Victoria Oil & Gas says Logbaba gas field rates sufficient to satisfy Douala city demand, extends permit

Victoria Oil & Gas (AIM: VOG) has extended its exploration permit for the Logbaba gas field in Cameroon for a further six months after tests at the Lower Logbaba and Upper Logbaba D sands returned production rates that the company said were sufficient to satisfy industrial demand in Douala, the country's largest port with 2 million inhabitants.

Tests at well La-105 produced rates in excess of 55 mmcsf/d (million cubic feet of natural gas per day) and 1,000 bbls (barrels) of condensate per day, making for a combined rate of 10,000 of oil equivalent per day.

The permit will now run until 20 August 2010 with a reassessment of independent reserve estimates for the field expected in Q2 2010.

The tests were run on multiple pay zones at depths between 7,005 and 8,500 ft (feet) after La-105, which was the first well drilled at the project, was completed to a depth of 8,700 ft. Over the testing period, various zones of La-105 flowed at rates between 11 - 56 mmscf/d of natural gas and 210 - 1,000 bbls per day of condensate.

The test covered horizons of the Lower Logbaba formation, which had not been tested before, and the Upper Logbaba D sands. The Upper Logbaba A through C sands were not tested as the well indicated more than sufficient production capacity to meet initial gas demand of 8 mmscf/d and will be perforated and added to the completion intervals when required for production.

VOG now intends to reassess the 104 bcf (billion cubic feet) proven and probable gas reserves estimate made in 2008 after the company completed full interpretation of the test results, including those from well La-106 and integrates them with the results of the passive spectroscopy survey conducted last year with the new data and the limited 2D reflection seismic shot over the field by Elf.

The interpretation is expected to wrap up by early Q2 2010 with the independent review estimated to take a further 4-6 weeks.

“La-105 has much greater deliverability than we anticipated when compared to the previous Elf wells...there also appears to be additional productive potential in the well that could be realised by hydraulic fracture stimulation of some of the lower quality reservoir sands. We will need to acquire more data to allow us to design and implement a stimulation programme, but in the longer term this could add significantly to the Logbaba reserves,” said Chief Operating Officer of Victoria Oil & Gas Radwan Hadi.

Shares in VOG rallied more than 7% on the update.
London-based stockbroker, Fox-Davies Capital said the results in Victoria's latest update are at the high end of its expectations in terms of productivity, and they confirm that Victoria Oil & Gas will be able to satisfy market demand without having to draw heavily on either of the two producer wells La-105 and -106.

Fox-Davies retained its ‘buy’ recommendation and maintained its £0.09 target price.

The broker also noted that it would be very surprised if the forthcoming third party reserve evaluation did not come in higher than the 2008 assessment carried out on a more limited and lower quality dataset.

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