Victoria Oil & Gas Plc Annual Report 2019

FY2019 Annual Report · Victoria Oil & Gas Plc

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Victoria Oil & Gas Plc
Annual Report & Accounts
to 31 December 2019

Victoria Oil & Gas Annual Report & Accounts to 31 December 2019

Victoria Oil & Gas Plc

Victoria Oil & Gas Plc (“VOG”) is a fully-integrated onshore gas
producer and distributor through its operations located in the port
city of Douala, Cameroon, and also has legacy assets in the FSU.

The Company is focused on providing a cleaner and more efficient
energy alternative to diesel and heavy fuel for the Douala region of
Cameroon through the safe and reliable supply of its natural gas.
Through the Company’s wholly-owned subsidiary, Gaz du Cameroun
S.A. (“GDC”), VOG has developed a cash generative business
that delivers fully integrated, indigenous gas to local industry and
communities. GDC has delivered gas to grid power, thermal and
industrial power customers using safe, consistent and scalable
solutions since 2012 via its now 51 km gas distribution pipeline
network from the Logbaba Project.

Through the direct and indirect employment of people within the
region, investment in local communities and its development of
industry expertise and infrastructure, VOG is committed to ensuring
a long-term energy future for the Douala region in Cameroon, where
demand for power remains high.

Victoria Oil & Gas Plc is listed on the AIM market of the London
Stock Exchange under the ticker VOG.L.

“Victoria Oil & Gas”, “VOG”, the “Company”
“Victoria Oil & Gas Plc and its subsidiaries”

Victoria Oil & Gas Plc
The Group
Gaz du Cameroun S.A. 100% owned subsidiary, “GDC”, “Gaz du Cameroun”
EBITDA
ENEO Cameroun S.A.
Logbaba
Matanda

Earnings before interest, taxes, depreciation and amortisation
Cameroon’s national electricity generating company, “ENEO”
Logbaba Project, 20 km2 hydrocarbon licence in Cameroon
Matanda Block, 1,235 km2 hydrocarbon licence in Cameroon

Please refer to full glossary, abbreviations and definitions section on page 94.

Contents

Strategic Report
1 Year in Review
2 Chairman’s Letter/Operational Review
9 Financial Review
14 Principal Risks and Uncertainties
20 Operations and Customers
22 Reserves and Resources
24 Strategic Summary
26 Corporate Social Responsibility Report

Corporate Governance
30 Directors & Other Information
32 Corporate Governance Statement
36 Directors’ Report
38 Directors’ Remuneration Report
42 Statement of Directors’ Responsibilities

Financial Statements
43 Independent Auditor’s Report
52 Consolidated Income Statement
52 Consolidated Statement of Comprehensive

Income

53 Consolidated Statement of Financial Position
54 Consolidated Statement of Changes in Equity
55 Consolidated Cash Flow Statement
55 Notes to the Consolidated Financial

Statements

88 Parent Company Statement of Financial

Position

89 Parent Company Statement of Changes in

Equity

90 Notes to the Parent Company Financial

Statements

94 Definitions, Abbreviations & Glossary

Year in Review

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Key Events
• Equity raise of US$16.8 million net of expenses.
• 93% increase in net revenue over 2018.
• 110% increase in daily average gross gas sales to 8.13 mmscf/d over 2018.

Post Year End
• Termination of ENEO contract.
• Appointment of Chief Executive Officer and Chief Financial Officer.
• Proven 1P reserves written down to 19 Bcf.

C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E

2019

2018

2017

2019

2018

2017

2019

2018

2017

Daily Average Gross Gas Sales (mmscf/d)

3.86

8.13 mmscf/d
110% increase from 2018

8.13

10.09

Annual Gross/Net Gas Sold (mmscf)

Net 804

Gross 1,410

Net 1,691

Gross 2,967

Net 2,163

Gross 3,684

2,967 mmscf
110% increase from 2018

Thermal (Gross)

Industrial Power (Gross)

Grid Power (Gross)

1,505 mmscf
(YE 2018: 1,311 mmscf)
15% increase from 2018

98 mmscf
(YE 2018: 74 mmscf)
33% increase from 2018

1,364 mmscf
(YE 2018: 25 mmscf)

Revenue (US$ million)

10.8

US$20.8 million
93% increase from 2018

20.8

23.5

FINANCIAL STATEMENTSSTRATEGIC REPORT

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Chairman’s Letter

Dear Shareholders,
I assumed the role of Executive Chairman in
April 2019 with the mandate to install a new
senior management
leadership team and
tackle, if not resolve, the legacy issues facing
Victoria Oil & Gas Plc (“VOG”, “the Company”).
2019 was, and 2020 continues to be, a year
of transition as we only welcomed Roy Kelly as
the Chief Executive Officer of VOG in late March
2020. Bridging this transition to the Company’s
future, I will provide the sole commentary in this
Annual Report.

Financial Performance
Having secured an extension of the ENEO
contract late in 2018, revenue for 2019
of US$20.8 million was almost double the
US$10.8 million attained in 2018.

Adjusted EBITDA for the year, which excludes
depreciation, impairments and the state royalty
provision for the operating loss, reflected a profit of
US$4.0 million (2018: loss of US$0.5 million).

However,
impairments and State Royalty
provisions had a significant, and one-time
impact, on the Company’s profitability.

that

the proven

The Group is reporting a loss after tax of
US$110.3 million for the year ended 31
December 2019 (2018: loss of US$8.5 million).
The principle reasons for this significant loss
are as follows:
• The Q2 2020 Operational Update advised
shareholders
(“1P”)
reserves for Logbaba had been revised
downwards effective 1 January 2020. The
stated reserves at 31 December 2019,
which included production for the year, was
65 Bcf, which was revised to 19 Bcf. This is
discussed in more detail later in this letter
and further in the Reserves and Resources
section on page 22. The reserves revision
precipitated a non-cash impairment charge
on the Logbaba assets of US$90.3 million
(2018: Nil).

• The ongoing legal action against Cameroon
Holdings Limited (“CHL”), which involves a
dispute over royalty payments, has resulted
in a non-cash impairment of the Group’s
investment in an associate of US$5.6 million
(2018: Nil).

• Post year-end a decision was taken by the
Logbaba partners crystallising a royalty
obligation to the State of Cameroon, which
back-dates to the inception of the project.
The dispute surrounding this royalty has
previously been disclosed as a contingent
liability, and as a result of the decision a
current liability of US$9.6 million has been

“REVENUE FOR

2019 WAS
ALMOST DOUBLE
YEAR-ON-YEAR
AND ADJUSTED
EBITDA REFLECTED
A PROFIT OF
US$4.0 MILLION.

”

raised for the Gaz du Cameroun S.A. (“GDC”)
share of the obligation (2018: contingent
liability of US$8.0 million).

• ENEO ceased consuming gas in September
2019. Following protracted efforts to effect
payment from ENEO, GDC terminated the
Gas Sales Agreement (“GSA”) with ENEO in
July 2020. The invoicing from September
2019 through to the date of termination
was based on take-or-pay provisions in the
GSA. Owing to uncertainty over the timing
of the recovery of the take-or-pay invoices,
management has raised a provision for
expected credit loss against these invoices
and certain other customers at 31 December
2019 amounting to US$3.8 million (2018:
reversal of US$0.7 million). The termination
of
the ENEO contract mid-2020 will
have a material impact on revenues and
performance during 2020.

Whilst these impairments and provisions are
significant, the Board believes that it has fully
accounted for the known matters and, with the
exception of the disclosed contingent liabilities
(Finance Review and Note 27), does not
anticipate further material write-downs.

Loss per share, which includes the items listed
above, was 48.2 cents (2018: loss of 5.8 cents).

The Directors have given careful consideration to
the appropriateness of the going concern basis
in the preparation of the Financial Statements.
Whilst there are material uncertainties, the
Directors have concluded that it is appropriate
to prepare the Financial Statements on a going
concern basis (see Note 3).

My Chairman’s Statement in the 2018 Annual
Report & Accounts brought to the forefront the
key challenges for management. These same
issues continued to be our strategic focus
throughout 2019, as well as other matters
detailed below.

Single Asset Risk (Upstream)
Logbaba wells are complex with commensurate
operational risk
This risk was exemplified during the drilling of
well La-108 in 2017. The well required two side-
tracks and subsequent remediation efforts
(of which further details below). So, mindful
of capital preservation and risk, coupled with
projections of demand growth, we will continue
to utilise the existing well stock, though we
realise this impacts our proved reserves.

This decision does not mean we don’t envisage
a fuller field development at a future stage
given the large in-place resources in Logbaba,

Chairman’s Letter continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

“AT THE TIME OF

TERMINATION
RECEIVABLES
DUE FROM ENEO
STOOD AT US$20
MILLION GROSS.

”

necessarily preceded by a modern seismic survey
to better image the reservoir and optimise the
locations of new wells. Such a survey would of
course require a new Environmental and Social
Impact Assessment (“ESIA”).

Added Matanda
To diversify risk, GDC received the Presidential
Decree that had been signed by H.E. Biya on 17
December 2018 authorising the transfer of the
interest in Matanda. The Production Sharing
Contract (“PSC”) was entered into in early 2016
with GDC having a 75% working interest and
Operatorship along with partner AFEX Global
Ltd (“AFEX”) with a 25% working interest. SNH
(Société Nationale des Hydrocarbures,
in
English: The National Hydrocarbons Corporation
of Cameroon) has the right to back into a 5% to
25% working interest post exploitation licence
(progress detailed below).

Letter of Intent signed with New Age
Discussions during the period resulted in the
Company announcing in February 2020 a non-
binding letter of intent (“LOI”) for the supply
of natural gas from the Etinde Field, offshore
Cameroon. The project, and in particular the
upstream development, has many conditions
that have to be met before it becomes a reality.

The Etinde owners
(New Age, AIM-listed
Bowleven, and Lukoil) have stated publicly that
they hope to make a Final Investment Decision
on the offshore development in the next six to
nine months. In this case, the upstream joint
venture partners will be taking the subsurface
geological risk, drilling operational risk, and will
have significant capital at risk.

Customer Concentration (Downstream)
Firstly, what we do in Cameroon
Through our wholly-owned subsidiary, GDC, we
reliably and safely supply cleaner fuel to the
greater Douala area in Cameroon.

Since 2012, the Company has been supplying
natural gas, by far the cleanest burning fossil
fuel, to numerous customers in the Douala
area for a variety of uses. Many of our customers
fuel oil
have converted diesel or heavy
equipment to run on natural gas as fuel. Diesel
and fuel oils are largely imported in Cameroon
and suffer supply interruptions. Liquid fuels are
than our gas.
priced significantly higher
Furthermore, compared with diesel, natural gas
represents the following reductions in emissions:
– a 25% reduction in carbon dioxide (CO2);
– an 80% reduction in nitrogen oxide (NOx); and
– a 97% reduction in carbon monoxide (CO)

emissions.

The combustion of natural gas does not emit
soot, dust or fumes. Natural gas also generates
30% less CO2 than fuel oil and 45% less than
coal, with a twofold reduction in N0x emissions
and almost no environmentally damaging
sulphur dioxide (SO2) emissions.

Grid Customer ENEO
Having not consumed gas throughout most part
of 2018, ENEO Cameroun S.A. (“ENEO”) signed
a new, binding term sheet in December 2018 to
resume gas consumption at the 30 MW
Logbaba Power Station at a price of US$6.75
per MMBtu. Gas sales recommenced on 22
December 2018.

The issues with settlement of aged debt by
ENEO has been much reported by the Company
to date.
In September 2019, Alternative
(“Altaaqa”),
Solutions Projects DWC-LLC
the generator supplier to ENEO, suspended
operations at ENEO’s Logbaba site due to non-
payment of invoices by ENEO. Consequently,
GDC has not been able to provide gas to ENEO
since that date, but continued to invoice ENEO
based on take-or-pay provisions as per the
binding term sheet. At 31 December 2019,
the outstanding balance due from ENEO was
US$10.3 million (US$6.2 million net to GDC,
against which the Group raised a provision for
expected credit loss of US$3.0 million for a
disclosed receivable of US$3.2 million). Post-
period, ENEO arranged payment of invoices
for May, June, July and August 2019, totalling
US$5.1 million via four promissory notes (akin
to post-dated cheques), which were used as
collateral for a bridging facility with BGFIBank
Cameroon (“BGFI”). The promissory notes have
subsequently been honoured and the bridging
facility with BGFI has been settled.

Absent any offer of payment or payment plan
for the aged debt, the Company announced in
July 2020 the termination of the agreement
to supply gas to ENEO. Despite ENEO’s poor
payment record, GDC had supplied natural gas
to ENEO at its Logbaba power plant since April
2015. The Company made repeated requests in
writing and in person to the senior management
of ENEO to discuss a method of settlement
of its burgeoning debt, which stood at US$20
million receivables (US$12 million net to GDC)
at the time of termination. Furthermore, the fully
termed agreement and payment guarantee that
were supposed to quickly follow the binding term
sheet had not been forthcoming. As a result of
this untenable situation, GDC served a notice of
Event of Default on ENEO pursuant to the binding
term sheet on 2 June 2020, which included a 30-
day remedy period. At the expiry of this period,

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
“WE BEGAN IN

2019 TO REPLACE
GAS SUPPLIED TO
ENEO WITH NEW,
HIGHER PAYING,
INDUSTRIAL
CUSTOMERS.

”

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Chairman’s Letter continued

GDC had no alternative but to terminate the
gas supply agreement with immediate effect.
The Company will now rigorously pursue this
unpaid debt via the legal channels available to
it, including interest, and a penalty payment of
three months’ fees as a result of termination as
per the binding term sheet.

Industrial Customers
During 2018, when GDC made limited gas
sales to grid power customer ENEO, there was
a large drive to grow the Company’s Industrial
customer base resulting in eight new customers
connected in 2018. The results of these new
customers were seen in the increased gas
sales in these sectors (as detailed below).
Whilst ENEO has been the largest off-taker
(when it was online) in 2019, it has been
paying the lowest gas price amongst our large
customer base. With the gas supply headroom
resulting from ENEO’s non-consumption of gas,
GDC management is able to actively pursue
the higher value, largely private, credit-worthy
customers, near our infrastructure in the first
phase, followed by similar customers in clusters
requiring more capital to tie-in (expanded on
below).

Other Independent Power Producers – AKSA
In July 2019, the Company and Aksa Enerji
Uretim A.S. (“AKSA”) signed a term sheet for
the sale of approximately 25 mmscf/d of gas
(the precise volume will depend on the calorific
value of the gas and the genset specification) to
AKSA’s proposed 150 MW Douala Power Station
(Bekoko). The term sheet is subject to various
conditions precedent, including government
approvals and the signing of a Power Purchase
Agreement with an electricity distributor. On 2
July 2019, the Minister of Water Resources
and Energy of Cameroon, on behalf of the
Government of the Republic of Cameroon,
and AKSA, entered into a Memorandum of
Understanding to develop a 150 MW of power
plant project at Bekoko, subject to receipt of the
requisite approvals and licenses. The location
of the proposed power plant is expected to be
near the existing Bekoko substation, not far
from GDC’s existing gas pipeline network.

New Opportunities:
The installation of a major gas pipeline network
from Limbe to Bekoko (part of the Etinde
Project, operated by New Age) could provide
numerous additional opportunities to GDC,
which otherwise would have been deemed
uneconomic. This pipeline may allow GDC to
be in a position to supply gas to smaller towns
along the route into Douala, such regions and
towns as Ombe, Mutengene, Tiko and Buea,

and provide much needed power using smaller
gas-fired power plants.

Contingent Liabilities
CHL
In the first quarter of 2019, GDC ceased paying
the Cameroon Holdings Ltd (“CHL”) Royalty
and
initiated a review of the underlying
documentation. In July 2019, CHL commenced
proceedings against both GDC and VOG with
regard to payments CHL believes it is entitled
to under the Royalty Agreement. The Company
is vigorously defending the claim. Whilst the
Company owns 35% of CHL, the Company has
not accrued for CHL royalties during 2019 and
has fully impaired this investment, resulting in
an impairment charge of US$5.6 million during
2019. In the event that the legal proceedings
result in GDC being obliged to continue paying
royalty payments, the Group’s liability at 31
December 2019 would be US$3.0 million
(2018: US$0.3 million).

Requirement to separate Upstream and
Downstream
The separation of the business into upstream
and downstream business units
is a
requirement of the Petroleum and Gas Codes
in Cameroon, and is an industry norm.

Operationally, the separation and a downstream
framework makes sense for the Company as
the Logbaba Field depletes over time and the
Company seeks to source other gas for the
pipeline network. In order to comply with the Gas
and Petroleum Codes in Cameroon, the Logbaba
partners are working with the Cameroonian
Government to separate the business into
its upstream and downstream components.
The parties are in ongoing negotiations with
SNH regarding the mechanism and fiscal
arrangements for, amongst others: the potential
participation of SNH
the downstream
activities; the allocation of assets, liabilities,
revenues and costs, and the associated
transfer pricing mechanisms; and the net
settlement required by SNH to take ownership
of their entitlement. One of the matters under
negotiation has been the parties’ obligation to
pay state royalties. In prior years this potential
liability was disclosed as a contingent liability.
Following a GDC decision post year-end, the
royalty liability has now been crystalised and
the Company has accordingly provided US$9.6
million at 31 December 2019; however, GDC
has requested to “net out” against amounts
that may be owed by SNH. The presentation
of the consolidated Financial Statements has
required management’s judgement with regard

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Senior Management on operations and strategy
and guard the interests of shareholders and
stakeholders.

As previously mentioned, with the new Senior
Management in place, I plan to step back from
the Executive to a Non-Executive Chairman
position following the General Meeting to be
held on 29 October 2020 as the Company
neither needs the cost nor role of an Executive
Chairman.

During the period:
April 2019 • Kevin Foo – Executive Chairman

retired

• Roger Kennedy – Change from

Non-Executive Director (“NED”)
to Executive Chairman

• John Knight – Appointed NED

and Senior Independent Director

• John Daniel – Appointed NED

“NEW SENIOR

MANAGEMENT
AND ADDITIONS
TO THE BOARD
WILL ALLOW VOG
TO RESET ITS
STRATEGY AND
FUTURE.

”

July 2019 • John Bryant – Resigned NED

Nov 2019 • John Knight – Resigned NED

Post period:
Feb 2020 • Robert Collins – Appointed NED
and Senior Independent Director

Mar 2020 • Roy Kelly – Appointed as CEO
• Ahmet Dik – Resigned as CEO

May 2020 • Andrew Diamond – Resigned as
Finance Director

Aug 2020 • Robert Collins – Changed

from NED to Chief Financial
Officer. Ceased to be Senior
Independent Director.

I would like to take this opportunity to thank
the former Directors for their contribution to the
Company during their appointments and wish
them well in their future endeavours.

Chairman’s Letter continued

to the outcome of these negotiations to ensure
that the Financial Statements present a fair
and reasonable view of the financial position
and results of the Company.

RSM
RSM has instituted an arbitration in Texas, USA
under ICC rules in which it is asserting material
claims primarily related to final invoices for the
drilling of the two wells, La-107 and La-108,
and certain audit exceptions raised by RSM
following audits of the Logbaba operations
between 2015 and 2018. RSM has made two
attempts to obtain interim rulings which GDC
has successfully defended and the substantive
matter is currently scheduled for hearing at the
end of January 2021.

Separately, on 3 February 2020, RSM filed an
arbitration application under UNCITRAL Rules
pursuant to a Participation Agreement for
the project. Much of the relief sought in this
second arbitration duplicates the claims in the
ICC arbitration save that it also challenges the
validity of cash calls GDC issued in November
2019 for RSM’s share of expenses in relation
to the La-108 well remediation (in aggregate
US$2.9 million) and raises issues relating
to the primacy of the underlying governing
documents relating to the Logbaba Project, and
the process of approvals for certain actions of
GDC as the Operator on the Logbaba Project.

This arbitration will be heard in London under
Cameroon Law.

Arbitrations under ICC and UNCITRAL rules are
confidential processes. VOG is not permitted
to provide detailed comments on them, beyond
saying that it continues to vigorously defend the
claims raised by RSM.

Equity Raise
In March 2019 the Company announced an
equity raise which was completed following a
General Meeting of the Shareholders in early
April 2019. US$16.8 million net of expenses
was raised. 104,627,788 new Ordinary Shares
were issued at 13 pence per share. The
Company used the proceeds of the Fundraising
to continue to invest in its Logbaba and
Matanda projects in Cameroon.

Board Changes
Changes to Senior Management commenced in
April 2019 and have been completed in 2020.
There have been many Board changes during
and post period to ensure the Company has a
balanced, independent and dedicated core of
Directors to provide oversight and advice to the

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

“POST REPORTING

PERIOD AND
FOLLOWING
DETAILED
ANALYSIS OF WELL
PERFORMANCE,
THE COMPANY HAS
REDUCED THE
PROVED RESERVES
OF THE FIELD IN
LINE WITH THE
PERFORMANCE
OF THE CURRENT
WELL STOCK. THIS
DOES NOT IN ANY
WAY DIMMISH
OUR VIEW OF THE
SIGNIFICANT IN-
PLACE RESOURCES
THAT REMAIN IN
THE LICENSE.

”

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Chairman’s Letter continued

Review of Operations
Key Events
• Grid Power Customer ENEO consumed gas
from January to mid-September 2019

• 110% increase in gross annual gas sold of

2,967 mmscf (2018: 1,410 mmscf):
Gross 2,967 mmscf/Net 1,691 mmscf
• Daily average gross gas sold 8.13 mmscf/d

(2018: 3.86 mmscf/d)

Logbaba – Upstream:
Reserves & Resources
Following a thorough review of field and well
performance data, and recognising there are
no short-term plans for further drilling at this
time, management has reduced its estimated
Proved Reserves (“1P”) for the Logbaba Field.
Other categories of reserves remain unchanged
at this time, as do other classifications (e.g.
Contingent and Prospective Resources). The
Reserves reduction is accompanied by a non-
cash impairment charge of US$90.3 million
discussed in the Financial Review.

All nine penetrations of the primary reservoir
in the Logbaba Field have encountered mobile
gas in reservoir quality sands in what is
undoubtedly a significant in-place resource, and
we are not downgrading previous estimates of
gas in place. Our reduction in Proved Reserves
at this time reflects our finite well stock, an
assessment of the La-107 performance which
did not meet our pre-drill expectations, and
recognition that the project was designed to
be a staged development, involving more wells
drilled over time and in line with an improved
understanding of the reservoir and growth in
demand. As mentioned above, we don’t propose
to drill more capital-intensive and operationally
risky wells at this time. Given a successful
remediation of La-108, the Proved Reserves
level would support sustained production at
current demand levels (which excludes grid
power) for several years. Additional wells in
previously undrilled areas of the field would
immediately add to the Proved Reserves.

It was previously determined that the acquisition
of new seismic data using modern technology
and methods over the Logbaba field would de-
risk the block and identify prospective new well
locations. To this end, a feasibility study was
carried out in the downtown Douala area by a
seismic specialist in April 2019 to ascertain
whether a seismic survey could be acquired
in an urban area. It was concluded that a full-
fold 3D survey over the C38 block would be
possible with suitable equipment and crew.
Absent of the requirement for new wells, this

work has been put on hold given the drive to
conserve capital.

La-108 Remediation Project
At the end of the La-108 well testing operations
in December 2017, a spent perforating gun was
stuck in the production tubing at a depth of
895 m, with a wireline cable extended from the
stuck gun to surface. In April 2018, the cable
was cut downhole at a depth of about 700 m.
The cut wire was recovered from the hole,
leaving the perforating gun and about 200 m of
cable in the hole. Gas consumption levels were
low during 2018 and due to cash constraints
the Company decided to put this project on hold
until a later date. Production increased in 2019
and planning commenced for works to recover
the perforating gun, conduct further perforating,
and flow testing to complete well La-108. The
work was to be performed using a hydraulic
work-over unit. A clean out of the wellbore
(tubing and lining) was to then be carried out,
followed by perforation of the Upper Logbaba
Sands. On completion, the La-108 well will
then be tied-back to the existing flowline and
the flowline made permanent. In the first half
of 2019, the service provider tendering was
carried out, contracts put in place, preparations
on site completed, long-lead items ordered, and
the work commenced in August 2019. The tool
string and a large proportion of the wire were
retrieved, and operations continued to retrieve
the remaining wire. The wireline tool string
and 130 m of wire was recovered. A clean out
assembly was run to recover the remaining 50
m of wire and clean the hole, but this became
stuck in the tubing at approximately 900 m.
Operations were suspended at the end of
October 2019 to mobilise additional equipment
to complete the remediation programme. Prior to
suspending operations, GDC used the available
equipment on site to successfully perform
additional perforations in well La-107. The
remediation work on well La-108 was expected
to commence during April 2020 upon the arrival
of the additional equipment which was sourced
to perform the project. The equipment is now on
site, however, due to safety concerns related to
measures taken in-country regarding Covid-19,
the snubbing rig contractor evacuated their
personnel.

Processing Facilities Enhancements
In December 2018, the VOG Board approved
engineering and execution planning to upgrade
the Logbaba Gas Plant to enable production
operations at lower pressures, increasing the
value of the gas deliverability and ultimately
recovery from the wells. The objective of the

Chairman’s Letter continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

“FORTUNATELY

COVID-19 HAS
HAD A LIMITED
EFFECT ON GAS
DEMAND FROM
CUSTOMERS.

”

planned enhancements at the Logbaba Process
Plant is to maximise hydrocarbon recovery from
existing and future wells by lowering the
minimum gas inlet pressure to the plant.
Modifications made to the Logbaba Process
Plant since its commissioning in 2012 have
resulted in the two process trains having
different configurations and capabilities. The
configuration of both trains needs to be
optimised to ensure maximum production
availability which, in turn, should increase
recovery of hydrocarbons. The project will
include the installation of a feed gas chilling
system to ensure continued gas and condensate
export at lower wellhead pressures, whilst
maximising recovery from all wells. It should
also provide operational flexibility and increased
reliability by enabling both high-pressure and
low-pressure wells to be produced concurrently,
thereby potentially extending the life of the wells
at the Logbaba Field. A further benefit of the
project is that it will enhance the reliability of the
Logbaba Gas Plant as GDC production
increases. The project is being delivered in two
stages. Stage 1, which was completed in
September 2019, comprised the following Front-
(“FEED”) work:
End Engineering Design
engineering design, cost estimation and
execution planning for implementation of the
selected process configuration; and Stage 2,
focuses on execution, which at the time of
writing, has commenced, and includes detailed
engineering, design, equipment and materials
specification, procurement, fabrication, shipping,
construction and commissioning. Post reporting
period, we carried out low pressure trials on the
plant without any major modifications, assessing
in particular whether the gas will stay within
export specification, and the results suggested
this was possible. We are thus able to slowly
reduce the operating pressure of the plant with
the full expenditure of the enhancement project
deferred until such time that it becomes
necessary.

Pipeline
During 2019, 1.09 km of service lines were laid
and the total pipeline network at the year-end
was 51.09 km.

Industrial Customers
The focus continues to be to improve our
customer diversification.

During 2019, three new thermal customers
(ACI, CCC and CIMAF) commenced consuming
gas. The efforts in 2018 on industrial customer
growth were reflected in 2019 gas sales with
a 15% increase in gross thermal gas sales to
1,505 mmscf and a 33% increase in industrial

gas for power consumption with 98 mmscf
gross consumed.

Post year-end, a further customer has been
connected to the network with another two due
to be commissioned by the end of 2020. As
is normal, we have also seen five customers
cease consumption during the period for
various reasons. At the time of writing we have
36 consuming customers.

Post Period
Covid-19 has had a limited and difficult-to-quantify
effect on gas demand as borders have closed,
the supply of raw materials was interrupted, and
demand for customers’ products fell off slightly.
Crew mobilisation restrictions have led to delays
to La-108 remediation work. However, at the
time of writing, lockdown restrictions have been
relaxed and consumption has increased again,
but the impact on gas consumption has not
been material.

La-108 Insurance Claim
The Company continues to pursue its claim
and, post period, has employed industry claim
specialists to assist in this matter.

OECD Claim
Following a complaint to the Organisation for
Economic Co-operation and Development
(“OECD”) in 2018 and various communications
with the UK National Contact Point (“NCP”)
for promotion of the OECD Guidelines for
Multinational Enterprises (the “Guidelines”),
the Company participated in mediation in late
2019 with the aim of addressing the concerns
of the residents involved and this is ongoing
although meetings have been postponed due
to Covid-19 restrictions. The Company does not
expect any economic costs resulting from this
claim.

ISO Certification
GDC has worked on International Organization
for Standardization Compliance (“ISO”) 9001,
14001 and 45001 ISO since 2017. It has
developed and implemented its Integrated
Management System (“IMS”) based upon the
requirements of these international standards.
We were pleased to announce in May 2019
that following an audit by an external certifying
authority, GDC has successfully completed
the audit process for ISO 9001:2015, ISO
ISO 45001:2018. This
14001:2015 and
achievement
that GDC has
established management systems for Quality,
Environmental and Occupational Safety and
Health, which conform to international ISO
standards. This accomplishment demonstrates
our continued commitment to providing a high-

is evidence

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
“I AM CONFIDENT

THAT UNDER THE
LEADERSHIP OF
OUR NEW CEO ROY
KELLY AND NEW
CFO ROB COLLINS
THE COMPANY IS
IN GOOD HANDS.

”

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Chairman’s Letter continued

quality product and delivering a consistent
service in a safe and environmentally conscience
manner to all our clients, alongside the
investment of time and money into new
technology, staff, processes and procedures
by the Company.

discussions with potential buyers of the field.
Whilst a prospective buyer is conducting due
diligence, the Company expects an extended
sales process due to the Covid-19 crisis and
the volatility of crude prices. This asset has
previously been fully impaired.

As this report covers a period of time that
preceded Roy Kelly’s appointment as CEO, I am
going to personally refrain from detailing the
future strategy of the Company. Roy is a CEO
of the calibre that does not need an Executive
Chairman. His appointment predicated my
announcement to step down to a Non-Executive
Chairman role after the publication of this Report
and our General Meeting in October 2020. I am
confident that under Roy’s leadership, and with
the addition of our new CFO, Rob Collins, the
Company is in good hands and will be set in
a new direction to ensure shareholder value.
They themselves will communicate their plans
in due course and will have my continued input
and backing. In the coming weeks the Company
will be releasing its Q3 20 Operational Update
and the Interim Results to the end of June
2020.

It goes without saying that the Company is
grateful for the commitment of all management
and staff. I would like to thank our operational
partners, stakeholders in the Projects, and, of
course, our shareholders for their continued
support and patience.

Roger Kennedy
Executive Chairman
29 September 2020

Matanda
GDC received the Presidential Decree that had
been signed by H.E. Biya on 17 December
2018 authorising the transfer of the interest in
Matanda from Glencore resulting in GDC holding
a 75% interest and operatorship and AFEX
holding the remaining 25%. SNH have a right
to back in up to 25% post exploitation licence.
The agreed obligation for this work programme
was one exploration well plus reprocessing of
existing seismic in the first two-year period of
the PSC.

The next phase of subsurface work on the
block involved completion of the evaluation
of the prospectivity and de-risking of existing
prospects. The evaluation of so-called Area 2 of
the Matanda Block (in between the Logbaba and
North Matanda fields) has been completed and
numerous Tertiary and Cretaceous prospects and
leads have been identified. This work concluded
Phase One of the Work Programme and the
evaluation of the Matanda Block’s prospectivity.

