Victoria Oil & Gas : Annual Report and Accounts to 2020

Strategic Report

1. Year in Review
2. Chairman's and Chief Executive Officer's Letter

8 Financial Review

1. Principal Risks and Uncertainties

1. Strategic Summary

1. Reserves and Resources

1. Operations and Customers
2. Environmental, Social and Governance Report

Corporate Governance

1. Directors & Other Information

1. Corporate Governance Statement

1. Directors' Report

1. Directors' Remuneration Report

1. Statement of Directors' Responsibilities

Financial Statements

1. Independent Auditor's Report

1. Consolidated Income Statement

1. Consolidated Statement of Comprehensive Income
2. Consolidated Statement of Financial Position
3. Consolidated Statement of Changes in Equity
4. Consolidated Cash Flow Statement
5. Notes to the Consolidated Financial Statements

1. Parent Company Statement of Financial Position
2. Parent Company Statement of Changes in Equity
3. Notes to the Parent Company Financial Statements

85 Definitions, Abbreviations & Glossary

Year in Review

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2020 1

REPORT STRATEGIC

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 Period Events

• Full and final settlement with ENEO.
• Well La-108 tied in and put on production.
• 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.

Annual Gross/Attributable Gas Sold (MMscf)

STATEMENTS FINANCIAL GOVERNANCE CORPORATE

Victoria Oil & Gas Plc Annual Report & Accounts to 31 December 2020 3

Chairman's and Chief Executive Officer's Letter continued

REPORT STRATEGIC

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 19 Bcf, reducing to 17 Bcf 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 4½" 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.

STATEMENTS FINANCIAL GOVERNANCE CORPORATE