The Oil Man: Victoria Oil & Gas, Wentworth Resources

WTI $52.47 +57c, Brent $58.33 +96c, Diff -$5.86 +39c, NG $2.97 -2c

A quietly better day yesterday with comments from Russia who said that compliance is 102% and the Saudis who commented that they would continue to do “whatever it takes” to maintain price stability keeping momentum upwards. With the Saudis continuing to cut and most others falling in line, at present there is little reason to disbelieve the positive stance.

Victoria Oil & Gas

Victoria Oil & Gas (VOG) announced this morning that “as a result of recent market speculation regarding the company undertaking a potential fundraise” the company, having been in advanced discussions with a number of investors, was indeed now going ahead with a proposed placing and subscription to raise $20-26 (£15-20 million) and an Open Offer to raise $3 million.

Since then the company has confirmed that through the ABB it has raised gross proceeds of $23.5 million at 57p.

I have yet to talk to Chairman Kevin Foo, but here at Africa Oil Week CEO Ahmet Dik has been at pains to point out that production expansion in the near and longer term in Cameroon is crucial to the success of the company’s policy in Douala.

Indeed, the availability of capital and the resultant cost reductions over the operational base, both at Logbaba and the potential production areas at Bomono, and in the Matanda block, are crucial to the the significant ongoing profitability of the company.

With the company targeting the 1,700 megawatt deficiency of power in Douala, including significant demand from both local power generation and local industrial users, it is the right time to step up investment in all areas of the business.

This means that the La-108 well which is close to testing, should be ready to go into production by the end of this year followed by drilling the La 109 well in 2018.

The next obvious investment will be at Bomono and in the Matanda block where easier to drill and produce wells will be able to satisfy significant local demand.

Bolstered by increased gas processing efficiency at Logbaba and extended pipelines to Bomono and the potentially exciting Eastern corridor capacity and deliverability will be company changing.

With this raise, VOG has made significant inroads into its cost base and with the potential for the highly prolific Matanda block ever closer, the huge local demand will be easier to address.

The company estimate that they will deliver 100 million cubic feet per day by the end of 2021 with both power generation and thermal industrial clients still needing to be satisfied.

I will comment further in the next few days when I have spoken to the company in more detail, but this successful raise to bolster production in a market crying out for more gas seems eminently sensible. VOG still looks incredibly good value and this raise makes the economics look even better than before.

Wentworth Resources

I met with Geoff Bury, MD and CFO Lance Mierendorf of Wentworth Resources (WRL) who are in Cape Town at Africa Oil week. I will write in further depth later but my increasing confidence in the company was more than justified by the discussions we had.

Recent announcements from the company have showed a significant increase in production from Mnazi Bay in Tanzania and whilst not getting carried away it does look highly promising.

At present production is in the 60-70 million standard cubic feet per day range and growing and, whilst annual guidance is still in the 40-50 million standard cubic feet per day range for appropriately cautious reasons, one can consider this asset to be delivering with increased confidence even given production fluctuations.

As with other parts of Africa there is a significant increase in demand from power producers and industrial users who are taking Wentworth’s gas.

They include Dangote Cement at seven million standard cubic feet per day and Kinyerezi two with its six turbines coming into commission later this year and through 2018 to 36 million standard cubic feet per day.

The company are pencilling in further power plants with demand of up to 180 million standard cubic feet per day, which is why there is so much excitement about the exploration upside of P50 resources of up to 1.5 TCF on the existing licence.

Finally, it is worth bearing in mind that fixed opex costs fall as volumes increase and of course a welcome return to getting paid for gas sales as evidenced by recent payments.

At the Tembo block in Mozambique WRL has 85% of either 1.7 TCF of gas or a possible 219 million barrels of oil or both, as significant oil shows were monitored at Tembo-1.

Here, WRL have opened the data room in order to farm-out some of their position and, I understand, that a good number of oil companies have acknowledged interest, WRL hope to have something tied up before the appraisal well currently planned for mid 2018.

The well is designed, the location is selected and the environmental permits are under way, even a short list of rigs has been identified.

This well could be a game changer for WRL and some very interesting names are having a nose around I understand.

It seems to me that things are looking up for WRL and that it would not take much for the market to reappraise its longer term value, with more payments, increased demand and upside from both Mnazi Bay and the Tembo block. Certainly one to keep firmly on the radar screen.

And finally…

In the Haribo Cup, holders the Red Devils saw off the Swans whilst their Noisy Neighbours only drew with Wolves, but eventually won 4-1 on pens. The Gooners finally overcame the Canaries, the Cherries beat Boro 3-1 and the Foxes beat Leeds 3-1 and have today named Claude Poel as their new manager, Claude Who?

Result of the night was for Bristol City who beat the Eagles 4-1 and go through to the quarter finals. Last night it was Chelski v the Toffees and Spurs v old rivals the Hammers…

Malcolm Graham-Wood is an independent oil industry expert and freelance contributor, not a direct employee of Interactive Investor.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Source.