Leni Gas & Oil Underscores Major Acquisitions, FY08 Operations
Leni Gas and Oil has announced its second unaudited results for the twelve month period ending August 31, 2008. As announced on August 29, 2008, the Company will publish its financial statements for the 16 month period ending December 31, 2008 on or before April 30, 2009.
US GULF OF MEXICO
In July 2008 the Company acquired 22.3% of the total issued shared capital in Byron Energy Pty Ltd ("Byron"), for an aggregate cost of approximately US $22 million in cash. Byron is a private Australian company, incorporated in 2005 and operates as an oil & gas exploration, development and production company focused on opportunities in the US Gulf of Mexico and Lower 48.
Byron's primary assets comprise rights granted to oil and gas properties in the shallow waters of the Gulf of Mexico under a scouting agreement (the "Scouting Agreement") with Leed Petroleum plc ("Leed"), a company listed on AIM. Under the Scouting Agreement Byron exclusively presents potential acquisition opportunities and provides additional technical expertise to Leed, as required. The Scouting Agreement remains valid and binding until December 2008. In return Byron is granted rights, exercisable at its discretion for up to one year, to acquire up to 25 per cent (25%) of Leed's working interest in any such acquisition. To date, Byron has been granted these rights in respect of Eugene Island Blocks 172, 183 and 184, the Grand Isle Blocks 95 and 100, the Ship Shoal Blocks 201 and 205 , the South Marsh Island Blocks 5, 6 and 8, Main Pass Block 115 and West Cameron Block 106.
In July 2008, Byron completed a transaction to acquire a 25% Working Interest in both Eugene Island Blocks 183 and the southern half of Block 184 (Net Revenue Interest up to 20.83% in Block 183 and 19.17% in the southern half of Block 184), including the Eugene Island 184A platform and production facilities. Byron also acquired a 12.5% Working Interest (Net Revenue Interest 9.58%) in the northern half Eugene Island Block 184 and 10.37% Working Interest (Net Revenue Interest 8.64%) in Eugene Island Block 172, excluding the Eugene Island 172 producing reserves and platform.
The Eugene Island asset is the first of these interests to be developed and 181 ft of true vertical pay across six pay zones was identified in the A-7 well which is now in production. The A-7 was completed in the Mid Tex pay zone and successfully tested at 4,012 barrels of oíl equivalent per day. The Eugene Island A-8 drilling program is currently underway.
The equity position in Byron was increased in August 2008 through the acquisition of a further 1,000,000 shares from IB Daiwa Corporation, increasing its holding from 22.3 percent (22.3%) of the issued share capital of Byron to 28.94 percent (28.94%) for an aggregate cost of US $6.57 million in cash.
In November 2007 the Company acquired the entire issued share capital of Compañía Petrolífera de Sedano, S.L., whose assets include 88.75% in the La Lora production concession (containing the Ayoluengo oil field) in Northern Spain and 50% interest in the surrounding exploration permits of Huermeces, Valderredible and Basconcillos H, covering an area of over 670 sq.km.
The equity position in all assets was increased in April 2008, by acquiring the remaining 11.25% of the Ayoluengo oil field in Northern Spain from Gold Oil Plc, and increasing to 85% through a farmout with Tethys Oil A.B., the interests in all the exploration permits.
The Company appointed TRACS International Ltd, the international consulting services company that specialises in the petroleum industry, as technical engineering supplier for all the Spain assets, and subsequent to a full field re-interpretation of the Ayoluengo field, the Company announced in April 2008, the enhanced prospectivity of STOIIP in the range of 93 -104-116 mmbo (P90-P50-P10) with a target increased recovery of 10%.
In June 2008 a multiple phase production enhanced program for the Ayoluengo oilfield was defined to realise the 10% incremental recovery and boost production above 1000 bopd. This program includes two phases of well stimulation, two phases of water injection and one phase of infill drilling in the shallower pay zones, and shall be executed from Q2 2008 through to end 2009. The initial results of the first few phases on this enhancement program are expected at end 2008.
The surrounding exploration acreage in Spain (Basconcillos H, Huermeces and Valderredible permits) also show significant potential for additional near-term developments, and the Company's technical team conducted an area wide re-interpretation to develop a fast-track exploitation program. To this extent, the Company increased it holding in these permits from 50% to 85% during the period.
In total 10 prospects (of which two are historical oil discoveries and one a gas discovery not previously assessed) are identified across the acreage with a total unrisked mean STOIIP ("stock tank oil initially in place") of 74 mmb and GIIP ("gas initially in place") of 4bcf. The total mean contingent oil resources is 1.76 mmbo, mean contingent gas resources is 2.9 bcf and mean unrisked prospective oil resources is 10.6 mmbo.
