Victoria Oil and Gas’ Results for year ended 31 May 2011

This has been a most significant year for Victoria Oil & Gas with considerable value added to our assets and extensive work completed at site on our principal projects. At our flagship Logbaba gas and condensate project in Douala, Cameroon we expect to commence production this year. At West Medvezhye, prospective resources are now in excess of 1.4 billion barrels of oil equivalent (“boe”), exceeding the previous estimates by approximately 300 million boe, and including increased oil prospectivity to 670 million bbls. Across the Company, we have increased net reserves by 40% to 52 million boe and net resources by 30% to 1,594 million boe. Shareholders have always supported these investments and it is now the Company’s responsibility to return added value to shareholders.

Review of the Markets

The financial markets remained extremely volatile throughout the period and fears over economic stability have increased further this year. The Eurozone debt crisis, global cut backs and austerity measures have dominated the headlines with gloomy predictions of economic growth in the West for the foreseeable future. In addition, civil unrest in the Arab world and the tsunami in Japan have only served to increase the volatility in the energy markets.

Access to capital markets in this economic climate has been challenging for smaller AIM-listed E&P companies. In this context, I am very pleased that Victoria has been able to continue exploration and development operations apace, securing additional finance of approximately $34 million in the financial period and reducing our Group losses by $1.4 million to $4.7 million.

West Medvezhye, Russia (100% owned)

Whilst the Logbaba project is understandably the focus of attention from investors, we have made great strides in Russia this year. West Medvezhye (“West Med”), strategically located in the Nenetsk region of Siberia with a licence area covering 1,224km2, represents an asset with major hydrocarbon potential which could propel the Company onto a new playing field. It lies just west of the super giant Medvezhye field where over 70 trillion cubic feet of dry gas has been produced. VOG’s wholly- owned subsidiary, ZAO SeverGas-Invest, holds a 20-year licence to develop the huge resource potential.

During the past twelve months, our technical team has commenced conceptual screening and appraisal studies to optimise development of our prospective resource base and develop our discovery, Well 103, with an early production scheme to bring forward initial cash flows. This work is ongoing and I am encouraged that preliminary assessment work on the Well 103 discovery indicates that we can plan for first oil sales in 2015.

In March 2011, the Company commissioned a seismic reprocessing and geological modelling study to be carried out on West Med by an independent Russian geoscience consulting institute, Mineral LLC (“Mineral”). Further to the previous assessment carried out by DeGolyer and MacNaughton in 2006, they were asked to incorporate our new well data, passive seismic and gas tomography results with our existing conventional 2D seismic.

In September this year, we were very pleased to report that Mineral has estimated West Med prospective resources to be in excess of 1.4 billion boe, exceeding the previous assessment by approximately 300 million boe, and including increased oil prospectivity to approximately 670 million barrels of oil. These results are very encouraging indeed. Our team is continuing to investigate the results of the Mineral study, together with the geochemical and passive seismic results, and we expect to submit an application to the Russian authorities requesting approval of our proposed drilling locations for two wells in 2012 very shortly.

Outlook and Other Projects

The traditional sector “packaging” and structural approach offered by companies is, post the financial crisis, being replaced by companies offering cash flow, superior growth potential and diversification of risk.

Following our recent placing for £9.5 million in September 2011, the Company is now well capitalised for an exciting year ahead with cash flows being generated from Logbaba and development plans firming up at West Med.

Victoria now has total recoverable proved and probable reserves of 52 million boe and significant potential, with prospective resources in excess of 1.5 billion boe.

Victoria constantly reviews opportunities to increase the Company’s asset base where we see economic value and synergies with our existing assets or technical and management competencies. We have reviewed a number of targets during the financial period and we have a number of existing business development opportunities both at the asset and corporate level that are currently being appraised by our management team. The Board remains committed to building Victoria into a medium sized, profitable, resource focused company within three years. We believe economies of scale through organic growth and via selected acquisitions where we can demonstrate real added value will facilitate greater returns to shareholders.

