A deal between Gaz du Cameroon (GDC), a subsidiary of VOG, and Cameroon Holdings Limited (CHL) sees the latter agree to cease all legal action and a royalty agreement held by CHL has been cancelled.
The agreement lifts a substantial cloud from what has otherwise been a small-cap success story, which saw VOG take the Logbaba field from single way exploration success, in 2009, into development by creating its own infrastructure and distribution into Cameroon’s economic capita, the City of Duala.
In London, VOG shares added 2.79p or 132% change hands at 4.89p.
VOG highlighted that the agreement results in a valuable increase in monthly net revenue to its subsidiary, Gaz du Cameroon (GDC), and, significant legal costs have been avoided.
At the same time, VOG told investors that management’s time can now be focussed on value-adding activities, whilst updating on continuing field operations which include well remediation and testing.
The company said that the La-108 well at the flagship Logbaba field was successfully cleaned out, additional perforations were made and, based on testing, it believes the well is highly likely to exceed the capacity of the plant (20mln cubic feet of gas per day).
VOG noted that the settlement payment takes into account past unpaid royalties and management’s forecast of the present value of the estimated cash flows due under the CHL Royalty Agreement.
The settlement will be paid to CHL on a monthly basis over many years, the company added.
Chief executive Roy Kelly said: “the settlement of this long-standing legal dispute removes financial uncertainty and ongoing costs which could have run to a final hearing in 2022, with potentially negative consequences.
“The termination of the CHL Royalty Agreement as part of the Settlement is a considerable benefit to shareholders in terms of future cashflow.
“Without the distraction of expensive legal proceedings and the considerable drain on management resources, we can now focus on value accretive activities.”