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Investors Presentation June 2010
 

Investors Presentation June 2010

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    Investors Presentation June 2010 Investors Presentation June 2010 Presentation Transcript

    • Victoria Oil & Gas PlcTapping Gas Value in Cameroon 2010
    • DisclaimerTHIS PRESENTATION IS BEING SUPPLIED TO YOU SOLELY FOR YOUR INFORMATION AND MAY NOT BE REPRODUCED, FURTHER DISTRIBUTED TO ANY OTHER PERSON OR PUBLISHED IN WHOLE OR IN PART, FOR ANY PURPOSE.These presentation materials are confidential and are directed only at persons who fall within the exemptions contained in Articles 19 and 49 of the Financial Services and Markets Act2000 (Financial Promotion) Order 2005 (such as persons who are authorised or exempt persons within the meaning of the Financial Services and Markets Act 2000 (“FMSA”), or in theUnited States who qualify as an “accredited investor”, “qualified institutional buyer” or “qualified purchaser” under United States Securities laws, or an"accredited investor" under National Instrument 45-106 in Canada, and certain other investment professionals, high net worth companies, unincorporated associations or partnershipsand the trustees of high value trusts) and persons who are otherwise permitted by law to receive them. These presentation materials are directed only at persons having professionalexperience in matters relating to investments and any investment or investment activity to which these presentation materials relate is available only to such persons. Persons of anyother description, including those who do not have professional experience in matters relating to investments, should not rely on these presentation materials or act upon their content.This document is exempt from the general restriction on the communication of invitations or inducements to enter into investment activity and has therefore not been approved by anauthorised person as would otherwise be required by section 21 of the FSMA. Any investment to which this document relates is available to (and any investment activity to which it relateswill be engaged with) only those persons described above. Persons who do not fall within this category of investor should not take any action upon this document, but should return itimmediately to Fox Davies Capital Limited (“FDC”). Postage and other reasonable delivery costs will be refunded. It is a condition of your receiving this document that you fall within, andyou warrant to Victoria Oil & Gas Plc (the “Company”) and FDC that you fall within, the category of person described above.The presentation materials do not constitute or form any part of any offer or invitation to sell or issue or purchase or subscribe for any shares in the Company nor shall they or any part ofthem, or the fact of their distribution, form the basis of, or be relied on in connection with, any contract with the Company relating to any securities. Any decision regarding any proposedsubscription for shares in the Company must be made solely on the basis of public information on the Company. The presentation materials are not intended to be distributed or passedon, directly or indirectly, or to any other class of persons. They are being supplied to you solely for your information and may not be reproduced, forwarded to any other person orpublished, in whole or in part, for any other purpose. Any other person who receives this document should not rely or act upon it. By accepting this document the recipient represents andwarrants that they are a person who falls within the above description of persons who are entitled to receive this document. The information contained in this document is confidential andthe property of the Company.No reliance may be placed for any purpose whatsoever on the information contained in this document or on its completeness, sufficiency, accuracy or fairness. No representation orwarranty, express or implied, is made or given by or on behalf of the Company or its directors or employees, or FDC or their professional advisers or any other person as to thecompleteness, sufficiency, accuracy or fairness of the information, beliefs or opinions contained in this document and in the presentation and no responsibility or liability is accepted toplacees for any such information or opinions. Any reliance on this communication could potentially expose you to a significant risk of losing all of the property invested by you or theincurring by you of additional liability. Save in the case of fraud, no liability is accepted for any loss, cost or damage suffered or incurred as a result of the reliance on such information,opinions or beliefs.Certain statements and graphs throughout the presentation are “forward-looking statements” including management’s and third party assessments of future plans, operations, values andreturns and represent the company’s international projects, expectations or beliefs concerning, among other things, future operating results and various components thereof or thecompany’s future economic performance.These projections, estimates and beliefs contained in such forward-looking statements necessarily involve known and unknown risks and uncertainties which may cause the company’sactual performance and financial results in future periods to differ materially from any estimates or projections.These risks include, but are not limited to, risks associated with the oil and gas industry in general, delays or changes in plans with respect to exploration and development activities andcapital expenditures, the uncertainties of estimates and projections relating to production, political risks, costs and expenses and health and safety and environmental risks, commodityprice and exchange rate fluctuations, and uncertainties resulting from competition and ability to access sufficient capital, and risks relating to the ability to complete capital marketstransactions referred to in the presentation.If you are in any doubt about the investment to which these presentation materials relate, you should consult a person authorised by the Financial Services Authority who specialises inadvising on securities of the kind described in this document. FDC is acting solely for the Company as broker in relation to matters described in this document and is not acting for anyother persons and will not be responsible in respect of such matters to any other person (whether or not a recipient of this document) for providing protections afforded to customers ofFDC or for providing advice in relation to those matters.The distribution of this document in certain jurisdictions may be restricted by law and therefore persons into whose possession this document comes should inform themselves about andobserve any such restrictions. Any such distribution could result in a violation of the law of such jurisdictions. Neither this document, nor any copy of it, may be taken or transmitted intoAustralia, Ireland, South Africa or Japan or into any jurisdiction where it would be unlawful to do so. Any failure to comply with this restriction may constitute a violation of relevant localsecurities laws.