Phase Two of the Matanda Work Programme
commenced in early June 2019 with a risk
mitigation workflow. The initial stages of this
work flow include an analysis of the gathered
data over each prospect. The aim of this work
is to refine the understanding of the risk of the
identified prospects which will lead into the next
phase of the work flow: detailed well planning
to geological prognosis.

Alongside the above workstreams, the scope for
the Environmental and Social Impact Assessment
(“ESIA”) was finalised to ensure that all aspects
of risks to the environment and social factors
have been assessed and necessary precautions
taken, in accordance with the requisite rules and
regulations, to ensure there is minimal impact
on the environment ahead of drilling preparation.
The EISA is ongoing.

West Medvezhye (“West Med”)
A
third-party Technical Report has been
completed by a specialist Russian consultancy
on the Company’s 100% owned Western
Medvezhye Licence in the prolific West Siberian
basin, containing the 2006 oil discovery.
Based on this Technical Report, the Company
has commenced a formal process to divest
in
the Western Medvezhye Field and

Financial Review

The year ended 31 December 2019 (“current
year”) was a challenging year for VOG. The
renewal of the gas supply contract with ENEO
on 22 December 2018 provided great hope of
a successful 2019, following a difficult year in
2018 (“prior year”). Unfortunately that hope
soon dissipated when the ongoing difficulties
in the Cameroonian energy sector resulted in
delayed and sporadic payments for gas provided
to ENEO. In September 2019 the generator
provider shut down the generators at ENEO’s
Logbaba Power Station citing non-payment by
ENEO. Eventually, despite tireless efforts to
recover amounts due, GDC terminated the Gas
Sales Agreement (“GSA”) with ENEO on 2 July
2020 and is currently using all means available
to recover the outstanding amounts from ENEO.

interests

the upstream
The working
operations of the Logbaba Project are as
follows:
• GDC (operator)
• RSM Corporation (“RSM”)
• National Hydrocarbons
Corporation of Cameroon (“SNH”) 5%

57%
38%

A down-grading of the Group’s Proven (“1P”)
Reserves on the Logbaba Project (as discussed
on page 22, in conjunction with the deteriorating
grid power outlook for Cameroon, have resulted
in a US$90.3 million impairment of the Group’s
Logbaba tangible and intangible assets. This is
discussed in more detail below.

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

The Logbaba Project has operated as an
integrated upstream and downstream operation
since inception. In order to comply with the Gas
and Petroleum Codes in Cameroon, the parties
are working with the Cameroonian Government
to separate the business into its components.
The parties are in ongoing negotiations with
SNH regarding the mechanism and fiscal
arrangements for, amongst others: the potential
the downstream
participation of SNH
activities; the allocation of assets, liabilities,
revenues and costs, and the associated
transfer pricing mechanisms; and the net
settlement required by SNH to take ownership
of their entitlement. One of the matters under
negotiation has been GDC’s obligation to pay
state royalties. In prior years this potential
liability was disclosed as a contingent liability.
Following a GDC decision post year-end, the
royalty liability has now crystalised and the
Company has accordingly provided US$9.6
million at 31 December 2019. The presentation
of the consolidated Financial Statements has
required management’s judgement with regard
to the outcome of these negotiations to ensure
that the Financial Statements present a fair,
balanced and understandable view of the
financial position and results of the Company.

The Company completed a
fundraise of
US$16.8 million net of expenses in April
2019 to strengthen the Company’s financial
position and provide a stable growth platform

Gas sales (mmscf) – Gross
Gas sales (mmscf) – Attributable
Condensate sales (bbls) – Attributable
Revenue (US$’000) – Gross
Revenue (US$’000) – Attributable

Net royalties (US$’000)

Impairment of tangible and intangible assets (US$’000)
Impairment of investment in associate (US$’000)

Impairment of assets (US$’000)

Adjusted EBITDA (US$’000)
Loss before tax (US$’000)
Loss after tax (US$’000)
Basic loss per share (cents)
Operating cash flow before working capital (US$’000)

Cash working capital movement (US$’000)

Capital invested (US$’000)

Net debt (US$’000)

31 December
2019

2,967
1,691
12,641
35,793
20,822

9,324

90,289
5,556

95,845

3,991
(111,952)
(110,280)
(48.2)
(4,267)

3,942

7,710

(10,685)

31 December
2018

1,410
804
8,309
18,596
10,796

1,145

–
–

–

(529)
(8,302)
(8,521)
(5.8)
(1,487)

1,367

3,363

(17,440)

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

10 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Financial Review continued

for the business. The net proceeds of the
fundraising enabled the Company to, amongst
other things, initiate the remediation project
on well La-108 at Logbaba. The remediation
works, which were performed during H2 2019
were partially successful in that the perforating
gun, which was previously stuck, was retrieved
and removed. Unfortunately, in the process of
cleaning out residual wireline the toolstring
became stuck and operations were suspended
to bring additional tooling in country. The
tooling arrived in March 2020, and just as the
team were gearing up to restart operations
Covid-19 struck and the rig contractor deemed
the conditions and local lockdown procedures
unsuitable to continue with the operations and
repatriated the crew. It is anticipated that the
remediation of La-108 will continue in Q4 2020.

Since January 2019, the Company has ceased
making payments under the CHL Royalty
Agreement. CHL has commenced proceedings
against both GDC and the Company regarding
payments CHL believes it is entitled to under the
Royalty Agreement. The Company is defending
such claims and the matter is progressing
towards an interim court hearing expected in
November 2020. The Company has not accrued
for CHL royalties in the current year, and has
reversed the accrual relating to the royalty from
the prior year of US$0.3 million. Furthermore,
as the investment in associate relates to the
Group’s 35% interest in CHL, the Company has
fully impaired this investment, resulting in an
impairment charge of US$5.6 million in 2019.

Statement of Comprehensive Income
The strong gas sales and revenue growth in the
current year (93%) is largely attributable to the
renewal of the ENEO binding term sheet. Grid
sales in the current year amounted to US$8.0
million (2018: US$0.1 million). Despite not
providing gas to ENEO since September
2019, when the generator provider ceased
operations, GDC has invoiced ENEO monthly on
a take-or-pay basis in accordance with the GSA.
GDC continued to invoice ENEO on this basis
until June 2020, at which point the GSA was
terminated. Shareholders should be aware that
revenue for grid power in 2020 will only reflect
January to June 2020 invoicing.

Excluding grid revenue, thermal and industrial
power revenue contributed US$12.0 million
(2018: US$10.1 million), a healthy 19%
increase, and reflective of the efforts made by
the GDC sales team to expand the customer
base in the prior year when ENEO was not
consuming gas. Condensate revenue of US$0.8

million (2018: US$0.6 million) reflects the
increased volumes of gas sold, but has also
suffered as a result of the fire at the Sonara
refinery, following which GDC was forced to
seek an alternate condensate off-taker at less
advantageous pricing.

Net royalties consist of an accrual of US$9.6
million (2018: contingent liability of US$8.0
million), being GDC’s share of the current and
past state royalties. The Logbaba Project incurs
state royalties at 8% of hydrocarbon production,
and it is anticipated that this royalty will be
levied on upstream revenues going forward.
State royalties for downstream operations in
Cameroon, according to the Gas Code, attract
royalty at 5% of revenues. The current year
royalties balance includes a US$0.3 million
reversal of an accrual for CHL royalties from
the prior year (2018: CHL net royalty charges of
US$1.1 million).

The increase in unit of production depreciation,
which amounted to US$7.3 million (2018:
US$5.0 million) reflects the increased gross
gas sales. When unit of production depreciation
and net royalties are stripped out of cost of
sales, the remaining costs of sales combined
with other administrative costs amounted to
US$18.4 million (2018: US$11.9 million). The
reasons for this increase, during a period when
the Group was actively trying to reduce costs,
are as follows:
• A non-cash increase of US$3.7 million in
provision for expected credit losses (2018:
reversal of US$0.7 million). The increase
relates principally
take-or-pay
invoices which, although contractual, may be
slow to recover, and an additional provision
for expected credit losses of US$0.8 million
due to a fire which destroyed the Sonara
in Limbe, Cameroon. Sonara
refinery
declared
force majeure, however GDC
continues to seek payment for condensate
delivered prior to the fire;

to ENEO

• Non-cash cost of US$1.0 million associated
with the issuance of share options to
directors and employees pursuant to the
Long-Term Incentive Plan (“LTIP”). These
options were issued with a strike price of
14p, 1p higher than the shares issued in the
fundraise in April 2019;

• Significant legal fees of US$0.6 million
incurred in defending the RSM arbitrations
and CHL litigation;

• Termination costs of US$0.5 million (2018:
Nil) paid to the Company’s former chairman
(see page 40); and

Financial Review continued

• Following a plethora of various fiscal
audits, in common with many businesses
in Cameroon, GDC was required to make
additional customs, and various social tax
payments, including penalties and interest,
of US$0.5 million.

investment

Impairments raised in the current year consist of
an impairment of the Logbaba tangible and
intangible assets of US$90.3 million (2018: Nil),
and a further US$5.6 million (2018: Nil)
impairment of
in
the Group’s
associate CHL. These impairments are disclosed
in greater detail in Note 4. Impairment indicators,
namely the downward revision of the Group’s
Logbaba 1P Reserves, termination of the ENEO
GSA and the deteriorating conditions in the
Cameroonian energy sector, were identified and
an impairment review was performed on a value-
in-use basis. A discounted cashflow model was
based on management’s best estimates for the
Logbaba Project, including the aforementioned
indicators and other key assumptions. The
results of the review concluded that the assets
required impairment and accordingly wells La-
105, La-107 and La-108 as well as the pipeline
infrastructure in Douala have had their carrying
values reduced by US$90.3 million in 2019.

Operating loss
Depreciation
Provision for state
royalties
Impairment charges

Adjusted EBITDA

31 December
2019
US$’000

(110,101)
8,609

9,638
95,845

3,991

31 December
2018
US$’000

(6,336)
5,807

–
–

(529)

Adjusted EBITDA, which removes depreciation
(provision
and significant one-off charges
for current and historic state royalties and
impairment charges in the current year) from
the reported operating loss, was a gain of
US$4.0 million (2018: loss of US$0.5 million)
reflecting the impact of the increased revenues.
The result would be even better if the non-cash
ENEO and Sonara expected credit loss provision
increases of US$4.5 million were excluded.

The Group produced a loss before tax of
US$112.0 million (2018: US$8.3 million), and
a loss after tax of US$110.3 million (2018:
US$8.5 million). The basic and diluted loss per
share was 48.2 cents (2018: loss of 5.79 cents).

Statement of Financial Position
Intangible assets consist mainly of the costs
incurred on well La-108 less impairment
charges. Works to remediate the well amounting

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 11

to US$6.7 million were capitalised in 2019
(2018: Nil) and succeeded in recovering the
stuck perforating gun. Further remediation work
will be performed in 2020 to recover a stuck
section of drill string, clean out the well and
conduct further perforating and flow testing to
complete the well. When feasible these costs
will be transferred to oil and gas assets within
property, plant and equipment.
Intangible
assets were impaired by US$27.4 million
(2018: Nil), with a residual carrying value of
US$8.6 million (2018: US$30.4 million).

Property, plant and equipment was impaired by
US$62.9 million (2018: Nil), being the full
impairment of well La-107, a partial impairment
of well La-105, and a partial impairment of the
pipeline infrastructure. The remaining carrying
value was US$20.6 million (2018: US$91.1
million).

The increase in net trade receivables to
US$13.7 million (2018: US$8.7 million) is
largely due to the increased receivables due
from ENEO at 31 December 2019 of US$3.2
million (2018: US$0.3 million). As mentioned
above, GDC terminated the GSA with ENEO on
2 July 2020 following multiple contractual
breaches, including non-provision of payment
security and non-timely payment of invoices. At
the termination date ENEO was charged interest
on all late and outstanding payments as well as
a contractual termination penalty of three
months of
total
outstanding balance of US$20.4 million
(US$11.6 million net to GDC). An increase of
US$3.0 million (2018: reduction of US$3.2
million) was recorded in respect of amounts
owed by operating partners on the Group’s
Cameroonian assets. This increase relates
principally to the disputes with RSM which are
discussed below.

invoices, a

take-or-pay

Trade and other payables of US$9.3 million
(2018: US$10.8 million) reduced as the
residual drilling contractor obligations were
settled during the year.

Cash and cash equivalents of US$7.2 million
(2018: US$3.5 million). Borrowings reduced to
US$17.9 million (2018: US$20.9 million).
Provisions of US$11.7 million (2018: US$1.9
million) includes a US$9.6 million provision for
the payment of state royalties on the Logbaba
Project. As noted above, this provision arises
from a decision taken by GDC post year end
which will result in the state royalty becoming
payable to SNH. The provision was raised in
2019 as the matter had previously been
liability. GDC
disclosed as a contingent

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

12 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Financial Review continued

continues to negotiate with SNH to resolve the
separation of business and to recover SNH’s
contribution for past exploitation costs on the
project. The level of past costs is uncertain
pending the negotiated settlement with SNH
regarding SNH’s level of participation in the
downstream operations. Whilst there is no
legal right to set amounts owed by SNH off
against the royalty amounts due and payable,
the parties are working to ensure that any
settlement is done on a net basis to minimise
cash outflows to the Company.

Net Debt and Liquidity

Cash and cash
equivalents
Borrowings:
Current liabilities
Borrowings:
Non-current liabilities

Net debt

31 December
2019
US$’000

7,237

(5,969)

(11,953)

(10,685)

31 December
2018
US$’000

3,467

(4,109)

(16,798)

(17,440)

Net debt of US$10.7 million (2018: US$17.4
million) reflects the liquidity position of the
Group. The Group has no further available
credit facilities.

The Company raised US$16.8 million net
proceeds in an equity placement in April 2019.

Cash Flow Statement
Operating cash utilised, prior to the effects
of working capital movements, was US$4.3
million (2018: US$1.5 million). The increase
in receivables was offset by the increased
provision for state royalties resulting in a
working capital movement of US$3.9 million
(2018: US$1.4 million). Net cash utilised in
operations was US$2.4 million (2018: US$2.2
million).

Capital investment in 2018 was reduced to
only the essential spending and committed
costs. The Company’s capital
investment
increased to US$7.7 million (2018: US$3.4
million). The majority of the investment was
on the remediation of well La-108. Fundraising
generated net cashflows of US$16.8 million
in 2019 (2018: Nil). Repayment of capital on
borrowings was US$2.6 million (2018: US$2.8
million).

Commitments
The Logbaba Concession does not contain any
work programme obligations.

GDC’s work programme on the Matanda Block

is US$11.25 million, which should be executed
prior to December 2020. However, following
delays in obtaining PSC amendments, security
concerns and Covid-19 interruptions, GDC is
unlikely
required work
programme on time and is currently in the
process of making an application for an
extension.

to complete

the

Share or option issuances
Following the fundraise in April 2019, there
were 255,073,945 Ordinary Shares in issue.

On 31 May 2019, 961,546 Ordinary Shares were
allotted to employees in lieu of cash bonuses
at 13p per share, 152,088 Ordinary Shares
were allotted to a former consultant at 22.84p
per share, and 240,482 Ordinary Shares were
issued to Kevin Foo, former Chairman, pursuant
to the exercise of nil-cost options.

On 5 August 2019, options totalling 13 million
Ordinary Shares were granted to Directors and
employees pursuant to the LTIP. The options
were granted with a strike price of 14p, with a
five-year exercise period. Mr Ahmet Dik, former
CEO, was issued 433,735 Ordinary Shares on
5 August 2019 pursuant to the exercise of nil-
cost options.

The number of Ordinary Shares in issue at the
date of this report was 256,861,796.

Arbitrations
On 22 July 2016, RSM filed a request for
arbitration with the International Chamber of
Commerce (“ICC”) pursuant to the Operating
Agreement between the parties regarding the
rig and drilling contractor selected by GDC to
conduct the drilling of two new wells at the
Logbaba project. In January 2019, the subject
of the claim was withdrawn on condition that
RSM pay GDC’s costs, which it did.

In another ICC arbitration filed in October 2018,
which RSM amended in August 2019, RSM is
asserting material claims primarily related to
final invoices for the drilling of the two wells, La-
107 and La-108, and certain audit exceptions
raised by RSM following audits of the Logbaba
operations between 2015 and 2018. RSM has
made two attempts to obtain interim rulings
which GDC has successfully defended and the
substantive matter is currently scheduled for
hearing at the end of January 2021.

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 13

Financial Review continued

arbitration save that it also challenges the
validity of cash calls GDC has issued for RSM’s
share of expenses in relation to the La-108 well
remediation and raises issues relating to the
primacy of the underlying governing documents
relating to the Logbaba Project, and the process
of approvals for certain actions of GDC as the
Operator on
the Logbaba Project. This
arbitration will be heard in London under
Cameroon Law and is scheduled for hearing at
the end of September 2021.

Arbitrations under ICC and UNCITRAL rules
are confidential processes. The Company is
not permitted to provide detailed comments
on them, beyond saying that the claim and
counter-claim amounts are material and that
it continues to vigorously defend the claims
raised by RSM.

Subsequent Events
Mr Robert Collins was appointed as a Non-
Executive director of the Company on 10
February 2020. Mr Roy Kelly was appointed
CEO of the Company on 23 March 2020. Mr
Ahmet Dik stepped down as CEO on 20 March
2020. Mr Andrew Diamond resigned as Finance
Director on 15 May 2020. Mr Robert Collins
was appointed CFO on 11 August 2020.

The Company held its Annual General Meeting
(“AGM”) on 29 June 2020. All of the resolutions
proposed and voted on at the AGM were
approved. The Company obtained Companies
House and AIM approval to extend the filing
date of the Annual Report until not later than
30 September 2020. The Company will hold a
General Meeting on 29 October 2020 for the
Shareholders to receive the Annual Report.

On 3 July 2020, GDC terminated the GSA with
ENEO, as discussed earlier.

Directors’ Statement under Section 172 (1) of
the Companies Act 2006
Section 172 (1) of the Companies Act obliges
the Directors to promote the success of the
Company for the benefit of the Company’s
members as a whole. This section specifies
that the Directors must act in good faith when
promoting the success of the Company and in
doing so have regard (amongst other things) to:
a) the likely consequences of any decision in

the long term,

b) the interests of the Company’s employees,
c) the need to foster the Company’s business
relationship with suppliers, customers and
others,

d) the impact of the Company’s operations on

the community and environment,

e) the desirability of the Company maintaining
a reputation for high standards of business
conduct, and

f) the need to act fairly as between members

of the Company.

The Board of Directors is collectively responsible
for formulating the Company’s strategy which
is the appraisal and exploitation of the assets
currently owned.
1. The decision to progress with the remediation

of La-108;

2. The decision to terminate the ENEO Gas

Sales Agreement in July 2020.

The Directors believe this key strategic decision
will generate value for our shareholders in the
long term. In executing the Company’s strategy,
the Directors remain focused on responsible
and ethical business practices, and
the
Company strives to be a responsible corporate
citizen in all its territories of operation.

The Board places equal importance on all
shareholders and strives for transparent and
effective external communications within the
regulatory confines of an AIM-listed company.
The primary communication tool for regulatory
matters and matters of material substance is
through the Regulatory News Service, (“RNS”).
is also updated
The Company’s website
regularly, and provides further details on the
business as well as links to helpful content
such as our latest investor presentations.

Further detail illustrating how Directors adhere
to the requirement set out in Section 172 (1)
a to f above, are included in the Corporate
Governance Report which begins on page 32.

The Directors believe they have acted in the
way they consider most likely to promote the
success of the Company for the benefit of its
members as a whole, as required by Section
172 (1) of the Companies Act 2006.

Roger Kennedy
Executive Chairman
29 September 2020

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
14 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Principal Risks and Uncertainties

The Group is subject to a number of potential risks and uncertainties, which could have a material impact on the long-term
performance of the Group and could cause actual results to differ materially from expectation.

The management of risk is the collective responsibility of the Board of Directors and the Group has developed a range of
internal controls and procedures in order to manage the risk. The controls and procedures and identified risks are discussed
and reviewed annually by the Audit Committee and their findings and recommendations are reported to the Board.

The principal risks and uncertainties inherent in the Group’s business model have been grouped into five categories: global,
strategic, financial, compliance and operational. The risk items and the planned actions to mitigate these risks are listed below:

GLOBAL

The Group operates within the upstream and midstream gas sectors in
Cameroon, and also has an operation in Russia and its headquarters in
London, UK.

RISK OR UNCERTAINTY

2020 DEVELOPMENTS AND MITIGATING ACTION

Covid-19 or other global pandemic
implications

Global oil supplies and prices

As has been recently demonstrated, a global pandemic can have a material impact
on a number of areas of the business. Government regulations to control the spread
of this virus could result in customers slowing down or ceasing operations, and/or
requirements to cease the production of gas and condensates. There are numerous
other material impacts which either inhibit or prevent the continuation of business,
including health and mobility of employees, access to existing and/or prospective
customers, liquidity and financial constraints with customers, suppliers, banks and
other stakeholders.

The Group has developed a comprehensive contingency plan to ensure the
safeguarding of staff and assets.

Circumstances where global oil demand is dramatically reduced and/or major oil
producers cannot agree on production targets can result in significant downside
pressure on oil prices and consequently all hydrocarbon prices. Where the Group
has been competitive on pricing with alternative products for energy generation, a
significant reduction in oil prices will result in price pressure for the Group when
competitive products become cheaper.

Furthermore, at dramatically reduced oil pricing, new hydrocarbon developments face
significant headwinds in obtaining the financing and approval for development, which
will impede on the Group’s strategy to seek alternate gas sources for distribution
in Cameroon.

Principal Risks and Uncertainties continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 15

STRATEGIC

The Group is reliant on the development of the energy sector in Cameroon
for the monetisation of its assets. Failure to develop this sector to meet
the growing power demand in the country is a significant risk to the strategy
of the Group. Additional strategic risks include those risks inherent in the
appraisal, development and production of hydrocarbons.

RISK OR UNCERTAINTY

2019 OUTCOME AND MITIGATING ACTION

The existence of a growing market
for gas in Cameroon is key to the
successful commercial development
of the Logbaba and Matanda Blocks

The Company has relied on several sources such as the Cameroon Government’s
estimate of future power demand and discussions with potential new power
suppliers seeking to use gas as well as existing customers seeking to increase
gas consumption in Cameroon. The Company cannot guarantee the future demand,
nor that energy demand will be met through gas sales, rather than alternatives
such as hydropower, and therefore there is a risk that revenue from these potential
customers will not materialise or be reduced.

The Group has established strong relationships with local and national government
and regulatory bodies which enable the Group to monitor the political and regulatory
environment.

Political and regulatory uncertainty
and delays or refusal in granting
approvals may severely inhibit project
development

Any changes to political leadership could result in increased political uncertainty
and slower decision taking in Cameroon. The uncertain regulatory environment and
adverse investment climate may affect the Group’s ability to execute commercial
transactions.

The Group continues to engage with the respective Government and regulatory body
representatives to progress the Group’s agenda.

The Group has a comprehensive political violence insurance package including
business interruption.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
16 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Principal Risks and Uncertainties continued

FINANCIAL

The production and distribution of gas in Douala, Cameroon, is a capital-
intensive business model. Companies in the oil and gas industry are
commonly associated with funding and liquidity risks. Other financial risks
include volatility in commodity prices, foreign currency risk, interest rate
risk, changes in fiscal regimes and credit risk.

RISK OR UNCERTAINTY

2019 OUTCOME AND MITIGATING ACTION

The Group has sufficient funds
available to continue running
operations and meeting financial
obligations

The Group’s ability to access
funding to meet commitments and
development plans

Group cash flows are rigorously monitored and managed to ensure the Group is in
a liquid position and able to meet its ongoing commitments.

As highlighted in this Annual Report, there are various matters that may significantly,
positively or negatively, impact the cash generation of the Group. The Directors and
management regularly meet to agree the appropriate course of action to ensure that
these matters are resolved in the best interests of the Group and its shareholders.

In the scenario of restrictive Governmental regulations being imposed, as in the
case of the Covid-19 pandemic, where customers cease consumption and/or
payment for the gas they have consumed, the Group will face liquidity constraints.

No guarantee that market conditions will permit the raising of the necessary funds
by way of debt financing, issue of new equity or farming out of interests.

The Group raised US$16.8 million net of expenses in equity during 2019. Stringent
capital discipline is deployed to maximise value and is reviewed at every Board
meeting. The Board considers different possible sources of funds and the timing
of accessing the markets, including funds generated from sales, debt financing,
convertible loans and raising equity.

Non-payment by key customer (ENEO) On 3 July 2020 the Group terminated the agreement to supply gas to its largest
customer ENEO. At termination, the outstanding receivable from ENEO was US$20
million (US$12 million net to GDC).

The Group will now rigorously pursue this unpaid amount via the legal channels
available to it.

However, non-recovery of these amounts will result in a significant reduction in the
cash generation of the Group.

Principal Risks and Uncertainties continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 17

COMPLIANCE

The Group’s current business is dependent on the continuing enforceability of
the Logbaba Concession, Matanda PSC, farm-in agreements and exploration
and development licences. Developments in politics, law, regulations and/
or general adverse public sentiment could compromise the business.

RISK OR UNCERTAINTY

2019 OUTCOME AND MITIGATING ACTION

Title to oil and gas assets can be
complex and may be disputed

The areas in which the Group
operates are perceived to have
serious bribery and corruption
problems and issues

Operations in Cameroon must be carried out in accordance with the terms of the
concession contract and local laws. The Directors and management monitor any
threats to the Group’s interest in its licences and employ the services of experienced
and competent lawyers in relevant jurisdictions to defend those interests.

To date the Group has not paid royalties at 8% to the State of Cameroon on the
Logbaba Concession. In August 2020 the Group has concluded a long-standing
dispute regarding the Logbaba Concession agreement, and in so doing has
crystalised a liability to pay back-dated royalties to the Cameroonian State in the
amount of US$9.6 million (net amount). GDC and its joint venture partner are
seeking to ensure that the royalty amounts payable are netted against amounts
due by Cameroon for their participating interest in the Logbaba Project. There is no
guarantee that the State of Cameroon will accede and the Group may be exposed
to material financial exposure and liquidity risk.

The Board has a zero-tolerance attitude towards bribery and corruption and is
committed to acting professionally, fairly and with integrity in all business dealings
and relationships. The Group has an Integrity Policy, consistent with the Group’s
obligations arising under all relevant legislation and has procedures in place to
monitor compliance, including regular training for all Group staff. The Group includes
anti-bribery and corruption compliance provisions in all contracts entered into with
third-parties.

As part of the regular training, staff are also reminded of the relevant whistleblowing
provisions in the Group’s Integrity Policy and encouraged to confidentially raise any
concerns that they may have about dangerous, illegal activity or any wrongdoing
within the organisation.

The Group is subject to compliance
requirements within the regulatory
frameworks under which it operates

The Group is subject to operational, environmental, safety and fiscal requirements,
which are subject to frequent change. The legislation often lacks clarity and there is
the added risk of receiving substantial fines for non-compliance.

Fiscal pressures on Government as a result of reduced revenues due to lower oil
prices is evident in the increasing number of audits been undertaken to identify
areas of non-compliance. The Group remains committed to maintaining the highest
levels of compliance and works closely with local regulatory authorities to ensure it
operates within the regulatory frameworks.

Furthermore, the Logbaba Project is required to separate the operations into
upstream and downstream components in order to comply with the Petroleum and
Gas legislations in Cameroon. The Group is currently negotiating the economic
and fiscal implications of this separation. The final outcome of this process is
uncertain and may impact the Logbaba Project economics. The Group maintains a
good working relationship with all relevant Government departments and with SNH,
who are kept updated on all key developments impacting GDC.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
18 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Principal Risks and Uncertainties continued

OPERATIONAL

Exploration and production activities by their nature involve significant risks.
Risks such as delays in executing work programmes, construction and
commissioning of production facilities and/or pipeline expansions, technical
difficulties, lack of access to key infrastructure, labour disputes, health and
safety incidents and other acts of God are inherent to the business.

RISK OR UNCERTAINTY

2019 OUTCOME AND MITIGATING ACTION

Exploration and production activities
are inherently uncertain in their cost,
reserve estimations and outcomes

Projections of future production are based on historic production levels and reserve
estimates. Generally accepted, industry standard reserves reporting techniques
have been used to calculate reserves and resources. All estimates of reserves and
resources involve some degree of uncertainty.

Natural disasters, project delays and
cost overruns

Future production and the quantity of recoverable reserves may vary significantly
from that expected and could affect the estimated remaining quantity of the
Company’s reserves and, therefore, the commercial viability of the Group’s current,
future or potential producing assets.

The Groups activities are in proven gas basins. The Group uses a range of
geotechnical techniques to minimise risk prior to drilling and utilises independent
reserves auditors to assess reserves and commercial viability. The Group has
access to specialists who have gained knowledge and experience in the Company’s
technical challenges.

The remediation of well La-108 required the removal of a stuck perforation gun,
clean-up and reperforation. The project encountered difficulties following the
retrieval of the perforating gun when a section of the drill string became stuck in the
wellbore. The project was put on hold and new equipment imported. The completion
of the remediation of La-108 will be subject to the risks normally associated with
exploration and production of oil and gas, including blow-outs, explosions, hurricanes,
earthquakes and fires and may result in the Group’s current or future projected target
dates for production being delayed or further capital expenditure being required.

The Group mitigates the risks through careful and detailed planning, expertise on site
and selection of qualified and experienced contractors.

The Group has a comprehensive all-risk insurance package including business
interruption.

Principal Risks and Uncertainties continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 19 S
T
R
A
T
E
G
C
R
E
P
O
R
T

OPERATIONAL (continued)

RISK OR UNCERTAINTY

2019 OUTCOME AND MITIGATING ACTION

The nature of the Group’s operations
exposes it to a wide range of HSSE
risks, including cybercrime risk

The Logbaba gas wells and pipeline network are located in the metropolitan area
of Douala, Cameroon, with a population of 2.5 million. The Board is committed
to maintaining high health, safety, security and environmental standards and
continuously reviews HSSE policies and procedures and monitors performance.
International Organisation for Standardisation compliance (“ISO”) 9001, 14001
& 45001 audits successfully completed in 2019, emphasising the Company’s
commitment to international standards in its management systems.

The Group is aware of the growing threat of cybercrime. The Company is implementing
measures to ensure that the Group systems are secure and able to adequately
protect its intellectual property and confidential information.

Alternative gas markets cannot
be developed quickly enough or in
sufficient volume to provide required
revenue

The Group is working on developing a gas-to-power solution for new and existing
customers, with CNG and natural gas vehicles as potential alternative markets. The
Directors will assess if such alternative gas markets are economically viable before
implementation.

Failure to effectively manage
community relations could impact
production and sales

The Group has a Corporate and Social Responsibility Policy and is committed to
conducting it business in accordance with best practice standards. The Group
carries out impact assessments, identifies mitigation measures and implements
them. The Group engages regularly with local communities to provide information
on operations and address any concerns.

This Strategic Report was approved by the Board of Directors on 29 September 2020 and signed on its behalf by:

Roger Kennedy
Executive Chairman
29 September 2020

FINANCIAL STATEMENTSCORPORATE GOVERNANCE

20 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2018

Operations and Customers

Logbaba Wells

Processing

107
La-107

108
La-108

La-106

106

105
La-105

MOROCCO

Gas Field Locations

TUNISIA

Logbaba Field
A 57% interest in, and operatorship
of, the Logbaba field. There are two
producing wells and one (La-108)
awaiting remediation.

