13 July 2021

Victoria Oil & Gas Plc

("VOG", "Company" or the "Group")

Audited Results for the year ended 31 December 2020

Victoria Oil & Gas Plc, whose wholly owned subsidiary, Gaz du Cameroun S.A. ("GDC"), the onshore gas producer and distributor with operations located in the port city of Douala, Cameroon, is pleased to announce the publication of the financial information for the year ended 31 December 2020. 

2020 Key Events

·    Appointment of new Executive Directors

·    Successful remediation of well La-108

·    Settlement with Cameroon Holdings Limited

·    Termination of ENEO contract

·    Extension of Matanda Licence

Post Year End

·    Full and final settlement with ENEO

·    Approval of Matanda Environmental and Social Impact Assessment

·    Unsecured loan note with Hadron Master Fund of £1.25 million

·    Unsecured loan note facility with Meridian Capital (HK) Ltd for up to US$7.5 million

The full Annual Report and Accounts for the Year to 31 December 2020 ("Annual Report") may be viewed on the Company's website by clicking on the following link: https://www.victoriaoilandgas.com/investor-relations/reports-presentations. The Annual Report will be posted in due course to those shareholders who receive a hard copy.

This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014, which forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018.

CHAIRMAN'S AND CHIEF EXECUTIVE OFFICER'S LETTER

Dear Shareholders,

The twelve months of 2020 will be remembered as a traumatic period in which the COVID-19 pandemic affected the lives and livelihoods of almost everyone around the globe and forced much of the world into an unprecedented lockdown with significant impact on the global economy and energy demand on an unprecedented scale. The severity, length and ultimate impact of the pandemic remain uncertain; however, as the global response to the pandemic continues, including mass vaccination campaigns, there is an expectation that economies will begin to recover throughout 2021/2022, bringing with it the fundamental drivers for energy demand.

Your company's operations were affected by the pandemic as capital projects in West Africa had to be halted and the YaNAO region of Russia underwent a severe lockdown. We are pleased to say that both jurisdictions eventually emerged from the worst of the pandemic's restrictions and am particularly pleased to report that Gaz du Cameroun S.A ("GDC") managed to safely and continuously meet all of its customers demand for natural gas throughout the year.

2020 saw the installation of an all-new, highly experienced, professional executive management team in the form of Roy Kelly as Chief Executive Officer and Rob Collins as Chief Financial Officer.  The new team has been tasked with, preserving capital, continuing the transition to profitability and tackling the litany of legacy issues we spoke of in last year's Annual Report.  2020 has felt like the bottom of the curve for the Company as in a short space of time our new team oversaw the successful remediation of Logbaba's well La-108, settled the dispute with Cameroon Holdings Limited ("CHL") and took decisive action to terminate the grid power contract and set out to recover receivables from Eneo Cameroon S.A. ("ENEO").

Impact of COVID-19

Cameroon shut its borders in March 2020, restricting the movement of raw materials to our customers, constraining our customers' cross-border exports, and severely limiting the movement of personnel and equipment. These issues had a minor impact on our gas sales as GDC's customers showed great resilience in the face of these restrictions. However, we had to suspend the well La-108 remediation and the Matanda Environmental and Social Impact Assessment ("ESIA") in March 2020 as these operations involved largely expatriate crews, who were repatriated before international travel was stopped. Operations recommenced in September 2020, but not before each of these projects lost some six months, and of course incurred additional mobilisation and demobilisation costs.

In the YaNAO region of Russia, where our West Medvezhye ("West Med") asset is located, there has been a severe lockdown for much of 2020, continuing into 2021. Whilst we have had no planned field operations in the period, travel to and from the region was interrupted for our expatriate staff.

Financial Performance

The financial performance in 2020 is obscured by the effect of the settlement with ENEO, the settlement with CHL and the regularisation and separation of business with Société Nationale Des Hydrocarbures ("SNH"). These matters are discussed in the Financial Review.

