17th Nov 2009 07:00
LENI GAS & OIL PLC("LGO" or "The Company")
17, November 2009
CORPORATE ACTIVITY & PRODUCTION UPDATE - SEPTEMBER
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 September 2009 and production update for September:
Corporate
During September the Company's direct and indirect monthly production totalled 12,034 boe (average 411 boepd).
The production schedule from the Company's primary production assets was impacted by short term production restrictions in Spain due to the Ayoluengo Oilfield experiencing a welcome major increase in gas production which has temporarily limited liquids production, and by restrictions in the Gulf of Mexico and Gulf Coast caused by third party gas export line maintenance. Both of these issues are being addressed and production levels should be restored in the near term.
David Lenigas, Executive Chairman, commented:
"In Spain, we are witnessing a major change in reservoir dynamics with a major increase in gas production. Although currently limiting oil production due to gas handling facilities at the Ayoluengo oilfield decommissioned by former owners, we are about to embark on a winter campaign to re-instate these facilities and boost oil and gas production from the field. This upgrade will also prepare the field for the next major increase in production from the 2010 capex perforation and drilling program."
"In the Gulf of Mexico, we are near completion of major well interventions and gas export maintenance, and we forecast returning Eugene Island production to near full capacity shortly. The agreement to convert the Byron equity to a direct working interest is almost complete and we are looking forward to greater direct involvement in operations of the Gulf of Mexico shortly. Likewise in Trinidad, with the new licence concluded and actions underway to effect change in control. In Hungary, we are pleased with the dispute resolution on our investment in western Hungary and continuing developments in the East of the country."
"Looking ahead, the Company forecasts the October production schedule to be similar to September with ongoing programs in nearly all countries of operations. We also expect to report the program of works in Spain and Gulf of Mexico for the next 6 months with the development of the Spain winter campaign scope and completion of the Gulf of Mexico conversion. The Company shall also provide an update on the plans for Trinidad and Hungary during the remainder of 2009."
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 6,094 bbls of oil and 1.224 mmscf of gas during September. Net LGO production in barrels of oil equivalent totalled 6,298 (210 boepd).
Oil volumes were only 10% higher than August due to major oil production restrictions caused by a considerable increase in gas production. Re-configuration of the well production equipment during recent months has re-opened all four producing reservoir zones resulting in major increases of differential oil, gas and water production.
Major gas production has not been witnessed in the Ayoluengo field since the late 1980s and demonstrates the high potential of the field and validates the Company's investment to date.
Liquids production has been limited as the processing plant needs to be re-commissioning and re-configured to handle high pressure gas production. A campaign of work to maximise gas production and thereby maximise oil production is currently being finalised by Eclipse for execution in Q4 2009. Details will be issued in the October corporate update.
Negotiations for new oil sales agreements continue to identify multiple off-take points to increase sales volumes and commodity pricing.
A major review of the Spain acreage potential was commenced by Eclipse and Equipoise to identify further potential for reserves recovery and to refine the capital projects plan for 2010.
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 October 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).
Production volumes from the Eugene Island field were considerably reduced by a planned pipeline system shut-in which resulted in a total of 18 days of deferred production.
During the pipeline shut-in, the joint venture operator successfully completed operations to enhance production and stabilise the A-6 well, which was returned to production on 2 October 2009. Wire-line operations on the A-7 well are also being conducted to restore it to full production.
Preparations are also underway to commence additional production enhancement activities at Eugene Island, including reviewing gas lift efficiencies in the field, and installing a new gas compressor with significantly increased capacity, which is expected to enable additional gas and oil production.
As announced on 19 October, in relation to 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, completion agreements have now been signed by both parties, Byron Energy shareholders have approved the transaction and LGO's US subsidiary which has been specifically established for this transaction has been properly authorized by the relevant authorities in the US to hold these interests. Full completion of the conversion agreement is expected by the middle of November to enable Byron Energy under Australian law, where the company is incorporated, to transfer the rights in the Gulf of Mexico to LGO's subsidiary.
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 955 bbls during September. The Oilfield produces no gas. Net LGO production in barrels of oil equivalent totalled 478 (16 bopd).
Production deferment of 25% was reported for September as a result of planned well intervention.
Negotiations with the Ministry of Energy were concluded to finalise the new licence commitments to increase production from the existing reservoir, exploit the undepleted acreage and undertake subsurface surveys to fully evaluate the reserves and resources. The draft licence is currently progressing legal reviews prior to commencement, expected in early Q4 2009, which shall also include a change in control of the Oilfield operations.
Proposals were submitted to the joint venture partner for acquisition of all interests and rights in the Oilfield.
Hungary
Production of Pen-104a was shut-in at end of the month due to maximum depletion of the reserves, which has produced 76% of the forecast recoverable reserves. Total production from Pen-104 and Pen-104a from August 2008 to September 2009 was 0.87 bcf, which represents 78% of the forecast 1.11 bcf mean contingent reserves.
The joint venture commenced a further sidetrack of the Pen-104a ("Pen-104aa") on 28 September to test a substantial Miocene volcani-clastic (tuffaceous) prospect in the Penészlek field. The target for the sidetrack, identified on the 3D seismic that was acquired at end 2008, will be drilled from the existing Pen-104a wellbore on essentially the same trajectory to a depth anticipated to be equivalent to a vertical depth of approximately 1,360 metres. The results of the well will be announced in the October update.
As announced on 05 October, the Company resolved the dispute with Ascent Resources plc ("AST") regarding the Company's investment in ZalaGasCo Kft (LGO 14.54%), and the announcement by AST on 06 July 2009 regarding the venture between MOL Hungarian Oil & Gas ("MOL") and Ascent Hungary Limited ("AHL"). Under terms of the dispute settlement agreement LGO shall have an option to become a 14.54% shareholder in a joint venture with AHL subject to LGO conducting technical and commercial due diligence on the venture and paying its pro-rata share of all reasonable costs to date. Should LGO decide not to proceed with involvement in the venture there shall be no further liability between AST and LGO regarding AHL.
LGO shall announce its future involvement with AHL and ZGC in due course.
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.
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 ChairmanFraser Pritchard, Executive DirectorTel +44 (0) 20 7016 5103
Beaumont Cornish Limited Roland Cornish / Rosalind Hill Abrahams Tel +44 (0) 20 7628 3396
Mirabaud Securities LimitedRory ScottTel +44 (0) 20 7878 3360
Pelham PR Mark Antelme / Henry LerwillTel + 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 ondon 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 oilboepd = boe per daybbls = barrels of oilbopd = barrels of oil per daymmscf = million standard cubic feet of gas per daymmscfd = mmscf per day
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