By Amy McLellan
Victoria Oil & Gas has acquired the Logbaba gas processing plant, which processes and separates the output from its Logbaba gas-condensate field in Cameroon, for US$2.578 million. The AIM-quoted gas company funded the purchase from cash flows from its growing gas production and distribution business: the condensate is sold to a local refinery and clean natural gas is distributed to customers through its 33 km pipeline network in the industrialised region of Douala.
Kevin Foo, executive chairman of GDC, VOG’s 100 per cent owned subsidiary in the country, said the purchased was a “key milestone” that will bring “significant cost savings”. He added that the company was now evaluating options to expand the plant.
Analysts at SP Angel Corporate Finance welcomed the deal as a “solid step forwards, and one that provides an increasingly stable and solid platform from which to continue to build its business”.
Certainly the company is on a roll. After a number of slow years as it battled the realities of building a gas-based infrastructure from scratch in Cameroon, momentum has been building.
Its gas offers heavy end-users a more reliable, cheaper and cleaner source of energy than the alternatives, such as expensive heavy fuel oil or seasonal hydroelectricity. It now pipes gas to industrial customers and is also delivering on a 50 MW gas-to-power deal with local partners, a deal that Foo rightly called “game-changing”.
That deal, signed at the end of 2014, saw VOG commit to supply gas to generate 50 MW, which draws on 10.1 million cf/d of gas, of which the minimum take or pay component is 90 per cent in the dry season and 30 per cent in the wet season. Since the 50 MW came online last month, production from the field has averaged 14.5 million cf/d, with a daily peak of 15.3 million cf/d. Under the terms of the contract, the gas sells at a fixed price of US$9/mmbtu.
Foo pointed out it had taken less than four months to get from contract signing to delivery of 50MW to the grid. “Average production levels have risen to 14.5 million cf/d, three times higher than levels at the end of 2014, which underlines this transformational agreement for VOG and give us confidence GDC can meet its average production target of 10.4 million cf/d for calendar year 2015,” he said.
As this starts to yield positive cash flows, boosted by the cost savings yielded by the acquisition of the processing plant, it is clear that 2015 is shaping up to be a very significant year for the AIM company. An interesting year ahead.