The recoverable prospective and contingent resources across the 10 prospects have a total unrisked mean volume of 12.8 mmboe. These prospective and contingent resources are in addition to the recoverable reserves target from Ayoluengo of 10.4 mmboe.
Ayoluengo production for the twelve months to August 31, 2008 totalled 45,204 bbls of oil and 15,037 Mscf of gas.
In January 2008, the Company announced it had exercised an option to purchase the entire share capital of Eastern Petroleum Australia Pty Ltd ("Eastern"). Eastern's main asset is a 25% interest in the Icacos oilfield permit, covering 1,900 acres, located on the Cedros Peninsula of Southern Trinidad, within the East Venezuelan Basin. The Company also purchased a further 25% interest in the Icacos permit from Kroes Energy Inc. ("Kroes") giving the Company a total interest of 50% in the field.
The field will be jointly owned with the operator of the field, Primera Oil, an active participant in the Trinidad petroleum industry. Current daily production for the field is 31 barrels per day from only 3 of 14 wells, with enhanced production targeted through improving well productivity and executing secondary recovery techniques.
The acquisition of 50% of the producing Icacos oilfield in Trinidad provides the Company with a foothold in one of the richest oil and gas bearing areas of the world, and access to the highly prospective East Venezuelan Basin. Initial data analysis of the prospect has identified a potential deep oil & gas play of significant magnitude.
In order to step change the existing production of the Icacos asset, and validate the magnitude of the prospective deeper reserves, the Company has commissioned TRACS International Limited to undertake an immediate review of the Icacos oilfield to establish STOIIP and recoverable reserve estimates and define well stimulation programs. This review shall be completed by end 2008.
Icacos oil production from the January 12, 2008 to August 31, 2008 totalled 3,791 bbls of oil on a 100% basis.
In April 2008 the Company agreed conditional terms with Ascent Resources plc to acquire a 7.27% interest in PetroHungaria kft and a 14.54% interest in ZalaGasCo kft in East and West Hungary respectively.
PetroHungaria kft ("PetroHungaria") owns a 100% interest in the Peneszlek gas development project in the Nyirség exploration permits in eastern Hungary, while ZalaGasCo kft has a joint development agreement with MOL Hungarian Oil & Gas for a 50% interest in the multiple tight gasfield redevelopment projects in western Hungary. The acquisition was completed in July 2008.
In August 2008, the Penészlek gas development came onstream with a stabilised gross production of 88,200 cu.m per day (3.12 MMscfd; 520 boepd). This project is centred on the development of a discovery that was drilled and tested by PetroHungaria in 2006, with production routed through MOL national gas transportation network. In addition to the planned tie-in of two existing appraised wells, further appraisal of the area will be undertaken in late 2008 with the acquisition of approximately 100 sq km of 3D seismic including the area of the partially depleted Penészlek field, which is a candidate for re-development.
ZalaGasCo kft retains a 50:50 joint venture with MOL in multiple gasfield re-development projects. A pilot project due to commence at end 2008 will undertake the redevelopment of the Bajcsa gasfield with the drilling of horizontal wells into proven productive gas reservoirs. These wells, because they were previously on production, are already connected to the field gas processing facilities and production can start immediately once these wells are completed, during third quarter 2008. Upon successful development of Bajcsa, ZalaGasCo kft has the option to repeat the same development plan on other analog nearby fields.
Peneszlek gas production from the August 12, 2008 to August 31, 2008 totalled net 4.52 mmscf of gas and 2 barrels of condensate.
In June 2008 the Exploration Study on the joint venture with Mediterranean Oil & Gas (MOG) for Area 4 Blocks 4, 5, 6 and 7 was completed.
The Company varied the terms of the joint venture with MOG in July 2008 and will now contribute a total of a US $2.5 million (including US $1.5 million the Company has already sole funded) to the costs MOG has expended on exploring the PSC Area and will earn a 10% working interest in the PSC. This agreement reduces the Company's exposure to this exploration venture to ensure funds are focused on current and future production enhancement investments.
Four prospects and five leads on the 5,700 square Kilometer PSC Area have been delineated. The total most likely hydrocarbon potential of the PSC Area is estimated at 5 billion barrels of oil in place with resultant total most likely case prospective recoverable oil resources of 1,475 mmbo.
A future work program is proposed under the PSC to increase the understanding of the prospect and leads and increase their relative chance of success for identifying the highest potential for drilling in 2010 and 2011. The Work Program will be finalised in Q4 2008 and commence immediately.
The investment in assets in the Hungary assets resulted as a variation in the option to acquire a 10% interest in Ascent's Seeland Freinisburg Exploration Permit in Switzerland, which was executed in order to de-risk the Company's portfolio from high risk exploration to mature production upside assets. The Company still retains an option with Ascent to farm into the Switzerland gas acreage on the original terms until April 2010.
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