on a number of corporate and operational fronts. The company now has a well stock of four wells at Logbaba, albeit with very different production characteristics. The operations team have done a great job managing the different wellhead pressures during the multi-well operations, and the higher water production.

In the Matanda license, we’re pleased with progress on the ranking of prospects and the start of the well planning phase. We have initial interest in the farmout of Matanda but there is of course a long way to go in that process.

The interest shown in West Med has been very encouraging and we have for the first time entered into a short period of exclusivity with a potential buyer as they conduct serious due diligence using well-known specialists. Of course, we know this may not result in a binding bid or a sale but is nonetheless encouraging,” Roy Kelly, Chief Executive of the Company, commented.