Investor Presentation - June 2011


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Investor Presentation - June 2011

  1. 1. Victoria Oil & Gas PlcFirst Onshore Gas Production in Cameroon
  2. 2. Disclaimer THIS 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 Act 2000(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 the United Stateswho 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 partnerships and thetrustees of high value trusts) and persons who are otherwise permitted by law to receive them. These presentation materials are directed only at persons having professional experience in mattersrelating to investments and any investment or investment activity to which these presentation materials relate is available only to such persons. Persons of any other description, including thosewho 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 an authorisedperson 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 relates will be engagedwith) 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 it immediately to Fox DaviesCapital Limited (“FDC”). Postage and other reasonable delivery costs will be refunded. It is a condition of your receiving this document that you fall within, and you 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 of them, orthe 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 proposed subscription forshares 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 passed on, directly or indirectly, orto 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 or published, in whole or in part, for any otherpurpose. Any other person who receives this document should not rely or act upon it. By accepting this document the recipient represents and warrants that they are a person who falls within theabove description of persons who are entitled to receive this document. The information contained in this document is confidential and the 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 or warranty,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 the completeness, 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 to placees for any such information oropinions. Any reliance on this communication could potentially expose you to a significant risk of losing all of the property invested by you or the incurring by you of additional liability. Save in thecase 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 and returnsand represent the company’s international projects, expectations or beliefs concerning, among other things, future operating results and various components thereof or the company’s futureeconomic 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’s actualperformance 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 and capitalexpenditures, the uncertainties of estimates and projections relating to production, political risks, costs and expenses and health and safety and environmental risks, commodity price and exchangerate fluctuations, and uncertainties resulting from competition and ability to access sufficient capital, and risks relating to the ability to complete capital markets transactions referred to in thepresentation.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 in advising onsecurities 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 any other persons and willnot 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 of FDC or for providing advice inrelation 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 and observeany 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 into Australia, 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 local securities laws.
  3. 3. Strategy - Growth and Profits Victoria plans to grow into a Mid Cap E&P company within 3 years by:   Building on cash flow and profits from the Logbaba gas project by becoming a leading player in new thermal and power projects in Cameroon   Acquiring suitably sized companies with outstanding reserve and production potential   Developing the giant West Medvezhye oil and gas deposit in Russia3
  4. 4. Key Points This year, Victoria Oil & Gas Plc (VOG) becomes the first natural gas supplier in Cameroon   Logbaba gas and condensate field in Douala is the only onshore gas discovery in the country – no competition   Industrial customers located on ‘our doorstep’   Strong government support and incentives for growth First revenues from Logbaba targeted in Q4 2011   12 Gas Sales Agreements signed with industrial customers, including some multi-nationals and in-principal agreements signed with many more   Price fixed at US$16/mmbtu for 5 years, 20 year exclusive contract terms   8 mmscf/d in 2012 rising to 44mmscf/d of production (7,300 boe/d) anticipated by end 2014   Over 600 feet of gross sandstone pay in two wells   212 BCF of 2P reserves and 1 TCF of Potential   Further large growth based on gas to power generation promoted by Government of Cameroon4