    • Key Points o  Victoria Oil & Gas Plc (VOG) is emerging as a significant player in natural gas production o  Logbaba gas and condensate field in Douala, Cameroon, is the only onshore gas discovery in the country o  The West Medvezhye (West Med) project in Siberia has independently estimated recoverable prospective resources of over 5 Tcf of gas o  Logbaba is poised to deliver first cash flows and profits for VOG o  Over 600 feet of gross sandstone pay in two wells o  In-principal agreements signed with industrial customers o  First revenues from Logbaba targeted in Q4 20103
    • Logbaba: First Mover Advantage o  Government plans announced to triple Cameroon power generation capacity in the next 10 years, much of which could be generated by gas o  The Logbaba field represents a unique opportunity to dominate the nascent natural gas market in Cameroon o  Competitive advantages:   The field lies beneath the major industrial city in the Central African Region   Agreements for gas off-take already signed with industrial customers in Douala   The only onshore gas discovery in the country   All facilities (drilling, processing and pipeline) will be operated by VOG   First gas Q4 2010 o  Plans announced to triple Cameroon power generation in the next 10 years4
    • Cameroon: Heart of Central Africa o  Cameroon is a member of the ECCAS Economic Community of Central African States (ECCAS) o  Members share trade markets and currency o  Douala is the deep-water port and industrial heart of the region o  Major companies such as Guinness and Nestle have facilities there o  Rio Tinto Alcan have a major aluminium smelter at Edea close to Douala o  Douala handles around 95% of import/exports for Cameroon, Chad and CAR o  Logbaba is located in the eastern suburbs of Douala5
    • Cameroon Gas: No Competition o  Logbaba remains the only onshore natural gas discovery in the country o  Due to Logbaba’s position and development, VOG also has the opportunity to beat larger operators in feeding new power projects o  Perenco’s offshore Sanaga Sud field yet to come into development despite location next to Kribi power station o  Limbe power station, north of Douala, relies solely on liquid fuels despite Total’s offshore discoveries nearby6
    • Logbaba: Summary Economics Management Forecasts Prices: Post-Tax NPV net to VOG Gas price Industrial Gas $16/mmbtu ($MM) 10% 15% IRR Industrial Power $16/mmbtu Industrial to gas & power(1) 405 271 64% Grid Power(5) $6.5/mmbtu Plus mini Power (2) 409 274 64% Plus LNG(3) 681 448 73% LNG $12/mmbtu Plus large power(4) 819 538 75% Condensate Limbe Refinery $75/bbl Fiscal Terms: Scenario 4 Reserves & Ratios Net to VOG Corporate tax 38.5% $MM $/boe Capex 1055 $9.6 Government Royalty 8.0% Opex 393 $3.6 Royalty to Rodeo Resources 1.2% Royalty to Cameroon 6.7% Reserves 578 Bcf Holdings R/P ratio 19 Years Scenarios (1) 8.5 mmcfd supplied for industrial customers for gas & power rising to 40mmcfd by 2013 (2) Case 1, plus VOG 10MW IPP - (incremental 2mmcfd) to be connected to the power grid (3) As in case 2 but VOG new LNG facility with incremental demand of 40mmcfd on stream by 2013 (4) As in case 3 but VOG supplying power to new IPP 200MW facility (incremental 40mmcfd) by 2013 (5) Gas for power generation to be connected to the grid has been priced at the approximate cost of generation until further negotiation with ARSEL – the state regulator7
    • Early Cash Flow – Captive Market •  Gas price is fixed at $16/MMBtu for first 5 years •  20 year exclusive gas supply agreements •  Base Case Payback in 2011 •  Low cost, first mover advantage for a captive market with severe power disruption and energy constraints •  Possible expansion in the future (2013 onwards) with mini-LNG & IPP options to markets further afield8
    • Logbaba: Exceptional Progress Winter 2008 Spring 2009 Autumn 2009 Summer 20099
    • Logbaba: Well La-105 Drilling o  La-105 was drilled to a total depth of 8,920 feet o  Multiple gas-bearing sands with over 300 feet of gross pay between 1,836 and 2,540 m correlating to La-103 o  La-105 was completed as a production well o  Logbaba wells are more complex and difficult to control than predicted o  Chronic lack of oil and gas infrastructure o  Drilling progress being far slower than expected due to the need for heavier mud10 weights.