Attributable revenue for thermal and industrial power, was US$13.0 million, 8.4% higher than the prior year.

The Group is reporting a loss after tax of US$9.0 million for the year ended 31 December 2020 (2019: loss of US$110.3 million). The material difference in the loss is due to the impairment of assets of US$95.8 million in the prior year.

Loss per share, which includes the items listed above, was 3.51 cents (2019: loss of 48.20 cents).

Net assets for the year ended 31 December 2020 were US$2.3 million (2019: US$11.3 million). 

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 in the Report and Accounts).

Operational Performance

Review of Operations

Key Events

·   Grid Power Customer ENEO consumed zero gas in 2020 and contract terminated

·   Gross gas sold of 1,778 MMscf (2019: 2,967 MMscf)

·   Attributable gas sold 1,013 MMscf (2019: 1,691 MMscf)

·   Daily average gross gas sold 4.86 MMscf/d (2019: 8.13 MMscf/d)

·   Successful remediation of well La-108

·   Extension of Matanda licence

Logbaba

We remain mindful of capital preservation and risk mitigation, and we envisage continuing the use of the existing well stock, including the newly remediated well La-108. It has been well documented that Logbaba wells are relatively deep, over-pressured and have been operationally and geologically complex and expensive to drill. In addition, the Logbaba field underlies the populous city of Douala, making the acquisition of a comprehensive seismic grid challenging, all of which would make anyone reticent to drill more wells at this time, but especially at a time of capital preservation. Any hydrocarbon accumulation is finite in volume, and we recognise the concentration risk in the Logbaba project, especially with a finite well stock, thus our pursuit of other projects both in Cameroon and in other countries.

·   Reserves & Resources:

Management reduced its estimate of Proved Reserves ("1P") for the Logbaba Field at the beginning of the period following a review of well performance and in light of the limited well stock. At 1 January 2020 Logbaba Proven 1P reserves gross were 19Bcf, reducing to 17Bcf at year end from production. The reality is that, prior to the recommissioning of well La-108 (a post-period event), the field has relied predominantly on well La-105 (which has produced over 80% of reserves to date), with back-up from well La-107 and occasional back-up from well La-106, which had been fully written down in 2016.

Early estimates of reserves, before the field's geological variability had been recognised, had envisioned a full field development with many more wells drilled. The reality is that without higher quality seismic to mitigate the geological uncertainty that has led to such variable well results, and fewer surface challenges, the drilling of new wells at Logbaba would not be the best use of precious capital resources at this time.

·   Well La-108 Remediation Project:

As shareholders will remember, at the end of the testing operation for well La-108 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.

In the first half of 2019, an attempt was made to remediate the well and the tool string and a large proportion of the wire was retrieved. 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.

The continued remediation work on well La-108 was expected to commence in March 2020 upon the arrival of the additional equipment which was sourced to perform the project. With the equipment and crew on site, however, due to safety concerns related to measures taken in-country regarding Covid-19, the snubbing rig contractor evacuated its expatriate personnel. The crew eventually returned in September 2020 following the relaxing of travel restrictions and successfully recovered all fish and debris from the well down to the Lower Logbaba formation. Six sets of perforations were then shot across a total estimated gross pay interval of 86 m of the Upper Logbaba Formation inside the 4 ½" liner.  The well was opened up for a clean-up flow test to flare on 11 November 2020 and achieved a flowrate of just under 20 MMscf/d with a FWHP of 3,580 psig on a 32/64" choke. This rate was the maximum possible through the small diameter surface flowlines that were used. This remediation was no mean feat and the result of meticulous planning and execution by the team and its subcontractors, who are to be congratulated on the outcome. The complexity of such operations in a deep, high pressure well are exacerbated by the remoteness of our operation from reliable supply lines meaning lead times for spares or new equipment can be several weeks or months as there are no other upstream operations onshore Cameroon. It remains to be seen how the well will contribute to the field over the longer-term, and as we have seen in the other wells: long-term performance is highly variable, and the ultimate recovery from the well does not correlate with short-term performance.

