25th Jan 2010 07:00
LENI GAS & OIL PLC
("LGO" or "The Company")
25, January 2010
CORPORATE ACTIVITY & PRODUCTION UPDATE - DECEMBER 2009
Leni Gas & Oil plc (LGO), the AIM listed International Oil and Gas Exploration, Development and Production Company, today gives its corporate update for the six week period commencing 1 December 2009 and production update for December:
Highlights:
During December the Company's direct and indirect monthly production totalled 10,125 boe (average 338boepd).
Peak daily production for the month was 393 boepd. The full production capacity was restricted by 60% in both Spain and the Gulf of Mexico with planned development works, 20% in Trinidad by planned interventions, and shut-in production in Hungary.
The Spain production schedule continues to be restricted due to the 2009 rehabilitation well program flowing high pressure gas and increasing water production in some key producer wells for the first time in decades. The Company is working at resolving both fluid handling challenges so as oil production can be maximised ahead of the next capital programs.
The Company now owns 100% of all the Spanish exploration acreage after assignment from the minority partner.
A new reserves and resources evaluation is being finalised by the Company's geotechnical service provider, and is scheduled to be released in February 2010.
The evaluation of reserves and resources is also including the assessment of potential resources below the Ayoluengo oilfield as regional geology indicates significant shale gas potential within the permits managed by the Company.
In the Gulf of Mexico, the agreement to convert the Company's investment in Byron Energy to direct working interests and options in the Gulf of Mexico and Gulf Coast acreage has been successfully completed.
Programs to increase Eugene Island production continue with new compression completed and work planned to perforate undepleted zones.
Agreements for the assignment of Trinidad interests to a new subsidiary are near completion which shall enable more control and influence on production expansion.
Joint venture reviews of all countries of operation shall take place during January 2010 and shall be reported in the next corporate update.
David Lenigas, Executive Chairman, commented:
"In Spain our works to upgrade the facilities and well completions continue to prepare for the 2010 production enhancement program. We are pleased with the assignment of the minority partner interests in the exploration acreage to the Company and are looking forward to completion of the new reserves and resources assessment which shall also include an estimate of deeper prospectivity across the acreage."
"In the Gulf of Mexico we are very pleased with the completion of the conversion agreement to retain a direct working interest in the portfolio and are looking forward to reporting the direct performance of Eugene Island and progress of the other developments at start 2010."
"In Trinidad we are near completion on the commercial agreements to considerably increase our activities levels in country to commence production expansion works, and we look forward to reporting progress on Hungary next month with re-commencement of testing operations."
"Looking ahead, the Company expects the January production schedule to be higher than December, and shall report the program of activities for all countries after discussion with all partners in January."
Spain
The Ayoluengo Oilfield (100% LGO) in northern Spain, through LGO's 100% ownership of Compañia Petrolifera de Sedano, S.L. produced net to LGO 4,788 bbls of oil and 1.158 mmscf of gas during December. Net LGO production in barrels of oil equivalent totalled 4,981 (166 boepd).
Peak production reported during the month was 217 boepd, with production restricted from the estimated unrestricted rate of 440 boepd.
Oil volumes were restricted with four major production wells offline due to planned interventions, gas processing plant modifications to handle higher gas production and isolation testing to identify water shutoff targets. These works shall continue during Q1 2010 as they are required prior to execution of the perforation and infill drilling programs to maximise incremental production due to the single completions in wells.
Assignment of the minority interests, 15%, in the exploration acreage from Tethys Oil Spain AB to the Company was completed. The Company's Spain subsidiary now retains 100% of the exploration acreage, in addition to 100% of the production concession acreage.
Upgrade of the reserves and resources for the acreage is currently underway with the recently re-processed 3D seismic. This work is expected to complete in February and shall be used to refine the scope and targets of the 2010 capital programs to access undepleted oil zones.
The evaluation of reserves and resources is also including the assessment of a deep prospectivity below the Ayoluengo oilfield and possibly extending outwith the field boundaries. The assessment is being conducted in association with the Spanish Government and relevant Ministries to maximise use of available geotechnical data. The results of the preliminary assessment are also expected to complete in February.
The 2010 work program with CIUDEN, the Spanish Government Foundation for carbon capture and storage, was finalised with the Foundation Director with works approved for Hontomin and West Ayoluengo injection testing.
The severe winter and snow conditions have delayed the re-opening of the Hontomin 2 well to commence the extended well test. This is scheduled for end Q1 2010 once the weather improves.
US Gulf of Mexico & Gulf Coast
The interests held by Byron Energy (28.94% LGO) in the US Gulf of Mexico and Gulf Coast is producing at a restricted rate of 2,155 boepd gross (61% gas and 38% oil) from the Eugene Island field as announced by the joint venture operator on 16 November 2009. LGO's indirect interest in the Eugene Island field through Byron Energy approximates to an effective net LGO monthly production in barrels of oil equivalent totalling 4,663 (156 boepd).
