[Cameroon] Victoria Oil and Gas announces settlement of litigation with CHL
Victoria Oil and Gas (VOG) announced that its wholly owned subsidiary Gaz du Cameroun S.A. ("GDC"), a BVI company, and VOG have entered into a confidential Settlement Agreement with CHL, terminating the litigation with CHL and terminating the CHL Royalty Agreement.
As previously disclosed, the Company had ceased making payments under the CHL Royalty Agreement. CHL commenced legal proceedings against both VOG and GDC concerning the payments that CHL claimed it was entitled to under the CHL Royalty Agreement.
The Company now announces that the parties have agreed not only to a full and final settlement of all claims, but also the termination of the CHL Royalty Agreement. The Settlement Amount agreed takes into consideration the past unpaid royalties up to the date of the agreement, disclosed in the Interim Financial Statements as at 30 June 2020 as a contingent liability of $4.9 million and management's forecast of the present value of the estimated cash flows due under the CHL Royalty Agreement. In addition, the Company considered the future cost of this litigation including damages, the huge drain on management resources and the distraction from focusing on value enhancing activities.
The Settlement Amount will be paid monthly over many years unless it is satisfied earlier by other means, including the realisation of cash from certain trade receivables, which have been fully provided in the Company's accounts, active and planned claims (insurance and legal) and the sale of one of the Group's non-core assets (the "Alternative Assets"). The Company can pay down the Settlement Amount earlier without a redemption penalty.
The monthly payment commences at $90,000 from 31 December 2020 for four months rising to $100,000 thereafter. In the event that gas sales commence from La-108 and certain prescribed threshold gas sales are achieved from the Logbaba field, then monthly payments will increase to $150,000. The monthly payments cease once the Settlement Amount has been satisfied and the Company and the Company will pay interest of 5 per cent on any balance outstanding after 2 years. The Company and GDC have provided a charge, with customary terms, over the Alternative Assets, and CHL will be entitled to receive varying portions of the proceeds of any future realisation of such assets while the Settlement Amount is outstanding and these amounts will reduce the balance outstanding.