·   Processing Facilities Enhancements:

A Facilities Enhancement Project ("FEP") was approved by the Board in 2018, with the objective of lowering the minimum gas inlet pressure to the plant, thereby maximising deliverability and ultimate recovery from the wells.

The project includes 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. The project was to be delivered in two stages. Stage 1, which was completed in September 2019, comprised the following Front End Engineering Design ("FEED") work: engineering design, cost estimation and execution planning for implementation of the selected process configuration; withStage 2 to focus on execution, including detailed engineering, design, equipment and materials specification, procurement, fabrication, shipping, construction and commissioning.

Mindful of the preservation of capital, the Company carried out low pressure trials on the plant in 2020 without any major modifications, assessing in particular whether the gas will stay within export specification as the plant operating pressure is reduced, and the results suggested this was possible down to 20 to 25 barg. 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 2020, 0.51 km of service lines were laid and the total pipeline network at the year-end was 51.6 km.

Matanda

The Matanda 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 has the right to back into a 5% to 25% working interest post exploitation licence. In late 2020, the Minister of Mines, Industry and Technological Development granted a one-year extension to our licence to 17 December 2021. 

In 2020 the Company completed an updated evaluation of the prospectivity of the licence, and a de-risking of existing prospects. Numerous Tertiary and Cretaceous prospects and leads have been identified, and a number of these are significantly de-risked by shows or hydrocarbon tests in nearby wells, in particular the wells drilled in the contiguous Bomono block in 2015.

Alongside the above workstreams, the scope for the 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. A team arrived in country to start the ESIA in March 2020 but were unfortunately repatriated out of Cameroon due to COVID-19 and in total some six months were lost before they could return and complete the work. The ESIA was submitted in March 2021 and GDC was pleased to announce that the ESIA Report on its planned activities on the Matanda Block was approved in early June 2021.  The certificate of environmental conformity, as issued by an inter-ministerial committee between the Ministry of Environment, Protection of Nature and Sustainable Development (MINEPDED) and the Ministry of Mines, Industry and Technological Development (MINIMIDT) permits the progress of drilling activities subject to the implementation of an approved Environment and Social Management Plan (ESMP).

In order to share the capital and risk of drilling the commitment well, the Company is seeking an industry partner via a farmout process which continues post-period.

West Medvezhye ("West Med")

The Company's 100% owned West Med Licence in the prolific West Siberian basin contains the 2006 oil discovery in well 103, which was subjected to an extended well test at the time. As previously described, the Company has commenced a process to divest the West Med Field and is in discussions with potential buyers of the field.

The perfect storm in early 2020 of Covid-19 and oil price volatility of crude prices led to a hiatus in the sales process but this picked up again towards the end of the year. Post-period the Company continued discussions with potential buyers. There is of course no guarantee that any of these buyers will produce a binding offer.

This asset has previously been fully impaired in VOG's accounts (in 2014).

Potential GDC Role in the Downstream Segment of the Offshore Etinde Project

Shareholders will know that GDC signed a non-binding letter of intent ("LOI") with Etinde Operator New Age Cameroon Offshore Petroleum S.A. ("New Age") for the supply of natural gas from the Etinde Field.  Whilst New Age and its partners progressed the engineering design of the project, they have yet to take a Final Investment Decision ("FID"), which could now slip into 2022 according to public domain sources.

Post-period, this LOI expired on 31 March 2021 and we agreed with New Age not to renew it.  Instead we entered into discussions with SNH and other stakeholders about our continuing involvement, including an offer for GDC to be an offtaker of gas. In addition to the numerous conditions that the Etinde project must fulfil, the State must also clarify the timing and size of potential power projects for the Limbe (the landfall for Etinde gas) and Bekoko (on the outskirts of Douala) sites.

Customers

Since 2012, the Company has been continuously supplying natural gas through VOG's wholly-owned subsidiary, GDC, to numerous customers in the Douala area for a variety of uses.

