Leni Flows Oil at Restricted Rate from Hontomin

Leni announced preliminary results from the Hontomin-2 extended well test program in northern Spain. Subsequent to re-completion of the Hontomin-2 well and installation of production separation and storage facilities, oil production has commenced at a restricted rate and shall be increased over the next few weeks to a stabilized test rate. Flowrates as at October 26, 2010 were 167 bpd with a 67% watercut and oil of 32 degrees API. Further updates on the results of the test program will be issued in due course.

David Lenigas, Executive Chairman, commented, "This well has been a success for LGO and the Company is steadily increasing Hontomin-2 production in accordance with the extended well test schedule to minimize formation damage to the well and to conduct the full remit of testing."

"The well test schedule will optimize the flowrate with the surface facilities during the coming weeks and then increase the producing zone by perforating the full Lower Jurassic formation from 1350 to 1397 meters."

"On completion of the test program in January 2011, and interpretation of the recent seismic survey, the license will be considered for conversion to a production concession together with a production sidetrack on the Hontomin-2 well."


The objective of the Hontomin-2 extended well test program and recently completed 3D seismic program is to appraise the commercial production potential of the Hontomin reservoir, and determine the optimum long term exploitation plan for the oilfield. The Hontomin structure is formed in a highly faulted thrusted anticline and covers a maximum area of 2.9 km2 with mean OIIP of 2.40 mmbo.

The drilling and recompletion program of the Hontomin-2 well has been completed, with the well recompleted to a depth of 1397m and the top Lower Jurassic Clastic reservoir interval opened from 1359 to 1375 meters. The well was recompleted from surface with a new 4.5" production casing to a depth of 1203 meters to ensure production test integrity and minimize the cost of the proposed production sidetrack of the well in 2011.

Production facilities and utilities have been installed at the wellsite to handle separation and storage of the production fluids. All separated production fluids shall be transported on a daily basis from the wellsite to the central processing and storage facility at Ayoluengo for analysis, testing and processing.

Production from the Hontomin-2 well shall be steadily increased during the next 2 weeks from an initial restricted rate of approximately 170 bpd to the maximum possible with the new production facilities. This steady increase is required to monitor the response of the well, minimize formation damage, and to stabilize production at an optimum flowrate to maximize information from the extended well test program.

The extended production test program is planned to continue until the license is considered for conversion to a production concession in January 2011 and shall monitor the fluid properties and production potential of the reservoir. The re-perforation of the opened interval from 1359 to 1375 meters is planned for execution in late Q4 2010, as well as perforation of the wider top Clastic interval from 1350 to 1397 meters. The permitting and contracting of this program is in the final stages of completion.

Interpretation of the 3D seismic survey shot during the summer is currently ongoing to improve the understanding of the secondary faulting and revise the resources in place of the Hontomin reservoir. The results of the production test program shall be combined with the results of the 3D seismic interpretation at end 2010 to optimize the production development plan for Hontomin. These results shall also be used to define the appraisal program for the deeper oil resources at Ayoluengo which are also within the Lower Jurassic Clastic interval.

The proposed long term development plan for Hontomin is threefold. Conversion of the permit from exploration to a production concession is planned for January 2011. Sidetrack of the Hontomin-2 well is provisionally planned in Q2 2011 to deviate the well 300 meters from the flank of the structure to the crest at a target depth of 1500m and perforate the full Lower Jurassic Clastic reservoir from 1350 meters to 1450 meters. Later in 2011, under terms of the Carbon Capture and Sequestration Joint Development Agreement with CIUDEN, a new well, Hontomin-5, shall be drilled as a carbon dioxide injection well on the flank of the structure.


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