Eugene Island works to install new compression were completed with stabilised production tests ongoing during the month. Additional works were commenced including well intervention of the A-6 well and perforations on the A-8 well. All planned works on Eugene Island are expected to complete early Q1 2010.
The conversion agreement to transfer the Company's shareholding in Byron Energy to direct ownership of its US Gulf of Mexico and Gulf Coast assets was completed during the period.
LGO now retains a 7.25% direct working interest in Eugene Island Blocks 183 and 184 south, a 3.625% direct working interest in Block 184 north and a 3.00649% direct working interest in Block 172 (collectively referred to as "Eugene Island Field"). Net revenue interests range from 2.50540% to 6.04167%.
LGO now retains rights to acquire up to 29% of Byron Energy's interest in all option properties in the GoM under the existing Leed Petroleum plc / Byron Energy Scouting Agreement ("Scouting Agreement"). These properties include: Eugene Island Block 177; Ship Shoal Blocks 197, 201 and 202; Grand Isle Blocks 95 and 100; South Marsh Island Block 8; West Cameron Block 106; and Main Pass Block 115.
LGO now retains the rights to acquire up to 20% direct working interest in all other properties acquired by Byron Energy outwith of the aforementioned Scouting Agreement. These properties include West Cameron Area South Blocks 469, 472, 473, 475, 489, 490 and 491; and West Delta Block 49.
Monthly reporting of Eugene Island performance and progress of the other developments and interests will commence in January 2010.
Trinidad
The Icacos Oilfield (50% LGO rights) located on the Cedros Peninsula of Trinidad through LGO's 100% ownership of Eastern Petroleum (Australia) Pty Ltd produced gross 961 bbls during December. The Oilfield produces no gas. Net LGO production in barrels of oil equivalent totalled 481 (17 bopd).
Production deferment of 20% was reported due to planned well interventions
Issue of the new production licence to Leni Trinidad Ltd is expected by February 2010, with a new joint operating agreement including change in operator control to LGO. Assignment of all interests in Eastern Petroleum (Australia) Pty Ltd to Leni Trinidad Ltd shall be concluded in January prior to licence issue.
Negotiations to acquire the remaining 50% of the Oilfield are continuing with the joint venture partner parent company.
Malta
LGO retains 10% in Area 4 Blocks 4, 5, 6 and 7 of Southern Offshore Malta with Mediterranean Oil & Gas ("MOG") retaining the balance. The Area is governed by a Production Sharing Contract with the Maltese Ministry of Natural Resources with a commitment to drill by July 2011. The joint venture is currently undertaking various geoscience studies and data acquisition surveys in accordance with the work program to firm the drill target and well plan.
Hungary
The Penészlek Gasfield (7.27% LGO) in eastern Hungary through LGO's 7.27% ownership of PetroHungaria Kft is currently shut-in.
Pen-105 is awaiting the completion of its pipeline connection to commence production and the Pen-104aa sidetracked well is awaiting specialist equipment, expected to be available in January, to continue testing operations. Preparations are on-going for the drilling of the Pen-101 and Pen-106 wells.
The ZalaGasCo joint venture (14.54% LGO) reported no activity during the period.
Competent Person's Statement:
The technical information contained in this announcement has been reviewed and approved by Fraser S Pritchard, Executive Director for Leni Gas & Oil Plc (member of the SPE) who has 20 years relevant experience in the oil industry.
Enquiries:
Leni Gas & Oil plc
David Lenigas, Executive Chairman
Fraser Pritchard, Executive Director
Tel +44 (0) 20 7016 5103
Beaumont Cornish Limited
Roland Cornish / Rosalind Hill Abrahams
Tel +44 (0) 20 7628 3396
Mirabaud Securities Limited
Rory Scott
Tel +44 (0) 20 7878 3360
Pelham Bell Pottinger
Mark Antelme
Mobile 07525 951011
Henry Lerwill
Tel + 44 (0)20 7337 1500
NOTES TO EDITORS
Leni Gas & Oil Plc is an international oil and gas exploration, development and production company headquartered in London, trading on the London Stock Exchange's AIM index. LGO's strategy is to acquire projects and businesses within the oil and gas sector that contain a development premium which can be unlocked through a combination of financial, commercial, and technical expertise.
LGO operates a low risk portfolio of production expansion assets in the US Gulf of Mexico, Spain, Trinidad, Hungary and Malta with significant play upside using similar strategies to leverage technologies and proven production enhancement techniques. LGO specifically targets near term production with upside exploitation potential and manages its portfolio to ensure all assets have accelerated incremental reserves and production enhancement programs.
GLOSSARY
boe: barrels of oil equivalent calculated on the basis of six thousand cubic feet of gas equals one barrel of oil
boepd = boe per day
bbls = barrels of oil
bopd = barrels of oil per day
mmscf = million standard cubic feet of gas per day
mmscfd = mmscf per day
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