VOG Adds Bomono to the Douala Gas Network

Victoria Oil & Gas (VOG) Plc is on course of extending its gas network in Cameroon to include gas to be produced from the Bomono production sharing contract (Bomono PSC).

The company signed a farm-in agreement with Bowleven plc, operator of the Bomono PSC, which allows that gas produced from the Bomono PSC will be fed into the customer distribution network owned and operated by Gaz du Cameroun S.A. (“GDC”), a wholly owned subsidiary of VOG.

In the event, VOG will have 80% working interest in Bomono PSC.
VOG currently runs a 7Million standard cubic feet of gas per day (7MMscf/d) network which feeds power plants and industries in the city of Douala, the commercial hub of Cameroon.

“First gas supply to the GDC network is anticipated to start following granting of a Provisional Exploitation Authorisation (“PEA”) and other approvals”, Bowleven notes in a statement. “This Agreement, which has been negotiated by the parties over several months, aligns Bowleven’s intention of realising near term value from Bomono through commercial production of its Bomono gas deposit with VOG’s business of commercialising local onshore gas deposits using its established gas infrastructure and customer network”, the company explains, adding: “The transaction provides the ability to minimise the timescale to first production and optimises the proven advantages of Bowleven’s upstream expertise and VOG’s established gas supply business that feeds a diverse range of industries and the local power grid.

The initial plan is that gas currently suspended at Moambe be brought onstream and that further drilling be considered to supply the growing domestic market in and around the Douala area.

Farm Out Highlights
On completion, EurOil Limited (“EurOil”), a Bowleven subsidiary, will have a 20% working interest in the Bomono PSC and GDC Bomono S.A. (“GDC Bomono”), a wholly owned VOG subsidiary, will have an 80% working interest.
Bowleven will remain as operator of the project.

Gas from Bomono PSC will be sold to GDC less a tolling fee. The gas price paid will be a weighted average received by GDC for its total domestic sales less a tolling fee for use of the pipeline network.

The pipeline connection from the Bomono PSC to the main network will be managed and funded by GDC. GDC Bomono will complete the civil engineering works necessary for the gas processing plant installation at the Bomono site. The estimated capital cost for these works is US$6 million.

Bowleven has agreed to pay GDC Bomono 50% of any deficit, limited to a maximum payment of US$2 million, if the first 3 years of net income received by GDC Bomono is less than the development expenditure incurred.

EurOil will receive a 3.5% royalty from GDC Bomono’s production share of hydrocarbons, with an aggregate cap limiting the total royalty payments to US$20 million.

Bowleven will, on completion, also receive £100,000 worth of new ordinary shares in VOG based on the volume weighted average share price 10 days preceding the date of the Agreement, being 69.23 pence per share. It is the intention of Bowleven to retain these shares initially, but keep that decision under regular review as there are no restrictions on their disposal.
Asset Details:

The farm-out transaction relates to the Bomono PSC, onshore Cameroon. EurOil is operator of the Bomono PSC.

Bowleven completed extended well flow tests on the Moambe well that exceeded 7mmscf/d. The Moambe and Zingana exploration wells drilled at Bomono were then suspended as future producers.

As previously announced by Bowleven, the detailed prospect inventory prepared indicates there is 146bcf and 263bcf of mean un-risked GIIP in the Tertiary and deeper Cretaceous reservoir intervals respectively.

Additional Transaction Details:
The economic effective date of the transaction is 1 January 2017.
The above interests are expressed prior to the exercise of any back-in rights by the Cameroon State. Under the terms of the Bomono PSC, the Cameroon State has the right to take a 10% participating interest in development activity undertaken under an exploitation authorisation.

Completion is subject to, amongst other things:
The grant of a PEA over the Bomono PSC. The PEA application was submitted by Bowleven to the Cameroon authorities as requested following Ministerial approval for the award of a two-year extension to the Bomono PSC (to 12 December 2018);
The approval by the Cameroon Government of the assignment of the equity interest from EurOil to GDC Bomono; and
Should these conditions precedent not be satisfied by 30 June 2017, both Bowleven and VOG have the right to terminate the Agreement.

In the event that any of the resolutions requisitioned by Crown Ocean Capital P1 Limited at the forthcoming Bowleven General Meeting on 14 March 2017 are passed, VOG has the right to terminate the Agreement.



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