·   Industrial Customers

GDC has some 40 customers connected and metered and usually has 30 to 36 customers online at any time. In recent years, GDC has experienced more and more requests for increased demand as our customers expand their own businesses and some seek independence from unreliable grid power supplies by installing small generation sets ("gensets") to make them self-sufficient. Such organic growth is obviously of high value, but we take great care to match our finite Logbaba supply to demand projections.

Our top ten customers by volume include a palm oil plant, a flour mill, bottling plants, cement works, a cotton manufacturer and breweries - a diverse range of industries. The Logbaba operation's safety record continues to set records, indeed it has now gone over 1,280 days without even a Lost Time Incident.

During 2020, GDC was able to offer increased sales to some existing customers because of the termination of the ENEO contract, and several customers took advantage of this opportunity, leading them to order and install new equipment.

The focus continues to be to improve our customer diversification. During 2020, one new industrial power customer, SCTB2, was commissioned and post year end the same customer initiated consuming gas for thermal use. Post period, a further customer was connected to the network, Prometal 4.

The continued efforts on industrial customer growth were reflected in 2020 gas sales with a 11% increase in gross thermal gas sales to 1,677 MMscf and a 3% increase in industrial gas for power consumption with 101 MMscf gross consumed. As is normal, we have also seen several smaller customers cease consumption during the period for various reasons.

·   Grid Power Customer

There continued to be no demand from ENEO for their Logbaba site in 2020, as the third-party gensets on the Logbaba site remained disconnected.

In early 2020, ENEO arranged payment of four invoices related to gas supplied up to September 2019, totalling US$5.1 million via four promissory notes. After these payments, there was still a significant amount outstanding relating to invoices from September 2019 onwards.  After repeated requests to discuss settlement and with the aged debt ever increasing, the Company had no alternative but to terminate the contract with ENEO in July 2020 with ten unpaid invoices outstanding at that stage.  We note also that the third-party provider of the gensets had also terminated its contract with ENEO.  The outstanding receivables from ENEO were covered under the take-or-pay provisions of the Term Sheet. The Company subsequently entered into negotiations with ENEO and post-period a settlement was arrived at involving payment for all unpaid 2019 invoices plus interest on these invoices up to the end of February 2021 amounting approximately to US$5.1 million gross (US$2.9 million attributable to GDC). These funds were received in early June. In addition, the Company will seek credit for approximately US$0.7 million gross (US$0.4 million attributable to GDC) of taxes paid at the time of billing on invoices that have been fully written down in the accounts.

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 to supply AKSA's proposed 150 MW Douala Power Station (Bekoko). The term sheet remains subject to a number of conditions precedent.

AKSA remains in discussions with New Age and SNH on the offtake of Etinde gas and also with GDC on gas supply from Logbaba. The Company will need certainty of competitive pricing, plus a better understanding of the long-term performance of well La-108 prior to committing to the supply of 9 Bcf/year of gas that the AKSA term sheet requires.

Contingent Liabilities

·   CHL

The litigation with CHL was settled in full in November 2020, converting what was an unknown and potentially large liability, and one that would have been instantly payable in the event of an adverse outcome, into a known financial liability which can be paid out over many years or sooner without an early redemption penalty. This full and final settlement also terminates the Royalty Agreement. Furthermore, significant legal costs have also been avoided, allowing management to focus on more value-adding activities.

The financial impact of the CHL settlement is discussed in the Financial Review and in note 22.

·   Requirement to Separate Upstream and Downstream

The separation of the business into upstream and downstream business units remains a requirement of the Petroleum and Gas Codes in Cameroon (the 'PGC') and is an industry norm.

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 participation of SNH in 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 GDC's obligation to pay State Royalties. In prior years this potential liability was disclosed as a contingent liability. Following the signing of a new Accounting Procedure to the licence in mid 2020, the royalty liability has now crystalised and the Company accordingly recognised a provision of US$9.6 million in the Annual Report to 31 December 2019. This has been increased to US$13.2 as at 31 December 2020 and recognised as a current liability. This amount has been offset by amounts owing by SNH with respect to their 5% share of net revenues and costs.

