Recently, Victoria Oil & Gas Plc (VOG) released its results for the year ended 31st December 2018. The group is a Cameroon-based gas and condensate producer and distributor and is the owner of Gaz du Cameroun S.A. The group is focused on actively developing the Compressed Natural Gas and Natural Gas Vehicle markets but is also focused on developing new markets for diesel and LPG within Cameroon as well as in other developing countries outside of Africa. In the latest annual filing, the company reported that though a recently implemented cost-cutting programme helped to narrow pre-tax losses, but revenue declined by more than 50 per cent over the year.
Grid Power customer, Eneo Cameroon S.A, did not renew its contract in January 2018, causing a substantial impact on the group and leading to a challenging year, with revenue reported to have more than halved to $10.8m, down from $23.5m last year and a 62% decrease in the annual gas sold - Gross 1,410 mmscf /Net 804 mmscf. Average daily gas production declined to 3.75 mmscfd, representing a decrease of 66 per cent. In the previous year, grid power sales accounted for 64 per cent of gas sales, while grid power gas sales accounted for only 2 per cent of gas sales in the current year. The decline in attributable revenue worth $12.7 million can be attributed to lower grid power gas sales. On 22nd December 2018, Logbaba power plant resumed consumption after a binding term sheet with ENEO was signed on 21st December.
In response to non-renewal of the contract with Eneo Cameroon, the management responded rapidly to readjust the operations, including costs cutting. The company expects its cost-cutting programme to have a more considerable impact in the financials for 2019. Moreover, the group forecasts better results in 2019 as Eneo Cameroon has resumed gas consumption. The company was successful in cutting its operating costs by 24 per cent on year on year basis. The company reported a negative EBITDA of $0.5 million (2017: gain of $4.6 million), reflecting the impact of fall in revenues. A loss before tax stood at $8.3 million and loss after tax was $8.5 million. The group reported a basic and diluted loss per share of 5.79 cents.
The episode with Eneo Cameroon forced the company to increase the diversification of customers and its revenue, signifying a possible positive thing to have come out of the situation. The management’s focus is also towards seeking higher value for its gas from industrial power customers, with cost-cutting became a significant focus for the group. Despite all the headwinds faced by the company during the year, the chairman of the board, Roger Kennedy, said that with lower costs, a better-defined strategy, the company is on the right track for the first time in many years.
Share Price Commentary
Daily Chart as at May-29-19, before the market closed (Source: Thomson Reuters)
On 29th May 2019, at the time of writing (before the market closed, GMT 11:30 am), VOG shares were trading at GBX 11.95, down by 1.44 per cent against the previous day closing price. Stock's 52 weeks High and Low is GBX 43.50/GBX 11.27. The company’s stock beta was 0.31, reflecting less volatility as compared to the benchmark index. Total outstanding market capitalisation was around £30.86 million.
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