Victoria Oil & Gas Plc (Victoria Oil & Gas), through its subsidiary, Rodeo Development Limited (RDL) has signed agreements with Cameroon Holdings Limited (Cameroon Holdings) for the provision of drilling services, local advisory services and funding for Logbaba. Cameroon Holdings will provide a 1,000 horse-power drilling rig and drilling crew at a discounted operating rate and a minimum of $4 million to a maximum of $10 million in cash for well-site equipment.
Cameroon Holdings will also provide in-country advisory services and assistance for the first 300 days of operation of the project. As compensation, Cameroon Holdings will receive an average royalty payment of about 7% from RDL’s share of gross revenue over the life of the project.
Cameroon Holdings also has the option of providing step-in finance should it be necessary to complete the development in the event that Victoria Oil & Gas requires additional funding. The Transaction provides for interest on the finance provided and security over the rights to the Project in the unlikely event that Victoria Oil & Gas defaults on its obligations.
The rig, which has been inspected, certified and packed in Portugal, is now en route by ship to Douala and is expected to arrive in mid-July. Once the rig is in place at the drilling location, the Logbaba exploration license will be automatically extended until the first well is completed.
Logbaba is a proven discovery, with total independently assessed 2P reserves of 104 billion cubic feet of natural gas, located beneath the country’s largest city, Douala. Victoria Oil & Gas has already signed gas off-take agreements for up to eight million cubic feet per day with some of the city’s major industrial consumers and management believes that the first two wells will yield more than sufficient gas to service this initial market.
Commenting today on the signing of the agreements, Deputy Chairman Grant Manheim said, Satisfying the technical requirements of this extraordinary project with the resources available to us has been Victoria Oil & Gas’ priority since we acquired Logbaba in late 2008. The arrangements with CH, which we started negotiating in April, should allow us to fulfill our drilling requirement, which is a significant achievement.”
The arrangements with CH will provide Victoria Oil & Gas with a drilling rig, the team to operate it, at least US$4 million funding and the support and attention of an established local business. For these services, Victoria Oil & Gas pays nothing until work commences and CH shares the front-end geological risk in return for a production royalty. CH’s return will not come until Logbaba commences commercial production. With CH as our partners and the rig on the water to Douala, the Project is now underway.