·   RSM

RSM instituted an arbitration in Texas, USA under ICC rules in 2018, in which it is asserting material claims primarily related to final invoices for the drilling of the two wells, La-107 and La-108, the pay-out calculation and certain audit exceptions raised by RSM following audits of the Logbaba operations between 2015 and 2019. The hearing took place in April 2021 remotely by video-conference, though the panel's findings and any award is not expected until August 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 well La-108 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. This arbitration will be heard in London under Cameroon Law, currently scheduled for late September 2021.

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

·   La-108 Insurance Claim

The Company continues to pursue its highly meritorious claim with the help of industry claim specialists to assist in the 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 continued mediation in early 2020.  Whilst meetings had to be postponed due to Covid-19 restrictions a number of the issues raised continue to be addressed. The Company does not expect any economic costs resulting from this claim.

Board Changes

There were a number of Board changes during the period, specifically:

March 2020 • Ahmet Dik - CEO resigned

March 2020 • Roy Kelly - CEO joined

May 2020 • Andrew Diamond - Finance Director resigned

August 2020 • Rob Collins - resigned as NED and joined as CFO

November 2020 • Roger Kennedy - converted from Executive to Non-Executive Chairman

Strategic Focus

Shareholder Return and Experience. We aim to maximize shareholder return from the portfolio, and also enhance the shareholder's experience by greater access to information and management in a timely fashion. The maximization of returns starts by harvesting maximum value from existing assets, mindful of all stakeholders.

Capital Discipline. The preservation of capital is a core mantra. Ongoing capital discipline includes the careful management of cashflow and minimising calls on shareholder capital, as is staying low on the cost curve by avoiding exotic and expensive locations or technologies.

Legacy Issues. The company continues to face a number of legacy issues that cannot be ignored and we aim to deal with these decisively.

Diversification. By diversification, we mean commercial and geo-political diversification to mitigate single asset / single country concentration risk. To this end, a number of opportunities have presented themselves, but we shall of course be constrained by our balance sheet and risk appetite.

Good Corporate Citizenship. As a strategic imperative, we will continue to bring ESG matters to the fore in everything we do, starting with our social license to operate, through to our role in sustainability and in the Net Zero journey.

We would like to take this opportunity to thank our employees, consultants and project partners and shareholders for their continued commitment and support in what, given Covid-19, has been an especially challenging year.

Roger Kennedy                    Roy Kelly

Chairman                             Chief Executive Officer

12 July 2021                        12 July 2021

FINANCIAL REVIEW

The year ended 31 December 2020 ("current year") was an exceptionally challenging year for the Group dealing with many legacy issues, such as:

·        defending the legal proceedings initiated by Cameroon Holdings Ltd ("CHL") with respect to the suspension of payments to CHL under the CHL Royalty Agreement;

·        defending the arbitrations initiated by RSM in Texas, USA under ICC rules and in London under UNCITRAL rules;

·        the remediation of well La-108;

·        the negotiations with ENEO to attempt to recover amounts outstanding to GDC; and

·        the ongoing discussions with SNH with respect to the regularisation of the concession and the separation of the business into upstream and downstream businesses.

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 participation of SNH in 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 GDC's obligation to pay State Royalties. In prior years this potential liability was disclosed as a contingent liability. Following the signing of a new Accounting Procedure to the licence in mid 2020, the royalty liability crystalised and the Company accordingly recognised a provision of US$9.6 million in the Annual Report to 31 December 2019. This has been increased to US$13.2 million as at 31 December 2020 and recognised as a current liability. This amount has been offset by amounts owing by SNH with respect to their 5% share of net revenues and costs.