The Company is also assessing a number of opportunities in Cameroon where we can leverage our existing relationships and benefit from our existing infrastructure and capabilities. Cameroon is blessed with an abundance of natural resources and we are examining asset opportunities outside the traditional exploration and production sphere where our gas reserves can be a catalyst for other industrial opportunities.

I would like to thank all employees, contractors and advisers of the Company and my fellow Directors for the excellent progress to which everyone has contributed this year. Equally, I would like to thank all Company shareholders for continuing to support Victoria in these challenging markets. I hope you can begin to see the rewards of your confidence very soon.

COO Review

West Medvezhye, Russia

VOG’s wholly owned subsidiary, ZAO SeverGas-Invest (“SGI”), holds a 20-year Exploitation Licence for West Medvezhye, (“West Med”), covering 1,224km2. West Med is located in one of the most prolific oil and gas producing areas of the world and is adjacent to Gazprom’s giant Medvezhye field that has already produced over 70 trillion cubic feet of gas.

The block is located in the Yamal Peninsula in the Nenets region of Siberia and was independently assessed in 2006 by DeGolyer and MacNaughton (“D&M”) to have total prospective resources of approximately 1.1 billion boe. In total, D&M identified 25 leads and prospects and the Company’s first discovery in West Med, Well 103, was based on a prospect defined by D&M. The discovery has C1 and C2 reserves, independently assessed, under the Russian classification convention of 14.4 million boe as approved by the Russian Ministry of Natural Resources.

During 2010, the second phase of passive seismic and gas tomography surveys were recorded and interpreted throughout the year, identifying direct hydrocarbon indications in six areas, covering a total of 79 km2, according to VOG management and GDR estimates.

Further to these encouraging results, the Company commissioned a seismic reprocessing and geological modeling study to be carried out on West Med by an independent Russian geoscience consulting institute, Mineral LLC (“Mineral”), incorporating the new data sets with the existing conventional 2D seismic. Mineral has prepared structure maps and seismic attributes maps for all of the prospective formations in the West Med block.

These results are being integrated with the Company’s passive seismic, gas tomography and geochemical studies to define/rank leads and prospects and to further assess the 103 discovery. The relevant technical details are currently under review by the technical team within the Company and Blackwatch.

On the basis of their assessment received at the end of August 2011, Mineral has independently estimated West Med prospective resources to be in excess of 1.4 billion boe, exceeding D&M’s previous estimate by approximately 300 million boe, and including increased oil prospectivity to approximately 670 million barrels of oil in the Lower Cretaceous Neocomian- Achimov and Jurassic formations. Further to the Company’s review and assessment of Mineral’s report we will submit an application in November 2011 to the Russian authorities requesting approval of our proposed drilling locations.

Studies have commenced on well design and engineering for the next phase of appraisal and development drilling planned for Q4 2012. The Company is in discussions with international and Russian service companies and has compiled initial budgetary estimates for the wells and drill pads. Future development wells are planned to be drilled in clusters of three to ten to significantly reduce location preparation and access cost. This will have a marked impact on development economics.

Conceptual design work has commenced to establish costs and schedules for oil, gas and condensate production facilities and supporting infrastructure. The gathering and distribution network design and engineering will be phased with facilities design, starting with fast track development of the Well 103 discovery.

There exist several routes for the commercialisation of West Med hydrocarbons. The neighbouring town of Nadym is located 44km away with access by all-weather road. The Chircha railroad station is located within the southwest boundary of the licence and the river port and loading terminal of Old Nadym are located 22km away. In addition, one of Gazprom’s principal gas transmission pipelines in the area runs along the eastern border of the licence.

Initial studies have highlighted that an early production scheme of the Well 103 discovery could involve the sale of small volumes of crude into the local market with prices of US$60 per barrel achievable. This would be followed by full scale oil and gas development for export as the export market is well established in this part of Siberia.

The results of our preliminary development assessment work on the Well 103 discovery indicate achieving first oil sales in 2015, subject to further refinement and screening.


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