Matanda Block
A 75% interest in, and operatorship
of, the Matanda Block. Title for this
interest conferred on 17 December
2018.

ALGERIA

LIBYA

EGYPT

MAURITANIA

MALI

NIGER

LEBANON

ISRAEL

JORDAN

KUWAIT

NA-1

N’Kapa-1

Bomono, Zingana,
Moambe discoveries

Bomono-101

Pungo-1x

Bomono-102

Missellele-1

ERITREA

QATAR

BOMONO
BLOCK

U.A.E.

OMAN

Razel-1

Razel-2

Pibissou-1

SUDAN

MATANDA
BLOCK

YEMEN

Logbaba
Field

Pipeline network

Industrial

customers

Power stations

Condensate trucked

to refinery

BURKINA

BENIN

T
O
G
O

NIGERIA

LIBERIA

IVORY

COAST

GHANA

CAMEROON

Douala

Yaoundé

EQUATORIAL
GUINEA

CHAD

CENTRAL
AFRICAN
REPUBLIC

DEMOCRATIC
REPUBLIC
OF THE
CONGO

CONGO

GABON

Sapele-1

SOUTH
SUDAN

Gas well
Gas and oil well
Gas well with oil show
Dry hole with gas show
Dry hole
Permitted location
Oil well
Gas show

UGANDA

RWANDA

D-1R

Sapele-1ST

Sapele-2

BURUNDI

TANZANIA

Wouri-1x

DJIBOUTI

NM-1x

North
Matanda
Field

NM-3x

ETHIOPIA

NM-2x

Souellaba-4

Souellaba-1 & 2

Souellaba-3

ETINDE
BLOCK

KENYA

Sanaga-1X

SOMALIA

KOMBE-NSEPE
BLOCK

Mami Water-1

Mombe-1

LO-1

LG-1X

Kwa Kwa-2X

Yatou-1X

Kwa Kwa-1X

ANGOLA

ZAMBIA

NAMIBIA

BOTSWANA

ZIMBABWE

REPUBLIC

SOUTH AFRICA

SWAZILAND

LESOTHO

WESTERN

SAHARA

SENEGAL

THE

GAMBIA

GUINEA-

BISSAU

GUINEA

SIERRA

LEONE

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2018 21

Operations and Customers continued
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE
CORPORATE GOVERNANCE

STRATEGIC REPORT
STRATEGIC REPORT
STRATEGIC REPORT
STRATEGIC REPORT

FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS

Gas to Market

Distribution

Logbaba Wells

Processing
Processing
Processing
Processing

Victoria Oil & Gas Plc Report & Accounts 2016
Victoria Oil & Gas Plc Report & Accounts 2016
Victoria Oil & Gas Plc Report & Accounts 2016
Victoria Oil & Gas Plc Report & Accounts 2016

5
5
5
5

Power stations

Operations & Customer Types
Douala is a growing industrial and manufacturing
hub serving Cameroon and Central/West African
markets. Since being operational, GDC has
supplied gas to a diversified customer base.

Distribution
Distribution
Distribution
Distribution
Power stations
Power stations
Power stations
Power stations

Grid Power
Supply of gas to power stations distributing to
the Douala grid.

Thermal customers
GDC supplies gas to industrial customers for use in
boilers, process plants and furnaces.

Industrial Power customers
Gas supplied to industrial customers to gas-
fired electricity generators for power generation.

Gas condensate
A by-product of the gas production process
which is sold to a local oil refinery.

Industrial
customers

51 km pipeline
network through
Doula

Pipeline network
Pipeline network
Pipeline network
Pipeline network

Industrial
Industrial
Industrial
customers
Industrial
customers
customers
customers

Condensate trucked
Condensate trucked
Condensate trucked
to refinery
Condensate trucked
to refinery
to refinery
to refinery
Condensate trucked
to refinery

Pipeline Network
GDC’s 51 km gas pipeline distributes gas across the
city of Douala as illustrated in the schematic below
(not to scale).

Bonaberi
Less densely populated side of
the Wouri River and the fastest
growing industrial area of the city.

BONABERI LINE

Phase 3

Phase 2

Phase 1

Northern Line

S
T
R
A
T
E
G
C
R
E
P
O
R
T

C
O
R
P
O
R
A
T
E
G
O
V
E
R
N
A
N
C
E

F
I
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S

ENEO
Bassa

DOUALA

Western Line
Phase 1

BOMONO
BOMONO
BOMONO
BLOCK
BOMONO
BLOCK
BLOCK
BLOCK

Razel-1
Razel-1
Razel-1
Razel-1

Razel-2
Western Line
Razel-2
Razel-2
Razel-2
Phase 2

Pibissou-1
Pibissou-1
Pibissou-1
Pibissou-1

Logbaba
Logbaba
Logbaba
Field
Logbaba
Field
Field
Field

Ports Branch Line

NA-1
NA-1
NA-1
NA-1
N’Kapa-1
N’Kapa-1
N’Kapa-1
N’Kapa-1

Bomono-101
Bomono-101
Bomono-101
Bomono-101

WOURI RIVER

Bomono-102
Bomono-102
Bomono-102
Bomono-102

Wouri-1x
Wouri-1x
Wouri-1x
Wouri-1x

NM-1x
NM-1x
NM-1x
NM-1x

NM-3x
NM-3x
NM-3x
NM-3x

NM-2x
PORT AREA
NM-2x
NM-2x
NM-2x

North
North
North
Matanda
North
Matanda
Matanda
Field
Matanda
Field
Field
Field

Magzi Branch Line

Southern
Line

Bekoko

Bomono, Zingana,
Bomono, Zingana,
Bomono, Zingana,
Moambe discoveries
Bomono, Zingana,
Moambe discoveries
Moambe discoveries
Moambe discoveries

Pungo-1x
Pungo-1x
Pungo-1x
Pungo-1x

Missellele-1
Missellele-1
Missellele-1
Missellele-1

MATANDA
MATANDA
MATANDA
BLOCK
MATANDA
BLOCK
BLOCK
BLOCK

Existing 51 km pipeline

Potential future pipeline

Consuming thermal
customer

Consuming power
customer

Condensate loading bay

Next phase customer
connections

Grid power stations

Gas well
Gas well
Gas well
Gas well
Gas and oil well
Gas and oil well
Gas and oil well
Gas and oil well
Gas well with oil show
Gas well with oil show
Gas well with oil show
Gas well with oil show
Dry hole with gas show
Dry hole with gas show
Dry hole with gas show
Dry hole with gas show
Dry hole
Dry hole
Dry hole
Dry hole
Permitted location
Permitted location
Permitted location
Permitted location
Oil well
Oil well
Oil well
Oil well
Gas show
Gas show
Gas show
Gas show

EQUATORIAL

GUINEA

CONGO

GABON

Sapele-1
Sapele-1
Sapele-1
Sapele-1

Sapele-1ST
Sapele-1ST

Sapele-1ST

Sapele-2

D-1R

Souellaba-1 & 2
Souellaba-1 & 2
Souellaba-1 & 2
Souellaba-1 & 2
Souellaba-3
Souellaba-3
Souellaba-3
Souellaba-3

Souellaba-4
Souellaba-4
Souellaba-4
Souellaba-4

ETINDE
ETINDE
ETINDE
BLOCK
ETINDE
BLOCK
BLOCK
BLOCK

Sanaga-1X
Sanaga-1X
Sanaga-1X
Sanaga-1X

KOMBE-NSEPE
KOMBE-NSEPE
KOMBE-NSEPE
BLOCK
KOMBE-NSEPE
BLOCK
BLOCK
BLOCK

Mami Water-1
Mami Water-1
Mami Water-1
Mami Water-1

Mombe-1
Mombe-1
Mombe-1
Mombe-1

LO-1
LO-1
LO-1
LO-1

LG-1X
LG-1X
LG-1X
LG-1X

Kwa Kwa-2X
Kwa Kwa-2X
Kwa Kwa-2X
Kwa Kwa-2X

Yatou-1X
Yatou-1X
Yatou-1X
Yatou-1X
Kwa Kwa-1X
Kwa Kwa-1X
Kwa Kwa-1X
Kwa Kwa-1X

Eastern Line

Yassa

Dibamba

Main Trunk Line

ENEO
Logbaba

Logbaba
Production
Wells &
Processing
Plant

Accurate as of September 2020

107

108

106

105

Gas Sources

Gas Field Locations

GDC has producing wells at the

Logbaba field where two new wells

are currently being drilled. A 75%

interest in, and operatorship of, the

Matanda Block was added to

the Group’s portfolio during the

period. A farm-in agreement to

the Bomono PSC was entered

into in early March 2017 and

at the date of reporting

remains subject to

government approvals.

Pipeline network

reach

NIGERIA

CAMEROON

Douala

Yaoundé

CHAD

CENTRAL

AFRICAN

CENTRAL

AFRICAN

REPUBLIC

AFRICAN

REPUBLIC

DEMOCRATIC

REPUBLIC

DEMOCRATIC

REPUBLIC

OF THE

REPUBLIC

OF THE

CONGO

OF THE

CONGO

22 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Reserves and Resources

Logbaba C38 Reserves and Resources
Post period the Company carried out a review
of the 1P Reserves on the Logbaba Field
and, given the analysis of the well stock and
recognising that there are no plans to drill
further wells at present (at least in the short-
term), the Company has reduced its estimates
of 1P Reserves per the table below. The overall
Resource estimates remain unchanged as the
Company has not amended the gas in place
volumes derived from previous work.

Bcf
100% basis

68
-3
-46
19

As at 1 January 2019
2019 Production
Adjustment
As at 1 January 2020

Proven (1P)1
Probable (2P)2
Possible (3P)2
Mean Prospective Resources3

All nine penetrations of the primary reservoir in
the Logbaba Field have encountered mobile gas
in reservoir quality sands in what is undoubtedly
a significant in-place resource. Our reduction
in Proved Reserves at this time reflects our
finite well stock, an assessment of the La-107
performance which did not meet our pre-drill
expectations, and recognition that the project
was designed to be a staged development
involving more wells drilled through time in line
with improved understanding of the reservoir
and growth in demand. The Proved Reserves
support sustained production at current
demand levels. Additional wells in previously
undrilled areas of the field would immediately
add to the Proved Reserves.

Gas
Gas
Gas
Gas

Bcf
Bcf
Bcf
Bcf

Gross

19
204
361
752

Net (57%)

11
116
206
429

increase of

Matanda Resources
Post period the Company was pleased to report
its estimate of
a material
Prospective Resources onshore Matanda, with
gross unrisked, mean Prospective Resources
increased to 1,196 Bcf in the Matanda Licence
(onshore) from the previously reported 903 Bcf.
This increase is the result of a detailed internal
prospect evaluation which has identified 19 gas
prospects in shallower Tertiary-aged reservoirs,

plus 7 prospects in deeper, Cretaceous-aged
prospects. The Company believes the larger
of
these prospects has mean unrisked,
Prospective Resources of over 65 Bcf, with
geological Chance of Success estimated at
better than 40%. This acreage is contiguous
with the greater Logbaba license, offering an
easy monetisation route for gas discoveries.

Matanda Onshore
Mean Prospective Resources4

North Matanda Offshore5
1C Contingent Resources
2C Contingent Resources
3C Contingent Resources
P50 Prospective Resources6

Gas

Gas
Gas
Gas
Gas

Bcf

Bcf
Bcf
Bcf
Bcf

Gross

1,196

43
163
384
3,747

Net (75%)

897

32
122
288
2,810

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 23

Reserves and Resources continued

West Medvezhye Reserves and Resources7

Proven + Probable (C1 + C2)
Proven + Probable (C1 + C2)
Field Contingent Resources
(103 discovery)
Field Contingent Resources
(103 discovery)
Prospective Resources
Prospective Resources

1 Company estimates.

Gas
Oil
Gas

Oil

Gas
Oil

Bcf
mmbls
Bcf

Bcf

Bcf
mmbls

Gross

11.8
15.6
25

3,902
722

Net (100%)

11.8
15.6
25

3,902
722

2 From work by Gaz du Cameroun and Exploration Reservoir Consultants Ltd (“ERCL”) in 2018 using the SPE/WPC/
AAPG/SPEE Petroleum Resources Management System as the basis for its classification and categorisation of
hydrocarbon volumes.

3 From the Logbaba Field Reserves Report, August 2016, by Blackwatch Petroleum Services Ltd using the SPE/
WPC/AAPG/SPEE Petroleum Resources Management System as the basis for its classification and categorisation
of hydrocarbon volumes.

4 Company Estimates.

5 From RPS Energy report: ‘North Matanda Field Assessment of Gas Volumes’. February 2018.

6 From the Volumetrics Assessment for North Matanda, Cameroon, November 2015, by ERCL.

7 C1 and C2 Reserves are from The Early Production Scheme for the Hydrocarbon Accumulation in the JN21 Reservoir
of the West Medvezhye Oil Deposit, 2012, by Neftepoekt, OOO NTS, and Prospective Resources are from the
Research Report: Refinement of the Geological-Geophysical Model of the West Medvezhy License Block, 2012, by
LLC Mineral+. Both reports use the Russian Natural Resources Classification System as the basis for classification
and categorisation of hydrocarbon volumes.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

24 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Strategic Summary

2019 Objectives

Key Performance Indicators

Capital Value

• Increase shareholder return

• Share Price Performance

Upstream Development –
Logbaba

• Completion of La-108 remediation

• Reserves increase following

programme

• Process plant optimisation works

• Independent reserves & resources

report

completion of La-108 remediation
programme

Upstream Development –
Matanda

• Develop targets for drilling sites

• Completion of seismic

on Matanda

• Commence ESIA

reinterpretation and identification
of potential well locations

• Commence ESIA

Downstream Development

• Expansion of pipeline network
following La-108 remediation
completion

• Additional grid power opportunities

• Additional customers

• Expansion of pipeline network

• Implementation of a CNG solution

• Expansion of thermal and

industrial power

• CNG project development

Financial Performance

• Credit management under new

• EBITDA

• Operating Cash Flow

• Debt and equity financing

ENEO GSA

• Ongoing cashflow and working

capital management

• Close spending supervision on

La-108 remediation and process
plant optimisation projects

• Further cost reductions at

corporate and operating levels

Responsible Operations

• Ensuring safe operations,

• Maintain Group’s strong safety

respectful of the environment and
committed to local communities

record

• Contribute to the societies in

• Resolution of OECD instance

which we operate

Strategic Opportunities

• Under review

Non-Core Projects

• West Medvezhye Project, Russia

• Sale/Farm-out

Strategic Summary continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 25

2019 Outcomes

2020 Priorities

Principal Risks & Uncertainties
See page 14 for more information

• Share price -72% yoy
(2/1/19: 24.0p, 31/12/19: 6.5p)

• Increase shareholder return

• Remediation work partially

complete with wireline tool string
and 130 m of wire recovered

• Process plant optimisation Stage
1 (Front End Engineering Design)
completed

• Uninterrupted gas supply during

2019 and gas demand met

• Completion of La-108 remediation
works to retrieve remaining 50 m
of wire, clean out well bore,
perforate and tie back to flowline

• Progress Process plant

optimisation Stage 2 if required

• Existence of Gas Market

• Political/Regulatory Delay

• Exploitation & Production Risks

• Title to assets

• Natural Disasters

• Project delays and costs

• Presidential Decree conferring

• Finalise targets for drilling sites

• Existence of Gas Market

title to Matanda Block announced
January 2019

on Matanda

• Complete ESIA

• Continued seismic reinterpretation
to identify potential well locations

• Political/Regulatory Delay

• Exploitation & Production Risks

• Title to assets

• Natural Disasters

• Project delays and costs

• ENEO online until end Q3 2019

• Expansion of thermal and

• Reliance on key customer

and 3 additional industrial
customers connected

• 1.09 km added to the pipeline

network

• CNG implementation put on hold

pending commercial studies

• Adjusted EBITDA US$4.0 million
(2018: a loss of US$0.5 million)

industrial power customer base
and associated expansion of the
pipeline network

• Additional grid power opportunities

• Existence of Gas Market

• Political and Regulatory Delay

• Alternative Market Development

• Ongoing cashflow and working

• Reliance on key customer

capital management

• Access to funding

• Liquidity

• Net Cash utilised in operating

• Recovery of outstanding

activities US$2.4 million (2018:
cash utilised of US$2.2 million)
• Net debt US$10.7 million (2018:

US$17.4 million)

• US$16.8 million net equity raise

receivables

• Nil lost time injuries throughout

• Ensuring safe operations,

the year

• OECD instance mediation initiated

respectful of the environment and
committed to local communities

• Resolution of OECD instance

• HSSE & Cyber crime

• Bribery & Corruption

• Regulatory Compliance

• Human Rights/Community

• Under review

• Political/Regulatory Delay

• Continued marketing of West

• Sale/Farm-out

Medvezhye with various parties

• Title to assets

• Title to Assets
• Political and Regulatory delay

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
26 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Corporate Social Responsibility Report

Community relations
The Group engages in CSR activities company-
wide, however the focus is in Cameroon.

During 2019 GDC continued with its dialogue led
Community Work, working with representative
groups from those living and working in our area
of operations. GDC operates within a highly
urban environment, some of the challenges
faced by ourselves, and our neighbours are very
context specific. Platform Meetings are held
within the local community alongside SNH to
report on the ongoing environmental monitoring
and compliance reporting that the Company
undertakes and provide a direct dialogue with
the community to raise any concerns or issues
they may have.

GDC has continued its commitment to health
and education schemes.

Education
GDC makes annual donations of educational
materials to junior schools in the local proximity
to the Logbaba site. As part of a “back to
school”
initiative donations of stationery
and school books were made to government
primary schools within the city of Douala in
the neighbourhoods of Ndogpassi, Logbaba,
Bonapriso and Bonaberi.

All GDC employees can apply for loan assistance
in relation to school fees.

Environmental Education
GDC continued into 2019 its involvement in
the “Waste Management Awareness Sessions”
with a number of educational institutions
selected around the Logbaba Concession Area
to try and improve awareness within the area.
The students ranged from Junior to Senior
school ages.

Medical
GDC employees and their families covering
490 people are covered under the Company’s
medical insurance policy.

During 2018 VOG and GDC worked with the
Cameroonian Presidents Office representative
in the UK in their bid to raise funds for, and
the delivery of some dialysis machines for
Buea Kidney Dialysis Centre in Cameroon. Four
Fresenius 5008 refurbished and fully serviced
dialysis machines were obtained with the
incredible assistance of St Georges Hospital in
Tooting and these were handed over in Buea in
May 2019.

“

OUR COMMUNITY
COMMITMENT:
• ENSURING A

SAFE WORKING
AND OPERATING
ENVIRONMENT
• DIALOGUE LED

LOCAL
COMMUNITY
PARTNER
INITIATIVES
• ADHERING TO

BEST PRACTICE
ENVIRONMENTAL
STANDARDS.

”

Corporate Social Responsibility Report continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 27

GDC’s wider impact
GDC maintains an engaged and proactive
relationship with local communities within
Douala, Cameroon. As a domestic supplier of
gas our contribution to the people of Cameroon
has a wider reaching impact that the direct
community engagement that we carry out:
1. Supporting the provision of clean energy –
As a domestic supplier of gas we contribute
a major energy source to the Cameroon
economy. This has seen businesses move
into the area of our pipeline reach allowing
those wishing to access it to be provided with
a consistent, safe source of combustion.
Many existing businesses have switched
from the use of heavy fuel oil to a cleaner
natural gas solution.

2. Fiscal contributions – GDC pays all applicable
in an
taxes disclosing our dealings
appropriate and transparent manner. In the
eight years that VOG has been operating in
the Douala
the Company has
contributed significantly to the local and
national economy, paying circa US$81 million
in taxes and spending >US$147 million with
local contractors.

region,

US$12.3 million paid
in local Cameroon
direct and indirect
taxes in 2019. US$81
million in total
since 2011.

3. Direct employment and skills training –
Over 40% of the GDC senior management
are Cameroon nationals and other senior
positions are now filled in the majority by
individuals from the region. 96% of GDC’s
employees are Cameroonian nationals. We
maintain an equal opportunities employment
policy and have defined skills and training
programmes both internally and externally
provided to develop our employees’ careers.
GDC is particularly proud of its staff
retention record and we have reskilled a
core team, that have been with us from
the start, that have adapted their roles in
step with our transition from E&P company
to gas supply utility. The consistent, highly
skilled work force we have within the Group
is one of our key strengths. Notably, in a
process that was initiated in 2019, and
came to fruition post period, the Minister of
Labour acknowledged recipients of Bronze,
Silver and Gold Cameroonian Long Standing
Service Awards, a scheme established to
encourage a commitment to employment.

During 2019 community workers were
continuously engaged by ourselves and our
on site suppliers.

Total investment
in Cameroon to end
2019 US$485 million.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

28 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Corporate Social Responsibility Report continued

Environment
GDC is subject to best practice standards
and extensive
regulations, which govern
environmental protection. GDC is committed to
uphold these standards and regulations as a
minimum, and to keep these important matters
under continuous review and operates to
ensure compliance with the standards expected
of an international oil and gas exploration and
production company.

Health and Safety
Safety is paramount to GDC’s operations both
at the site of the gas processing plant and
across the extensive pipeline network built
under the city of Douala. All work is undertaken
to the standards established by British Gas (the
UK’s major gas distributor). The majority of the
gas pipeline network is buried underground and
patrolled 24/7 by our safety patrol who work
closely with local communities.

136 employees.

96% local
Cameroonians.

Medical Insurance
provided to 128
employees and 362
family members.

The Group engages external consultants to
carry Hazard Studies on our operations to
ensure GDC operates to a high standard of in
relation to Emergency and Response Planning.

GDC operates its own training programmes, for
employees and customers, carrying emergency
response and gas leak drills at both the gas
processing plant and on customer sites. GDC
also works very closely with the emergency
services in Douala.

ISO Certification
GDC has been working on
International
Organization for Standardization compliance
(“ISO”) 9001, 14001 & 45001 ISO since
2017. It has developed and implemented its
Integrated Management System (“IMS”) based
upon the requirements of these International
Standards.

ISO 14001:2015 and

During 2019 GDC received its certification
following an audit by an external certifying
authority completing the audit process for ISO
9001:2015,
ISO
45001:2018. GDC has established manage-
ment systems; Quality, Environmental and
Occupational Safety and Health, which conform
to international ISO standards demonstrating
our continued commitment to providing a high-
quality product and delivering a consistent
service to all our clients, alongside the
investment of time and money into new
technology, staff, processes and procedures by
the Company.

At the outset of GDC’s Logbaba Project GDC
commissioned an independent Social and
Environmental Due Diligence study in the
context of the Equator Principles, 2006 and the
IFC Performance Standards, 2012. The Project
was identified as being limited in adverse social
or environmental impact, and any impacts were
likely to be few in number, generally site specific,
largely reversible and readily addressed through
mitigation measures. The Group completed a
further Environmental and Social
Impact
Assessment (“ESIA”) as part of the La-108 and
La-108 drilling programme planning the results
of which feed into the Environmental and Social
Management Plans (“ESMP”) for the entire
operation. In line with the ESMPs, Environmental
Monitoring and Compliance is carried out as
per Cameroon’s environmental
regulations
notably: The Environmental Framework Law and
the implementation Decree which lays down
procedures for the realisation of Environmental
Assessments. The Projects have been thus
Environmental
awarded
Conformity
to
subjected
administrative and technical Environmental
Monitoring. Such, obligatory follow-up and
supervision ensures projects respect their
terms of approval in line with ESMP. The
responsibility to monitor the compliance of
ESMP
projects/
operations is vested on GDC’s Environmental
Officer.

Certificates
(“CEC”)

implementation

of
are

during

international

Within this context, GDC in respect of national
and
legislations and aligned
with its integrated Quality, Health, Safety
and Environmental, Policy prepares quarterly
reporting in compliance with the specifications
of the ESMPs which are submitted to the relevant
stakeholders. These are also presented to the
local communities at regular Platform Meetings
held by GDC.

Corporate Social Responsibility Report continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 29

OECD Instance
Following a complaint to the Organisation for
Economic Co-operation and Development
(“OECD”) in 2018 and various communications
with the UK National Contact Point (“NCP”)
for promotion of the OECD Guidelines for
Multinational Enterprises (the “Guidelines”), the
NCP has decided, on an “Initial Assessment”
that issues raised merit further examination
(based on initial information from both parties).
The instance was made by the association of
residents of Ndogpassi I, II and III and the Good
Neighbours circle of Logmayangui in relation
to the establishment and operation of the
Logbaba Project in Cameroon.

The Guidelines are principles for responsible
business conduct in areas including employment,
human rights and the environment. While the
Board and GDC both strongly believes that
the Company has and has had the necessary
policies and processes in place, during 2019
the Company attended mediation sessions with
the complainants and the process continues,
albeit meetings postponed due to the Covid-19
restrictions.

Covid-19
In the period since 31 December 2019, the
emergence and spread of Covid-19 has not had
a significant impact on the Group’s operations.
Remediation work in relation to La-108 was
postponed due to the Covid-19 pandemic as
crews were unable to mobilise.

A crisis management team was established in
accordance with the GDC corporate management
plan to manage the company’s activities and
coordinate with the State authorities in order to
implement all the recommended guidelines and
preventive controls for Covid-19.

Many of our office based workers have worked
from home; education and training was provided
to all staff and appropriate PPE equipment
issued.

to monitor

The Company continues
the
development of Covid-19 as presented by WHO
and the State of Cameroon and implement
recommendations and guidelines within GDC
site and offices. The Drilling Camp was isolated
in order to be used for any quarantine
requirements.

A Community Platform meeting scheduled for
July 2020 has had to be postponed due to
social distancing requirements.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
30 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Directors & Other Information

Roy Kelly
Chief Executive Officer
Roy Kelly has over 35 years of technical,
commercial and managerial experience
in the international energy industry
and was previously Partner, Head
of Technical, at Kerogen Capital, a
specialist oil, gas and energy private
equity fund with over US$2 billion in
assets under management across
several funds. Mr Kelly remains on
Kerogen’s Technical Committee as an
operating partner. Prior to Kerogen, Mr
Kelly trained as a petroleum engineer
with BP and a number of independent
oil companies. He also spent 14 years
in consulting and advisory roles to the
energy industry, latterly as Managing
Director of Consulting at RPS Energy
reserves and
Ltd, which
resource auditing, and technical and
advisory roles throughout West Africa,
including Cameroon. Mr Kelly is a
Chartered Petroleum Engineer, a Fellow
of the Energy Institute and a Member
of the Society of Petroleum Engineers.
He holds a BSc (Honours) from the
University of Wales and an MBA from
the University of Durham.

included

Robert Collins
Chief Financial Officer
Rob joined the Company in February
2020 as a Non-Executive Director and in
August 2020 assumed the role of Chief
Financial Officer. Rob brings a wealth of
expertise with over 20 years’ experience
in Natural Resources Corporate Finance,
advising on a broad range of corporate
transactions spanning various commodity
groups and
transactions. He has
successfully advised on numerous IPOs,
public and private equity raises and
M&A transactions for many Official List,
AIM, TSX and ASX listed companies.
Prior to joining the Company as a Non-
Executive Director, Rob was joint senior
partner of Alternative Resource Capital
LLP (“ARC”), a business he co-founded.
He will remain an advisor to ARC in a
non-executive capacity. Prior to ARC,
Rob headed up the Natural Resource
teams at Zeus Capital Limited, GMP
LLP, Canaccord
Securities Europe
Genuity Europe Limited and Evolution
Securities Limited. Rob commenced his
career at Coopers and Lybrand and is
qualified as a Chartered Accountant.

Roger Kennedy
Executive Chairman
Dr Kennedy has worked within the natural
resources industry for over 30 years
developing and executing company and
project strategies, in addition to his roles
as an investment manager and as a senior
advisor. Currently he is Director of KCP
Private Limited, a family office focused on
investments in natural resources, infra-
structure, technology, consumer finance
and power. In 2012, he co-founded QKR
Corporation Limited, a diversified mining
investment company backed by sovereign
funds, institutional investors and high-net-
worth individuals and served as a director
until 2014.

Prior to 2012, Dr Kennedy was Managing
Director and Head of the Energy & Natural
Resources Group, Asia Pacific at JP Morgan
Securities (Asia Pacific) Limited, where he
managed a large Asia Pacific based team
focused on Oil & Gas, Metals & Mining,
Power and Chemicals. From 1994 to
2000 Mr Kennedy was Head of the Latin
American Industrials Group (Oil & Gas,
Metals & Mining, Utilities, Infrastructure
and Construction) and member of the
M&A, Debt Capital Markets, Telecom and
Natural Resources Investment Banking
teams at Salomon Brothers Inc. Dr
Kennedy has graduated from Oxford
University with a D.Phil./PhD in Economics
and Politics, holds a Juris Doctorate from
New York University and is a member of
the New York Bar Association.

Directors & Other Information continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 31

founded

John Daniel
Non-Executive Director
John Daniel has 35 years of experience
in the upstream oil and gas sector,
including
roles within operations,
exploration management and business
development. In November 2017, Mr
JD Oil and Gas
Daniel
Consultancy Limited, an independent oil
and gas consultancy, specialising in
technical and commercial due diligence
for upstream oil and gas transactions.
Prior to this, between 2011 and 2017,
Mr Daniel was Technical Director at
Kerogen Capital (UK) Limited, a Private
Equity fund specialising in upstream oil
and gas investments. In addition, Mr
Daniel held senior positions
in
exploration at Conoco, Lasmo and
Ranger Oil, and in business development
at Marathon Oil Company, MND
Exploration and Production Limited and
Sasol Petroleum International. Mr Daniel
has a MSc in Petroleum Geology from
Imperial College, London and a BSc in
Geology from Sheffield University. He is
a Fellow of the Geological Society and a
member of the PESGB.

Directors
Roger Kennedy, Executive Chairman
Roy Kelly, Chief Executive Officer
Robert Collins, Chief Financial Officer
John Daniel Independent Non-Executive
Director

Company Secretary
Leena Nagrecha

Company Number
5139892

Registered Office
Victoria Oil & Gas Plc
200 Strand
London WC2R 1DJ

Auditors
Deloitte Ireland LLP
Deloitte & Touche House
Earlsfort Terrace
Dublin 2
Ireland

Bankers
Barclays Bank Plc
Level 27, One Churchill Place
London E14 5HP

Solicitors
Kerman & Co LLP
200 Strand
London WC2R 1DJ

Nominated Adviser
Strand Hanson Limited
26 Mount Row
London W1K 3SQ

Brokers
Shore Capital Stockbrokers Limited
Bond Street House
14 Clifford Street
London W1S 4JU

Registrars
Computershare Investor Services Plc
The Pavilions
Bridgwater Road
Bristol BS99 6ZY

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
32 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Corporate Governance Statement

High standards of corporate governance are a key priority for
the Board of Victoria Oil & Gas Plc. It is the responsibility of
the Board to ensure that the Group is managed in an efficient,
effective and entrepreneurial manner for the benefit of all
shareholders over the longer term. Corporate governance is
an important aspect of this, reducing risk and adding value to
our business.

As a Company whose shares are traded on the AIM market of
the London Stock Exchange, the Company complies with the
Quoted Companies Alliance (“QCA”) Corporate Governance
Code (“the Code”) as the basis of the Group’s Governance
framework and its Statement of Compliance with the same
can be found on the Company website:

www.victoriaoilandgas.com/investor-relations/corporate-
governance.

