26th Aug 2009 11:50
LENI GAS & OIL PLC
("LGO" or "The Company")
26, August 2009
CORPORATE ACTIVITY & PRODUCTION UPDATE - JULY
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 July 2009 and production update for July:
Corporate
During July the Company's direct and indirect monthly production totalled 16,099 boe (average 537 boepd) which was 10% increased from June (14,765 boe) rebased with updated GoM production.
The total production schedule for the Company for April to June 2009 was updated due to revised figures by Leed Petroleum that Eugene Island production in the three months to June 2009 averaged 4,044 boepd and not 5,000 boepd as reported at end Q1 2009.
Due to ongoing production development programs in Spain and production restrictions in the Gulf of Mexico 34% of company production was offline (16% planned developments and 18% production restrictions) against a base monthly production schedule of 23,800 boe (793 boped) as of 2009 start.
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 4,044 boepd gross (58% gas and 42% oil) from the Eugene Island field as announced by the joint venture operator on 23 July 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 8,796 (293 boepd).
Production volumes from Eugene Island were affected by various well performance issues including the shut-in of low pressure oil wells due to gas compressor constraints and the onset of water production from the A-8 well. It is planned to continue production of the A-8 well from the current reservoir and augment compression facilities to re-establish production from the low pressure oil wells. In addition it should be noted that the A-8 well contains significant behind pipe reserves which at a later date will add production from alternate horizons and contribute to an increase in output from the A-8 well.
As announced on 21 August, the acreage position of Byron Energy was increased with four leases in the Central Gulf of Mexico as confirmed by the Minerals Management Services ("MMS") under Lease Sale 210. Byron was the highest bidder on West Cameron Area, South Addition blocks 469, 472, 473 and 475 (working interest 100%) with final award of these leases due within four months subject to a geological review by the MMS to confirm adequacy of the bid values.
LGO and Byron Energy are nearing completion of the conversion agreement as announced on 08 April 2009 to transfer the Company's shareholding in Byron Energy to direct ownership of its US Gulf of Mexico and Gulf Coast assets. Under terms of the conversion LGO shall retain 7.25% share of Eugene Island Field production, the ability to acquire up to 29% of Byron Energy's interest in all option properties with Leed Petroleum and an option to acquire a 20% direct working interest in properties acquired by Byron Energy outwith of the Leed Petroleum agreement. This conversion agreement is expected to complete shortly.
A competent persons report on the proved reserves and probable and possible resources of Byron Energy as at 01 March 2009 was completed. The results shall be issued on completion of the interest conversion agreement.
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 1184 bbls during July. The Oilfield produces no gas. Net LGO production in barrels of oil equivalent totalled 592 (20 bopd).
No production deferment was reported for July.
New licence commitments have been agreed with the Ministry of Energy to substantially increase production from the existing zones, exploit the undepleted acreage and undertake subsurface surveys to re-evaluate the reserves and resources. It is expected these commitments will commence as of October 2009.
Negotiations are continuing with the joint venture partner (50% rights) to acquire majority rights and change in control of the Oilfield by Q4 2009.
Hungary
The Penészlek Gasfield (7.27% LGO) in eastern Hungary, through LGO's 7.27% ownership of PetroHungaria Kft produced net to LGO 9.649 mmscf of gas and no condensate during July. The Gasfield produces no oil. Net LGO production in barrels of oil equivalent totalled 1,608 (54 boepd)
Production was 10% higher than June as a result of the joint venture decision to increase the production choke setting to maximise field recovery. This setting was reduced at end July to minimise water production and maximise the remaining recoverable reserves.
The joint venture spudded the next Penészlek development well, Pen-105, on 16 August which is targeting mean contingent gas resources of 1.46 bcf in two Miocene reservoirs. Pen-105 will be drilled to a depth of approximately 1500m to target a structure which previously tested gas by the Pen-12 discovery well in 1982. Seismic interpretation indicated the Pen-12 well is off the structure, with Pen-105 targeting a location approximately 20 metres structurally higher than PEN-12 on the crest of the four way closure. Drilling is expected to take two weeks followed by a two week test period.
The joint venture in western Hungary, ZalaGasCo Kft (14.74% LGO) which has a joint development agreement with MOL Hungarian Oil & Gas for the re-development of tight gas acreage and licences managed is currently in dispute with Ascent Resources plc, the majority owner and operator of the joint venture. Subsequent to announcement of a gas development venture with MOL on 06 July by Ascent Resources plc, which the Company believes is in breach of the ZalaGasCo Kft joint venture, the Company is looking to resolve the matter with Ascent Resources failing which the matter will be resolved in accordance with the resolution provisions of the joint venture agreement.
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.
An Advisory Committee Meeting was held between LGO, MOG and the Maltese Ministry in July to discuss the work program to finalise the drilling plan. The PSC partners are currently executing various geoscience studies and data acquisition surveys in accordance with the work program.
David Lenigas, Executive Chairman, commented:
"We are pleased to be able to report progress across all of our operations over the last six weeks. In Spain, the first phase stimulation program was completed to rehabilitate all wells for the first time in 20 years. In the Gulf of Mexico we now anticipate increasing both the development activity and the production schedule reporting shortly. In Trinidad, production was restored to full capacity and in east Hungary the Penészlek Development Area venture exceeded the production schedule again by 40%.
"As forecast, July saw an increase in production with an increase in Spain and no deferment in Trinidad and Hungary. A total of 34% of the base production schedule was offline during the period due to continuing production enhancement projects in Spain and production restrictions in the Gulf of Mexico. Looking ahead, the Company forecasts the August production schedule to be higher than July, with continuing production improvements in Spain. We also expect to report a timetable to expand production in Trinidad, results of the Pen-105 well in east Hungary and potentially completion of the interest conversion agreement in the Gulf of Mexico."
Competent Person's Statement:
The technical information contained in this announcement has been reviewed and approved by Fraser S Pritchard, Executive Director (Operations) 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 (Operations)
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 PR
Mark Antelme / 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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