  5. 5. VOG Corporate Snapshot Background Directors and Management •  Listed on AIM in July 2004 DIRECTORS Kevin Foo Executive Chairman •  57% of the Logbaba gas field in Cameroon Grant Manheim Deputy Chairman   2P reserves of 212Bcf Robert Palmer Finance Director   Two appraisal wells completed as producers Austen Titford Executive Director in 2010   Award of the Exploitation Licence by Philip Rand Non-Executive Director Presidential Decree in April 2011 SENIOR MANAGEMENT   First gas sales in Q4 2011 Radwan Hadi Chief Operating Officer •  100% of West Med gas and condensate project Martin Devine Commercial Manager, London in prolific province in Western Siberian basin SENIOR CAMEROON MANAGEMENT   Prospective resources of 1.1Bnboe Jonathan Scott-Barrett Managing Director, Cameroon   Proved & Probable reserves of 14.4 mmboe Divine Mofa Operations Manager •  Market Capitalisation - £110 million Francois Nguene Government Relations Manager Martin Bihaya HSE Manager •  Key shareholders Clovis Kape Engineering Manager •  Noor Petroleum Ghislain Fotue Financial Controller •  Management Dairou Honore Environmental Manager •  Barclays5
  6. 6. The Logbaba Story A production facility The gas sales and consisting of two 20 marketing team has MMscf/d production signed many industrial units will clean the gas customers, including and extract some multinational condensate for market. firms, for gas delivery Expro are supplying in 2011 and the and operating the plant Company expects in the initial phase. many more customers The gas distribution network serving to be signed before first gas sales. Customers Douala’s industrial are expecting annual customers will be fuel savings in excess constructed in unpaved of 30%. In 2009 and 2010, RDL ground, black top drilled 2 wells, La-105 highway and land & La-106 at a cost of adjacent to the Douala $53m. La-105 tested at rail network. The total gas distribution prolific rates of up to network will be 55mmscf/d while The pipeline has a approximately 32 km in La-106 tested at rates design capacity of 60 length comprising pipe of up to 22 mmscf/d. mmscf/d which can be diameters between Both wells have now increased with higher 400mm and 63 mm and been completed as operating pressures. a normal operating production wells. pressure of 5.5 barg.6
  7. 7. Logbaba: Well Testing La-105 Testing La-105   Multiple pay zones tested at depths between 7,005 - 8,500 feet.   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 La-106   Flowed at up to 22mmscf/d and well head pressures up to 3,078 psi   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 meet initial gas demand of 8 MMscf/d.7
  8. 8. Logbaba Reserves Update: October 2010   VOG reserves consultant Blackwatch integrated the recent well logs and well test data from the successfully drilled and completed new wells La-105 & La-106 and the original four wells Logbaba Reserves, 100% Basis (Bcf) Category Jul-08 Oct-10 Logbaba Field Upper Logbaba Proved Reserves (1P) 10 49 Proved + Probable Reserves (2P) 104 212 Proved + Probable + Possible Reserves (3P) 202 350 Entire Logbaba Block Prospective Resources n/a >1000 VOG 57% Net Working Interest   Logbaba Proved Reserves increase five fold to 49 Bcf   Proved plus Probable (2P) reserves more than double to 212 Bcf   Prospective Resources evaluated to be in excess of 1 Tcf8
  9. 9. Logbaba: Exceptional Progress Surveying Pipeline Route Pipeline Preparation Process Plant Pipeline Arrival on Site9
  10. 10. The Pipeline Route VOG will install and commission a gas processing facility and its own gas pipeline to industrial customers Approx 85% of industrial market within 10km10
  11. 11. Market – The Case for Gas   Natural gas is the cleanest of Customer Specific Benefits all fossil fuels; reduces   Energy needs are currently emission of greenhouse satisfied by high-cost fuels gases; reduces risk of smog, such as diesel and fuel oil resulting in cleaner and   Almost all fuels imported – healthier air in urban areas supply issues   Douala is one of Africa’s most   Petrol and diesel costs are important trade centres and is equivalent to UK a major hub for Central Africa   Circa 30% fuel bill savings   In all developed and   Improved boiler efficiencies and developing countries, the life through reduction of scaling and soot; availability of gas leads to rapid growth in energy   Reduced maintenance costs and consumption and industrial less downtime; expansion   Reduced pumping, storage and heating costs11