Board
The Board is collectively responsible for the governance of the
Company and is accountable to the Company’s shareholders
for the long-term success of the Group. The Board sets
the Company’s strategic objectives and ensures that they
are properly pursued within a sound framework of internal
controls and risk management. It is ultimately responsible
for the management, governance, controls, risk management,
direction and performance of the Group.

The Board of Directors currently has four members, comprising
the Executive Chairman, Chief Executive Officer, Chief Financial
Officer and one independent Non-Executive Director.

During the current year, Roger Kennedy replaced Kevin Foo as
Executive Chairman at the conclusion of the General Meeting
(“GM”) held on 3 April 2019. John Knight was appointed Senior
Independent Director in place of Roger Kennedy effective
3 April 2019. John Bryant resigned from the Board on 7 July
2019 and John Knight on 7 November 2019, reducing the
number of independent Non-Executive Directors to one.

The Board was strengthened with the appointment of Robert
Collins as an additional independent Non-Executive Director
on 10 February 2020. He was also appointed as Senior
Independent Director. Ahmet Dik resigned as Chief Executive
Officer on 20 March 2020 and Roy Kelly was appointed Chief
Executive Officer on 23 March 2020. On 15 May 2020, Andrew
Diamond, Finance Director, tendered his resignation and he
is currently working out his six-month notice period. Robert
Collins (formerly Non-Executive Director) was appointed
Chief Financial Officer on 11 August 2020. The Company is
reviewing the appointment of an additional Non-Executive
Director. Roger Kennedy will assume the role of Non-Executive
Chairman after the General Meeting to be held on 29 October
2020.

The Chairman is responsible for leadership of the Board. He
is assisted by other Board members in formulating strategy
and, once agreed by the Board, the Executive Directors
are responsible for its delivery. The structure of the Board
ensures that no one individual dominates the decision-making
process and the Chairman facilitates and ensures that there is
effective contribution from other Executive and Non-Executive
Directors. The Board provides effective leadership and overall
management of the Group’s affairs. The Board approves the
Group’s strategy and investment plans and regularly reviews
operational and financial performance and risk management
matters. A schedule of matters reserved for Board decision
is maintained. This includes the approval of business plans,
the annual budget, major capital expenditure, acquisitions and
disposals, risk management policies and the approval of the
Financial Statements.

The Board currently represents an effective balance of skills
and experience in the international energy industry, including
resource exploration and production, finance, corporate and
business development as well as entrepreneurial and country
background. The experience and knowledge of each of the
Directors gives them the ability to constructively challenge
the strategy and to scrutinise performance. The Board is
committed to ensuring diversity of skill, experience and gender
balance. Biographical details of the Directors as at the date of
the Annual Report and Accounts are available in the section
‘Directors and Other Information’.

The Board is aware of other commitments and interests of its
Directors and changes to these commitments and interests
are reported to and, where appropriate, agreed with the rest
of the Board.

The Board holds six scheduled meetings each year. Additional
meetings are held where necessary to consider matters of
importance which cannot be held over until the next scheduled
meeting. During the current year, the Board held six scheduled
meetings and also met a further eighteen times at short
notice. In addition, the Board approved matters by written
resolutions on four occasions and appointed a committee
to approve specific matters on four occasions. Details of the
attendance of the Directors at eligible meetings, together with
meetings of the Audit and Remuneration Committees are set
out below.

Corporate Governance Statement continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 33

Audit Remuneration Nomination
Committee

Directors

Roger Kennedy
Ahmet Dik
Andrew Diamond
John Daniel (a)
John Knight (b)
John Bryant (c)
Kevin Foo (d)

Board
(scheduled)
.

Board
(additional)
.
6/6 16/18
6/6 17/18
6/6 18/18
4/4
5/5
4/4
4/4
2/2 16/17
1/1 14/14
.

Committee
.
–
–
–
4/4
4/4
3/3
–
.

Committee
.
–
–
–
2/2
2/2
1/1
–
.

–
–
–
–
–
–
–

(a) John Daniel was appointed as Director on 3 April 2019.
(b) John Knight was appointed as Director on 3 April 2019 and resigned

from the Board on 7 November 2019.

The Board delegates certain of its responsibilities to the
Board Committees, listed below, which have clearly defined
terms of reference.

All Directors have access to the advice and services of the
Company’s solicitors and the Company Secretary, who is
responsible for ensuring that all Board procedures are followed.
Any Director may take independent professional advice at the
Company’s expense in the furtherance of his duties.

The Company’s Articles of Association requires one-third
of the Directors to retire by rotation at each Annual General
Meeting (“AGM”) of the Company and each may be re-elected.
Furthermore, every Director must stand for re-election once
every three years. The Company’s Articles also require any new
Director appointed by the Board during the year to retire at the
next AGM.

Board Committees
The Board has Remuneration, Audit and Nomination
Committees and the membership of these Committees, during
the financial year and to date, changed as follows:

1 January 2019 – 3 April 2019

3 April 2019 – 7 July 2019 (a)

7 July 2019 – 7 November 2019 (b)

Audit
Committee Members
.
Roger Kennedy (Chairman)
and John Bryant

Remuneration
Committee Members
.
John Bryant (Chairman)
and Roger Kennedy

.
John Knight (Chairman),
John Bryant and
John Daniel
.
John Knight (Chairman)
and John Daniel

.
John Bryant (Chairman),
John Daniel and
John Knight
.
John Daniel (Chairman)
and John Knight

.
7 November 2019 – 9 February 2020 (c)

.
–

.
10 February 2020 – 10 August 2020(d) Robert Collins (Chairman)
and John Daniel

.
John Daniel (Chairman)
and Robert Collins

11 August 2020 – to date (e)

.
–

Nomination
Committee Members

Kevin Foo (Chairman)
Roger Kennedy and
John Bryant

John Daniel (Chairman)
Roger Kennedy, John
Bryant and John Knight

John Daniel (Chairman)
Roger Kennedy and
John Knight

John Daniel (Chairman)
and Roger Kennedy

John Daniel (Chairman)
Roger Kennedy and
Robert Collins

John Daniel (Chairman)
and Roger Kennedy

(a) On 3 April 2019 Roger Kennedy ceased to be an independent Non-Executive Director, on his appointment as Executive Chairman. John Knight and

John Daniel were appointed independent Non-Executive Directors.

(b) John Bryant resigned as independent Non-Executive Director on 7 July 2019.
(c) John Knight resigned as independent Non-Executive Director on 7 November 2019.
(d) Robert Collins appointed independent Non-Executive Director on 10 February 2020.
(e) Robert Collins appointed as Chief Financial Officer on 11 August 2020.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

34 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Corporate Governance Statement continued

Audit Committee
The membership of the Committee is as set out above.

Remuneration Committee
The membership of the Committee is as set out above.

The Finance Director and other members of the Board and
finance team attend the Committee meetings by invitation.

The Committee meets at least four times per year. During
2019, the Committee met four times and Audit Committee
matters during the period 7 November 2019 to 9 February
2020 and from 11 August 2020 onwards were dealt with by
the Board. Additional meetings are held where necessary to
consider matters referred by the Board. It is responsible for
ensuring that the financial activities of the Group are properly
monitored, controlled and reported on, complying with relevant
legal requirements. The Committee receives and reviews
reports from management and the Group’s auditors relating
to the Group’s Report and Accounts, the interim results and
review of the accounting policies. Meetings are held at least
twice a year with the auditors, once at the audit planning
stage to consider the scope of the audit and thereafter at the
reporting stage, to receive post-audit findings. The ultimate
responsibility for reviewing and approving the annual report
remains with the Board of Directors. The Committee is also
responsible for reviewing the relationship with the external
auditors, making recommendations to the Board on their
appointment and remuneration, monitoring their independence,
as well as assessing scope and results of their work, including
any non-audit work. The Committee authorises any non-audit
work to be carried out by the external auditors and ensures
that the objectivity and independence of the external auditor
has not been impaired in anyway by the nature of the non-audit
work undertaken, the level of non-audit fees charged for such
work or any other factors.

The Committee, with management, reviews the effectiveness
of internal controls.

The Committee recommends to the Board the scale and
structure of the Executive Directors’ remuneration and
that of senior management and the basis of their service
agreements with due regard to the interests of shareholders.
In determining the remuneration of the Executive Directors
and senior management, the Committee seeks to ensure
that the Company will be able to attract and retain executives
of the highest calibre. It makes recommendations to the
Board concerning bonuses and share awards. No Director
participates in discussions or decisions concerning his own
remuneration. Further details regarding matters considered by
the Remuneration Committee during the year are outlined in
the Remuneration Report.

The Chairman of the Committee will attend the AGM and
respond to any shareholder questions on the Committee’s
activities.

Nomination Committee
The membership of the Committee is as set out above and
currently comprises one independent Non-Executive Director
and the Executive Chairman. The Committee did not meet
during the year because there were no Executive Directors
appointed during the period.

The Committee oversees the composition of the Board
(including skills, knowledge and experience), senior executive
recruitment and succession, and the process for appointment
of Directors.

Corporate Governance Statement continued

Dialogue with Shareholders
The Board is active in communicating with all of its shareholders
and encourages two-way communication with both
its
institutional and private investors, subject to compliance
with the AIM Rules and the Market Abuse Regulations. The
Executive Directors talk regularly with the Company’s major
shareholders to ensure a mutual understanding of objectives
and to further explain the Group’s strategy and ensure that
their views are communicated fully to the Board.

The Board recognises the AGM as an important opportunity
to meet with private shareholders. The Non-Executive Director
attends the shareholders’ meetings and is available to
answer any questions relevant to the Committees chaired by
him. The Executive Directors are also available to listen to
the views of shareholders informally immediately following the
shareholder meetings. Covid-19 lockdown restrictions, and
related social distancing requirements impeded the ability of
shareholders to communicate with the Board members at the
AGM. The Board will seek an alternative forum to engage with
shareholders at the GM to be held to receive the 2019 Annual
Report and Accounts.

Extensive information about the Group’s activities is included
in the Annual Report and the Interim Report. The Group also
issues quarterly updates to shareholders. Market sensitive
information is regularly released to all shareholders in
accordance with London Stock Exchange rules for AIM-listed
companies. The Company maintains a corporate website
where information on the Company is regularly updated,
including Annual and Interim Reports, presentations and
announcements.

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 35

Internal Controls
The Board acknowledges that it is responsible for establishing
and maintaining the Group’s system of internal controls and
reviewing its effectiveness. The procedures that include, inter
alia, financial, operational, health and safety, compliance
matters and risk management (as detailed in the Principal
Risks and Uncertainties section) are reviewed on an ongoing
basis.

The Group’s internal control procedures include Board approval
for all significant projects, including corporate transactions and
major capital projects. The Board receives and reviews regular
reports covering both the technical progress of projects and
the Group’s financial affairs to facilitate its control.

The Group has in place internal control and risk management
systems in relation to the Group’s financial reporting process
and the Group’s process for preparing consolidated accounts,
which the Board considers adequate in view of the size and
nature of the Group’s operations. These systems include
policies and procedures to ensure that adequate accounting
records are maintained, and transactions are recorded
accurately and fairly to permit the preparation of Consolidated
Financial Statements in accordance with International Financial
Reporting Standards (“IFRSs”). The Audit Committee reviews
draft Annual and Interim Reports before recommending them
for approval to the Board. The Audit Committee discusses
with the Executive Chairman, Finance Director and external
auditors the significant accounting policies, estimates and
judgments applied in preparing these reports.

The Board acknowledges that it is responsible for managing
and preventing fraud, corruption or any other malfeasance
which comes to its attention, and to implement control systems
to ensure that knowledge of such events are communicated to
the Board in a timely and accurate manner.

The internal control system can only provide reasonable
and not absolute assurance against material misstatement
or loss. The Board has considered the need for a separate
internal audit function but, bearing in mind the present size
and composition of the Group, does not consider it necessary
at the current time.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
36 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Directors’ Report

Principal Activities, Business Review and Future
Developments
The principal activities of the Group are gas exploration,
production and distribution in Cameroon. During the year, the
Group continued the sale of gas and condensate to customers
in Cameroon and development of the Group’s strategy to
increase gas sales in Cameroon. The main activity has been
the ongoing development of the Logbaba gas and condensate
field and progress the development of the neighbouring
Matanda Block to supply gas to our customers in Douala,
Cameroon, and the expansion of the gas pipeline distribution
network to reach new customers. A detailed update on these
activities is provided in the Chairman’s Letter.

The Group has an exploration project in Russia, the
100%-owned West Medvezhye field, which is fully impaired.
The Group continues to pursue ways to derive value from the
asset through farm out, joint venture or sale.

The Group operates through overseas branches and subsidiary
undertakings as appropriate to the fiscal environment.

Subsidiary undertakings of the Group are set out in Note 30.
The Cameroonian operations are funded by operating cash
flows and partner contributions, with certain capital projects
being funded by debt or funds held centrally by the Group.

A detailed review of the significant developments and operating
activities of the Group, as well as the business environment,
future prospects and the main trends and factors that are likely
to affect the future development, performance and position of
the Group’s business are contained in the Strategic Report.

Directors
The following Directors held office during the financial year
and as at the date of this Annual Report and Accounts:

Executive Directors
Kevin Foo (retired 3 April 2019)
Roger Kennedy (appointed Executive Chairman 3 April 2019)
Ahmet Dik (resigned 20 March 2020)
Roy Kelly (appointed Chief Executive Officer 23 March 2020)
Andrew Diamond (resigned 15 May 2020)
Robert Collins (appointed Chief Financial Officer 11 August
2020)

Independent Non-Executive Directors
John Bryant (resigned 7 July 2019)
John Knight (appointed 3 April 2019 and resigned 7 November
2019)
John Daniel (appointed 3 April 2019)
Roger Kennedy (ceased to be independent Non-Executive
Director on 3 April 2019)
Robert Collins (appointed 10 February 2020 and ceased to
be independent Non-Executive Director 11 August 2020)

Rotation and Election of Directors
In accordance with Article 102.2 of the Company’s Articles of
Association, Roger Kennedy retired by rotation at the Annual
General Meeting (“AGM”) held on 29 June 2020 and he was
duly re-elected. Also at this AGM Robert Collins and Roy Kelly,
who were appointed Directors by the Board following the
2019 AGM, were elected as Directors in accordance with
Article 106.

Dividends
The Directors do not propose that a dividend be paid (prior
year: Nil).

Directors’ Indemnities
The Company maintained directors’ and officers’ liability
insurance during the year and it remains in force at the date
of this report.

Auditors
Each person who is a Director at the date of approval of this
Report and Accounts confirms that:
• So far as the Director is aware, there is no information of

which the Company’s auditors are unaware; and

• The Director has taken all steps that he ought to have taken
as a Director in order to make himself aware of any relevant
audit information and to establish that the Company’s
auditor is aware of that information.

This confirmation is given and should be interpreted in
accordance with the provisions of Section 418 of the
Companies Act 2006.

A resolution to re-appoint the auditors, Deloitte Ireland LLP,
was duly approved at the AGM held on 29 June 2020.

Substantial Shareholders
At 29 September 2020, the Company had received notification
from the following shareholders of interests in excess of 3%
of the Company’s issued Ordinary Shares with voting rights:

Shareholder

Askar Alshinbayev
Hadron Capital LLP
Forest Nominees Limited (GC1)

Number
of shares

60,913,330
27,440,962
7,775,366

Percentage
of issued
share capital

23.71%
10.7%
3.0%

Share Capital
Details of changes to share capital in the year are set out in
Note 23. This includes the subscription of shares during the
year.

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 37

Annual General Meeting
The AGM of the Company was held in London on 29 June 2020
in compliance with the Company’s statutory requirements and
all the resolutions put to vote were duly approved.

The Company’s 2019 Annual Report and Accounts were not
available to consider at the AGM and a General Meeting
(“GM”) will be held in London on 29 October 2020 to receive
these. The Notice of the GM will be available on the Company’s
website: www.victoriaoilandgas.com.

By Order of the Board,

Leena Nagrecha
Company Secretary
29 September 2020

Directors’ Report continued

Information set out in the Strategic Report
The Directors have chosen to set out the following information
in the Strategic Report which would otherwise be required to
be contained in the Directors’ Report:
• Results for the financial year
• Principal risks and uncertainties
• Likely future developments

Going Concern
The Group’s consolidated Financial Statements have been
prepared on a going concern basis as detailed in Note 3.

The Directors have given careful consideration to the
appropriateness of the going concern basis in the preparation
of the financial statements.

In performing their assessment of going concern, the Directors
have reviewed operating and cash forecasts in respect of the
operating activities and planned work programmes of the
Group’s assets to 30 September 2021. The expected cash
flows, plus available cash on hand, after allowing for funds
required for administration and development costs, working
capital improvement and debt servicing, are expected to cover
these activities.

The Directors are of the view that the Group is sufficiently
funded for the twelve-month period from the date of approval
of these Financial Statements. However, the Directors note
that there are material uncertainties as set out in Note 3,
which if any should eventuate, would require the Group to
raise additional funds in 2021.

the Directors consider

likelihood of all
Although
uncertainties eventuating to be remote, they are confident
additional funding can be accessed should it be required.

the

On the basis of the considerations set out above, the Directors
have concluded that it is appropriate to prepare the Financial
Statements on a going concern basis. These Financial
Statements do not include any adjustments to the carrying
amount and classification of assets and liabilities that may
arise if the Group was unable to continue as a going concern.

Covid-19
A statement on the impact of the Covid-19 pandemic on the
Group, as well as the additional risks faced, contingency
planning and responses is detailed in the Chairman’s Letter,
Finance Review, Principal Risks and Uncertainties and Going
Concern Review (see Note 3, Financial Statements).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
38 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Directors’ Remuneration Report

As an AIM-listed company, Victoria Oil & Gas is not obliged
to implement the remuneration reporting requirement for
premium listed companies set out in The Large and Medium-
sized Companies and Groups (Accounts and Reports)
(Amendment) Regulations 2013. However, the Remuneration
Committee (“the Committee”) has chosen to disclose the
following information in the interests of greater transparency:
• An overview of the remuneration policy for the Group’s
executives endorsed by the Committee following a review
of the existing remuneration arrangements; and

• Remuneration arrangements including payments and awards

made to the Directors for the current year.

Remuneration Committee
The remit of the Committee is provided in the Corporate
Governance section.

During the financial year the Committee was represented
by independent Non-Executive Directors. John Bryant and
Roger Kennedy as members of the Committee until 3 April
2019, when John Knight and John Daniel were appointed
members of the Committee and Roger Kennedy ceased to
be a member. John Bryant continued to chair the Committee
until his resignation as independent Non-Executive Director
of the Company on 7 July 2019. John Daniel was appointed
Chairman of the Committee effective 7 July 2019. John Knight
ceased to be a member of the Committee when he resigned
as independent Non-Executive Director on 7 November 2019.

Robert Collins was appointed a member of the Committee
on 10 February 2020 on his appointment as Non-Executive
Director. He ceased to be a member of the Remuneration
Committee on his appointment as Chief Financial Officer
on 11 August 2020. For the period 11 November 2019 to
10 February 2020 and from 11 August 2020 onwards, all
Remuneration Committee matters were dealt with by the
Board as the Committee was represented by only one Non-
Executive Director. Roger Kennedy will be appointed a member
of the Committee effective from the date of his appointment
as Non-Executive Chairman of the Company.

The Committee met twice during the current year.

Remuneration Policy
The Company’s policy is to maintain levels of remuneration
sufficient to recruit and retain senior executives of the
required calibre who can deliver growth in shareholder value.
The Company seeks to strike an appropriate balance between
fixed and performance-related reward, forming a clear link
between pay and performance. The performance targets will
be aligned to the key drivers of the business strategy, thereby
creating a strong alignment of interest between executives
and shareholders.

The Company’s remuneration policy during the financial year
consisted of the following elements, which are explained in
more detail below:
• Salary at market related levels to attract the right calibre

executive;

• Annual bonus to recognise performance during the financial
year against targets aligned with shareholder value
accretion; and

• Long-Term

Incentive Plan

introduced

following

the

fundraising in April 2019, to align the interests of the
Directors and the Senior Management with that of the
shareholders.

The Committee will continue to review the Company’s
remuneration policy on a regular basis and make amendments,
if necessary, to ensure it remains fit for purpose for the
Company, driving high levels of executive performance and
remains competitive in the market.

Salary – Executive Directors
The purpose of the base salary is to:
• reflect market rates to help recruit and retain key individuals;
• reflect the individual’s experience, role and contribution

within the Company; and

• ensure fair reward for carrying out their duties.

The Committee reviews base salaries regularly to ensure that
Executive Directors’ pay remains appropriate and competitively
aligned with external market practices.

Annual Bonus
The award of bonuses seeks to reward the Executive Directors
for the achievement of challenging corporate, strategic and
individual targets on an annual basis. The maximum potential
bonus entitlement for Executive Directors is 100% of base
salary and the allocation of bonus is calculated based on
defined performance metrics.

In order to align executives’ interests with those of
shareholders and manage cash costs, a proportion of the
bonus may be paid in shares of the Company. The Committee
will, in accordance with Executives’ contracts, determine on an
annual basis the level of deferral of the bonus payment into
the Company’s shares, the vesting period and the maximum
vesting period.

The performance targets for the year ended 31 December
2019, included the following:
• Total Shareholder Return performance relative to the AIM

All Share Oil and Gas index;

• Additional Gas Sale Agreements with grid and non-grid

customers;

• Ensure sufficient cash levels are maintained;
• Safe and successful remediation of well La-108; and
• Increase customer base of GDC.

Based on review of performance against the above listed
targets, the Committee has concluded that whilst certain of
the objectives were achieved, in light of the current financial
position of the Company, no bonus awards for the year ended
31 December 2019 should be granted. This recommendation
from the Committee was approved by the Board. The Company
did not make any bonus awards for the financial year ended
31 December 2018.

The performance targets for the year ending 31 December
2020 include the following:
• Total Shareholder Return performance relative to the AIM

All Share Oil and Gas index;
• Recovery of ENEO receivables;
• Ensure sufficient cash levels are maintained; and
• Safe and successful remediation of well La-108.

The annual bonus plan does not contain any claw back
provisions.

Directors’ Remuneration Report continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 39

Long-Term Incentive Plan (“LTIP”)
Following the fundraising in April 2019, and as set out in the shareholder circular dated 11 March 2019, work was carried out
to set up a new LTIP to align the interests of the Executive Directors and senior management with the shareholders. On 31 July
2019, the Board, on the recommendation of the Committee, adopted the new LTIP and the Committee approved the grant of
share options under the LTIP as detailed below.

The Long-Term Incentive Plan adopted by the Board on 12 September 2017 has not been activated to date and has been
superseded by the new LTIP adopted by the Board.

Share Options
In addition to the share options granted to Executive Directors under the LTIP, on 31 July 2019, the Board granted share options
to the two Non-Executive Directors in accordance with individual share option agreements. Upon resignation as Non-Executive
Director on 7 November 2019, John Knight waived his rights to 1,000,000 share options awarded to him. Further details are
set out in this report (page 41).

Benefits
The Company provides medical insurance cover and pensions auto-enrolment for all UK based employees. The Company makes
a monthly contribution into pension schemes nominated by Mr Dik and Mr Diamond at 15% of their respective salaries. The total
value of the benefits for the Executive Directors is disclosed in the Directors’ Remuneration table below.

The details of the benefits paid/earned during 2019 are as follows:

Executive Director

Roger Kennedy
Ahmet Dik
Andrew Diamond
Kevin Foo

Grand Total

Healthcare
US$

16,219
16,260
3,669
5,186

41,334

Pension
US$

–
90,117
35,404
–

125,521

Total
US$

16,219
106,377
39,073
5,186

166,855

Directors’ Service Contracts
Executive Directors
Executive Directors are employed under service contracts with notice periods as follows:
(appointed Executive Chairman 3 April 2019)
Roger Kennedy
(resigned 20 March 2020)
Ahmet Dik
(resigned 15 May 2020)
Andrew Diamond
(retired 3 April 2019)
Kevin Foo
(appointed Chief Executive Officer 23 March 2020)
Roy Kelly
(appointed Chief Financial Officer 11 August 2020)
Robert Collins

6 months
12 months
6 months
12 months
12 months
12 months

Non-Executive Directors
The Non-Executive Directors are appointed for an initial term of three years, with a notice period of one month from the Company
or the Non-Executive Director. As at the date of the 2019 Annual Report, the unexpired terms of the Non-Executive Directors’
letters of appointment were:

John Daniel
Robert Collins (a)

Service Agreement Start Date

3 April 2019
10 February 2020

Service Agreement End Date

3 April 2022
10 August 2020

Unexpired Term at the
date of this Report

18 months
–

(a) Robert Collins ceased to be Non-Executive Director of the Company on his appointment as Chief Financial Officer on 11 August 2020.

Effective April 2019, the Non-Executive Directors receive a fixed cash fee of £40,000 per annum. Non-Executive Directors may,
at the discretion of the Board, also be awarded share options.

A copy of the Service Agreement for each Director is available for inspection at the Company’s Registered Office.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

40 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Directors’ Remuneration Report continued

Directors’ Remuneration
Directors’ remuneration in aggregate for the year ended 31 December 2019 is as follows:

12-months to 31 December 2019
Executive Directors
Roger Kennedy (a)
Ahmet Dik
Andrew Diamond
Kevin Foo(b)

Non-Executive Directors
John Bryant (c)
John Daniel
John Knight (d)

Grand Total

12-months to 31 December 2018
Executive Directors
Kevin Foo
Ahmet Dik
Andrew Diamond

Non-Executive Directors
John Bryant
Iain Patrick
Roger Kennedy

Grand Total

Salaries
and fees
US$

Benefits in kind
US$

193,821
593,629
241,864
127,275

16,219
106,377
39,073
5,186

49,359
37,414
29,636

1,272,998

Salaries
and fees
US$

376,140
549,953
241,903

100,304
37,266
100,304

1,405,870

–
–
–

166,855

Benefits in kind
US$

13,309
95,048
43,375

–
–
–

151,732

Share-based
payments
US$

345,340
394,674
197,337
81,007

–
24,667
–

1,043,025

Share-based
payments
US$

–
–
–

–

Settlement
payments
US$

–
–
–
494,323

8,108
–
–

502,431

Settlement
payment
US$

–
–
–

–
53,256
–

53,256

Total
US$

555,380
1,094,680
478,274
707,791

57,467
62,081
29,636

2,985,309

Total
US$

389,449
645,001
285,278

100,304
90,522
100,304

1,610,858

(a) Appointed as Executive Chairman and ceased to be independent Non-Executive Director on 3 April 2019.
(b) Retired as Executive Chairman on 3 April 2019.
(c) Resigned as Non-Executive Director on 7 July 2019.
(d) Resigned as Non-Executive Director on 7 November 2019.

Ahmet Dik, who resigned as Chief Executive Officer on 20 March 2020, will serve out his notice period of twelve months with
the Company, unless the Board agrees to a shorter duration. During the term of his notice period, his annual salary will revert to
US$600,000 and he will be entitled to all of the employment benefits he received under his former service agreement.

Roger Kennedy, who resigns as Executive Chairman, and takes up the role of Non-Executive Chairman following the General
Meeting scheduled on 29 October 2020, will waive his entitlements to his contractual notice period, holiday entitlements,
and any further benefits pursuant to his Executive Director services contract. During the year, Mr Kennedy received a loan of
US$22,576 from the Company to assist with his relocation to the UK. This loan has been fully repaid as at the date of reporting.

Directors’ Remuneration Report continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 41

Directors’ Interests in Share Capital of the Company
The interests of Directors who held office at 31 December 2019 are set out in the table below:

Executive Directors
Roger Kennedy
Ahmet Dik
Andrew Diamond

Non-Executive Directors
John Daniel

Ordinary Shares held

1 January
2019

1,754
1,148,110
14,554

–

31 December
2019

1,754
1,582,845
14,554

–

Ordinary Share Options

1 January

2019(a)

Granted during
the year

Exercised

31 December
2019

Weighted
Exercise price

–
433,735
205,422

3,500,000 (b)
4,000,000 (b)
2,000,000 (b)

– 3,500,000 0.14 pence
433,735 4,000,000 0.14 pence
2,205,422 0.13 pence

–

1,000,000 (c)

–

1,000,000 0.14 pence

(a) Fully vested Nil cost options which expire on 31 August 2022. These options relate to the annual bonus awards relating to 2016.
(b) Share options awarded on 31 July 2019 to Executive Directors pursuant to the LTIP, at an exercise price of 14 pence and fully vested from the date

of grant. The options are exercisable over a five-year period from the date of grant.

(c) Share options awarded on 31 July 2019 to the Non-Executive Director at an exercise price of 14 pence, 25% of the options vested on the date of

grant, with the balance vesting equally over three years. The options are exercisable over a five-year period from the date of grant.

John Daniel
Remuneration Committee Chairman
29 September 2020

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

We confirm that to the best of our knowledge:
• the Financial Statements, prepared in accordance with the
applicable accounting standards, give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Group and Company taken as a whole; and

• the Strategic Report and the Directors’ Report include a fair
review of the development and performance of the business
and the position of the Company and the undertakings
included in the consolidation taken as a whole, together
with a description of the principal risks and uncertainties
that they face.

By order of the Board,

Roger Kennedy
Executive Chairman
29 September 2020

John Daniel
Non-Executive Director
29 September 2020

42 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Statement of Directors’ Responsibilities

Responsibility Statement
The Directors are responsible for preparing the Report and
the Group and parent Company Financial Statements in
accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and
parent Company Financial Statements for each financial
period. Under that law, the Directors are required to prepare
the Group Consolidated Financial Statements in accordance
with International Financial Reporting Standards as adopted
by the European Union and have elected to prepare the
parent Company Financial Statements in accordance with
UK Generally Accepted Accounting Standards, adopting the
exclusions permitted under Financial Reporting Standard 101
Reduced Disclosure Framework.

Under company law, the Directors must not approve the
Financial Statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
parent Company and of their profit or loss for that period. In
preparing the Financial Statements for the Group and the
Company, the Directors are required to:
• properly select and apply accounting policies;
• present information, including accounting policies, in a
manner that provides relevant, reliable, comparable and
understandable information;

• make judgements that are reasonable and prudent;
• provide additional disclosures when compliance with the
specific accounting standards is insufficient to enable users
to understand the impact of particular transactions, other
events and conditions on the Group’s financial position and
financial performance; and

• make an assessment of the Group’s ability to continue as

a going concern.

responsible

The Directors are
for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company and
enable them to ensure that the Financial Statements comply
with the Companies Act 2006. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.

The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the United Kingdom
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 43

Opinion

In our opinion:
• the Financial Statements give a true and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2019 and of the Group’s loss for the year then ended;
• the Group Financial Statements have been properly prepared in accordance with International
Financial Reporting Standards (“IFRSs”) as adopted by the European Union and IFRSs as
issued by the International Accounting Standards Board (“IASB”);

• the Parent Company Financial Statements have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting Practice including Financial Reporting
Standard 101 “Reduced Disclosure Framework”; and

• the Financial Statements have been prepared in accordance with the requirements of the

Companies Act 2006.

