14th Aug 2013 07:00
For Immediate Release, 7am 14 August 2013
LENI GAS AND OIL PLC
("LGO" or the "Company")
Reduced Royalty Rates, Goudron Field, Trinidad
LGO today announces that it has successfully concluded an agreement with the Petroleum Company of Trinidad and Tobago Limited ("Petrotrin") to reduce substantially the overriding royalty rates associated with oil production from the Goudron Incremental Petroleum Service Contract ("IPSC") and to extend the contract by five (5) years to November 2024 in consideration for LGO undertaking additional drilling activities at the onshore Goudron Field in Eastern Trinidad.
Highlights:
· Overriding royalty rates have been reduced on all oil production from 1 August 2013
· Overriding royalty rates on production over approximately 40 bopd have been reduced
· A five year extension to the contract, subject to mutual agreement, has been included.
Petrotrin and LGO have reached an agreement, effective from 1 August 2013, in which the overriding royalty rates for existing and future production will be reduced to incentivise further development and exploration in the Goudron Block. LGO has committed to additional work beyond that envisaged in the original contract, all of which has already been included in the Company's current business development plans.
The new agreement states that oil production between the First Tranche Oil, which is currently approximately 40 barrels per day ("bopd"), and a rate of about 150 bopd (reducing annually by 2%) will receive a relative reduction of approximately 20% in the overriding royalty paid to Petrotrin. Production above 150 bopd, which Goudron is already exceeding, has been granted a more significant reduction equivalent to approximately 45% of the previously applicable rate at the current oil price.
Under the revised agreement LGO will drill a total of ten (10) additional development wells in the main Goudron field area to a depth not exceeding 3,500 feet and one (1) exploration well in the wider Goudron Block to a depth of 5,000 feet. This work programme will be undertaken over the next six (6) years. The Company's business plan already envisages the drilling of thirty (30) new wells in the block.
Language has also been included in the IPSC that, subject to mutual agreement in 2019, extends the current term of the contract by an additional five years to November 2024. This extension is significant as it will allow the Company to effectively instigate Enhanced Oil Recovery programmes in order to bring the 30 million barrels ("mmbbls") of Possible (P3) reserves and some of the 63 mmbbls of Contingent Resources currently estimated in 2012 by the Company's independent competent person, Challenge Energy Limited, in to Proven (P1) and Probable (P2) reserves over the next few years.
Neil Ritson, LGO Chief Executive, commented: "We greatly appreciate the efforts by Petrotrin to enhance the commercial terms in the Goudron IPSC. Netbacks will be significantly increased and this makes it easier for us to sanction additional capital work which is to the mutual benefit of both parties. This agreement is transformational and brings significant additional revenue to the Company's bottom line at a time when we are reinvesting heavily in production growth. Since we took over as operator of Goudron some nine months ago we have raised average daily production levels by 750% and that trajectory is set to continue as we now deploy additional resources to the field."
Competent Person's Statement:
The information contained in this announcement has been reviewed and approved by Neil Ritson, Chief Executive Officer and Director for Leni Gas & Oil Plc, who has over 35 years of relevant experience in the oil industry. Mr. Ritson is a member of the Society of Petroleum Engineers (SPE), an Active Member of the American Association of Petroleum Geologists (AAPG) and is a Fellow of the Geological Society of London.
Enquiries:
Leni Gas & Oil plc
David Lenigas Neil Ritson | +44 (0)20 7440 0645 |
|
|
Beaumont Cornish Limited
Nomad and Joint Broker Rosalind Hill Abrahams Roland Cornish | +44(0) 20 7628 3396 |
Old Park Lane Capital Plc
Joint Broker Michael Parnes | +44(0) 20 7493 8188 |
Pelham Bell Pottinger
Financial PR Mark Antelme | +44 (0) 20 7861 3232 |
Henry Lerwill |
|
Glossary
Contingent Resources
| those quantities of petroleum estimated, as of a given date, to be potentially recoverable from known accumulations, but the applied project(s) are not yet considered mature enough for commercial development due to one or more contingencies. Contingent Resources may include, for example, projects for which there are currently no viable markets, or where commercial recovery is dependent on technology under development, or where evaluation of the accumulation is insufficient to clearly assess commerciality |
Possible Reserves (P3)
| those additional reserves which analysis of geoscience and engineering data suggest are less likely to be recoverable than Probable Reserves. The total quantities ultimately recovered from the project have a low probability to exceed the sum of Proved plus Probable plus Possible (3P) Reserves, which is equivalent to the high estimate scenario |
Probable Reserves (P2)
| those additional reserves which analysis of geoscience and engineering data indicate are less likely to be recovered than Proved Reserves but more certain to be recovered than Possible Reserves. It is equally likely that actual remaining quantities recovered will be greater than or less than the sum of the estimated Proved plus Probable Reserves |
Proven Reserves (P1) | those quantities of petroleum, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be commercially recoverable, from a given date forward, from known reservoirs and under defined economic conditions, operating methods, and government regulations |
The estimates provide in this statement are based on the Petroleum Resources Management System ("PRMS") published by the Society of Petroleum Engineers ("SPE") and are reported consistent with the SPE's 2011 guidelines. All definitions used in this announcement have the meaning given to them in the PRMS.
Related Shares:
CERP.L