Victoria Oil & Gas on track for production at Logbaba

Victoria Oil and Gas (VOG) said it was on track to commence production at its flagship Logbaba gas and condensate project in Cameroon before the year is out.

The junior oil and gas explorer said the Douala-based project is approaching its initial production phase with first gas sales anticipated by the end of this year now that a substantial part of the gas pipeline network is complete.

The entire section of pipeline to first customers on the Magzi Industrial Estate is anticipated to be installed within one month.

AIM-listed Victoria Oil currently has got 13 gas sales agreements currently under its belt and said it had "every confidence" of doubling that figures, believing it will have signed in excess of 40 customers within a couple of years of commencing operations.

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The existing gross proved and probable reserves of 212 billion cubic feet at Logbaba are sufficient to satisfy an average production of 30 million standard cubic feet a day for the next 20 years, the company said, but it plans to do more to fully characterise the Logbaba reservoir.

"With prospective resources in excess of one trillion cubic feet, the company has considerable upside if we can develop these resources into quantifiable reserves," it said in a statement.

But while the focus of attention is on Logbaba, Victoria Oil said it has also made great strides in Russia this year.

During the past 12 months, it has commenced conceptual screening and appraisal studies on West Medvezhye to optimise development of its prospective resource base. In September, prospective resources at West Med were reported to be in excess of 1.4 billion barrels of oil equivalent (boe) - exceeding a previous assessment by around 300 million boe.

On a financial note, the company also made progress in reducing its after-tax loss to $4.6 million for the year ended 31 May from $6.1 million the previous year.

Having raised £9.5 million last month, the company said it was now well capitalised for an "exciting year ahead" with cash flows being generated from Logbaba and development plans firming up at West Med.

"Today's results announcement did not contain any surprises. As such, we maintain that the group is significantly undervalued in light of the start of production from Logbaba in the near term. We maintain our 'buy' recommendation and target price of 10.8p," said Peter Bassett, analyst at Westhouse Securities.

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