We have audited the Financial Statements of Victoria Oil & Gas Plc (the ‘Parent Company’) and its
subsidiaries (the ‘Group’) which comprise:
• The Consolidated Income Statement;
• The Consolidated Statement of Comprehensive Income;
• The Consolidated and Parent Company Statements of Financial Position;
• The Consolidated and Parent Company Statements of Changes in Equity;
• The Consolidated Cash Flow Statement ; and
• The related Notes 1 to 32 and Notes A to K including a summary of significant accounting

policies as set out in Note 2 and Note A.

The financial reporting framework that has been applied in the preparation of the Group Financial
Statements is applicable law and IFRSs as adopted by the European Union and IFRSs as issued by
the International Accounting Standards Board (“IASB”). The financial reporting framework that has
been applied in the preparation of the Parent Company Financial Statements is applicable law and
United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework” (United
Kingdom Generally Accepted Accounting Practice).

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and
applicable law. Our responsibilities under those standards are further described in the auditor’s
responsibilities for the audit of the Financial Statements section of our report.

We are independent of the Group and the Parent Company in accordance with the ethical requirements
that are relevant to our audit of the Financial Statements in the UK, including the Financial Reporting
Council’s (“the FRC’s”) Ethical Standard as applied to listed entities, and we have fulfilled our other
ethical responsibilities in accordance with these requirements. We believe that the audit evidence
we have obtained is sufficient and appropriate to provide a basis for our opinion.

Material uncertainty relating to going concern

In forming our opinion on the Financial Statements, which is not modified, we draw your attention to:

Note 3 to the Group’s Consolidated Financial Statements concerning the Group and Parent Company’s
ability to continue as a going concern. The Group incurred a loss of $110.3 million for the year ended
31 December 2019. The Group had a cash balance of $7.2 million and borrowings of $17.9 million
at the Balance Sheet date.

The Parent Company incurred a loss of $110.3 million for the year ended 31 December 2019. The
Parent Company has a cash balance of $3.6 million at the Balance Sheet date.

The ability of the Group and the Parent Company to continue as a going concern is dependent
on a number of uncertainties including the recoverability of amounts owed by ENEO, a successful
conclusion to the Logbaba Concession agreement negotiations, and the ability to raise additional
financing if required.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
44 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

Material uncertainty relating to going concern continued

The Directors have prepared the Financial Statements of the Group and Parent Company on the basis that the Group and Parent
Company is a going concern.

In response to this, we:
• obtained an understanding of the Group and Parent Company’s controls over the development and approval of the projections
and assumptions used in the cash flow forecasts to support the going concern assumption and assessed the design and
determined the implementation of these controls;

• challenged the key assumptions used in the cash flow forecasts by agreement to historical run rates, expenditure commitments

and other supporting documentation;

• performed sensitivity analysis on the cash flow forecasts to assess the amount of headroom;
• tested the clerical accuracy of the cash flow forecast model; and
• assessed the adequacy of the disclosures in the Financial Statements.

These events and conditions, along with the other matters as set forth in Note 3 to the Financial Statements, indicate the
existence of a material uncertainty on the Group’s and Parent Company ability to continue as a going concern. Our opinion is
not modified in respect of this matter.

Summary of our audit approach

Key audit matters

The key audit matters that we identified in the current year were:
• Recoverability of Property, Plant and Equipment and other assets – Group and Parent Company;
• Recoverability of Exploration and Evaluation Assets; and
• Going concern (see material uncertainty relating to going concern section).

Materiality

Scoping

Within this report, any new key audit matters are identified with and any key audit matters which are
the same as the prior year identified with .

The materiality that we used for the Group Financial Statements was US$300,000 which was
determined on the basis of a blended rate of 2% of shareholders equity and 2% of revenue. The Parent
Company materiality that we determined was US$150,000 based on 1.3% of net assets.

We determined the scope of our Group audit by obtaining an understanding of the Group and assessing
the risks of material misstatement at the Group level. We also considered the quantum of Financial
Statement balances and individual financial transactions of a significant nature.

We assessed the Group to consist of three significant components being Victoria Oil & Gas PLC
(“Company”), Gaz Du Cameroun S.A. (“GDC”) and Bramlin Limited (“Bramlin”). We performed a full
scope audit on these components.

Significant changes
in our approach

No significant changes in our approach.

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 45

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Financial
Statements of the current year and include the most significant assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of
our audit of the Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion
on these matters.

In addition to the matter described in the Material Uncertainty relating to Going Concern section, we have determined the matters
described below to be the key audit matters to be communicated in our report.

Key audit matter title

Recoverability of Property, Plant & Equipment and other assets – Group and Parent Company

Key audit matter
description

As at 31 December 2019, the carrying value of Property, Plant & Equipment (“PPE”) including Oil and
Gas assets (“O&G”) was US$20.6 million (2018: US$91.1 million). The Parent Company had amounts
due from subsidiaries of US$9.5 million (2018: US$85.9 million) at the Balance Sheet date.

During the year the Group recorded an impairment charge of US$62.9 million in relation to PPE (2018:
Nil) and an impairment charge of US$5.6 million (2018: Nil) in relation to investment in associates. The
Parent Company fully impaired its investments in subsidiaries and associates during the year recording
an impairment charge of US$16.9 million (2018: Nil).

PPE assets relate to costs capitalised in relation to the gas reserves in production. PPE assets are
tested against the expected recoverable amount by comparing the carrying value of the asset against the
future net cash flows expected. Calculation of the recoverable amount of the asset requires judgement
in determining appropriate assumptions including but not limited to reserves and production profiles,
revenue assumptions and discount rates to use when projecting future cash flows.

The realisation of the carrying value of PPE is dependent on the continued development of economic
reserves from the Logbaba project and the successful remediation of LA-108 well. The realisation of
amounts due from subsidiaries is also dependent on the realisation of PPE, and accordingly, on the
continued development of economic reserves from the Logbaba Project.

Refer to the accounting policy in Note 2 (Significant accounting policies), Note 4 (Impairment of assets)
and the disclosures in Note 15 (Property, Plant & Equipment) of the Group Financial Statements and
as described in Note A (Significant accounting policies) and in Note B of the Parent Company Financial
Statements.

Our audit response included the procedures below:
• We have evaluated management’s procedures for assessing indicators of impairment;
• We obtained an understanding of management’s controls over the development and approval of the
projections and assumptions used in the impairment model and assessed the design and determined
the implementation of these controls;

• We assessed the mechanical accuracy of the impairment models and the methodology applied by

management for consistency with the requirements of IAS 36;

• We challenged the key assumptions used in management’s calculation of the value in use by
reference to historical trends and gathering of other relevant information including market data;
• We engaged our valuation experts to determine an independent discount rate to assess the

appropriateness of the discount rate used by management;

• We assessed revenue growth assumptions by agreeing details of new customers to relevant gas

supply agreements;

• We assessed cost assumptions by agreement to relevant information including capital expenditure

commitments and historical run rates of operating costs;

• We recalculated the impairment charges recorded by management to assess their reasonableness

in the context of the value in use models prepared; and

• We assessed the completeness and accuracy of disclosures within the financial statements in

accordance with IFRSs.

The recoverability of PPE and amounts due from subsidiaries is dependent on the continued
development of economic reserves and revenue growth from the Logbaba Project which is subject
to a number of uncertainties including the ability of the Group to raise sufficient finance to continue
to develop operations.
The Financial Statements do not include any adjustments relating to this uncertainty and the
ultimate outcome cannot, at present, be determined. Our opinion is not modified in respect of
this matter.

How the scope of
our audit responded
to the key audit
matter

Key observations

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
46 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

Key audit matter title

Recoverability of Exploration and Evaluation Assets

Key audit matter
description

As described in Note 2 (Significant accounting policies), Note 4 (Impairment of assets) and Note
14 (Intangible assets), the Group held Exploration and Evaluation (“E&E”) assets of US$8.5 million
(2018: US$30.3 million) as at the year-end. The exploration and evaluation assets relate to the
Logbaba drilling programme and represent the cost of the development of the LA-108 well.

The Group has impaired E&E assets totalling US$27.4 million (2018: Nil).

In accordance with IFRS 6, Exploration and Evaluation costs are capitalised as intangible assets until
technical feasibility and commercial viability of extraction of reserves are demonstrable, at which point
the cost of the assets is transferred to PPE.

The recoverability of LA-108 is dependent on the successful discovery and development of reserves
through the remediation of LA-108 and access to financial resources to develop LA-108 and bring the
asset to economic maturity and profitability.

As disclosed in Notes 4 and 14 to the Financial Statements, the outcome of ongoing field development,
and therefore whether the carrying value of intangible exploration and evaluation assets will be
recovered, is inherently uncertain.

How the scope of our
audit responded to
the key audit matter

In response to the risk identified we performed the following:
• We considered and evaluated the Directors assessment of indicators of impairment in relation to

the E&E assets in accordance with IFRS 6;

• We obtained an understanding of management’s controls over the development and approval of
the projections and assumptions used in the impairment model and assessed the design and
determined the implementation of these controls;

• We assessed the mechanical accuracy of the impairment models and the methodology applied by

management for consistency with the requirements of IAS 36;

• We challenged the key assumption used in management’s calculation of the value in use by

reference to historical trends;

• We engaged our valuation experts to determine an independent discount rate to assess the

appropriateness of the discount rate used by management;

• We reviewed the current results level of expenditure required to bring well La-108 into production;

and

• We assessed the completeness and accuracy of disclosures within the Financial Statements in

accordance with IFRSs.

Key observations

Recoverability of E&E assets is dependent on the successful remediation of the LA-108 well and
access to financial resources to develop LA-108 and bringing the asset to economic maturity and
profitability. The Financial Statements do not include any adjustments relating to this uncertainty and
the ultimate outcome cannot, at present, be determined. Our opinion is not modified in respect of
this matter.

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 47

Our application of materiality

We define materiality as the magnitude of misstatement in the Financial Statements that makes it probable that the economic
decisions of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope
of our audit work and in evaluating the results of our work.

Based on our professional judgement, we determined materiality for the Financial Statements as a whole as follows:

Group Financial Statements

Parent Company Financial Statements

Materiality

US$300,000 (2018: US$600,000)

US$150,000 (2018: US$450,000)

Basis for determining
materiality

Group materiality was determined based on a
blended rate of an average of approximately 2%
of shareholders equity and 2% of Revenue.

The Parent Company materiality equates to 1.3%
of net assets, which is capped at 50% of Group
materiality.

Rationale for the
benchmark applied

We have used two benchmarks to determine our materiality, which we believe cover key metrics of the
Group which are used by stakeholders.

Given that the Group is currently transitioning from an exploration company to a production company,
we have determined materiality based on an average blended rate between shareholders’ equity (2%)
and revenue (2%).

The Parent Company does not trade. It holds intercompany receivables. As a result, net assets are the
key metric for the Parent Company.

We believe that using a materiality based on these benchmarks reflects critical underlying measures of
the Group given these are the critical elements of the business.

Shareholder Funds
US$11.3 million

Shareholder Funds

Group materiality

Group materiality US$0.3 million

Component materiality
US$0.150 million

Audit Committee reporting
threshold US$0.015 million

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of US$15,000
(2018: US$30,000) for the Group and US$7,500 (2018: US$22,500) for the Parent Company, as well as differences below
that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure
matters that we identified when assessing the overall presentation of the Financial Statements.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

48 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

An overview of the scope of our audit

We determined the scope of our Group audit by obtaining an understanding of the Group and
its environment and assessing the risks of material misstatement at the Group level. We also
considered the quantum of Financial Statement balances and individual financial transactions of a
significant nature.

Based on this assessment, we assessed the Group to consist of three significant components
being Victoria Oil & Gas PLC (“the Parent Company”), Bramlin Limited and Gaz Du Cameroun S.A.
(“GDC”). We performed a full scope audit on these components covering 100% of revenue, 98% of
profit before tax and 99% of net assets. In addition, we have performed analytical procedures on all
non-significant components. The work performed by the component audit team in Cameroon was
directed by the Group audit team and performed to component materiality levels applicable to each
component which were lower than Group materiality.

At the Parent Company entity level we also tested the consolidation process and carried out analytical
procedures to confirm our conclusion that there were no significant risks of material misstatement
of the aggregated financial information of the remaining components not subject to audit or audit of
specified account balances.

Other information

The Directors are responsible for the other information. The other information comprises the
information included in the Annual Report and Accounts 2019, other than the Financial Statements
and our Auditor’s Report thereon.

We have nothing to
report in respect of
these matters.

Our opinion on the Financial Statements does not cover the other information and, except to the
extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion
thereon.

In connection with our audit of the Financial Statements, our responsibility is to read the other
information and, in doing so, consider whether the other information is materially inconsistent
with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be
materially misstated.

If we identify such material inconsistencies or apparent material misstatements, we are required
to determine whether there is a material misstatement in the Financial Statements or a material
misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact.

Responsibilities of Directors

As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible
for the preparation of the Financial Statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the preparation
of Financial Statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, the Directors are responsible for assessing the Group’s
and the Parent Company’s ability to continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic
alternative but to do so.

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 49

Auditor’s responsibilities for the audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the Financial Statements as a
whole are free from material misstatement, whether due to fraud or error, and to issue an Auditor’s
Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these Financial Statements.

As part of an audit in accordance with ISAs (UK), the auditor exercises professional judgment and
maintains professional scepticism throughout the audit. The auditor also:

• Identifies and assesses the risks of material misstatement of the entity’s (or where relevant,
the Consolidated) Financial Statements, whether due to fraud or error, designs and performs
audit procedures responsive to those risks, and obtains audit evidence that is sufficient and
appropriate to provide a basis for the Auditor’s opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtains an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s (or where relevant, the Group’s) internal control.

• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the Directors.

• Concludes on the appropriateness of the Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on the entity’s (or where relevant, the Group’s)
ability to continue as a going concern. If the Auditor concludes that a material uncertainty exists,
the Auditor is required to draw attention in the Auditor’s Report to the related disclosures in the
Financial Statements or, if such disclosures are inadequate, to modify the Auditor’s opinion. The
Auditor’s conclusions are based on the audit evidence obtained up to the date of the Auditor’s
Report. However, future events or conditions may cause the entity (or where relevant, the Group)
to cease to continue as a going concern.

• Evaluates the overall presentation, structure and content of the Financial Statements, including
the disclosures, and whether the Financial Statements represent the underlying transactions and
events in a manner that achieves fair presentation (i.e. gives a true and fair view).

• Where the Auditor is required to report on Consolidated Financial Statements, obtains sufficient
appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the Consolidated Financial Statements. The Group
Auditor is responsible for the direction, supervision and performance of the Group audit. The
Group Auditor remains solely responsible for the audit opinion.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
50 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

Auditor’s responsibilities for the audit of the Financial Statements continued

The Auditor communicates with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that the auditor identifies during the audit.

For listed entities and public interest entities, the Auditor also provides those charged with governance
with a statement that the Auditor has complied with relevant ethical requirements regarding
independence, including the FRC’s Ethical Standard, and communicates with them all relationships
and other matters that may reasonably be thought to bear on the auditor’s independence, and where
applicable, related safeguards.

Where the Auditor is required to report on key audit matters, from the matters communicated
with those charged with governance, the Auditor determines those matters that were of most
significance in the audit of the Financial Statements of the current period and are therefore the key
audit matters. The Auditor describes these matters in the Auditor’s Report unless law or regulation
precludes public disclosure about the matter or when, in extremely rare circumstances, the Auditor
determines that a matter should not be communicated in the Auditor’s Report because the adverse
consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.

Report on other legal and regulatory requirements

Opinions on other matters prescribed by the Companies Act 2006

In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic Report and the Directors’ Report for the Financial Year for
which the Financial Statements are prepared is consistent with the Financial Statements; and
• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable

legal requirements.

In the light of the knowledge and understanding of the Group and the Parent Company and their
environment obtained in the course of the audit, we have not identified any material misstatements
in the Strategic Report or the Directors’ Report.

Independent Auditor’s Report to the members of Victoria Oil & Gas Plc continued

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 51

Matters on which we are required to report by exception

Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Parent Company, or returns adequate for

We have nothing to
report in respect of
these matters.

our audit have not been received from branches not visited by us; or

• the Parent Company Financial Statements are not in agreement with the accounting records

and returns.

Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures
of Directors’ remuneration have not been made.

Use of our report

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of
Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state
to the Company’s members those matters we are required to state to them in an auditor’s report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s members as a body, for our
audit work, for this report, or for the opinions we have formed.

We have nothing to
report in respect of
this matter.

Sinéad McHugh (Senior Statutory Auditor)
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Auditor
Deloitte & Touche House, Earlsfort Terrace, Dublin 2
Ireland

29 September 2020

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
52 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Consolidated Income Statement
For the year ended 31 December 2019

Continuing operations
Revenue
Cost of sales

Gross profit
Administrative expenses
Other (losses)/gains
Share of profit of associate
Impairment of assets

Operating loss
Finance costs

Loss before tax
Tax credit/(charge)

Loss for the year – attributable to shareholders of the parent

Loss per share – basic & diluted

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2019

Loss for the year
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations

Total comprehensive loss for the year – attributable to shareholders of the parent

Notes

8
6
16
4

Note

2019
US$’000

20,822
(18,403)

2,419
(16,615)
(60)
–
(95,845)

(110,101)
(1,851)

(111,952)
1,672

(110,280)

Cents

(48.20)

2019
US$’000

(110,280)

(91)

(110,371)

2018
US$’000

10,796
(10,117)

679
(8,366)
821
530
–

(6,336)
(1,966)

(8,302)
(219)

(8,521)

Cents

(5.79)

2018
US$’000

(8,521)

(8,443)

Consolidated Statement of Financial Position
At 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 53

Assets:
Non-current assets
Intangible assets
Property, plant and equipment
Investment in associate

Current assets
Inventories
Trade and other receivables
Cash and cash equivalents

Total assets

Liabilities:
Current liabilities
Trade and other payables
Provisions
Borrowings

Net current liabilities

Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions

Net assets

Equity:
Called-up share capital
Share premium
ESOP Trust reserve
Translation reserve
Other reserves
Retained (losses)/earnings

Total equity

31 December
2019
US$’000

8,620
20,606
–

29,226

12
13,711
7,237

20,960

50,186

9,272
9,638
5,969

24,879

(3,919)

11,953
–
2,037

13,990

11,317

1,826
42,817
–
(17,725)
1,093
(16,694)

11,317

31 December
2018
US$’000

30,445
91,087
5,556

127,088

18
8,666
3,467

12,151

139,239

10,800
199
4,109

15,108

(2,957)

16,798
2,030
1,651

20,479

103,652

1,130
26,254
(4)
(17,634)
401
93,505

103,652

Notes

14
15
16

17
18

19
20
21

21
9
20

The Financial Statements of Victoria Oil & Gas Plc, registered number 5139892, were approved by the Board of Directors on
29 September 2020.

Roger Kennedy
Executive Chairman

John Daniel
Non-Executive Director

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

54 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Consolidated Statement of Changes in Equity
For the year ended 31 December 2019

For the year ended 31 December 2018
At 31 December 2017
Shares issued
Vesting of share options
Warrants expired
Total comprehensive loss for the year

At 31 December 2018

For the year ended 31 December 2019
At 31 December 2018
Shares issued
Share-based payments
Vesting of share options
Shares granted to ESOP members
Total comprehensive loss for the year

At 31 December 2019

Share
capital
US$’000

1,095
35
–
–
–

1,130

1,130
685
11
–
–
–

1,826

Share
premium
US$’000

24,218
2,036
–
–
–

26,254

26,254
16,067
496
–
–
–

42,817

ESOP Trust
reserve
US$’000

(4)
–
–
–
–

(4)

Translation
reserve
US$’000

(17,712)
–
–
–
78

(17,634)

(4) (17,634)
–
–
–
–
–
–
4
–
(91)
–

–

(17,725)

Other
reserves
US$’000

Retained
(losses)/
earnings
US$’000

Total
US$’000

248 102,005 109,850
2,071
174
–
(8,443)

–
–
21
(8,521)

–
174
(21)
–

401

93,505 103,652

93,505 103,652
401
16,752
–
–
199
–
(308)
1,000
–
1,000
–
85
81
– (110,280) (110,371)

1,093

(16,694) 11,317

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 55

Consolidated Cash Flow Statement
For the year ended 31 December 2019

Cash flows from operating activities
Loss for the year
Adjustments for non-cash and other items:

Tax
Share of profit in associate
Impairment of assets
Finance costs
Depreciation and amortisation
Other losses/(gains)
Other non-cash items
Shares vested by ESOP Trust
Share-based payments

Movements in working capital
(Increase)/decrease in trade and other receivables
Decrease in inventories
Increase/(decrease) in trade and other payables and provisions

Net movements in working capital
Tax paid
Interest paid

Net cash utilised in operating activities

Cash flows from investing activities
Payments for intangible assets
Payments for property, plant and equipment
Dividends received from associate

Net cash utilised in investing activities

Cash flows from financing activities
Repayment of borrowings
Net cash generated from equity raise

Net cash generated by/(utilised in) financing activities

Net increase/(decrease) in cash and cash equivalents

Cash and cash equivalents – beginning of year
Effects of exchange rate changes on the balance of cash held in foreign currencies

Cash and cash equivalents – end of year

Notes

2019
US$’000

(110,280)

(1,672)
–
95,845
1,851
8,609
60
40
81
1,199

(4,267)

(5,160)
6
9,096

3,942
(358)
(1,738)

(2,421)

(6,673)
(1,037)
–

(7,710)

(2,563)
16,752

14,189

4,058

3,467
(288)

7,237

2018
US$’000

(8,521)

219
(530)
–
1,966
5,807
(821)
–
–
393

(1,487)

4,998
6
(3,637)

1,367
(119)
(1,920)

(2,159)

(1,889)
(1,474)
403

(2,960)

(2,809)
–

(2,809)

(7,928)

11,476
(81)

3,467

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

56 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements
For the year ended 31 December 2019

1. GENERAL INFORMATION

Victoria Oil & Gas Plc is a public company limited by shares,
incorporated in England and Wales under the Companies Act
2006. The address of the registered office is 200 Strand,
London, WC2R 1DJ. The primary activity of the Group is the
discovery, production and supply of gas to customers in
Cameroon. The Company is listed on the AIM market of the
London Stock Exchange (“AIM”).

The Consolidated Financial Statements incorporate the
Financial Statements of the Company and its subsidiaries
(“the Group”) for the year ended 31 December 2019. The

Consolidated Financial Statements have been prepared in
accordance with International Financial Reporting Standards
adopted for use by the European Union (“IFRSs”). They have
also been prepared in accordance with the Companies Act
2006.

The Company has elected to prepare its Parent Company’s
Financial Statements in accordance with UK Generally
Accepted Accounting Practice adopting Financial Reporting
Standard 101 Reduced Disclosure Framework. These are
presented on pages 88 to 93.

2. SIGNIFICANT ACCOUNTING POLICIES

(i) Basis of Preparation
The Consolidated Financial Statements are prepared under
the going concern basis using the historical cost convention
except for certain financial instruments that are measured at
revalued amounts or fair values at the end of each reporting
period. The Consolidated Financial Statements are presented
in US Dollars, rounded to the nearest thousand (US$’000)
except where otherwise indicated.

(ii) New and amended standards, interpretations and
amendments adopted by the Group
The following new and revised standards and interpretations,
all of which are effective for accounting periods beginning on
or after 1 January 2019, have been adopted in the current
financial year.
• Amendments to IAS 28 Sale of Long-Term Interest in

Associates and Joint Ventures.

• IFRS 16 Leases.
• IFRIC 23 Uncertainty over Income Tax Treatments.
• Annual Improvements to IFRS Standards 2015-2017 Cycle.
• Amendments to IAS 19 Plan Amendment, Curtailment or

Settlement.

• Amendments to IFRS 9 Prepayment Features with Negative

Compensation.

The adoption of IFRS 16 Leases is described below. The Group
has adopted IFRIC 23 Uncertainty over Income Tax Treatments
which is effective for accounting periods beginning on or after
1 January 2019. The interpretation is applied to the
determination of taxable profit (tax loss), tax bases, unused
tax losses, unused tax credits and tax rates, when there is
uncertainty over income tax treatments under IAS 12. The
adoption of this interpretation has not had a material impact on
the financial statements of the Group. The other new standards
effective from 1 January 2019, as listed above, do not have a
material effect on the Group’s Financial Statements.

IFRS 16 Leases
The Group adopted IFRS 16 Leases for the period beginning
1 January 2019. The adoption of IFRS 16 impacts both
the measurement and disclosures of leases over a value
threshold and with terms longer than one year. For qualifying
leases additional lease liabilities and right of use assets are

recorded. The Group has assessed its existing leases and,
as none were longer than twelve months in duration, was
not required to make any adjustments. Any future leases
will be assessed and accounted for in accordance with the
new standard. For existing leases, under the new IFRS 16
Leases standard, the Group has continued to recognise lease
expenses on a straight-line basis over the term of the lease.

Other new and amended standards and interpretations issued
by the International Accounting Standards Board (“IASB”) that
have been applied for the first time in these Annual Financial
Statements have not had a significant impact on the Group as
they are either not relevant to the Group’s activities or require
accounting which is consistent with the Group’s current
accounting policies.

(iii) New standards, interpretations and amendments not
yet effective
At the date of authorisation of these financial statements,
the Group has not applied the following new and revised IFRS
Standards that have been issued but are not yet effective:
• IFRS 17 Insurance Contracts
• IFRS 10 and IAS 28 (amendments) Sale or Contribution
of Assets between an investor and its Associate or Joint
Venture

• Amendments to IFRS 3 Definition of a Business
• Amendments to IAS 1 and IAS 8 Definition of material
• Conceptual Framework Amendments to References to the

Conceptual Framework in IFRS Standards

The Company is currently assessing the impact of these new
accounting standards and amendments. None of these are
expected to have a significant effect on the Group.

(iv) Basis of Consolidation
The Consolidated Financial Statements incorporate the
Financial Statements of the Company and entities controlled
by the Company and its subsidiaries. Control is achieved when
the Company:
• has power over the investee;
• is exposed, or has rights, to variable returns from its

involvement with the investee; and

• has the ability to use its power to affect its returns.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 57

2. SIGNIFICANT ACCOUNTING POLICIES continued

The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control listed
above.

When the Company has less than a majority of the voting
rights of an investee, it has the power over the investee when
the voting rights are sufficient to give it the practical ability to
direct the relevant activities of the investee unilaterally. The
Company considers all relevant facts and circumstances in
assessing whether or not the Company’s voting rights in an
investee are sufficient to give it power, including:
• the size of the Company’s holding of voting rights relative
to the size and dispersion of holdings of the other vote
holders;

• potential voting rights held by the Company, other vote

holders or other parties;

• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that
the Company has, or does not have, the current ability to
direct the relevant activities at the time that decisions
need to be made, including voting patterns at previous
shareholders’ meetings.

Consolidation of a subsidiary begins when the Company
obtains control over the subsidiary and ceases when the
Company loses control of the subsidiary. Specifically, income
and expenses of a subsidiary acquired or disposed of during
the year are included in the Consolidated Income Statement
and other comprehensive income from the date the Company
gains control until the date when the Company ceases to
control the subsidiary.

Profit or loss and each component of other comprehensive
income are attributed to the owners of the Company and to
the non-controlling interests. Total comprehensive income of
subsidiaries is attributed to the owners of the Company and
to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.

When necessary, adjustments are made to the Financial
Statements of subsidiaries to bring their accounting policies
into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between members of
the Group are eliminated in full on consolidation.

Changes in the Group’s ownership interests in existing
subsidiaries
Changes in the Group’s ownership interests in subsidiaries that
do not result in the Group losing control over the subsidiaries
are accounted for as equity transactions. The carrying amounts
of the Group’s interests and the non-controlling interests are
adjusted to reflect the changes in their relative interests in the
subsidiaries. Any difference between the amount by which the
non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity
and attributed to owners of the Company.

When the Group loses control of a subsidiary, a gain or loss is
recognised in profit or loss and is calculated as the difference
between: (i) the aggregate of the fair value of the consideration
received and the fair value of any retained interest; and (ii) the
previous carrying amount of the assets (including goodwill), and
liabilities of the subsidiary. All amounts previously recognised
in other comprehensive income in relation to that subsidiary
are accounted for as if the Group had directly disposed of the
related assets or liabilities of the subsidiary (reclassified to
profit or loss or transferred to another category of equity as
specified/permitted by applicable IFRSs).

Investments in associates
An associate is an entity over which the Group has significant
influence. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but
does not control or have joint control over these policies. The
Group’s investment in Cameroon Holdings Limited (“CHL”) is
accounted for as an investment in associates.

The results and assets and liabilities of associates are
incorporated in these Consolidated Financial Statements
using the equity method of accounting. Under the equity
method, an investment in an associate is initially recognised
in the Consolidated Statement of Financial Position at cost
and adjusted thereafter to recognise the Group’s share of
the profit or loss and other comprehensive income of the
associate. When the Group’s share of losses of an associate
exceeds the Group’s interest in that associate (which includes
any long-term interests that, in substance, form part of the
Group’s net investment in the associate), the Group no longer
recognises its share of further losses. Additional losses are
recognised only to the extent that the Group has incurred legal
or constructive obligations or made payments on behalf of
the associate.

An investment in an associate is accounted for using the
equity method from the date on which the investee becomes
an associate. On acquisition of the investment in an associate,
any excess of the cost of the investment over the Group’s share
of the net fair value of the identifiable assets and liabilities
of the investee is recognised as goodwill, which is included
within the carrying amount of the investment. Any excess
of the Group’s share of the net fair value of the identifiable
assets and liabilities over the cost of the investment, after
reassessment, is recognised immediately in profit or loss in
the period in which the investment is acquired.

The requirements of IAS 36 are applied to determine whether
it is necessary to recognise any impairment loss with respect
to the Group’s investment in an associate. The carrying amount
of the investment (including goodwill) is tested annually for
impairment in accordance with IAS 36 as a single asset by
comparing its recoverable amount (higher of value in use and
fair value less costs of disposal) with its carrying amount.
Any impairment loss recognised forms part of the carrying
amount of the investment. Any reversal of that impairment
loss is recognised in accordance with IAS 36 to the extent the
recoverable amount of the investment subsequently increases.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
58 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

2. SIGNIFICANT ACCOUNTING POLICIES continued

Interests in joint operations
The Group’s operations in Cameroon are conducted through
joint arrangements. A joint operation is an arrangement
whereby the parties that have joint control of the arrangement
have rights to the assets, and obligations for the liabilities,
relating to the arrangement, such as is the case between Gaz
du Cameroun S.A. and its partners on the Logbaba and
Matanda Projects.

When a Group entity undertakes its activities under a joint
operation, the Group as a joint operator recognises in relation
to its interest in the joint operation:
• its assets, including its share of any assets held jointly;
• its liabilities, including its share of any liabilities jointly

incurred;

• its revenue from the sale of its share of the output arising

from the joint operation;

• its share of the revenue from the sale of the output by the

joint operation; and

• its expenses, including its share of any expenses incurred

jointly.

The Group accounts for the assets, liabilities, revenues
and expenses relating to its interest in a joint operation in
accordance with the IFRSs applicable to the particular assets,
liabilities, revenues and expenses.

In these Consolidated Financial Statements, the Group has
recognised its interest in the joint operation of the Logbaba
and Matanda projects in Cameroon as described above.

When a Group entity transacts with a joint operation in which a
Group entity is a joint operator (such as a sale or contribution
of assets), the Group is considered to be conducting the
transaction with the other parties to the joint operation, and
gains and losses resulting from the transactions are recognised
in the Group’s Consolidated Financial Statements only to the
extent of other parties’ interests in the joint operation.