    • Logbaba: Encouraging Early Results Due to encouraging LWD GR/Res Log from La-105 initial results, significant additional rig-time and expenditure was devoted to subsurface data acquisition to better evaluate the reservoir rock and fluid properties. Top Logbaba Fm at 1,735m TVDRKB This and the Sandstone application of latest technology are enabling VOG to Sandstone realise the true reservoir and well Sandstone potential at Logbaba. Sandstone11
    • Logbaba: Well La-105 Testing o  Multiple pay zones tested at La-105 Testing depths between 7,005 - 8,500 feet. o  Rates between 11 - 56 million standard cubic feet per day (MMscf/d) of natural gas and 210 - 1,000 barrels per day of condensate. Flowing wellhead pressures varied between 2,750 - 4,552 psi. o  The Upper Logbaba A through C sands, although indicated as the best quality hydrocarbon-bearing sands encountered in the well logs, were not tested as the well indicated more than sufficient production capacity to meet12 initial gas demand of 8 MMscf/d.
    • Logbaba: Well La-106 – Initial Data   Drilled deeper than planned to 10509 ft due to the better than expected observed sand quality in the Lower Logbaba sections.   Multiple gas-bearing sands encountered between 5482 feet and 10400 feet (measured depth) - Over 300 feet of gross pay Top most sand starts at 5482 ft (1671m) Example of deeper sand 9100 ft (2773m)13
    • Logbaba: Further Exploration o  90% of the block remains Passive Seismic Survey unexplored o  In late 2009, a passive seismic survey was commissioned o  Passive seismic is a direct hydrocarbon indicator o  Significant new structure 4 km north of the current well sites o  Best location on the current structure is as yet undrilled o  The new accumulations lie outside the area evaluated by RPS14
    • Vertically Integrated Strategy Pipeline Route VOG plans to install and commission a gas processing facility and its own gas pipeline to the industrial customers Approx 85% of industrial market within 10km Wells 105+106 and processing facility15
    • Concept Block Diagram Flare ~ LP LP Wells Well Manifold Separator ~ Pipeline Chokes Skid System (Condensate) Pressure Let Down ~ ~ Station Condensate Storage Power Generator Condensate To Industrial Tanker Consumers Switchgear Loading Condensate Transformer Diesel Tankers Generator (own use) Resurfaced Transmission Road Line16 To Limbe Refinery To Substation
    • Front End Engineering Design (FEED) Data collection studies We have commenced and nearly completed FEED studies o  Graphical Information System Project to merge satellite data with site and pipeline route survey o  Pipeline Route Selection and Network Design o  Definition of Customer Conversions o  Logbaba Site and Pipeline Route Survey o  Civil works   Soil sampling and analysis   Logbaba Site- •  Essential requirements: Process and Power Plant •  Accommodation, offices and warehousing   Pipeline construction and installation   Pre-qualification of Cameroon Civils Contractors17   HV Transmission Line to Logbaba Substation
    • Production Facilities Schedule18
    • VOG: High Impact Events o  VOG is targeting first revenues in Q4-2010 o  Test data and superior modern logs will be incorporated in an independent reserve re-estimation due in July 2010 o  Installation of the facility and construction of the pipeline is expected to be completed relatively quickly now that concept is confirmed19
    • Douala: Cicam Case Study o  Cotonniére Industrielle du Cameroun (Cicam) is the largest textile producer in ECCAS, with approximately 60% market share o  Current fuel cost for Douala facilities is around CFA 1Bn ($2.2 MM) o  Machinery purchased over a year ago still idle due to prohibitive energy cost o  Cicam estimate that converting to Logbaba gas would lower their energy cost by 30% and increase productivity by 400%20
