Victoria Oil & Gas (AIM: VOG) is set to raise £14m through an equity placing, issuing 430.7m new ordinary shares at a price of 3.25p per share to institutional and private investors. The company intends to use the proceeds to complete drilling and testing operations at the Logbaba natural gas and condensate project in Cameroon.
Additionally the new capital will help the company seek fast-track solutions for revenue generation and also fund a passive seismic spectroscopy and geochemical surveys at the West Medvezhye gas project in Russia.
The company’s brokers Fox-Davies Capital arranged the placing, which was 40% oversubscribed. The new shares will be issued in two tranches, with the first scheduled to become effective on 5 March, followed by the second on the 12 March.
“The oversubscription and the interest of major institutional investors in our company vindicates our belief that VOG is managing its assets correctly", Victoria chairman Kevin Foo stated.
Victoria also informed investors that another operational milestone has been achieved at Logbaba, where the La-106 well has been drilled to the target depth for the 12 ¼" hole section of 5,495 feet.
In February, a passive seismic spectroscopy survey of Logbaba suggested that the best areas on the field were yet to be explored. The study also discovered a much larger prospect within the license block. Consequently the La-106 well, is being deviated to a bottom-hole location north-west of well La-101 to access one of the most prospective areas of the existing discovery.
Should La-106 penetrate better reservoirs in the “sweet spot” identified by the survey, it will materially de-risk Logbaba, and take the stock to a materially higher price level, Fox-Davies said in a recent analyst note.
The company’s next step is to run and cement the 9 5/8" casing before rigging up a 10,000psi blow-out preventer in preparation for drilling the final hole section. The company expects La-106 to reach target depth within the 60 day schedule. Well La-105 is being tested and full results are expected to be available in early Q2 2010.
Furthermore, the company continues to make progress in terms of commercialising the field, Victoria has contracted a major international engineering firm to explore early revenue generation opportunities, in addition to the full-field development.
In-principle agreements have also been signed with selected customers for around 8m cubic feet of natural gas per day, at US$16 per thousand cubic feet.
In a note published today, , Fox-Davies maintained its 'buy' rating and 9 pence price target for the stock.
It expects the results of the Logbaba wells to demonstrate additional potential above and beyond the third party assessment of reserves which was based on the evaluation of old wells. This should lead to an increase of 2P reserves at Logbaba that would enable Victoria to supply gas to an expanding industrial gas market as well as to power generation companies, it added.
The proven and probable reserves for Logbaba are currently estimated at 106 billion cubic feet. GeoDynamics Research (GDR) has started a passive seismic spectroscopy survey over the entire license area, which will take measurements of 50 locations around the field to identify hydrocarbon bearing areas. Initial findings of the survey are expected by mid-January this year.
Additionally Victoria announced that a further 911,542 shares will be allotted to the company directors in lieu of a cash salary for the six month period ended 31 January 2010, in accordance with their standard employment contracts. The director shares will be issued at 5.4p per share, a weighted average month-end market prices. Victoria Oil & Gas Chairman Kevin Foo was issued approximately 5.4m shares, taking his total holding to 36.5m shares representing 2.56% of the company. Approximately 1.1m shares were allotted between Robert Palmer, George Donne, Austen Titford and Philip Rand.
Disclosure: The author holds no positions in the company