When a Group entity transacts with a joint operation in which a
Group entity is a joint operator (such as a purchase of assets),
the Group does not recognise its share of the gains and losses
until it resells those assets to a third party.

(v) Revenue
Revenue from contracts with customers is recognised when
the Group satisfies a performance obligation by transferring
control of a promised good or service to a customer.

The transfer of control of natural gas coincides with title
passing to the customer and the customer taking physical
possession. The Group satisfies its performance obligations
at a point in time.

When a performance obligation is satisfied, the Group
recognises as revenue the amount of the transaction price that
is allocated to that performance obligation. The transaction
price is the amount of consideration to which the Group expects
to be entitled to and is based on the contractual pricing
provisions which are set out in the Gas Supply Agreements
(“GSA”) and priced based at a rate per mmbtu.

Revenue is recognised based on the relevant prices as set out
in the GSA at the time of delivery.

(vi) Production Royalties
Royalty expenses are recognised on an accrual basis at the
time of sale of the hydrocarbons, subject to the applicable
royalty conditions.

(vii) Foreign Currencies
The presentation currency of the Group Financial Statements
is US Dollars and the functional currency and the presentation
currency of the Company is US Dollars. The individual Financial
Statements of each Group company are maintained in the
currency of the primary economic environment in which it
operates (its functional currency).

The Group’s expenses, which are primarily for development
and operation of the Logbaba gas and condensate field, are
incurred principally in Central African Franc (which is pegged
to the Euro) and US Dollars but also Sterling, Euros, Russian
Roubles and Kazakhstan Tenge. The Group’s revenue is based
on GSAs which are priced in US Dollars. For the purpose of the
Consolidated Financial Statements, the results and financial
position of each Group company are expressed in US Dollars,
the presentation currency.

In preparing the Financial Statements of the individual
companies, transactions in currencies other than the entity’s
functional currency (foreign currencies) are recorded at the
rates of exchange prevailing on the dates of the transactions.
At each Balance Sheet date, monetary assets and liabilities
that are denominated in foreign currencies are translated at
the rates prevailing on the Balance Sheet date. Non-monetary
items carried at fair value that are denominated in foreign
currencies are translated at the rates prevailing at the date
when the fair value was re-determined. Non-monetary items
that are measured in terms of historical cost in a foreign
currency are not retranslated. Exchange differences arising on
the settlement of monetary items, and on the retranslation
of monetary items, are included in the Income Statement for
the year, other than when a monetary item forms part of a net
investment in a foreign operation, then exchange differences
on that item are recognised in equity. Exchange differences
arising on the retranslation of non-monetary items carried at
fair value are recognised directly in equity.

The assets and liabilities of foreign operations are translated
into US Dollars at the rate of exchange ruling at the Balance
Sheet date and their Income Statements are translated at
the average exchange rates for the year, unless exchange
rates fluctuate significantly during that year in which case
the exchange rates at the date of transaction are used. The
exchange differences arising on the translation are taken
directly to a separate component of equity. On disposal of a
foreign entity, the deferred cumulative amount recognised in
equity relating to that particular foreign operation is recognised
in the Income Statement.

Fair value adjustments arising on the acquisition of a foreign

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 59

2. SIGNIFICANT ACCOUNTING POLICIES continued

entity are treated as assets and liabilities of the foreign entity
and translated at the closing rate.

(viii) Intangible Assets
Exploration and evaluation assets
Expenditure incurred in respect of research of potential
hydrocarbon exploration, prior to the Group acquiring an
exploration licence, is expensed in the Income Statement.

Exploration expenditure relates to the initial search for
deposits with economic potential. Evaluation expenditure
arises from a detailed assessment of deposits that have been
identified as having economic potential.

The costs of exploration and evaluation assets include the
cost of acquiring rights to explore. Costs incurred in relation
to evaluating the technical feasibility and commercial viability
of extracting a hydrocarbon resource are capitalised as part of
exploration and evaluation assets. Exploration and evaluation
costs include an allocation of administration and salary
costs, including share-based payments, as determined by
management.

Exploration and evaluation costs are capitalised until technical
feasibility and commercial viability of extraction of reserves
are demonstrable. At that point, all costs which have been
capitalised to date and included in exploration and evaluation
assets are assessed for impairment. All impairment losses
are recognised immediately in the Income Statement. The
remaining unimpaired costs are reclassified to oil and gas
interests within Property, Plant and Equipment.

Impairment of exploration and evaluation assets
Exploration and evaluation assets are not depreciated, but
are assessed for impairment when facts and circumstances
suggest that the carrying amount may exceed its recoverable
amount. The Company reviews and tests for impairment on an
ongoing basis and specifically if the following occurs:
a) the period for which the Group has a right to explore in the
specific area has expired during the period or will expire in
the near future, and is not expected to be renewed;

b) substantive expenditure on further exploration for, and
evaluation of, mineral resources in the specific area is
neither budgeted nor planned;

c) exploration for, and evaluation of, hydrocarbon resources
in the specific area have not led to the discovery of
commercially viable quantities of hydrocarbon resources
and the entity has decided to discontinue such activities in
the specific area; and

d) sufficient data exists to

indicate that, although a
development in the specific area is likely to proceed, the
carrying amount of the exploration and evaluation asset is
unlikely to be recovered in full from successful development
or by sale.

Software
Software is stated at cost less accumulated amortisation and
any impairment losses. Amortisation is charged so as to write
off the cost of software over its useful life using the straight-
line method.

(ix) Property, Plant and Equipment
Components
Where an asset has a significant component or components, on
initial recognition, the cost is allocated between the significant
components, and each significant component is depreciated
separately, based on its expected useful life. Components
that are not individually significant are grouped together and
are depreciated as a group based on its expected life.

Plant and equipment
Plant and equipment is stated at cost less accumulated
depreciation and impairment losses.

Depreciation of an asset begins when it is available for use,
which is when it is in the location and condition necessary
for it to be capable of operating in the manner intended by
management. Depreciation of an asset ceases at the earlier
of the date that the asset is classified as held for sale and the
date that the asset is derecognised.

Depreciation is charged so as to write off the cost of plant and
equipment over its useful life using the straight-line method
for all assets, with the exception of the pipeline, which is
depreciated using the unit-of-production method.

Oil and gas assets
Exploration and evaluation costs are transferred to oil and gas
assets when technical feasibility and commercial viability of
extraction of reserves are demonstrated.

Depreciation and depletion of costs is provided so as to
write off the cost of the assets over their useful lives using
the straight-line method or the unit-of-production method,
whichever is considered most appropriate. Until such time
as field development permits more comprehensive analysis,
calculations under the unit-of-production method are based
on proven reserves. Changes in estimates affecting unit-of-
production calculations for depreciation and decommissioning
provisions are accounted
for prospectively. Expected
decommissioning costs of a property are provided on the basis
of net present value of the liability. An equivalent amount is
added to the oil and gas asset and charged to the Income
Statement on a unit-of-production basis.

Impairment
Oil and gas assets are tested against the recoverable amount
of the asset by comparing the carrying value of the asset
against the present value of the future net cash flows expected.
The asset being assessed can be either a well within a field
or the field, whichever is considered most appropriate. Any
impairment identified is charged to the Income Statement as
part of the cost of operations.

Assets under construction
Assets under construction are stated at cost less impairment
losses. They are not depreciated until construction is complete
and the assets are ready for use.

(x) Inventory
Inventories consist of gas and condensate stocks. Inventories

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
60 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

2. SIGNIFICANT ACCOUNTING POLICIES continued

are stated at the lower of cost and net realisable value. Costs
of inventories are determined on a weighted average basis.

at each Balance Sheet date and the cost is charged to the
Income Statement.

(xi) Borrowing Costs
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get
ready for their intended use or sale, are added to the cost of
those assets, until such time as the assets are substantially
ready for their intended use or sale.

Investment income earned on the temporary investment of
specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for
capitalisation.

All other borrowing costs are recognised in the Income
Statement in the period in which they are incurred.

(xii) Provisions
Provisions are recognised when the Group has a present
obligation as a result of a past event, it is probable that the
Group will be required to settle that obligation, and a reliable
estimate can be made of the amount, taking into account the
risks and uncertainties surrounding the obligation.

Provisions are measured at management’s best estimate
of the expenditure required to settle the obligation at the
Balance Sheet date. Non-current provisions are discounted to
present value where the effect is material. The amortisation
or unwinding of the discount applied in establishing the net
present value of provisions is charged to the Income Statement
in each accounting period. The amortisation of the discount
is shown as a finance cost, rather than as an operating cost.

Decommissioning and rehabilitation (“D&R”) provision
D&R costs include the dismantling and demolition of
infrastructure and the removal of residual materials and
remediation of disturbed areas.

The amount recognised as a D&R provision is the best
estimate of the consideration required to settle the present
obligation at the Balance Sheet date. D&R costs are a normal
consequence of exploration, development and production
activities and the majority of such expenditure is incurred at
the end of the life of the field. Although the ultimate cost to
be incurred is uncertain, the provision has been estimated in
accordance with management’s expectation of the D&R costs
and of the period when those costs are to be incurred.

The initial D&R provision, together with other movements in
the provision, including those resulting from new disturbance,
updated cost estimates, changes to the estimated lives of
operations and revisions to discount rates is included within
exploration and evaluation of assets or property, plant and
equipment as appropriate. These costs are then depreciated
over the lives of the assets to which they relate. Where
rehabilitation is conducted systematically over the life of the
operation, rather than at the time of closure, provision is made
for the estimated outstanding continuous rehabilitation work

(xiii) Financial Instruments
Classification and measurement
Financial assets and financial liabilities are recognised in the
Group’s statement of financial position when the Group becomes
a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured
at fair value. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities at
fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised
immediately in profit or loss. The financial assets of the Group
consist of cash and cash equivalents and trade receivables.

Cash and cash equivalents comprise cash on hand. Cash and
cash equivalents are initially measured at fair value and are
subsequently measured at amortised cost. They are held by
the Group to collect deposit interest and to meet the liquidity
requirements of the Group.

Trade receivables are initially measured at fair value and
subsequently measured at amortised cost as they are held by
the Group in order to collect receipts under the credit terms
of the sales contracts i.e. solely payment of principal and
interest (“SPPI”).

Financial liabilities are initially recognised at fair value of
consideration received net of transaction costs as appropriate
and subsequently carried at amortised cost. Financial liabilities
that contain provisional pricing features and derivatives are
carried at FVTPL.

Impairment
The Group recognises a loss allowance for expected credit
losses on trade receivables. The amount of expected credit
losses is updated at each reporting date to reflect changes in
credit risk since initial recognition of the trade receivable. The
expected credit losses are estimated based on the Group’s
historical credit loss experience, adjusted for factors that are
specific to the customers, general economic conditions and
an assessment of both the current as well as the forecast
conditions at the reporting date.

The Group writes off a trade receivable when there is
information indicating that the debtor is in severe financial
difficulty and there is no realistic prospect of recovery, e.g.
when the debtor has been placed in liquidation or has entered
into bankruptcy proceedings.

Derecognition
The Group derecognises a financial asset when the contractual
rights to the cash flows from the asset expire, or when it
transfers the financial asset and substantially all the risks

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 61

2. SIGNIFICANT ACCOUNTING POLICIES continued

and rewards of ownership of the asset to another party. If
the Group neither transfers nor retains substantially all the
risks and rewards of ownership and continues to control the
transferred asset, the Group recognises its retained interest
in the asset and an associated liability for amounts it may
have to pay. If the Group retains substantially all the risks
and rewards of ownership of a transferred financial asset,
the Group continues to recognise the financial asset and
also recognises a collateralised borrowing for the proceeds
received.

Recoverability of receivables
The Group has one significant customer with long outstanding
invoices issued on both a provision of gas and a take-or-pay
basis in accordance with the terms of the relevant GSA. The
Group’s ability to recover the amounts due from this customer
requires judgement. The Group has terminated the GSA with
this customer post the reporting period and is pursuing legal
means to recover the outstanding amounts. The Directors
have recognised a loss allowance in relation to the expected
credit loss associated with this customer.

The Group derecognises financial liabilities when the Group’s
obligations are discharged, cancelled or have expired On
derecognition of a financial asset/financial liability in its
entirety, the difference between the carrying amount of the
financial asset/financial
liability and the sum of the
consideration received and receivable/paid and payable is
recognised in profit and loss.

(xiv) Share-Based Payments
When the Group issues equity-settled share-based payments
to suppliers or employees, they are measured at the fair value
at the date of grant. Depending on the nature of the cost, the
fair value at the grant date is expensed or capitalised on a
straight-line basis over the vesting period, based on the Group’s
estimate of shares that will eventually vest and adjusted for the
effect of non-market-based vesting conditions.

Where the value of the goods and services received in
exchange for the share-based payment cannot be reliably
estimated, the fair value is measured by use of an appropriate
valuation model. The expected life used in the model is
adjusted, based on management’s best estimate, for the effects
of non-transferability, exercise restrictions and behavioural
considerations. The cost of share-based payments for the
year ended 31 December 2019 was US$1.2 million (2018:
US$0.4 million).

(xv) Critical Accounting Judgements
In the process of applying the Group’s accounting policies
above, management has made the following judgements that
have the most significant effect on the amounts recognised
in the Financial Statements (apart from those involving
estimations, which are dealt with below).

Going concern
The assessment of the Group’s ability to execute its strategy by
funding future working capital requirements involves judgement.

The Directors monitor future cash requirements and are,
despite the existence of material uncertainties, confident
that the Group is able to continue as a going concern and no
adjustment is required to the Financial Statements. Further
information regarding going concern is outlined in Note 3.

As part of the assessment, management reviewed budgets
and cash flow forecasts and compared the requirements to
available resources, existing funding facilities and potential
sources of additional funds.

Unit-of-production depreciation method
The Group’s policy is to use the unit-of-production method of
depreciation based on proven reserves for depreciation and
amortisation of its oil and gas assets. These calculations
require the use of estimates and assumptions and significant
judgement is required in assessing the amount of estimated
reserves. Estimates of oil and gas reserves are inherently
imprecise, require the application of judgement and are
subject to future revision. Changes in proven reserves will
prospectively affect the unit-of-production depreciation charges
to the Income Statement.

The proven reserves used in the calculation of unit-of-
production depreciation were 69 billion cubic feet (“Bcf”)
(2018: 69 Bcf) in the Logbaba Field. The unit-of-production
depreciation charged to the Income Statement, which was
calculated, based on these reserves, was US$7.3 million
(2018: US$4.2 million). If the reserves were to vary by plus
10%, the unit-of-production depreciation for the current period
would have decreased by US$0.7 million and if they were to
vary by minus 10% the unit-of-production depreciation for the
current period would have increased by US$0.8 million.

Effective 1 January 2020 the Group has reassessed its
proven reserves for Logbaba to 19 Bcf. The reduction in
proven reserves was viewed by the Directors as an indication
of potential impairment, following which an impairment
assessment was carried out over the Logbaba assets (see
below and Note 4).

Accounting for joint operations
On 12 June 2017, Société Nationale des Hydrocarbures
(“SNH”) exercised its right in accordance with the Participation
Agreement to participate for 5% of the upstream operations
of the Logbaba Project. This participation is retrospective
and therefore they are deemed to have participated since
first production. The net share of this venture that has been
included in these Financial Statements is 57% of the upstream
operations and 60% of the downstream operations.

The Financial Statements are prepared on the basis that
downstream operations charge cost plus 15% to the
upstream operations as a fee for marketing the gas. This
transfer pricing mechanism has not been formally agreed
to by the Parties of the Logbaba Concession but represents
management judgement of the most likely outcome of the
current negotiations. Shared services have been allocated
between upstream and downstream operations based on
management’s assessment of the activity during the year.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
62 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

2. SIGNIFICANT ACCOUNTING POLICIES continued

Deferred tax assets
The assessment of availability of future taxable profits involves
judgement. A deferred tax asset is recognised to the extent
that it is probable that taxable profits will be available against
which deductible temporary differences and the carry forward
of unused tax credits and unused tax losses can be utilised.
In the event that all tax losses could be utilised, a deferred tax
asset of US$18.0 million (2018: US$17.0 million) would be
recognised in the Financial Statements.

The Group’s operation in Cameroon has deferred capital
allowances of US$9.3 million (2018: US$8.7 million) which are
available for offset against future taxable profits. A deferred
tax asset of Nil has been recognised in the current year in
relation to the deferred capital allowances as it is considered
unlikely that the operations will generate near-term future
taxable profit against which the deferred capital allowances
will be able to be applied (2018: Nil).

No deferred tax asset has been recognised in the current
year in relation to the Group’s other operations due to the
unpredictability of future profit streams in the companies that
have unutilised tax losses.

(xvi) Key Sources of Estimation Uncertainty
The preparation of Financial Statements requires management
to make estimates and assumptions that affect the amounts
reported for assets and liabilities as at the Statement of
Financial Position date and the amounts reported for revenues
and expenses during the year. The nature of estimation means
that actual outcomes could differ from those estimates. The
key sources of estimation uncertainty that have a significant
risk of causing material adjustment to the carrying amounts
of assets and liabilities within the next financial year are
discussed below.

Operating in Cameroon, Russia and Kazakhstan
The Group’s activities are conducted through its investments
and subsidiaries operating in the oil and gas industry. These
operations are subject to political, economic and regulatory
uncertainties prevailing in these countries. The legislation
regarding taxation and foreign exchange transactions is
constantly evolving and many new laws and regulations are
not always clearly written and their interpretation is subject
to the opinions of local inspectors. It is not possible to
quantify the potential impact of changes in the above on these
Financial Statements as there are too many possible variables
and outcomes, but management believe that the Group has
adequately recorded its assets and liabilities in the context of
these uncertainties, or made appropriate disclosures where
uncertain outcomes exist.

Provisions
Provisions for the current year were US$11.7 million
(2018: US$1.9 million). Post year-end the Group signed an
amendment to the Logbaba Concession documents which
resulted in royalties to the State of Cameroon becoming due
and payable. This matter has been disclosed as a contingent
liability in prior financial statements. As a consequence the
Group has provided an amount of US$9.6 million, being
the Groups share of the royalty obligation at 31 December
2019. The Group intends to settle this obligation on a net
basis with the State of Cameroon following completion of
the negotiations with the State on their participation in the
downstream business, but has no legal right to insist upon
this measure and has accordingly reflected the receivable and
obligation separately.

The other provisions are based on present obligations as
a result of past events, probable outflows and the ability
to reliably measure. The laws and regulations concerning
environmental assessments and site rehabilitation continue to
evolve and, accordingly, the Group may be liable to substantial
decommissioning and rehabilitation costs in the future relating
to past and current operations. Management has applied
their knowledge at the Statement of Financial Position date
in measuring provisions, however the actual outcomes could
vary from these measurements (see Note 20).

Impairment of assets
The Group has the majority of its assets in Cameroon, the
United Kingdom and Russia. These assets are tested for
impairment when there are indicators that the carrying value
of the assets exceeds the recoverable value.

The Group has reassessed its proven reserves on Logbaba,
which the Directors viewed as an indication of impairment of
the Group’s assets in Cameroon. Accordingly an impairment
assessment was carried out on the Cameroonian assets.
Estimated future cashflows were forecast over the life of the
project, and discounted back to evaluate against the asset
carrying values. An impairment of US$90.3 million has been
recorded over the Logbaba assets in the current year (2018:
Nil) (see Note 4).

Furthermore, having ceased to make royalty payments under
the CHL Royalty Agreement, which is the only source of income
for CHL, the Group has fully impaired its US$5.6 million
investment in associate (2018: Nil) (see Note 4).

Facts and circumstances may change with regard to the
assets in these countries which may have a significant impact
on the valuation of the carrying value of the respective assets.

The Directors expect certain of the key sources of estimation
uncertainty to be resolved in the next twelve months.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 63

3. GOING CONCERN

The Directors are required to give careful consideration to the
appropriateness of the going concern basis in the preparation
of the Financial Statements.

Revenue for the year was US$20.8 million (2018: US$10.8
million). The Group raised impairment charges of US$95.8
million (2018: Nil). The Group incurred a loss of US$110.1
million for the year ended 31 December 2019 (2018: loss of
US$8.5 million). Adjusted EBITDA, which excludes impairment
charges and the state royalty provision, for the year was a
profit of US$4.0 million (2018: loss of US$0.5 million). At
year-end the Group had cash and cash equivalents of US$7.2
million (2018: US$3.5 million) in addition to borrowings of
US$17.9 million (2018: US$20.9 million). Net cash utilised
in operating activities for the year was US$2.4 million (2018:
cash utilised US$2.2 million). The Consolidated Statement
of Financial Position shows that the Group had net current
liabilities of US$3.9 million at the year-end date (2018: net
current liabilities of US$3.0 million).

The Parent Company incurred a loss of $110.3 million for the
year ended 31 December 2019. The Parent Company has a
cash balance of $3.5 million at the balance sheet date.

Since year end the Group has implemented cost reduction
measures, including headcount reductions and the removal
of non-essential capital spend. Operating and capital costs
are being monitored very closely in order to maximise cash
preservation.

In their consideration of the appropriateness of applying
the going concern assumption the Directors have prepared
cash flow forecasts for the period to 31 December 2021, the
factors, estimates and assumptions included in the forecasts
and the related sensitivities. Future outcomes may differ
materially from these estimates.

The significant factors, estimates and assumptions applied in
the cash flow forecast are as follows:

Grid power and recovery of receivable amounts
In September 2019 the generator supplier to ENEO suspended
operations at ENEO’s Logbaba site due to non-payment of
invoices by ENEO. Consequently, GDC has not provided gas
to ENEO since that date, but has continued to invoice ENEO
based on a take-or-pay basis in accordance with the GSA. In
June 2020, GDC issued a notice of Event of Default to ENEO,
which included a 30-day remedy period. On 2 July 2020, with
ENEO having failed to remedy the breaches identified in the
notice of Event of Default, GDC issued a notice of termination
to ENEO.

At 31 December 2019, the gross amount owing by ENEO
to the Logbaba Project was US$10.4 million (net: US$6.2
million), and at the date of termination the gross amount
outstanding, including interest and termination charges was
US$20.2 million (net: US$12.1 million). Subsequent to year
end $3.2 million was received from ENEO in respect of 2019
invoices. Included in the cash flow forecast is an assumption
that the remaining amount of $3.0 million owed by ENEO
in respect of 2019 invoices will be received within the next
twelve months. The timing of the recovery of the remaining
amounts is uncertain.

Failure to recover amounts outstanding by ENEO and any other
significant debtors, would jeopardise the Group’s ability to
fund expansion projects, in particular the La-108 intervention
and would have a material impact on the Group’s financial
position.

Cameroonian State royalty obligation
As outlined in Note 20, following a protracted negotiation
with the State of Cameroon, in August 2020 the Group has
concluded a long-standing dispute regarding the Logbaba
Concession agreement, and in so doing has crystalised a
liability to pay back-dated royalties to the Cameroonian State in
the amount of US$9.6 million (net amount). GDC and its joint
venture partner are seeking to ensure that the royalty amounts
payable are netted against amounts due by the Cameroon
State for their participating interest in the Logbaba Project
and accordingly the Directors have included an assumption in
their forecast that the amount of US$9.6 million will not be
paid within the next twelve months as discussions continue
in relation to the State’s participating interest in the Logbaba
Project. There is no guarantee that the State of Cameroon will
accede and any requirement to pay the royalty in the short
term would have a material impact on the Group’s ability to
continue as a going concern.

Debt
The Group ended the year with cash and cash equivalents
of US$7.2 million (2018: US$3.5 million) (see Note 18) and
in a net debt position of US$10.7 million (2018: US$17.4
million) (see Note 22). The Group had borrowings of US$17.9
million (2018: US$20.9 million), approximately $6.0 million of
which is due within 12 months from the date of approval of the
Financial Statements. The Group has no available headroom
on any of its current credit facilities. The Group is actively
seeking additional debt facilities with financial institutions.
Should the Group not succeed in securing additional facilities,
this potentially will have a material impact on the Group’s
ability to continue as a going concern.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
64 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Conclusion
These conditions indicate the existence of a material
uncertainty in relation to the Group and the Parent Company’s
ability to continue as a going concern.

The Directors have reviewed operating and cash forecasts
in respect of the operating activities and planned work
programmes of the Group’s assets. The expected cash flows,
plus available cash on hand, after allowing for funds required
for administration and development costs, working capital
improvement and debt servicing, are expected to cover these
activities.

Based on the cash flow forecasts prepared the Directors are of
the view that the Group and the Parent Company is sufficiently
funded for the twelve-month period from the date of approval
of these Financial Statements. However, the Directors note
that there are material uncertainties as listed above, which if
any should eventuate, would require them to raise additional
funds in 2021.

Although the Directors consider the likelihood of these
uncertainties eventuating to be remote, they are confident
additional funding can be accessed should it be required.

On the basis of the considerations set out above, the
Directors have concluded that it is appropriate to prepare
the Financial Statements on a going concern basis. These
Financial Statements do not include any adjustments to the
carrying amount and classification of assets and liabilities
that may arise if the Group or the Parent Company was unable
to continue as a going concern.

3. GOING CONCERN continued

New funding
In 2019 the Group raised funds with net proceeds of US$16.8
million. There is significant uncertainty regarding the ability
of the Group to raise further funds in the current market
conditions due to the Covid-19 pandemic and the depressed
oil price and the impact of both of these factors on investor
sentiment towards funding further development in the oil and
gas sector. These factors may result in the Group having to
raise funds at whatever terms are available at the time, which,
at the Group’s current share price, could lead to significant
shareholder dilution.

Other items

Contingencies
The Group is exposed to further contingent liabilities as
outlined in Note 27. The amounts concerned in each of
these matters is material, and an adverse finding would have
material impacts on the Group’s ability to continue as a going
concern.

Covid-19
In response to Covid-19, we are complying with all the
instructions and guidance issued by the authorities in each
of the jurisdictions in which we operate. At the time of writing,
Cameroon remains relatively free of operating restrictions,
however, we remain cognisant that this position may change
at any point which may impact GDC staff, GDC’s ability to
produce and sell gas, our customers ability to purchase gas,
and/or our suppliers ability to deliver the services procured.

Available gas reserves and the La-108 intervention
With effect of 1 January 2020, the Group has revised the
Logbaba proved developed reserves (“1P”) from 69 Bcf to
19 Bcf. The successful completion of the La-108 intervention,
the funding of which is dependent on the recovery of
amounts owed to GDC by ENEO, or by alternative funding
arrangements, is fundamental to GDC’s ability to recover the
revised 1P Reserves and its continuing ability to provide gas
to customers. As with any such operation, the outcome of
the La-108 intervention has typical geological and operational
uncertainty. Should the outcome be at the lower end of
expectations, this would shorten the life of the Logbaba Field.
The Group is actively pursuing other sources of gas to mitigate
this risk.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 65

IMPAIRMENT OF ASSETS

Intangible assets – Exploration and evaluation assets
Tangible assets – Property, plant and equipment
Investment in associate

2019
US$’000

27,367
62,922
5,556

95,845

2018
US$’000

–
–
–

–

Intangible and tangible asset
The Group has undertaken a full impairment review of the Logbaba Project as at 31 December 2019. This review was undertaken
following impairment indicators being identified, namely the downward revision of the Logbaba proven (“1P”) reserves and the
termination of the ENEO GSA in July 2020. In accordance with IAS 36, the impairment review has been performed on a value-
in-use basis. The cash-generating unit for the purpose of impairment testing is the Logbaba Project. A financial model of the
forecast discounted cash flows for the project was employed for the value-in-use calculation.

The discounted cash flow model is based on our best estimate of the Logbaba Project, adjusted to reflect the Group’s working
interest, taking consideration of the following key factors and assumptions:
• a conservative forward-looking consumption profile based on the existing set of thermal and retail power customers, including

modest increases based on existing GSAs. The model did not consider any future grid power consumption or revenue;

• the reserves available for production, in line with the revised 1P reserves estimate. The model assumed success on the
second stage of the La-108 remediation programme resulting in access to the entire disclosed 1P reserves, but did not
assume any further deliverability of possible reserves (“2P”);

• the macroeconomic environment, globally and in Cameroon, in relation to the Logbaba Project and to the oil and gas sector

as a whole;

• the potential impact of global hydrocarbon prices on both gas and condensate sales prices;
• the Group will seek to reduce operating costs in the initial two years of the model followed by inflationary cost increases for

the remainder of the assessment period;

• capital costs during the assessment period are limited to those required to ensure the Group is able to monetise the

remaining gas reserves; and

• the assumptions surrounding contingent liabilities in the financial model are the same as those disclosed in Note 27.

A discounting rate of 14.2% was used to discount pre-tax cash flow projections to the present value. In determining the
appropriate discounting rate, the Group considers the weighted average cost of capital employed (“WACC”), which takes into
consideration the risk free rate of US treasury bonds with a long-term maturity period, the country risk rating for Cameroon, an
equity risk premium, the Group’s beta and the cost of the Group’s debt.

The key sensitivity is the Group’s ability to successfully complete the remediation of La-108. If the project cannot be completed,
and the 1P reserves attributable to this well are not economically recoverable, then an additional impairment would be required.
An increase of 2% in the pre-tax WACC rate would result in an increased impairment requirement of US$1.9 million.

Based on the value-in-use calculation, the discounted value of projected future cashflows was US$90.3 million lower than
the carrying value of the tangible and intangible assets. Accordingly, an impairment provision of US$90.3 million has been
accounted for between tangible and intangible assets related to the Logbaba Project. The split of the impairment provision was
determined according to:
• the reserves attributable to each remaining well; and
• the remaining useful life of the pipeline network in Douala, Cameroon.

Investment in associate
Since January 2019 the Company has ceased to make payments under the CHL Royalty Agreement. CHL has commenced
legal proceedings against both GDC and the Company with regard to payments CHL believes it is entitled to under the Royalty
Agreement. The CHL royalty paid by GDC is the only source of revenue for CHL. Consequently, the Company has fully impaired
its 35% investment in CHL, resulting in an impairment charge of US$5.6 million.

To the extent that future events crystalise assumptions made in the impairment assessment, the impairment charge will be
reassessed in future reporting periods.

Forecasting of scenarios, likelihood of occurrence and future cashflows relies heavily on management judgement and is inherently
uncertain and a source of significant risk of causing material adjustment.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

66 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

5. SEGMENTAL ANALYSIS

IFRS 8 Operating Segments requires operating segments to be identified on the basis of internal reports about the Group that
are regularly reviewed by the chief operating decision maker. The Board is deemed the chief operating decision maker within the
Group. The Group has one class of business: oil and gas exploration, development and production and the sale of hydrocarbons
and related activities. This is analysed on a location basis. Only the Cameroon segment is generating revenue, which is from the
sale of hydrocarbons. For the purposes of segmental reporting, the Russia and Kazakhstan segments have been combined, as
the assets of these segments have both been fully impaired. The accounting policies of the reportable segments are the same
as the Group’s accounting policies described in Note 1.