  12. 12. Douala: Thermal Market Cameroon Fuel Prices   Douala’s thermal market is $/MMbtu currently supplied by: Diesel: 454 CFA/L 27.99 Butane/Propane: 213 CFA/L 19.05   Heavy Fuel Oil -largest Fuel Oil: 454 CFA/L 20.50   Diesel - very expensive Kerosene: 500 CFA/L 29.93 Source Rodeo Development Limited/SNH: April 2011   Waste oil - huge problems   LPGs –small market share Current & Potential Customers Chemical Food Processing Breweries Industry USICAM CCC SABC CHOCOCAM CCIC GUINNESS   Douala thermal industrial market NESTLE PLASTICAM ISENBECK consumption estimated at SIC CACAOS CEP UCB TELCAR COCOA CIMENCAM 15mmscf/d equivalent PASTA PANZANI SOPICAM SAFCA Metallurgical MINOTERIES PILCAM STELL WORKS   Market expansion is stifled SRC MAYA LITTOCOL ALUBASSA by the high cost of energy GRANDS MOULINS CAMLAIT FERMENCAM SOCAFER SOCVER CICAM VOG has signed gas off-take agreements for approximately 8mmscf/d fixed for 5 years at $16/mmbtu12
  13. 13. Douala: Total Industrial Market   The Company is focused on gas sales to end users to replace alternative liquid fuels for industrial thermal Near Term Markets (heat) requirements   However, our near term strategy (1 to 3 years) is to serve three markets with the sale of natural gas, namely:   Substitution of HFO, LPGs and waste oil used by industrial customers for their heat requirements;   Gas sales to industrial customers to supply their own gas fired generators;   On-site power generation to a group of customers to limit reliance on the grid.   VOG anticipates sales of 44mmscf/d by end 2014   In the longer term, as further reserves are proven, gas may be supplied to large gas fired power stations connected to the grid13
  14. 14. Douala: Cicam Case Study   Cotonniére Industrielle du   Current fuel cost for Douala Cameroun (Cicam) is the largest facilities is around CFA 1Bn textile producer in ECCAS, with ($2.2 MM) approximately 60% market share   Machinery purchased over a   Cicam estimate that converting to year ago can now be Logbaba gas would lower their economically operated due to energy cost by 30% reliable lower cost energy14
  15. 15. Commercial Summary   Gas price is fixed at $16/MMBtu for first 5 years   Potential market needs of 44mmscf/d by 2014   20 year exclusive gas supply agreements   Base Case Payback in 2013   Possible expansion in the future (2013 onwards) with mini-LNG & IPP options to markets further afield   Big picture integration with major mining projects15
  16. 16. 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 Proved(1) 117 94 25% Proved & Probable(2) 406 293 52% Grid Power(5) $6.5/mmbtu Proved, Probable and Possible(3) 560 382 55% LNG $12/mmbtu P3 plus Prospective Resources(4) 1,164 759 74% Condensate Limbe Refinery $75/bbl Discounted to 1.1.11 Fiscal Terms: Logbaba Gross Costs, Reserves & Ratios Reserves Capex Opex Corporate tax 38.5% (BCF) ($MM) ($/boe) ( $MM) ($/boe) ($/mcf) Government Royalty 8.0% P1 49 156 15.0 86 8.3 1.4 P2 212 396 8.9 181 4.1 0.7 Other Royalties 5.6% P3 350 649 8.8 275 3.7 0.6 P3 + PR 1,350 2,168 7.7 882 3.1 0.5 Scenarios: (1) 8.5 mmscf/d in 2012 rising to 20mmscf/d supplied to industrial customers for gas & on site power (2) 8.5 mmscf/d in 2012 supplied to industrial customers for gas & on site power rising to 44 mmscf/d plateau production by 2014 (3) As in case 2 but rising to 60 mmscf/d plateau production by 2015 (4) As in case 3 but VOG supplying gas to new IPP 500MW facility (with 125mmscfd) by 2015 and a new LNG facility with 40 mmscf/d incremental demand by 2013 (5) Gas for power generation to be connected to the grid has been priced at $6.50 per mmbtu until further negotiation with ARSEL, the state regulator16
  17. 17. Key Tasks to Production   Re-opening wells La-105 and La-106;   Installation and commissioning of the leased process plant;   Trenching, jointing, installation and commissioning of the gas pipeline network; and   Arrangements on customer sites for installation of pressure reduction and metering stations and boiler conversions.17
  18. 18. Logbaba: Further Exploration Passive Seismic Survey   The majority of the block remains unexplored   In late 2009, a passive seismic survey was commissioned   Passive seismic is a direct hydrocarbon indicator   Significant new structure 4 km north of the current well sites   Best location on the current structure is as yet un-drilled18
