Victoria Oil & Gas PLC (LON:VOG) told investors that its power generation customer ENEO has now doubled its consumption levels, following December’s gas sales deal, and its power station is operating at full capacity at 30 megawatts.
Gas consumption has recently exceeded the ‘take or pay’ level of 4.88mln cubic feet per day, VOG said in a stock market statement.
WATCH: Victoria Oil & Gas looks ahead to increased cash flow and market recognition after ENEO renewal
The Cameroon-focused gas company’s production update on Monday highlighted that its average gas production rate measured 8.5mln cubic feet per day for the month to date (as of 19 January).
In the seven days ended January 19, the average rate was marked at 9.9mln cubic feet and the peak rate for the year to date was set on January 18 at 12.96mln cubic feet.
“Whilst gas supply for grid power to ENEO and to others will always be a key strategy of the group, the board, as previously announced, is focussed on the importance on the diversification of the customer base to reduce dependence on any single customer,” the company said in a statement.
“Our industrial customers are consuming at record levels as reported in our fourth quarter 2018 operations update and the business development of these and other routes to market continue to be developed.”
It noted the terms of the gas sales deal, under the December agreement, which is a three-year arrangement with peak delivery of 6.1mmscfd to be made available to the Logbaba station on an 80% minimum Take or Pay basis throughout the year.
The terms equate to a minimum average additional gas supply of 4.88mmscfd – differing from the prior arrangement with ENEO, which contained a seasonal minimum take or pay element of 90% during the January to June dry season and 30% during the wet season July to December.
VOG noted that the initial gas sale price of $6.75 per MMBtu will increase over the three-year term of the agreement by $0.10/MMBtu on each anniversary of the effective date of the agreement.
In a note to clients, analysts at ‘house’ broker Shore Capital commented: “We are confident that a significant reserves upgrade last year provides a robust platform for future growth across the grid power and non-grid segments, and have been particularly impressed by VOG’s successful expansion in the industrial power sector.”
They added: “Whilst we are in the process of fully reflecting recent developments at VOG into our model, our last published Risked NAV estimate stands at 70p/share, reflecting the value of VOG’s strategically important reserves base and the significant market opportunity that we see in the Douala region.”
In early afternoon trading, shares in VOG were 5.1% higher at 16.98p.
-- Adds analyst comment, share price --