The following tables present revenue, loss and certain asset and liability information regarding the Group’s business segments:

Year to 31 December 2019

Revenue
Gas sales – thermal power
Gas sales – industrial power
Gas sales – grid power

Gas revenue
Condensate sales
Other revenue

Total revenue

Segment result
Impairment of assets
Finance costs

(Loss)/profit before tax
Tax

(Loss)/profit for the year

Total assets

Total liabilities

Other segment information
Capital expenditure:
Intangible assets
Property, plant and equipment

Depreciation, amortisation and impairment

Cameroon
US$’000

11,360
621
7,983

19,964
832
26

20,822

(8,077)
(90,289)
(1,712)

(100,078)
1,672

(98,406)

46,409

(36,670)

6,673
1,035
98,883

Russia and
Kazakhstan
US$’000

–
–
–

–

452
–
8

460
–

460

(271)

–
–
–

Corporate
US$’000

–
–
–

–

(6,632)
(5,556)
(147)

(12,335)
–

(12,335)

3,706

(1,928)

–
2
15

Total
US$’000

11,360
621
7,983

19,964
832
26

20,822

(14,257)
(95,845)
(1,851)

(111,953)
1,672

(110,281)

50,186

(38,869)

6,673
1,037
98,898

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 67

5. SEGMENTAL ANALYSIS continued

Year to 31 December 2018

Revenue
Gas sales – thermal power
Gas sales – industrial power
Gas sales – grid power

Gas revenue
Condensate sales

Total revenue

Segment result
Finance costs

(Loss)/profit before tax
Tax

(Loss)/profit for the year

Total assets

Total liabilities

Other segment information
Capital expenditure:
Intangible assets
Property, plant and equipment

Depreciation and amortisation

Cameroon
US$’000

9,673
419
105

10,197
599

10,796

(3,768)
(1,801)

(5,569)
(219)

(5,788)

130,705

(33,047)

2,173
1,751
5,750

Russia and
Kazakhstan
US$’000

–
–
–

–
–

–

421
(21)

400
–

400

(234)

–
–
–

Corporate
US$’000

Total
US$’000

–
–
–

–
–

–

(2,989)
(144)

(3,133)
–

(3,133)

8,482

(2,306)

–
–
57

9,673
419
105

10,197
599

10,796

(6,336)
(1,966)

(8,302)
(219)

(8,521)

139,239

(35,587)

2,173
1,751
5,807

Information about major customers
For the purposes of IFRS, a group of entities known to a reporting entity to be under common control shall be considered a single
customer. Under this measure, revenues of US$20.8 million (2018: US$10.8 million) related to sales of gas and condensate
to 38 customers. One customer contributed 10% or more to the Group’s revenue during the current year, contributing US$7.8
million or 38% (2018: two customers contributed 10% or more, contributing US$2.0 million and US$1.9 million respectively).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

68 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

6. OTHER (LOSSES)/GAINS

Foreign exchange (losses)/gains
Discount on settlement of debts
Loss on disposal of non-current assets
Other Income

7. FINANCE COSTS

Loan interest
Unwinding of discount on provisions

8. LOSS BEFORE TAX

Cost of sales includes:

Production Royalties
Depreciation and amortisation
Operating costs

The loss before tax is stated after charging:

Administrative expenses comprise:
Wages and salaries
Professional fees
Office and other administrative expenditure
Travel
Rent
Depreciation and amortisation
Provision for expected credit loss

Directors’ remuneration (see Note 11)

The analysis of auditor’s remuneration is as follows:
Fees for audit services

2019
US$’000

2018
US$’000

(147)
38
(78)
127

(60)

2019
US$’000

1,730
121

1,851

2019
US$’000

9,324
7,854
1,225

18,403

6,031
2,407
3,069
410
448
589
3,661

16,615

2,985

264

787
–
(23)
57

821

2018
US$’000

1,952
14

1,966

2018
US$’000

1,675
4,952
3,490

10,117

5,190
1,034
1,214
174
575
855
(676)

8,366

1,611

216

Comparatives
The prior year’s comparatives have been regrouped on a basis consistent with the current year to enhance the understanding
of the Financial Statements.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 69

9. TAX

Current tax
Deferred tax

Tax (credit)/charge

2019
US$’000

358
(2,030)

(1,672)

2018
US$’000

119
100

219

The Group has two principal tax jurisdictions: the United Kingdom and The Republic of Cameroon.

United Kingdom
The main rate of UK corporation tax is 19% effective from 1 April 2019 (previously 20%). Income tax losses have no expiry
period. Taxable losses in the United Kingdom at 31 December 2019 amounted to US$69.0 million (2018: US$64.1 million).

Cameroon
The income tax rate enacted in Cameroon is 33% on taxable profits or 2.2% of turnover, whichever is higher. The concession
contract for Logbaba specifies a tax rate of 38.5% on taxable profits or 1.1% of turnover, whichever is higher. Tax regulations in
Cameroon allow for the deferral of capital allowances to the extent that they result in Companies generating income tax losses.
Income tax losses have a four-year expiry period. Deferred capital allowances do not expire. GDC has tax losses in both the
current and prior years, however the 1.1% tax rate on revenue applies and is reflected as current tax. The effect of this is shown
below as “tax on revenue”.

The corporation tax rates in the other countries in which the Group operates did not change during the current year.

The effective tax rate used in the tax rate reconciliation below is a weighted average of the tax rates in each of the tax
jurisdictions in which the Group operates.

2019
US$’000

(111,952)
(39,062)

2018
US$’000

(8,302)
(1,768)

Loss on ordinary activities before tax
Tax calculated at 34.9% (2018: 21.3%)

Less the effects of:
Share of profit in associate
Impairment losses not deductible for tax
Expenses not deductible for tax
Non-utilisation of tax losses
Deferred tax
Tax on revenue

Total tax (credit)/charge

–
33,442
646
4,974
(2,030)
358

(1,672)

The tax rate calculated represents a blended average rate of taxation for the jurisdiction in which the Group operates.

Deferred tax balances
Deferred tax liabilities – non-current liabilities

2019
US$’000

–

(113)
–
419
1,462
100
119

219

2018
US$’000

(2,030)

The deferred tax liability arose on the acquisition of GDC (formerly Rodeo Development Limited) by Bramlin Limited prior to
Bramlin Limited becoming part of the Group, and relates to property, plant and equipment in Cameroon. The property, plant and
equipment was fully impaired at 31 December 2019 and accordingly the deferred tax liability was released (see Note 4).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

70 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

9. TAX continued

The deferred tax balances are analysed as follows:

Year to 31 December 2019
Opening balance
Charge to Income Statement

Closing balance

Year to 31 December 2018
Opening balance
(Credit)/charge to Income Statement

Closing balance

Tax losses
US$’000

Other temporary
differences
US$’000

Total
US$’000

–
–

–

916
(916)

–

(2,030)
2,030

–

(2,846)
816

(2,030)

–

(1,930)
(100)

(2,030)

At the Balance Sheet date, the Group has aggregate unused tax losses of US$83.4 million (2018: US$78.3 million) available
for offset against future profit.

Of unused tax losses, Nil (2018: Nil) relates to the Group’s operation in Cameroon. However GDC has deferred capital allowances
of US$9.3 million (2018: US$8.7 million) which are not included above. A deferred tax asset of Nil has been recognised in relation
to the tax losses and deferred capital allowances in Cameroon (2018: Nil). As a result of the aggressive capital allowances in
Cameroon, the Group’s forecast indicates that it is not probable that near-term future taxable profits will be available against
which the losses and deferred capital allowances will be able to be utilised. The actual tax results in future periods may differ
from the forecast. At the year-end, a deferred tax asset relating to taxable losses and deferred capital allowances of US$21.6
million (2018: US$20.4 million) has not been recognised.

10. EMPLOYEE INFORMATION

The average number of persons employed by the Group during the year was:

Directors
Technical
Management and administration

Staff costs for the above persons were:

Wages and salaries
Social security costs
Share based payments

2019
Number

2018
Number

7
58
67

132

2019
US$’000

4,428
432
1,171

6,031

5
88
57

150

2018
US$’000

4,774
242
174

5,190

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 71

11. DIRECTORS’ REMUNERATION

Remuneration in respect of the Directors was as follows:

Directors’ emoluments

2019
US$’000

2,985

2018
US$’000

1,611

Further details of individual Directors’ remuneration are shown in the Directors’ Remuneration Report.

12. KEY MANAGEMENT COMPENSATION

The compensation of the Directors and the three (2018: four) other key management personnel (as defined within IAS 24
Related Party Disclosures) was as follows:

Wages and salaries
Settlement payments
Share-based payments
Professional fees paid to consultants in key management positions
Share-based payments to consultants in key management positions
Other non-cash benefits including pension

2019
US$’000

1,537
502
1,054
157
27
227

3,504

2018
US$’000

1,663
53
13
439
65
209

2,442

The compensation figures reflect only the Group’s participating interest in the Logbaba Project for GDC employees.

Under the Pensions Act 2008, every UK employer must put certain staff into a pension scheme and contribute towards it. The
Company auto-enrolled its eligible UK employees (five employees) in a defined contribution scheme on 1 January 2017. The
Company makes contributions to the defined contribution pension schemes of two Directors. This is disclosed as a benefit in
kind (see Directors’ Remuneration Report).

13. LOSS PER SHARE

Basic loss per share is computed by dividing the loss after tax for the year available to ordinary shareholders by the weighted
average number of ordinary shares in issue and ranking for dividend during the year, excluding those held by the ESOP Trust.
Diluted loss per share is computed by dividing the loss after tax for the year by the weighted average number of ordinary shares
in issue, each adjusted for the effect of all dilutive potential ordinary shares that were outstanding during the year.

The following table sets out the computation for basic and diluted loss per share.

Loss for the year

Weighted number of ordinary shares for the purpose of basic earnings per share
Dilutive potential of share options and warrants
Weighted number of ordinary shares for the purpose of basic and diluted earnings per share

Loss per share – basic and diluted

2019
US$’000

110,280

Number

2018
US$’000

8,521

Number

228,810,593 147,065,148
1,380,122
229,604,551 148,445,270

793,958

Cents

(48.20)

Cents

(5.79)

Basic and diluted loss per share are the same in the current year, as the effect of any potential shares is anti-dilutive and is
therefore excluded.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

72 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

14. INTANGIBLE ASSETS

Year to 31 December 2019

Cost
Opening balance
Additions
Disposal
Other movements
Effects of movement in foreign exchange

Closing balance

Accumulated amortisation and impairment
Opening balance
Disposal
Charge for the year
Impairment of assets (see Note 4)
Effects of movement in foreign exchange

Closing balance

Carrying amount 31 December 2019

Year to 31 December 2018

Cost
Opening balance
Additions
Effect of change in discounting rate
Transfers to property, plant and equipment
Effects of movement in foreign exchange

Closing balance

Accumulated amortisation
Opening balance
Charge for the year
Effects of movement in foreign exchange

Closing balance

Carrying amount 31 December 2018

Exploration
and evaluation
assets
US$’000

102,279
6,673
(13)
(1,017)
2,193

110,115

72,026
–
–
27,367
2,193

101,586

8,529

US$’000

129,412
2,161
(192)
(25,683)
(3,419)

102,279

75,445
–
(3,419)

72,026

30,253

Software
US$’000

383
–
(106)
–
2

279

191
(77)
75
–
(1)

188

US$’000

371
12
–
–
–

383

115
76
–

191

192

Total
US$’000

102,662
6,673
(119)
(1,017)
2,195

110,394

72,217
(77)
75
27,367
2,192

101,774

8,620

US$’000

129,783
2,173
(192)
(25,683)
(3,419)

102,662

75,560
76
(3,419)

72,217

30,445

The exploration and evaluation assets relate to the Logbaba drilling programme on well La-108. Included in other movement
noted above is a final settlement discount received in relation to the Logbaba drilling programme.

Recoverability of exploration and evaluation assets is dependent on the successful development of reserves within the licence
period, which is subject to a number of uncertainties including the ability of the Group to access financial resources to develop
the projects and bring the assets to economic maturity and profitability.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 73

15. PROPERTY, PLANT AND EQUIPMENT

Year to 31 December 2019

Cost
Opening balance
Additions
Effects of movement in foreign exchange
Transfers
Disposals

Closing balance

Accumulated depreciation
Opening balance
Disposals
Effects of movement in foreign exchange
Charge for the year
Impairment of assets (see Note 4)

Closing balance

Carrying amount 31 December 2019

Year to 31 December 2018

Cost
Opening balance
Additions
Effect of change in discounting rate
Transfers from intangible assets
Disposals

Closing balance

Accumulated depreciation
Opening balance
Disposals
Charge for the year

Closing balance

Carrying amount 31 December 2018

Plant and
equipment
US$’000

46,080
55
6
1,332
(533)

46,940

6,617
(461)
(4)
1,900
26,144

34,196

12,744

US$’000

40,829
265
(961)
6,289
(342)

46,080

5,426
(382)
1,573

6,617

39,463

Oil and gas
assets
US$’000

95,467
23
–
(984)
–

94,506

47,452
–
–
6,634
36,778

90,864

3,642

US$’000

72,213
285
(577)
23,546
–

95,467

43,294
–
4,158

47,452

48,015

Assets under
construction
US$’000

3,609
959
–
(348)
–

4,220

–
–
–
–
–

–

4,220

US$’000

6,589
1,209
–
(4,152)
(37)

3,609

–
–
–

–

3,609

Total
US$’000

145,156
1,037
6
–
(533)

145,666

54,069
(461)
(4)
8,534
62,922

125,060

20,606

US$’000

119,631
1,759
(1,538)
25,683
(379)

145,156

48,720
(382)
5,731

54,069

91,087

Assets under construction consists of expenditure relating to the pipeline network and surface infrastructure on the Logbaba
Project in Cameroon.

The realisation of property, plant and equipment of US$20.6 million is dependent on the continued successful development of
economic reserves within the licence period, which is subject to a number of uncertainties including the Group’s ability to access
financial resources to continue to successfully generate revenue from the assets.

Depreciation rates applied by the Group are as follows:

Plant and equipment
– Process plant
– Pipeline network (unit of production amortisation based on pipeline capacity)
– Other plant and equipment

Oil and gas interests
– Logbaba wells La-105 and La-107 (unit of production based on 1P reserves)

2019

2018

10 years
11.8%

10 years
9.7%
4-10 years 4-10 years

20.84%

17.24%

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

74 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

16. INVESTMENT IN ASSOCIATE

The Company has a 35% interest in CHL. See Note 29 for further information regarding CHL. The Company acquired the
investment in CHL as a mechanism to buy back part of the royalty payable on the Logbaba revenue stream. Details of the
investment are as follows:

Proportion ownership
interest and voting power
held by the Group

Company

Principal activity

Place of incorporation and operation

Cameroon Holdings Limited

Oil and gas services

Guernsey

CHL is equity accounted in the Group financial statements as follows:

Opening balance
Share of profit of associate
Dividends received
Impairment (see Note 4)

Investment in associate

Summarised financial information for CHL is set out below.

Assets and liabilities
Current assets
Non-current assets
Current liabilities

Elements of comprehensive income
– Revenue
– (Loss)/profit from continuous operations
Dividends declared

2019
US$’000

5,556
–
–
(5,556)

–

319
3,668
(368)

–
(365)
(43)

35%

2018
US$’000

5,429
530
(403)
–

5,556

311
3,577
(4)

1,631
1,515
(1,152)

The shares of CHL are not actively traded and their fair value cannot be reliably measured. CHL’s only source of income is the
GDC royalty which it receives (see Note 27). The royalty income is dependent on the Group’s share of revenue generated from
the Logbaba Project, and is therefore subject to the same risks as the Group on the Logbaba Project. As a result there is a broad
range of values that could be ascribed to the investment.

Since January 2019 the Company has ceased to make payments under the CHL Royalty Agreement. CHL has commenced
legal proceedings against both GDC and the Company with regard to payments CHL believes it is entitled to under the Royalty
Agreement. Consequently, the Company has fully impaired this investment, resulting in an impairment charge of US$5.6 million.

There were no further transactions between the Group and CHL during the year.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 75

17. TRADE AND OTHER RECEIVABLES

Amounts due within one year:
Trade receivables
Taxes recoverable
Prepayments
Other receivables

2019
US$’000

6,059
930
101
6,621

13,711

2018
US$’000

2,677
2,254
98
3,637

8,666

Trade Receivables
Trade and other receivables are financial assets and measured at amortised cost. The Group applies the IFRS 9 simplified
approach to measuring expected credit losses (“ECL”) which uses a lifetime expected loss allowance for all trade receivables.

Other Receivables
Other receivables includes a receivable from joint venture partners (RSM, SNH and AFEX) of US$5.6 million (2018: US$2.5 million)
for their share of their participating interest in the Logbaba and Matanda Blocks. The balance of other receivables consists of
deposits, customs guarantees, restricted cash and sundry receivables of US$1.0 million (2018: US$1.1 million).

Age of Trade Receivables that are Past Due but not Impaired

31-60 days
61-90 days
91-121 days
121+ days

Total

2019
US$’000

804
295
120
3,321

4,540

2018
US$’000

836
401
91
244

1,572

Trade receivable days for the current year was 106 days (2018: 90 days), however if ENEO is excluded the trade receivable
days in the current year was 83 days (2018: 90 days). The amount past due but not impaired for ENEO at 31 December 2019
was US$3.2 million (2018: Nil). Management has impaired certain of the ENEO invoices receivable. Amounts invoiced based
on quantities of gas consumed, which the customer has confirmed, and which ENEO, post year-end has either paid or provided
promissory notes against, have not been provided for. Amounts invoiced on the take-or-pay basis, in accordance with the GSA,
have been provided for.

Movement in Expected Credit Loss

Balance at beginning of the year
Movement in the year

Balance at end of the year

2019
US$’000

156
3,661

3,817

2018
US$’000

832
(676)

156

The change in expected credit loss during the year is included in administrative expenses (see Note 8).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

76 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

18. CASH AND CASH EQUIVALENTS

2019
US$’000

7,237

2018
US$’000

3,467

Funds are held in various currencies in order to enable the Group to trade and settle its debts in the currency in which they occur
and in order to mitigate the Group’s exposure to short-term foreign exchange fluctuations. All cash held is available on demand.

The carrying amount of these assets approximates their fair value, and is held in the following denominations:

US Dollar
Sterling
Central African Franc
Russian Rouble
Kazakh Tenge

19. TRADE AND OTHER PAYABLES

Amounts due within one year:
Trade payables
Taxes and social security costs
Accruals
Other payables

2019
US$’000

294
3,272
3,601
31
39

7,237

2019
US$’000

2,842
1,258
3,034
2,138

9,272

2018
US$’000

2,068
162
1,227
10
–

3,467

2018
US$’000

4,753
612
2,423
3,012

10,800

It is the Group’s normal practice to agree terms of transactions with suppliers, including payment terms which are typically
30 days from receipt of invoice. Trade creditor days for the Group for the year were 72 days (2018: 99 days), based on the ratio
of Group trade creditors at year-end to the amounts invoiced during the year by trade creditors.

Accruals
Accruals includes an amount of US$1.2 million (2018: US$1.5 million) in relation to the land claim on the Logbaba Project.

Other payables
Other payables includes an amount of US$2.1 million (2018: US$3.0 million) due under the reserve bonus settlement.

The carrying value of trade and other payables approximates to fair value.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 77

20. PROVISIONS

Decommissioning and rehabilitation costs
Production bonus provision
Provision for legal matters
Provision for State Royalty
Other

Disclosed as:
Current liabilities
Non-current liabilities

2019
US$’000

2018
US$’000

1,118
388
–
9,638
531

11,675

9,638
2,037

11,675

909
451
199
–
291

1,850

199
1,651

1,850

Non-current provisions represent the present value, as at the Balance Sheet date, of the amounts payable in future
periods discounted at a rate that reflects both the time value of the money and the risks inherent in the liability.

Provision for State Royalty
Following a protracted negotiation with the State of Cameroon, in August 2020 the Group concluded a long-standing dispute
regarding the Logbaba Concession agreement, and in so doing has crystalised a liability to pay back-dated royalties to the
Cameroonian State in the amount of US$9.6 million. The royalty obligation is disclosed as a current liability.

Provision for Decommissioning and Rehabilitation (“D&R”) Costs
The D&R provision represents an internal estimate of the present value of D&R costs relating to the Logbaba Project and the
West Med Project based on an estimate of the D&R costs in the year when those costs are likely to be incurred. The provision
in respect to the well locations on the West Med field is expected to be incurred by the end of 2024 and in respect to the wells,
process plant and pipeline for the Logbaba Project by the end of 2034.

Assumptions have been made based on the current economic environment. Anticipated D&R in current terms are escalated
to the date at which they are expected to be incurred. The inflation assumption is 2.0% p.a. (2018: 2.0% p.a.). The discount
rate used to determine the present value of the obligation was 9.5% p.a. (2018: 10.56% p.a.). The Directors believe these
assumptions are a reasonable basis upon which to estimate the future liability. These estimates and assumptions are reviewed
at least bi-annually to take into account any material changes. However, actual D&R costs will ultimately depend upon future
market prices of the necessary D&R works at the relevant time.

Opening balance
Movement in provision during the year
Effect of movement in foreign exchange
Effect of change of discounting rate
Unwinding of discount charged to the Income Statement

2019
US$’000

909
(62)
133
26
112

1,118

2018
US$’000

2,318
570
(86)
(1,949)
56

909

Production Bonus Provision
Under the Logbaba Concession Contract, a bonus of US$1.0 million is payable to the Government of Cameroon when certain
levels of production are achieved which management expects will not occur within the next twelve months. The discount rate
used to determine the present value of the obligation was 9.5% p.a. (2018: 10.56% p.a.).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

78 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

21. BORROWINGS

2019
Borrowings

2018
Borrowings

Due
3-5 years
US$’000

1,719

7,209

Due
2-3 years
US$’000

5,337

5,003

Due
1-2 years
US$’000

4,897

4,586

Due
0-1 year
US$’000

5,969

4,109

Total
US$’000

17,922

20,907

BGFIBank Cameroun S.A. (“BGFI”)
The initial debt facility with BGFI was entered into on 4 April 2016, was for XAF 15 billion (circa US$26.0 million at that time).

At 31 December 2019, the loan has a remaining term of 42 months, and bears interest at 7.15% p.a. The loan is secured by
a pledge over the revenue stream of certain customers, a pledge over attributable gas production volumes equivalent to the
monthly instalments and the ceding of GDC’s right to future insurance claims for the tenor of the loan. The outstanding balance
at 31 December 2019 was US$16.4 million (31 December 2018: US$19.4 million). The amount due within 1-2 years is US$4.9
million, within 2-3 years is US$5.3 million and within 3-4 years is US$1.7 million. The Company has provided a letter of support
to BGFI to support the facility.

Famcorp
The Group has a loan facility with United Arab Emirates based Famcorp. The facility is unsecured and incurred interest at
9.9% p.a. (2018: 9.9% p.a.) which is payable monthly. The principle is repayable on demand. The balance owing on the loan at
31 December 2019 was US$1.5 million (2018: US$1.5 million).

22. NET DEBT

Cash and cash equivalents
Borrowings: Current liabilities
Borrowings: Non-current liabilities

23. CALLED-UP SHARE CAPITAL

Allotted Called-Up and Fully Paid:

Ordinary shares of 0.5 pence each:

2019
US$’000

7,237
(5,969)
(11,953)

(10,685)

2018
US$’000

3,467
(4,109)
(16,798)

(17,440)

2019

Number

256,861,796

US$’000

Number

1,826 150,446,457

2018

US$’000

1,130

On 5 April 2019, the Company issued 104,627,788 new Ordinary Shares at a subscription price of 13 pence per share which
generated net proceeds of US$16.8 million. Further share issuances are disclosed in Note 26.

The Company’s Ordinary Shares have voting rights and are listed on AIM.

The Directors of the Company continue to be limited as to the number of shares they can allot at any time and remain subject
to the allotment authority granted by the shareholders pursuant to Section 551 of the Companies Act 2006.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 79

24. ESOP TRUST RESERVE

The Victoria Oil & Gas ESOP Trust (“ESOP Trust”) are consolidated in these accounts as if it were a subsidiary undertaking in
accordance with SIC 12. The ESOP Trust Reserve eliminates the cost of the shares in the Company held by the ESOP Trust, by
treating these as treasury shares. The Trust was terminated on 28 June 2019.

At 31 December 2019, Nil Ordinary Shares were held by the ESOP Trust (31 December 2018: 562,501). The ESOP Trust issued
500,000 Ordinary Shares to a former Director on 9 April 2019 and liquidated the remaining shares shortly thereafter.

The balance of the reserve is analysed separately in the Consolidated Statement of Changes in Equity.

25. FINANCIAL RISK MANAGEMENT

The Group’s financial instruments comprise cash balances and various items such as trade receivables and trade payables
which arise directly from trading operations.

It is the Group’s policy that no trading in derivatives shall be undertaken. The Group has previously issued hybrid financial
instruments, containing embedded derivatives, which formed part of the Group’s funding arrangements. There are presently no
hybrid instruments or embedded derivatives in issue. Should the Group elect to raise funding with an instrument containing an
embedded derivative, the Board will consider the associated risks at that time.

The main financial risks arising from the Group’s financial instruments are as follows:

Credit Risk
Credit risk is the risk that the Group’s counterparties will cause the Group financial loss by failing to honour their obligations.
The Group’s receivables relate primarily to cash and cash equivalents, trade and other receivables and prepayments. The
Group manages credit risk by pre-assessing the creditworthiness of counterparties and obtaining sufficient collateral, where
appropriate, as a means of mitigating the risk of financial loss from defaults. Credit exposure is controlled by counterparty limits
that are reviewed and approved by the Directors from time to time.

Despite signing a binding term sheet with ENEO in December 2018, which committed the parties to executing fully termed
agreements and ENEO to providing the appropriate payment guarantees, neither has been achieved. At the reporting date,
the gross amount owing by ENEO to the Logbaba Project was US$10.3 million (GDC share: US$6.2 million), and at the date
of termination the gross amount outstanding, including interest and termination charges was US$20.2 million (GDC share:
US$12.1 million). The Company will now rigorously pursue this unpaid debt via an ICC arbitration, the outcome of which is
unlikely to be within the forecast period.

Trade receivables consist of 39 customers from the Logbaba Project in Douala, Cameroon with operations in various industries
including electricity generators, food processors, breweries, foundries, cement producers and chemical companies, and two
further customers to which the Group sells the condensate produced from Logbaba.

The Group has policies in place to ensure that sales are made to customers with adequate creditworthiness. After the initial
evaluation and acceptance the Group subsequently monitors customer credit quality and payment compliance to limit its
exposure on all accounts receivable. Customers failing this review are issued a warning, followed by cessation of gas supply.

Trade receivables are comprised of:
• 7% amounts due from subsidiaries of multinational companies;
• 21% amounts due from other Cameroonian companies;
• 69% amounts due from subsidiaries of multinational companies with State participation; and
• 3% amounts due from other Cameroonian companies with State participation.

The Group rates the credit quality of the first group as high (making up 7% of trade receivables). The credit quality of other local
Cameroonian companies is reduced, but the Group mitigates this risk by implementing safeguards and retains the ability to
restrict/terminate gas supply. The credit quality of the subsidiaries of multinational companies with State participation, namely
ENEO (making up 69% of trade receivables) is uncertain, and their payment performance record is poor. The credit quality of the
final category is poor, and Management monitors payment performance of these customers carefully and mitigates credit risk
principally by retaining the ability to restrict/terminate the supply of gas.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
80 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

25. FINANCIAL RISK MANAGEMENT continued

Credit Risk continued

For trade and other receivables, the Group applies a simplified approach in calculating the Expected Credit Loss (“ECL”).
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at
each reporting date. The Group has established a single loss rate approach that is based on its historical credit loss experience,
adjusted for forward-looking factors specific to the receivable and the economic environment.

Credit risk arising in the context of the Group’s operations, excluding ENEO, is not significant with the total ECL at the Balance
Sheet date amounting to 9.5% of trade receivables (2018: 1.8%).

There is no difference between the carrying amount of trade and other receivables and the maximum credit risk exposure.

The credit risk on liquid funds is limited because the Group holds the majority of its funds with banks with investment grade
credit ratings. Funds held by GDC in Cameroon are principally held at BGFI, with whom GDC has debt exposure.

Liquidity Risk
The Group’s liquidity exposure is confined to meeting obligations under short-term trade payables agreements and under
longer term borrowing arrangements. The needs are monitored by regular forecasting of operational cash flows and financial
commitments. The exposure is considered significant. The risk is managed by managing the level of commitments at any point
in time, where possible and agreeing extended payment terms with suppliers.

Following a protracted negotiation with the State of Cameroon, in August 2020 the Group has concluded a long-standing dispute
regarding the Logbaba Concession agreement, and in so doing has crystalised a liability to pay back-dated royalties to the
Cameroonian State in the amount of US$9.6 million (GDC share). GDC and its joint venture partner are seeking to ensure that
the royalty amounts payable are netted against amounts due by Cameroon for their participating interest in the Logbaba Project.
There is no guarantee that the State of Cameroon will accede and the Group may be exposed to material financial exposure
and liquidity risk.

The Group’s commitments have been fully met during the current year from cash flows generated from sales revenue from the
Logbaba Project and existing cash holdings. The Group does not have any derivative financial liabilities at the end of the current
year. The Group’s contractual maturity for its non-current financial liabilities is more than one year but not more than five years,
with the exception of decommissioning and rehabilitation obligations.

The Group currently does not have any headroom on its debt facilities.

The Directors believe the Company is able to finance future exploration and development operations from internally generated
funds, existing facilities and, where required, access to additional debt or equity. The Group also has the option to farm-down
on existing assets if this is deemed appropriate.

The maturity profile of the Group’s financial liabilities based on the contractual terms is as follows:

2019
Borrowings
Accounts payables

Total

Due
3-5 years
US$’000

1,719
–

1,719

Due
2-3 years
US$’000

5,337
–

5,337

Due
1-2 years
US$’000

4,897
–

4,897

Due
0-1 year
US$’000

5,969
9,272

15,241

Total
US$’000

17,922
9,272

27,194

Foreign Currency Risk
Although the Company is based in the UK, overseas operations are funded primarily in US Dollars which is converted to local
currency to fund operations. The Group holds surplus cash in US Dollars, Sterling and Central African Franc, and buys other
currencies as required, at the most advantageous rates available, to meet short-term creditor obligations and fund other
expenditure. The Central African Franc, which is the currency of Cameroon, is pegged to the Euro. Stringent foreign exchange
controls within Cameroon present significant foreign currency risk as they impute procedural barriers to transferring foreign
exchange out of Cameroon and also increase the cost of purchasing foreign exchange as required.

The Group is exposed at any point in time to exchange rate fluctuations.

The Group seeks, where possible, to minimise its exposure to currency risk by holding surplus cash in US Dollars.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 81

25. FINANCIAL RISK MANAGEMENT continued

The functional currency of the majority of the Group’s operations is US Dollars, and the reporting currency is US Dollars. The
carrying amounts of the Group’s significant foreign currency denominated monetary assets and liabilities at the reporting dates
are as follows:

Central African Franc
Sterling
Euro
Russian Rouble
Kazakh Tenge

US Dollar

Monetary Assets
2019
US$’000

2018
US$’000

11,542
3,413
–
31
39

15,025

5,923

20,948

6,700
656
–
10
42

7,408

4,725

12,133

Monetary Liabilities
2019
US$’000

2018
US$’000

23,080
294
100
24
1

23,499

3,695

27,194

20,939
428
152
17
2

21,538

10,169

31,707

The Group does not utilise swaps or forward contracts to manage its currency exposures.