  19. 19. West Med, Russia: Land of Supergiants   West Med lies next to the super-giant Medvezhye and Urengoy fields   Medvezhye has produced about 75 Tcf of gas since 1972   25 Year Exploitation License granted for West Med   Independent reserve auditors DeGolyer & MacNaughton estimated recoverable gross prospective resources of 1.1 Bnboe:   5.1 Tcf gas   247 MMbbl condensate   25 MMbbl oil19 Source: Gazprom
  20. 20. West Med: New Exploration West Med Exploration Targets o  4 wells drilled, one discovery well, 103 o  Well 103 has C1 and C2 reserves estimated at 14.4 mmboe Exploration o  Recoverable resources for well target area 103 estimated at 170.6 mmboe o  Second IPDS passive seismic survey completed Spring 2010 o  Geochemical survey over the same area also completed o  Targeting stratigraphic traps where West Med meets Well 103 Medvezhye field discovery o  Further 2D and new drilling targets to be determined during summer 201120
  21. 21. Appendix21
  22. 22. History of Logbaba Gas Project In early 2010, successful drilling was completed and well La-105 tested at 55mmscf/d and La-106, the second well was drilled and tested up to 22 MMscf/d. SNH approved RSM Production Corporation the Discovery Report and Field signs concession Agreement with Development Plan. The gas the Government of Cameroon. No processing plant has also been Elf drilled 4 wells around exploration work during this Victoria Oil and Gas Plc, a UK delivered and is ready for Logbaba prospecting for oil, period. The operating company in company listed on the London construction. In the meantime, the but found gas. As there was Cameroon, Rodeo Development Stock Exchange, with oil and HDPE pipes required to transport no use for gas at that time the Ltd (RDL) was incorporated to gas assets in Russia and the natural gas to industry in Douala wells were capped. manage the Logbaba project. Kazakhstan, acquired Bramlin. were delivered ready for installation 2001 2010 1950s 2008 First Gas Q4 2011 1950-1999 2005 2009 2011 There was no exploration activity Bramlin Plc, a British For the first time since the The President of the Republic of during this period and Total/Elf/ company listed on the London 1950’s a drilling rig was Cameroon, S.E. President Biya, Fina relinquished their license in Stock Exchange signed a joint shipped to Douala from signs the Exploitation Licence on 1999. venture farm-in agreement Portugal and in September the 29th April, 2011. with RSM for the Logbaba 2009, drilling started on the Concession. first well La-105. This was the first exploration activity since the 1950’s.22
  23. 23. Logbaba Facilities & Engineering Progress   All engineering studies complete   Award of process plant contract to Expro   GIS project to merge satellite data with the site and pipeline route survey   Pipeline route selection and network design   Definition of customer conversions   Civil works   Soil sampling and analysis   All equipment required to re-open the wells, and commission and install the process plant and pipeline is now in Douala23
  24. 24. Key Management Kevin Foo Austen Titford Jonathan Scott-Barrett Martin Devine Chairman Executive Director Managing Director, Commercial Manager RDL 40 Year career in the Chartered Accountant Over 20 years in the 10 years upstream oil resources sector with more than 17 years resource sector. Former and gas experience including 19 years in the experience, covering CEO of Eureka Mining including corporate FSU; former MD of Celtic both the project Plc & executive director finance M&A and Resources Holdings development and of Celtic Resources Plc , debt advisory with JP operational phases in non-executive director of Morgan Chase quoted natural resource Hanson Plc 1991 to companies. 2000 Radwan Hadi Sam Metcalfe Andrew Wright Divine Mofa COO VOG Senior Reservoir Operations Manager, Engineer Project Director RDL Senior petroleum Over 25 yrs oil engineer with over 30 industry experience, Over 30 years experience Over 15 years of oil & gas yrs experience in oil worldwide. in upstream development industry experience as a and gas including in Has brought several including BP & Noble project manager and Nigeria, Ghana and North Sea gas Energy; MBA from City engineer working for J. Ray Equatorial Guinea. projects into University &Geology McDermott, Oceaneering Former Head of production for major degree from Oxford and Alseas. Divine is a Planning in ADCO corporations graduate from Prairie View A&M University in the US24
  25. 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 Franc25
  26. 26. VICTORIA OIL & GAS PLC 1st FLOOR, HATFIELD HOUSE 52-54 STAMFORD STREET LONDON, SE1 9LX Tel: + 44 (0)207 921 8820 Fax: +44 (0)207 921 8821