The working interests in the upstream operations of the Logbaba Project are as follows:

• GDC (operator)                                                                                                    57%

• RSM Corporation ("RSM")                                                                                 38%

• National Hydrocarbons  Corporation of Cameroon ("SNH")                       5%

Statement of Comprehensive Income

The overall reduction in revenue year-on-year is due to no invoicing of ENEO in 2020. Since September 2019, when the generator provider ceased operations, GDC invoiced ENEO monthly on a take-or-pay basis in accordance with the term sheet. GDC continued to invoice ENEO on this basis until the GSA was terminated. Following the termination GDC entered into amicable settlement agreement discussions with ENEO, which resulted in a full and final gross settlement of approximately 2.74 billion FCFA (Central African CFA franc), circa. US$5.1 million post year end. Funds were received from ENEO in early June 2021.

Total attributable revenue in 2020 was US$13.2 million compared to US$20.8 million in 2019. The attributable revenue in 2019 included US$8.0 million related to grid power provided to ENEO. Thermal and industrial power revenue was US$13.0 million in 2020 compared to US$12.0 million in 2019, a 8.4% increase year-on-year, a healthy increase with the backdrop of COVID-19 and its effects on business.

Condensate revenue of US$0.2 million (2019: US$0.8 million) reflects the change in the marketing of the condensate post the fire at the Sonara refinery. The condensate produced is de minimis to the volume of GDC gas sales. Condensate is stored by the offtakers and shipped and sold at their discretion

The unit of production depreciation decreased to US$0.4 million (2019: US$7.3 million) as a result of the effect of the significant impairment in property, plant and equipment assets in 2019. Production royalties in 2020 were US$4.2 million (2019: US$9.3 million).  When unit of production depreciation and net production royalties are stripped out of cost of sales, the remaining costs of sales in 2020 was US$1.9 million (2019 equivalent: US$1.8 million).

Administrative expenses were 7.3% lower at US$12.0 million in 2020 (2019: US$13.0 million). Wages and salaries were 18.9% lower and office and other administrative expenditure was 56.5% lower. However professional fees were 77.2% higher predominantly due to the various legal matters with which the Company is involved.

In November 2020, the Company entered into a confidential Settlement Agreement with CHL to cease all legal action and cancel the CHL Royalty Agreement which terminates the 15% royalty payable to the counterparty. The settlement amount is disclosed as a US$1.2 million current liability under other payables, and a further US$11.2 million, discounted at 8.5% to US$6.9 million, disclosed as a non-current liability.

The Group produced a loss before tax of US$8.8 million (2019: US$112.0 million), and a loss after tax of US$9.0 million (2019: US$110.3 million). The basic and diluted loss per share was 3.51 cents (2019: loss of 48.2 cents).

Statement of Financial Position

Intangible assets consist mainly of the costs incurred on well La-108. Works to remediate the well amounting to US$4.0 million were capitalised in 2020 and US$6.3 million were capitalised in 2019. The remediation was successful and GDC managed to recover a spent perforating gun and a stuck section of drill string, clean out and perforate the well and then flow test the well. Post year end the well was tied back and put on test production. When feasible these costs will be transferred to oil and gas assets within property, plant and equipment. Intangible assets have a carrying value of US$12.9 million (2019: US$8.6 million).

Property, plant and equipment was impaired by US$62.9 million in 2019, being the full impairment of well La-107, a partial impairment of well La-105, and a partial impairment of the pipeline infrastructure. The carrying value at the end of 2020 was US$18.7 million (2019: US$20.6 million). There was no impairment in 2020.

Trade and other receivables at 31 December 2020 were US$17.6 million (2019: US$13.7 million).  Trade receivables were affected by the reversal of the previous expected credit loss applied against the outstanding ENEO amounts which were subsequently settled post year end. The increase in other receivables reflected the recognition of additional amounts with respect to SNH.

