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Victoria Oil and Gas: after hours Fri RNS – bad news, shares collapse in auction, but whose fault?

By Nigel Somerville, the Deputy Sheriff of AIM | Monday 8 January 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

I can’t say I know an awful lot about AIM-listed Victoria Oil and Gas (VOG), beyond its (still) pending farm-out deal with fellow AIM-listed Bowleven (BLVN) which continues to await approval from the Cameroon authorities. But I do know is a 20% share price fall and an unfortunate after-hours RNS looks pretty bad – both for the company and for AIM in general. The question is what went on and whether the company and its Nomad behaved badly, or whether it was simply the effect of the blind application of AIM Rules.

The shares didn’t move all day, last Friday, during normal trading. But at 4.31 (so just after the close, but during the auction) the company released this:

Gas Supply Contract with ENEO Not Extended

Victoria Oil & Gas Plc ("the Company") announced on 26 June 2017 that it had extended a gas supply agreement with ENEO Cameroon S.A. ("ENEO"), the Cameroon energy joint venture between UK Group Actis and the Cameroon Government, until 31 December 2017, whilst negotiations to agree a new long-term contract continued.

ENEO has informed Gaz du Cameroun S.A. ("GDC") that it is not currently in a position to extend the gas supply agreement and has ceased taking gas from GDC. ENEO is actively discussing potential solutions to this situation with the Government of Cameroon and the Power Regulator in Cameroon. VOG believes this is a temporary issue and expects a resolution in the short to medium term.

ENEO has advised the Company that it faces considerable uncertainties in terms of generation costs that can be passed on as tariffs to end users, large payment arrears from the Cameroon Government and doubts over long term power payment security. Until such issues are resolved, the Company does not believe that ENEO will be able to underwrite the financial aspects of the extension of the contracts with GDC and Altaaqa Global Solutions ("Altaaqa"); the providers of the gas fired generators, or enter into long term financial commitments at this time. ENEO has advised that it is very pleased with the service provided by GDC and Altaaqa and that the suspension is as a result of factors beyond GDC's and Altaaqa's control.

Whilst the suspension of the ENEO supply will clearly directly affect GDC in the short term (it represents an estimated 53% of Logbaba project gas sales revenues for the year ended 31 December 2017), the Company supplies gas to a diverse customer base and will continue working with these customers and other investors in the region to place the newly available gas.

ENEO currently owes GDC approximately $8.7 million gross, which the Company expects will be paid in due course.

As a result of ENEO ceasing to take the gas from VOG, the Company will immediately undertake an assessment of the Company's capital projects and its wider budget and cash flow forecasts, in order to best position the Company to deal with this outturn. The Company intends to provide a comprehensive update of 2017 performance and outline the strategy for 2018, later this quarter.

Blah blah, etc etc.

Right, so this is a pretty serious development for Victoria – so much so that Victoria is immediately undertaking an assessment of its capital projects and its wider budget and cash flow forecasts. That sounds like Victoria is somewhat concerned – and therefore so should its investors be – albeit we are told that the company expects matters to be resolved.

The obvious question is why announce it to the market at 4.31pm on Friday evening? If it had taken a while to formulate a response, then put the announcement out at 7am on Monday morning – NOT on Friday evening when everyone has gone home for the weekend. It just looks like shoddy news management aimed at slipping it out when no-one is looking.

The second issue is that whilst the stock had been Steady Eddie at around 50p all day, the closing auction saw 20% wiped off the share price. Not everyone has access to the closing auction, so only a select few had the opportunity to trade on the news.  

ADVFN reports that the uncrossing trade at 4.45pm for the closing auction went through at just 39.3p, for 183,544 shares – over one third of the reported volume that day up until that point.

One further trade was reported at 4.52pm for 192,846 shares at 44.3p. It remains to be seen whether that was a delayed trade report, but if it was, why was it priced so far below the (then) market? Did someone know something?

The case for the defence – and this is pure conjecture – is that the news came as something of a surprise to the company, but AIM Rules meant that an RNS had to be put out “without delay” that day. It might have been difficult to get hold of some people to get an RNS written and approved. Imagine a scramble of messages and phone-calls amongst the directors, Nomad (Strand Hanson), Brokers (Shore Capital and FirstEnergy Capital) and the PR firm (Camarco) all on a Friday afternoon.

To make life more difficult, I gather that RNSs don’t always get released immediately so it is perfectly possible that the news was filed before 4.30pm.

But the bottom line is that only some shareholders could trade on the news because of the timing of the announcement: not everyone has access to the closing auction, and that is not fair. Surely that’s not how AIM should work: it’s not a level playing field.

I always take a very dim view of companies which release bad news out of hours – especially on a Friday. But in this particular case, it is perfectly possible that it was the result of having to meet AIM Rules.

Surely the Nomad, Strand Hanson, would know that 4.31pm was not the time to be releasing this RNS? Would an extra 10 minutes have hurt, so as to avoid the auction and thus only a favoured few a chance to deal?

More to the point, could it not have waited until 7am this morning, thus allowing investors a short period to assimilate the news before the markets opened? That, I believe, is what should have happened.

I have no idea whether the need to release the RNS after hours was so as to bury bad news or simply keep the oxymorons happy. Either way, it stinks.

But looking back over the last 20 months or so, it doesn’t look as though the company has made a habit of after-hours bad news RNSs. In any case, if you were going to bury (or try to) bad news, you  would be more likely to release it at 6.30pm on a Friday, not 4.31pm. So was this the result of the dead hand of AIM?

Whatever else, releasing this news at 4.31pm is the worst of all worlds.

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