Leed announced an operational and financial update.
The Company's total net attributable production averaged approximately 1,817 boepd (70% gas) during September 2010 and 1,729 boepd (72% gas) for the quarter ended September 30, 2010.
The Ship Shoal 201 A-6 well averaged 1,520 boepd (1,219 boepd net) (85% gas) for the quarter, in line with the Company's expectations. The well has produced over 233,000 boe (84% gas) to date. After evaluating five months of performance data from the well, at the end of September the Company elected to reduce the well's production rate to 1,150 boepd (922 boepd net) in order to maximize long term reserve recovery.
The Company's total net attributable production from the Eugene Island field for the quarter ended September 30, 2010 averaged 356 boepd (32% gas).
Production rates from the legacy gas-lifted oil wells at Eugene Island (A-1, A-3, A-4 and A-5 wells) have been consistent, performing at the aggregate gross rate of 310 boepd (194 boepd net) (75% oil) for the third quarter.
The Eugene Island A-8 well continues to produce from the Mid Tex sand and is currently flowing at approximately 266 boepd gross (166 boepd net). As previously announced, the Company is waiting for production from this sand to deplete, allowing the Company to recomplete the well to the T-1 sand.
Leed has completed its analysis of the A-7 well and has determined that the current completion failed due to excessive sand production and that incremental up dip reserves remain to be recovered from the current completed zone. The feasibility of sidetracking the A-7 well to recover incremental reserves from the current A-7 well and accelerate T-1 production is under review. The review is expected to be finished in the fourth quarter of the calendar year.
As previously reported, the Eugene Island A-6 well remains shut in. The Company is in the process of evaluating the feasibility of a remedial sand control treatment to restore production. If the treatment is deemed feasible, this operation will be performed in conjunction with other work in the field in order to minimize mobilization cost.
Together with the operator, Medco Energi US LLC, Leed elected to participate in the Main Pass 64 #1 sidetrack well at a cost of US $5.4MM (US $1.4MM net to Leed). The well reached a total measured depth of 8,086 feet on September 19, 2010. The wellbore encountered three pay sands, containing a total of 71 feet of true vertical thickness pay, including 48 feet of true vertical thickness pay in the field's primary pay zone. The well has been cased and completed in the primary pay zone and first production is expected to occur early in the fourth quarter of 2010.
The Company owns a 25% non-operated working interest and a 19.18% net revenue interest in the well.
As previously announced, the third party oil sales trunk line serving the field was shut-in on May 25, 2010 whilst the oil transmission company performed pipeline maintenance and repairs. On August 21, 2010, the operator commenced barging oil to maintain production from the field. The oil sales trunk line repairs were completed at the end of the quarter while additional associated maintenance and repairs on the in-field pipeline system were completed on October 19. Accordingly, resumption of transportation through the third party oil sales trunk line has occurred.
The Company's total net attributable production from the Main Pass field for the quarter ended September 30, 2010 averaged 66 boepd (100% oil). Oil sales were adversely affected by sales pipeline down time.
Leed submitted an "Exploration Plan" permit application to BOEMRE on 20 August 2010. Once the exploration plan is approved, a Drilling Permit will be submitted for approval and the project will be scheduled for commencement in the first half of 2011.
Remedial work to restore production from the 14-1 well continued during the quarter with additional perforations added in late September 2010. To date, the well has not been restored to producing status. Additional testing is planned for the fourth quarter of 2010.
The Company's total net attributable production from the East Cameron field for the quarter ended September 30, 2010 averaged 84 boepd (100% gas). A thru-tubing plug back was completed on the B-4 well during the month of September. The well was producing at a stabilized gross rate of 300 mcfpd (net 59 mcfpd) at the end of the quarter.
The Company owns a 25 per cent non-operated net working interest and a 19.58 per cent net revenue interest in the well.
As announced on September 16, 2010, Collarini Associates ("Collarini"), an independent reserve auditor based in Houston, Texas, has audited Leed's reserves, effective as of 1 July 2010. Based on Collarini's estimates, net 1P, 2P and 3P reserves were essentially in line with the previous audit as of January 1, 2010, with increases in net reserves offsetting production run-off.
During the first six months of 2010, Leed's primary emphasis was converting non-producing reserves to the producing category, resulting from the previously announced work at Ship Shoal Block 201 and Eugene Island Block 183 and improved waterflood performance at Main Pass Block 64. Consequently, proved producing reserves increased over 70% (comprising 8% of 2P reserves) from that reported as at January 1, 2010.
As at September 30, 2010, the Company had cash and cash equivalents of approximately US $7.6million. Management continues to work on adjusting its plans to ensure that it can execute on its development and exploration program.
Jim Haag joined Leed as Vice President of Reservoir Engineering and Business Development on August 2, 2010. Mr. Haag has over 35 years of industry experience in oil and gas exploration, production and energy consulting. Immediately prior to joining Leed, Mr. Haag was a Senior Vice President at RPS Energy, an international energy consulting firm. Mr. Haag worked for Texaco, Inc. from 1975 to 2001 in reserves determination, property evaluations, acquisitions and divestitures, and business development in the Gulf of Mexico and the Gulf Coast region. Mr. Haag holds a Bachelor of Science degree in Civil Engineering from the Pennsylvania State University and is a professional engineer.
Howard Wilson, President and Chief Executive of Leed, commented, "The Company continues to move forward with the diversification of our Gulf of Mexico portfolio. Steady operational progress is marked by the successes at Ship Shoal and Main Pass and we are very happy to add Jim Haag, a seasoned industry professional, to our management team."
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