Trade and other payables increased by US$15.6 million year-on-year from US$9.3 million in 2019 to US$24.9 million in 2020. The principal reasons for the increase were:

·    increase in trade payables due to increased legal fees with respect to the CHL litigation and the two arbitrations with RSM;

·    reclassification of the State Royalty to a current liability in 2020 from a provision in 2019; and

·    the CHL settlement

Cash and cash equivalents at 31 December 2020 were US$1.8 million (2019: US$7.2 million). Borrowings reduced to US$14.6 million (2019: US$17.9 million). Provisions reduced to US$2.4 million (2019: US$11.7 million) principally due to the provision for State Royalty being re-categorised to current liabilities.

Net debt and liquidity

Net debt of US$12.8 million (2019: US$10.7 million) reflects the liquidity position of the Group.

Cash Flow Statement

Operating cash utilised, prior to the effects of working capital movements, was US$7.4 million (2019: US$0.6million). The increase in payables predominantly related to the increased expense for State royalties and the CHL agreement. The decrease in trade receivables predominantly related to the reversal of expected credit losses related to ENEO. This resulted in a working capital movement of US$12.2 million (2019: US$0.3million). Net cash generated in operations was US$3.5 million (2019: US$2.4 million utilised).

Capital investment in 2020 was reduced to only the essential spending and committed costs. The Company's capital investment decreased to US$4.5 million (2019: US$7.7 million). The majority of the investment was on the remediation of well La-108. Repayment of capital on borrowings was US$4.6 million (2019: US$2.6 million).

Commitments

The Logbaba Concession does not contain any work programme obligations.

GDC's work programme commitment on the Matanda Block is US$11.25 million.  The licence was extended in December for one year.

Subsequent Events

ENEO settlement

Subsequent to year end, on 16 April 2021, GDC signed a settlement agreement with ENEO for approximately US$5 million gross. GDC received payment of US$5.1 million from ENEO in full and final settlement for all amounts invoiced to ENEO in early June 2020.

Loan Note and Warrants with Hadron Master Fund

On 8 April 2021, VOG announced that it had raised GBP1.25 million through the issue of an unsecured loan note provided by its second largest shareholder, Hadron Master Fund, ("Hadron"). The loan note is repayable on 5 April 2022 for 110% of the principal amount. Pursuant to the loan note, Hadron was granted warrants over 10,416,667 ordinary shares of £0.005 in the Company's share capital ("Ordinary Shares"). The subscription price of the warrants is 6.0 pence per Ordinary Share and can be exercised at any time prior to the third anniversary of the issue.

Loan Note Instrument with Meridian Capital (HK) Limited

On 18 June 2021, VOG announced that it had entered a definitive financing agreement with Meridian Capital (KH) Limited ("Meridian") (the "Facility") to raise maximum proceeds of US$7.5 million. The Facility is comprised of two series of loan notes - A Loan Notes and B Loan Notes (together the "Loan Notes").

The key terms of the Loan Notes are set out below:

A Loan Notes: 

·    unsecured loan notes with no conversion rights,

·    total principal amount of US$3.3 million, fully drawn on signing of the Facility Agreement (with funds in the process of being transferred to VOG),

·    two-year term with early redemption permitted at no additional cost, and 

·    interest at 10% per annum accruing daily from the date of issue and compounding monthly.

B Loan Notes: 

·    unsecured convertible loan notes,

·    total principal amount of US$4.2 million, which can be drawn down in tranches at the Company's option,

·    term expires on the second anniversary of the date of the Facility Agreement with early redemption permitted at any time at no additional cost, with Meridian having the ability to convert the outanding B Loan Notes, 

·    interest at 10% per annum accruing daily from the date of issue and compounding monthly,

·    principal and interest convertible wholly or partially into VOG shares at the Noteholder's option from the first anniversary of signing the Facility Agreement and on certain other specified events, 

·    conversion price of £0.078 per share (being a 30% premium to the volume weighted average trading price of VOG's shares as traded on AIM over the 10-day period immediately before the date of entry into the Facility Agreement), and

·    draw down conditional on The Takeover Panel ("Panel") agreeing to a waiver of Rule 9 of the Takeover Code ("Code") and independent shareholder approval being obtained.