Foreign Currency Sensitivity Analysis
If the US Dollar had gained/lost 5% against all currencies significant to the Group at 31 December 2019, the loss would have
been less than US$0.3 million lower/higher (2018: less than US$0.1 million lower/higher) and the net equity would have been
less than US$0.3 million higher/lower (2018: less than US$0.1 million higher/lower). Accordingly, the impact on the Company’s
Income Statement and net equity would be immaterial.

The Group secured a XAF 15 billion loan facility during 2016, this loan was restructured in July 2018 (see Note 21). At 31
December 2019 the total debt outstanding on facilities held in Central African Franc (“XAF”) amounted to US$16.4 million
equivalent (2018: US$19.4 million equivalent), marking a reduction in the foreign currency risk.

Commodity Price Risk
Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes
in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer or factors affecting similar financial instruments traded in the market.
This risk principally relates to sale of gas and condensate and is included in the analysis of financial risk factors in the Strategic
Report. For sales of gas, the risk is substantially reduced by entering into longer term, fixed-price gas contracts (two to five
years) with customers. Whilst customers are not forced to consume gas, the contractual prices are not linked to the relevant
commodity price. However, customers will weigh up the price of gas supplied against alternative fuel prices to obtain the lowest
unit cost price for production. The commodity price thus presents a significant risk for the Group, but the quantum of the impact
is difficult to estimate as the decision is made by customers with varying production requirements.

The condensate sales price is linked to the Brent Crude price and is anticipated to be significantly impacted by the recent
collapse in the world oil prices. For the current year, it is estimated that a general weakening of ten percentage point in Brent
would increase the Group’s loss before tax by less than US$0.1 million (2018: less than US$0.1 million).

Interest Rate Risk
The Group is exposed to interest rate risk. Where possible the Group borrows at fixed interest rates. At 31 December 2019, the
Group had the following outstanding borrowings:
• US$16.4 million from BGFI with interest payable at an average rate of 7.15% p.a.; and
• US$1.5 million from Famcorp with interest payable at a fixed rate of 9.9% p.a.

See Note 21 for more information regarding these loans. A change in the Cameroonian bank base rate of 1% would affect the
Group’s profit before tax by less than US$0.2 million. The Famcorp loan has a fixed rate and would have no impact from a change
in base rates.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

82 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

25. FINANCIAL RISK MANAGEMENT continued

Capital Management
The objective of managing capital is to maximise shareholder value. The capital structure of the Group consists of equity
attributable to equity holders of the Parent Company, comprising issued capital, reserves and retained earnings.

The Group meets its capital management objectives by reviewing the capital structure from time to time against its future capital
expenditure requirements based on forecasts prepared by management. When required, the Board decides on the mix and level
of capital to raise in order to enable it to achieve the Group strategy. As part of this review, the Board considers the cost of
capital and the risks associated with each class of capital.

On 5 April 2019, the Company issued 104,627,788 new Ordinary Shares at a subscription price of 13 pence per share which
generated net proceeds of US$16.8 million (see Note 26).

Gearing ratio
The Board considers the level of debt taking into consideration the status of projects in the development cycle and their ability
to service any debt. A measure to monitor capital is the gearing ratio, that is, the ratio of net debt to equity. The Group is in a
net debt position at year-end of US$10.7 million (2018: US$17.4 million) (see Note 22).

Categories of Financial Instruments
The financial assets and liabilities are presented by class in the tables below at their carrying values:

2019

Financial assets
Trade and other receivables

Total financial assets

Financial liabilities
Borrowings
Trade and other payables

Total financial liabilities

2018

Financial assets
Trade and other receivables

Total financial assets

Financial liabilities
Borrowings
Trade and other payables

Total financial liabilities

Notes

21
19

Amortised
cost
US$’000

13,711

–
9,272

9,272

8,666

–
10,800

10,800

FVTPL
US$’000

–

17,922
–

17,922

–

20,907
–

20,907

Total
US$’000

13,711

17,922
9,272

27,194

8,666

20,907
10,800

31,707

Where available, market values have been used to determine fair values. The estimated fair values have been determined using
market information and appropriate valuation methods. The Directors consider that the fair value of the Group’s financial assets
and liabilities are not materially different from their carrying values.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 83

26. SHARE-BASED PAYMENTS

Shares and Options granted through Long-Term Incentive Plan (“LTIP”)
On 31 July 2019, the Board adopted the new LTIP scheme and approved the grant of 9,500,000 share options to Executive
Directors. The share options, which were fully vested, were granted at an exercise price of 14 pence, with an expiry date of 31
July 2024 (Five years).

A further 1,500,000 share options were granted to senior management on 31 July 2019. These options were 25% vested, with
a further 25% vesting annually over three years on the grant date anniversary. The strike price of these share options was 14
pence, with an expiry date five years after the vesting date.

The LTIP adopted by the Board on 12 September 2017 has not been activated to date and has been superseded by the new
LTIP adopted by the Board. No options have been exercised to date.

Other Share Options
On 31 July 2019, 2,000,000 share options were granted to the two Non-Executive Directors under individual share option
agreements. These options were 25% vested, with a further 25% vesting annually over three years on the grant date anniversary.
The strike price of these share options was 14 pence, with an expiry date five years after the vesting date. Upon resignation
as Non-Executive Director on 7 November 2019, John Knight waived his rights to 1,000,000 share options awarded to him. No
options have been exercised to date.

In 2017, the Company awarded 880,122 nil cost share options to the Executive Directors in respect of annual bonus awards
for 2016. 50% of the share options vested on 1 January 2018 and the remaining 50% vested on 1 January 2019. The share
options have an expiry date of 31 August 2022. During 2019, 674,700 Ordinary Shares were issued to Executive Directors on
exercise of these share options. At 31 December 2019, 205,422 share options remained unexercised.

Shares and Options granted through ESOP Trust

During the current year, the ESOP Trust, which is consolidated as part of the Group, transferred 500,000 Ordinary Shares to
a former Director on exercise of share options. (see Note 29). Following the share issuance, the remaining 62,500 Ordinary
Shares held by the ESOP Trust were sold in the open market. The ESOP Trust was closed on 28 June 2019 by Deed of
Termination. No share options were granted by ESOP Trust during the current or prior year.

Opening balance
Exercised

Closing balance

2019
Number of
options
000s

500
(500)

–

2018
Number of
options
000s

500
–

500

Bonus awards to employees and contractors
On 31 May 2019, 961,546 Ordinary Shares were allotted to employees in lieu of cash performance bonuses for 2018. The
shares were issued at 13 pence per Ordinary Share. A further 152,088 Ordinary Shares of the Company were issued to a
contractor in lieu of payment for services. These shares were issued at 22.8 pence per Ordinary Share.

In 2018, the Company issued 571,914 Ordinary Shares to employees for performance bonuses for 2017. The shares were
issued at 30 pence per Ordinary Share. A further 4,814,815 Ordinary Shares of the Company were issued to a contractor in lieu
of payment for services. These shares were issued at 30 pence per Ordinary Share.

Ordinary Shares issued are translated at the exchange rate prevailing at the date of issue and share option issues are valued
in accordance with the Groups policies (see Note 2).

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

84 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

27. ROYALTY OBLIGATIONS AND CONTINGENT LIABILITIES

Royalty Obligations
The Group has certain royalty obligations in respect of the Logbaba Project. The royalties and related expenses are as follows:
• 8% of gas production to the Cameroon State as provided by the Concession Contract. Following a protracted negotiation with
the State of Cameroon, in August 2020 the Group has concluded a long-standing dispute regarding the Logbaba Concession
agreement, and in so doing has crystalised a liability to pay back-dated royalties to the Cameroonian State in the amount of
US$9.6 million (net amount). GDC and its joint venture partner are seeking to ensure that the royalty amounts payable are
netted against amounts due by Cameroon for their participating interest in the Logbaba Project. There is no guarantee that
the State of Cameroon will accede and the Group may be exposed to material financial exposure and liquidity risk. The royalty
obligation, which has been disclosed as a contingent liability in previous year’s financial statements, is disclosed as a current
liability.

• Sliding scale production royalty to CHL ranging from 0-15% of GDC revenue from the Logbaba Project for the life of the
Logbaba field (0% up to US$30.0 million of cumulative GDC revenue from the Logbaba Project; 15% of cumulative revenue
greater than US$30.0 million up to US$240.0 million; 6% of cumulative revenues in excess of US$240.0 million). All royalty
payments are subject to 15% withholding tax in Cameroon. The Company has a 35% interest in CHL. See Note 29 for further
information on CHL. Since January 2019 the Company has ceased to make payments under the CHL Royalty Agreement. CHL
has commenced legal proceedings against both GDC and the Company with regard to payments CHL believes it is entitled to
under the Royalty Agreement. In the event that the legal proceedings result in GDC being obliged to continue paying royalty
payments, the Group’s liability at 31 December 2019 would be US$3.0 million (2018: US$0.3 million).

Other Contingent Liabilities

RSM
RSM has instituted an arbitration in Texas, USA under ICC rules in which it is asserting material claims primarily related to
final invoices for the drilling of the two wells, La-107 and La-108, and certain audit exceptions raised by RSM following audits
of the Logbaba operations between 2015 and 2018. RSM has made two attempts to obtain interim rulings which GDC has
successfully defended and the substantive matter is currently scheduled for hearing at the end of January 2021.

Separately, on 3 February 2020, RSM filed an arbitration application under UNCITRAL Rules pursuant to a Participation Agreement
for the project. Much of the relief sought in this second arbitration duplicates the claims in the ICC arbitration save that it also
challenges the validity of cash calls GDC issued in November 2019 for RSM’s share of expenses in relation to the La-108 well
remediation (in aggregate US$2.9 million) and raises issues relating to the primacy of the underlying governing documents
relating to the Logbaba Project, and the process of approvals for certain actions of GDC as the Operator on the Logbaba Project.
This arbitration will be heard in London under Cameroon Law.

Arbitrations under ICC and UNCITRAL rules are confidential processes. VOG is not permitted to provide detailed comments on
them, beyond saying that it continues to vigorously defend the claims raised by RSM.

The amounts under dispute in these arbitrations are significant, and an adverse finding by either of the Tribunals would have a
material impact upon the results and position of the Group.

Cameroon Tax Assessment
GDC received a tax assessment for the period 2014 through 2016 in the amount of US$6.6 million on 22 May 2020, which
was revised to US$5.6 million on 10 August 2020 following an initial appeal by GDC. Management contends that it has paid
all taxes owed in Cameroon and believes the assessment is spurious as it seeks to levy double-taxation on GDC. Consequently
GDC intends to vigorously challenge this assessment. As at the date of approval of the current year Financial Statements, the
outcomes of the various submissions that GDC has lodged with the relevant regulatory bodies is unknown and therefore it is
not possible to quantify any potential impact. The amounts under dispute are significant, and an adverse outcome will have a
material impact upon the results and position of the Group.

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 85

28. NOTES TO THE CASH FLOW STATEMENT

Changes in liabilities from financing activities
The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash
changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified
in the Group’s Consolidated Cash Flow Statement as cash flows from financing activities.

Long-term borrowings
Short-term borrowings

Total liabilities from financing activities

Long-term borrowings
Short-term borrowings

Total liabilities from financing activities

1 January
2019
US$’000

16,798
4,109

20,907

1 January
2018
US$’000

21,363
3,174

24,537

Cashflows
US$’000

–
(2,563)

(2,563)

Cashflows
US$’000

–
(2,809)

(2,809)

Movement
long-term to
short-term
US$’000

(4,845)
4,845

–

Movement
long-term to
short-term
US$’000

(4,565)
4,565

–

Other
changes
US$’000

–
(422)

(422)

Other
changes
US$’000

–
(821)

(821)

31 December
2019
US$’000

11,953
5,969

17,922

31 December
2018
US$’000

16,798
4,109

20,907

Other changes include foreign exchange movements, transfers between long- and short-term borrowings and interest accruals
and payments.

29. RELATED PARTY TRANSACTIONS

The Consolidated Financial Statements include the Financial Statements of the Company and the subsidiaries listed in Note 30.
The Company is the ultimate parent entity of the Group.

Related parties include key management personnel. Payments (including share-based payments) to Directors and other key
management are set out in Note 12 and Note 26.

The Group did not have any transactions with related parties, other than as listed below (2018: purchases from related parties
US$31,000).

Directors
Kevin Foo, who resigned as a Director on 3 April 2019, and certain members of his family are potential beneficiaries of
a discretionary trust that owns HJ Resources Limited (“HJR”). Mr Foo exercised 500,000 share options via the ESOP Trust on
9 April 2019. He exercised a further 240,964 nil cost options on 10 June 2019.

Ahmet Dik, who resigned as Chief Executive Officer on 20 March 2020, exercised 433,735 share options on 1 August 2019.

Roger Kennedy, Executive Chairman, took a loan of US$22,576 from the Company. The loan was fully repaid in March 2020.

Cameroon Holdings Limited (“CHL”)
In 2009, the Group signed agreements with a private company, CHL, to secure a drilling rig and provide drilling services
and emergency funding to enable the Group to meet its work obligations to the Government of Cameroon for the Logbaba
Concession. Part of the consideration was a royalty over the Group’s share of the revenues from the Logbaba Concession (see
Note 27). There was also an obligation to pay 15% of the first US$30 million of cumulative GDC revenue from the Logbaba
Project to meet mobilisation and demobilisation costs of the drilling rig.

As per Note 16, the Company acquired a 35% interest in CHL from an unrelated party during the 2011 financial year. The
remaining 65% of CHL is owned by Logbaba Projects Limited.

HJR has an indirect 43.3% shareholding in CHL due to its 66.6% interest in Logbaba Projects Limited, the controlling entity of
CHL. Kevin Foo, former Executive Chairman, was excluded from the Board discussions and decisions in respect of the Group’s
investment in or decisions related to CHL. During the year GDC ceased making royalty payments to CHL (2018: US$1.7 million), and
consequently the Group did not receive any dividends from CHL (2018: US$0.4 million). CHL has commenced legal proceedings
against both GDC and the Company with regard to payments CHL believes it is entitled to under the Royalty Agreement.

The only transactions between the Group and CHL since the Company acquired its interest in CHL have been payment of
royalties, payments related to mobilisation and demobilisation costs, dividends, and the repayment of loans.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

86 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

30. COMPANIES CONSOLIDATED IN THE FINANCIAL STATEMENTS

The holdings of the Group as at 31 December 2019 were:

Company

Country of incorporation

Registered address

Victoria Oil & Gas Plc

England & Wales

200 Strand,
London, WC2R 1DJ

Class of
shares

Percentage
of capital
held

Nature of business

Victoria Petroleum Ltd

England & Wales

200 Strand,
London, WC2R 1DJ

Ordinary 100%

Holding company

ZAO SeverGas-Invest

Russia

Proezd 13, promzona,
panel “C”, Nadym, 629730,
Yamal-Nenets
Autonomous Okrug

Ordinary 100%

Exploration

Bramlin Ltd

Guernsey

St Peters House,
Le Bordage, St Peter Port,
Guernsey, GY1 1BR

Ordinary 100%

Holding company

Gaz du Cameroun S.A.

British Virgin
Islands

Sea Meadow House,
Blackburne Highway,
PO Box 116, Road Town,
Tortola, British Virgin Islands

Ordinary 100%

Exploration and
production

Victoria Oil & Gas
Central Asia Ltd

Victoria Energy
Central Asia UK Ltd

Victoria Energy
Central Asia LLP

England & Wales

200 Strand,
London, WC2R 1DJ

Ordinary 100%

Holding company

England & Wales

200 Strand,
London, WC2R 1DJ

Ordinary 100%

Holding company

Kazakhstan

Temirkhanova Str. 1a,
1st Floor, Atyrau, 060002,
Republic of Kazakhstan

Ordinary 100%

Representative
office

Gaz du Cameroun Sarl.

Cameroon

741 Rue Vasnitex, Bonapriso,
PO Box 12874, Douala,
Cameroon

Ordinary 100%

Licence operator

Victoria Oil & Gas
International Ltd

British Virgin
Islands

R G Hodge Plaza,
3rd Floor, Upper Main Street,
Wickhams Cay 1,
PO Box 3483, Road Town,
Tortola, British Virgin Islands

Ordinary 100%

Dormant

Gaz du Cameroun
Matanda S.A.

British Virgin
Islands

Sea Meadow House,
Blackburne Highway,
PO Box 116, Road Town,
Tortola, British Virgin Islands

Ordinary 100%

Dormant

Gaz du Cameroun
Investments Ltd

Guernsey

St Peters House,
Le Bordage, St Peter Port,
Guernsey, GY1 1BR

Ordinary 100%

Dormant

All of the Group’s holdings are fully consolidated in the Group’s Consolidated Financial Statements, with the exception of the
Group’s participating interest in both the Logbaba and Matanda Projects, which are accounted for as joint operations, and
Cameroon Holdings Limited, which is equity accounted.

Following the participation of SNH in the Logbaba Project in June 2017, the Group participating interest was reduced from 60%
to 57%. On 17 December 2018 the Group received the Presidential Decree authorising the transfer of the 75% participating
interest in the Matanda PSC, however the PSC governing the Matanda Block grants the Cameroonian State an option to acquire
between a 5% and 25% participation in the exploitation activities of the block. Should the Cameroonian State exercise its option,
upon conversion to an exploitation licence, the Group’s interest would thereafter be reduced to between 71.25% and 56.25%
depending on the State’s election.

The following subsidiaries are exempt from the requirements of the UK Companies Act 2006 relating to the audit of individual
accounts by virtue of s479A of the Act:
• Victoria Petroleum Ltd
• Victoria Oil & Gas Central Asia Ltd
• Victoria Energy Central Asia UK Ltd

Notes to the Consolidated Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 87

31. SUBSEQUENT EVENTS

Board Changes
• On 10 February 2020, Robert Collins was appointed as Non-Executive Director.
• On 23 March 2020, Roy Kelly was appointed Chief Executive Officer following the resignation of Ahmet Dik on 20 March

2020.

• On 15 May 2020, Andrew Diamond resigned as Finance Director.
• On 11 August 2020, Robert Collins was appointed Chief Financial Officer.

Covid-19
• In the period since 31 December 2019, the emergence and spread of Covid-19 has not had a significant impact on the
Group’s operations. Although remediation work in relation to La-108 was postponed due to the Covid-19 pandemic, the
remediation work is expected to recommence in the coming months.

Other subsequent Events
• The Company held its Annual General Meeting on 29 June 2020, at which all the resolutions put to vote were approved. A
General Meeting will be convened on 29 October 2020 for the shareholders to receive the current year Annual Report and
Accounts.

• On 2 July 2020, GDC terminated the ENEO Gas Sales Agreement following protracted efforts to get ENEO to abide by the

contractual terms of the binding term sheet between the Parties (see Notes 3 and 17).

• On 27 July 2020 the Group reduced the estimated proven (“1P”) reserves on Logbaba to 19 Bcf effective 1 January 2020.

The Group has included the revised reserves estimate in its asset impairment during the current year.

32. CAPITAL AND LEASE COMMITMENTS

At 31 December 2019, GDC had no capital commitments (2018: Nil).

On 17 December 2018, the Group received the Presidential Decree authorising the transfer of the 75% interest in the Matanda
PSC. The Group has a minimum work programme obligation of one exploration well plus seismic reprocessing to be completed
in the first two years of the assignment following the Presidential Decree (i.e. by December 2020). The Group will not be in
a position to achieve the minimum work programme and has commenced discussions with the SNH for an extension of the
exploration period.

The Group’s commitment is expected to be US$11.25 million (2018: US$11.25 million). The Group will seek a farm-down
partner to mitigate the work programme commitment, assuming a suitable extension is obtained.

The Group has lease commitments at 31 December 2019 as follows:

Lease commitments

2020
US$’000

2021-24
US$’000

–

Total
US$’000

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

88 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Parent Company Statement of Financial Position
At 31 December 2019

Assets:
Non-current assets
Intangible assets
Property, plant and equipment
Investment in associate
Investment in subsidiaries

Current assets
Trade and other receivables
Cash and cash equivalents

Total assets

Liabilities:
Current liabilities
Trade and other payables
Borrowings

Net current assets

Net assets

Equity:
Called-up share capital
Share premium
Other reserves
Retained (losses)/earnings

Total equity

Notes

B
B

C
D

E
F

31 December
2019
US$’000

–
–
–
–

–

9,679
3,565

13,244

447
1,480

1,927

11,317

1,826
42,817
1,093
(34,419)

11,317

31 December
2018
US$’000

29
42
4,502
12,410

16,983

86,955
2,222

89,177

106,160

1,126
1,480

2,606

86,571

103,554

1,130
26,254
401
75,769

103,554

As permitted by Section 408 of the Companies Act 2006, the Parent Company is availing of the exemption from presenting its
separate Income Statement in these Financial Statements and from filing it with Companies House. The loss for the year dealt
with in the Financial Statements of the Company amounts to US$110.3 million (2018: US$7.1 million).

The Financial Statements of Victoria Oil & Gas Plc, registered number 5139892, were approved by the Board of Directors on
29 September 2020.

Roger Kennedy
Executive Chairman

John Daniel
Non-Executive Director

Parent Company Statement of Changes in Equity
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 89

For the year ended 31 December 2018
At 31 December 2017
Shares issued
Vesting of share options
Warrants expired
Total comprehensive loss for the year

At 31 December 2018

For the year ended 31 December 2019
At 31 December 2018
Shares issued
Share-based payments
Vesting of share options
Shares granted to ESOP members
Total comprehensive loss for the year

At 31 December 2019

Share capital
US$’000

1,095
35
–
–
–

1,130

1,130
685
11
–
–
–

1,826

Share premium
US$’000

24,218
2,036
–
–
–

26,254

26,254
16,067
496
–
–
–

42,817

Other reserves
US$’000

248
–
174
(21)
–

401

401
–
(308)
1,000
–
–

1,093

Retained
(losses)/
earnings
US$’000

82,868
–
–
21
(7,120)

75,769

75,769
–
–
–
81

(110,269)

(34,419)

Total
US$’000

108,429
2,071
174
–
(7,120)

103,554

103,554
16,752
199
1,000
81
(110,269)

11,317

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

90 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Parent Company Financial Statements
For the year ended 31 December 2019

A. SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies adopted by Victoria Oil & Gas Plc are summarised below.

Statement of Compliance and Basis of Preparation
These separate Financial Statements, of Victoria Oil & Gas Plc (“the Company”), for the year ended 31 December 2019, are
presented as required by the Companies Act 2006. The Company meets the definition of a qualifying entity under Financial
Reporting Standard 100 issued by the Financial Reporting Council. The separate Financial Statements have been prepared in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS101”).

The Financial Statements have been prepared under the going concern basis and are presented in US Dollars, rounded to the
nearest thousand (US$’000) except where otherwise indicated. They have been prepared under the historical cost convention
except for the revaluation of certain financial instruments.

Exemptions
Under Section s408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and
loss account.

The Company has taken advantage of the exemptions permitted under FRS 101 in relation to share-based payments, financial
instruments, capital management, presentation of a cash flow statement and certain related party transactions.

Accounting Policies
The principal accounting policies adopted are the same as those set out in Note 2 to the Consolidated Financial Statements,
except as noted below.

Investments
Investments in subsidiary undertakings and associates, are stated at cost less impairment amounts.

Financial Support
The Company has issued letters of support in relation to the indebtedness of companies within the Group. The Company treats
such letters as a contingent liability unless, and until such time as, it becomes probable that the Company will be required to
make a payment.

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 91

B. INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES

Full details of significant investments held by the Company and the Group are detailed in Note 29 of the Consolidated Financial
Statements.

Subsidiaries

Cost
Impairment

Carrying amount

2019
US$’000

49,774
(49,774)

–

2018
US$’000

49,774
(37,364)

12,410

An impairment of US$12.4 million was raised during the year to recognise the impairment of assets in Cameroon following the
reduction in the estimated proven (“1P”) reserves on Logbaba to 19bcf (2018: Nil) (see Note 4 of the Consolidated Financial
Statements).

In addition to the current year’s impairment of the Cameroon investments, the provision for impairment includes the Company’s
Kemerkol assets in Kazakhstan which were fully impaired in 2007 and 2009 and the West Medvezhye assets in Russia which
were fully impaired in 2015.

Associate
The Company has a 35% interest in Cameroon Holdings Limited (“CHL”). See Note 16 of the Consolidated Financial Statements
for further information regarding CHL.

Since January 2019 the Company’s subsidiary, Gaz du Cameroun S.A. (“GDC”), has ceased to make payments to CHL under the
CHL Royalty Agreement. CHL has commenced legal proceedings against both GDC and the Company with regard to payments
CHL believes it is entitled to under the Royalty Agreement. The CHL royalty paid by GDC is the only source of revenue for CHL.
Consequently, in 2019 the Company has fully impaired this investment, resulting in an impairment charge of US$4.5 million.

C. TRADE AND OTHER RECEIVABLES

Amounts due from subsidiaries
VAT recoverable
Prepayments
Other receivables

Amounts Due from Subsidiaries

Opening balance
Funds advanced
Impairment

Closing balance

2019
US$’000

9,538
33
62
46

9,679

2019
US$’000

85,921
11,085
(87,468)

9,538

2018
US$’000

85,921
67
71
896

86,955

2018
US$’000

74,996
14,925
(4,000)

85,921

Amounts due from subsidiaries is entirely due from GDC and are non-interest bearing loans repayable on demand. An impairment
of US$87.6 million (2018: US$4.0 million) was raised against amounts due from subsidiaries. Aside from amounts due from
GDC, all other loan amounts to subsidiaries have been fully impaired.

The realisation of intercompany receivables of US$9.5 million is dependent on the continued successful development of
economic reserves on the Logbaba Project.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT

92 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Notes to the Parent Company Financial Statements
For the year ended 31 December 2019

D. CASH AND CASH EQUIVALENTS

Cash and cash equivalents

Denomination:
US Dollar
Sterling

E. TRADE AND OTHER PAYABLES

Amounts due within one year:
Trade payables
Taxes and social security costs
Accruals

F. BORROWINGS

2019
US$’000

3,565

293
3,272

3,565

2019
US$’000

294
30
123

447

2018
US$’000

2,222

2,065
157

2,222

2018
US$’000

494
29
603

1,126

Borrowings relate to Famcorp and are disclosed in more detail in Note 21 of the Consolidated Financial Statements.

G. CALLED-UP SHARE CAPITAL

Details of the Company’s called-up share capital are disclosed in Note 23 of the Consolidated Financial Statements.

H. LOSS FOR THE YEAR

In accordance with Section 408 of the Companies Act 2006, the Parent Company’s Income Statement has not been presented
in this document.

The loss for the year ended 31 December 2019 was US$110.3 million (2018: US$7.1 million). The current year loss contains an
impairment of associate of US$4.5 million, an impairment of investment in subsidiaries of US$12.4 million and an impairment
of amounts due from subsidiaries of US$87.6 million (2018: US$4.0 million).

The auditor’s remuneration for audit and other services is disclosed in Note 8 of the Consolidated Financial Statements.

Notes to the Parent Company Financial Statements continued
For the year ended 31 December 2019

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019 93

I. RELATED PARTY TRANSACTIONS

Certain disclosures relevant to the Company are presented within Note 29 of the Consolidated Financial Statements. Company
transactions with Group undertakings primarily consist of loan transactions and central service recharges.

The Company received no dividends (2018: US$0.4 million) and no loan repayments from CHL during the period (2018: US$0.1
million). There were no further material transactions with non-wholly owned Group undertakings (2018: Nil).

J. CONTINGENT LIABILITIES

At 31 December 2019 the Company had issued a Parent Company guarantee to the Cameroonian State as assurance for
the Matanda PSC work programme. The Company has also provided a letter of support to BGFI in relation to the facility (see
Note 21). The Parent Company guarantee and letter of support are unchanged from 2018.

K. SUBSEQUENT EVENTS

Board Changes
Details of the Company’s subsequent events are disclosed in Note 31 of the Consolidated Financial Statements.

FINANCIAL STATEMENTSCORPORATE GOVERNANCESTRATEGIC REPORT
94 Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2019

Definitions, Abbreviations & Glossary

“US$”

US$, currency of United States of America

“Adjusted EBITDA”

Adjusted EBITDA excludes depreciation, impairments and the state royalty provision. A reconciliation to the nearest
IFRS measure is included in the Financial Review

“AFEX”

“AGM”

“AIM”

AFEX Global Limited

Annual General Meeting

Alternative Investment Market, a sub-market of the London Stock Exchange

“Altaaqa”

Alternative Solutions Projects DWC-LLC (equipment partner and genset supplier at ENEO owned power stations

“bbl”

“Bcf”

“BGFI”

“CHL”

“CNG”

Barrel, or 42 US gallons

Billion cubic feet 1bcf = 0.83 million tonnes of oil equivalent

BGFIBank Cameroon S.A., an African bank with operations in Cameroon

Cameroon Holdings Limited of which the Company owns a 35% interest

Compressed Natural Gas

“the Company”

Victoria Oil & Gas Plc

“D&R”

Decommissioning and rehabilitation

“Deferred Shares”

The deferred shares of 19.5 pence each in the capital of the Company to be created pursuant to the
Sub-Division

“E&P”

“EBITDA”

“ENEO”

“ESOP”

“Esia”

“Esmp”

“FRS 101”

“GDC”

Exploration and production

Earnings before interest, taxes, depreciation and amortisation

ENEO Cameroon S.A., Cameroon’s national electricity generating company

Employee Share Ownership Plan

Environmental and social impact assessment

Environmental and social management plan

Financial Reporting Standard 101 Reduced Disclosure Framework

Gaz du Cameroun S.A.

“Government”

Government of Cameroon

“the Group”

Victoria Oil & Gas Plc and its subsidiaries

“GSA”

“IFRS”

“IMS”

“IPP”

“ISO”

“Logbaba”

“Lost time injuries”

“Matanda”

Gas sales agreement

International Financial Reporting Standards

Integrated Management System

Independent Power Producers

International Organization for Standardization Compliance
“Logbaba Project”, 20km2 hydrocarbon licence in Cameroon.

All on-the-job injuries that require a person to stay away from work more than 24 hours, or which result in death or
permanent disability. This definition comes from the Australian standard 1885.1 – 1990 Workplace Injury and Disease
Recording Standard
Matanda Block, 1,235km2 hydrocarbon licence in Cameroon

“Matanda PSC”

Matanda Production Sharing Contract

“MMbtu”

“mmscf”

Million British Thermal Units of Energy

Million standard cubic feet

“mmscf/d”

Million standard cubic feet per day

“MW”

Mega Watt

“Naturelgaz”

Naturelgaz Sanayi ve Ticaret A.S., Europe’s largest CNG supplier and distributorP

“NED”

“NCP”

“OECD”

“P50”

“p.a.”

Non-Executive Director

UK National Contact Point

Organisation for Economic Co-Operation and Development

Prospective resources with a 50% probability that the size of the field is larger or smaller than indicated

per annum

“Prospective”

A potential accumulation that is sufficiently well defined to represent a viable drilling target

“PSC”

“RSM”

“SNH”

“tcf”

“VOG”

“XAF”

Production Sharing Contract

RSM Productions Corporation

Société Nationale des Hydrocarbures, The National Hydrocarbons Corporation of Cameroon

Trillion cubic feet

Victoria Oil & Gas Plc

Central African Francs; currency of Cameroon

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Victoria Oil & Gas Plc
Scott House
Suite 1
The Concourse
Waterloo Station
London SE1 7LY

Tel: +44 20 7921 8820
Fax: +44 20 7921 8821
Email: info@victoriaoilandgas.com

Company Registration No. 5139892 (England and Wales)