    • Douala: Industrial Market o  Douala is one of Africa’s most important trade centres o  Energy needs satisfied by high-cost fuels such as diesel and fuel oil NB: Prevailing WTI price = $37/bbl o  Almost all fuels imported o  Petrol and diesel costs are Principal Businesses equivalent to UK o  Douala industrial market consumption estimated at 15MMcf/d equivalent o  Market expansion is stifled by the high cost of energy VOG has signed gas off-take agreements for 8MMcf/d fixed for 5 years at $16/mcf21
    • RPS Independent Valuation RSP Energy Competent Person’s Report Net Attributable Reserves and Resources 1P 2P 3P Total Liquids MMbbl 0.28 2.35 4.51 Natural Gas Bcf 7.92 64.53 123.91 Total MMboe 1.71 13.97 26.81 NPV valuation at 10% $MM 18.17 168.65 412.16 Source: RPS Energy o  RPS Energy undertook an evaluation of the Logbaba field in July 2008 o  65Bcf of 2P reserves with an NPV10 valuation of $169MM o  The evaluation only RPS review encompassed a small area (~6km2) section of the total 64km2 licence area22
    • West Med, Russia: Land of Supergiants o  West Med lies next to the super-giant Medvezhye field and the world’s largest field, Urengoy o  Medvezhye has produced about 75 Tcf of gas since 1972 o  Independent reserve auditors DeGolyer & MacNaughton estimated recoverable gross prospective resources of 1.1 Bnboe: o  5.1 Tcf gas o  247 MMbbl condensate o  25 MMbbl oil23 Source: Gazprom
    • West Med: New Exploration West Med Exploration Targets o  Second IPDS passive seismic survey completed Spring 2010 o  Geochemical survey over the same area also completed Exploration target area o  Stratigraphic traps could exist where West Med meets Medvezhye field o  Targets for further 2D and new drilling to be determined during summer 2010 Well 103 discovery24
    • Key Management Team Radwan Hadi Sam Metcalfe Geoff Gill Kamal Jardaneh Assistant Project Senior Petroleum Drilling COO VOG Manager Engineer Supervisor TECHNICAL Senior petroleum Over 25 yrs oil 15 yr career in oil 30 yrs of oil and engineer with over industry experience, and gas, gas experience, 23 30 yrs experience in worldwide. predominantly with yrs as drilling oil and gas including Has brought several Schlumberger superintendent / in Nigeria, Ghana North Sea gas Testing and then senior drilling and Equatorial projects into senior petroleum engineer for BP Guinea. production for major engineer with and currently a Former Head of corporations Blackwatch drilling consultant Planning in ADCO Kevin Foo Jonathan Scott Barratt Austen Titford Francois Nguene COMMERCIAL Commercial Gov’t Relations Chairman Financial Director Director Manager 39 yr career in the Former CEO of Chartered Accountant Former resources sector Eureka Mining Plc & with more than 17 years Exploration and including 19 years in executive director of experience, covering Production the FSU; former MD Celtic Resources Plc both the project Manager for SNH of Celtic Resources development and in charge of Chad- Holdings operational phases in Cameroon quoted natural resource Pipeline companies.25
    • Abbreviations Bnboe Billion barrels of oil equivalent MMboe Million barrels of oil equivalent MMbbl Million barrels of oil bbl/d Barrels per day mcf Thousand cubic feet of natural gas mcf/d Thousand cubic feet per day MMcf/d Million standard cubic feet of gas per day Bcf Billion cubic feet of natural gas Tcf Trillion cubic feet of natural gas $MM Million US$ $Bn Billion US$ km2 Square kilometres m Metres MMBtu Million British thermal units MW Megawatts tpa Tonnes per annum CFA Central African Franc26
    • VICTORIA OIL & GAS PLC HATFIELD HOUSE 52-54 STAMFORD STREET LONDON SE1 9LX Tel: + 44 (0)207 921 8820 Fax: +44 (0)207 921 8821 www.victoriaoilandgas.com info@victoriaoilandgas.com