Leni Seeks Partner for Ayoluengo Field Development

Leni announced plans for further development of the Ayoluengo Field in Northern Spain including its plans for Enhanced Oil Recovery ("EOR").

The Company remains confident that the ultimate recoverable reserves in the field will be best produced through the implementation of secondary and tertiary recovery techniques with the preferred EOR scheme considered to be a nitrogen flood. Following discussions in the last several months with a number of interested parties, with the relevant experience and resources, the Company now considers that it can successfully implement such a scheme in collaboration with a partner. This will optimize the commercial value and reduce any execution risks associated with the planned project. To initiate commercial negotiations with interested parties LGO is currently preparing a data room which it is anticipated to be open in six weeks.

The Ayoluengo Field contains 104 mmbbls STOIIP P50 and LGO estimates that between 10 and 20 mmbbls of additional oil recovery is possible using existing technology if deployed in the wells available for injection and production. Reservoir studies and geological correlations incorporating the results of the recent intervention program will be combined with a more detailed reinterpretation of the reprocessed 3D seismic to determine the initial phase of gas injection, which could start as early as the second quarter of 2012.

Eight of the 53 wells available to us were investigated during the well intervention and work-over program carried out between April and July 2011. The Company has studied the results with a view to planning further work on some of those wells and on other wells with similar characteristics.

Prior to commencing further field development work, which will be aimed at clean-up and stimulation of wells, it was decided to complete the five year re-certification of the Company owned Cardwell service rig. This process is expected to be completed within a week at which point the re-certified rig will complete well maintenance work before commencing the new well intervention program.

The presence of scale development and wax build-up in existing wells continues to require attention. Chemicals to treat wax and scale have been sourced for trials in Ayo-5 with the aim of increasing production further following recompletion of the well in May this year. Field trials are expected to commence once the Cardwell rig is fully re-commissioned and when the necessary chemicals are on site. This work will be conducted during ongoing operations over the next few months and within the operating budget derived from revenue generated within LGO's Spanish operations.

We also plan to address the issue of excessive water production in some wells where high rates of water influx is reducing the oil production potential. Water shut-off is seen to offer a significant potential reward, and work is underway to procure the additional equipment required for this program; equipment which is not routinely available at the field. It is anticipated that this work will be undertaken starting in the first quarter of 2012.

Production from Spain of over 300 boepd was achieved in July with average production during the last quarter, until the rig was taken out of service, at 225 boepd. The use of the Cardwell rig on the eight well intervention program necessitated the deferment of routine mechanical interventions on a number of wells and once the Cardwell rig returns to service production levels will be improved significantly. The Company's internal production targets for 2011 and 2012 will be revised once essential well maintenance work has been undertaken and will be announced once available.

All production continues to be sold as fuel oil to local users in Northern Spain whilst discussions with BP Espana continue in order to ship crude oil to the Castellon refinery in due course.

There continues to be a high level of industry interest in the potential for unconventional gas exploration in Northern Spain and the Company maintains a dialogue with various interested parties. LGO holds over 550 sq km of exploration and production acreage in the center of the Cantabrian Basin and also has a number of outstanding exploration license applications. Due to its unique position as the only active producer in the region LGO is well placed to participate in future initiatives to test the potential for shale gas exploitation.

Neil Ritson, LGO's Chief Executive, commented, "LGO sees Enhanced Oil Recovery as the key to unlocking the full value in the Ayoluengo field. The recent work has demonstrated the potential impact on production of EOR and we feel confident moving onto the next phase of the program. As expected, this year's work program has provided us with new insights into how best to optimize production and value. The next phase will be an exciting departure from the past as we look to exploit the resources in a completely new way."


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