Leed Petroleum announced an operational and financial update.
The Company's total net attributable production averaged approximately 1,774 boepd (74% gas) during June 2010 and 1,391 boepd (64% gas) for the quarter ended 30 June 2010.
The Ship Shoal 201 A-6 well continues to produce consistently at a gross rate of 1,617 boepd (1,297 boepd net) (82% gas).
The Company has continued to work hard to address the ongoing well performance issues at Eugene Island. The Company’s total net attributable production from the Eugene Island field for the quarter ended 30 June 2010 averaged 463 boepd (38% gas). The Eugene Island A-8 well continues to flow at approximately 345 boepd gross (216 boepd net) from the Mid Tex sand. As previously announced, the Company has been waiting for production from this sand to deplete to a level that, under BOEMRE regulatory requirements, would allow the Company to recomplete the well to the T-1 sand. Production from the Mid Tex sand has not yet fallen to a level that would allow recompletion.
As announced on May 28, 2010, production from the Eugene Island A-7 was restored after a period of being shut in. However, following a platform shut in required for minor maintenance work and which finished on 27 June 2010, the Company has been unable to restore production due to suspected sand plugging. The Company is preparing to run diagnostic tests to determine the action required to bring the well back to production.
As previously reported, the Eugene Island A-6 well remains shut in.
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 approximate aggregate gross rate of 300 to 400 boepd (173 to 230 boepd net) (33% oil) prior to a recent shut in for minor maintenance work. Production has now been restored at these wells.
On 12 June 2010, Leed received notification from the operator of Main Pass 64 that the third party oil sales line serving the field, which was shut in on 25 May 2010 for maintenance work, is likely to remain out of service until mid-August 2010. Production at Main Pass 64 averaged 90 boepd (100% oil) on a net revenue interest basis during the quarter ended 31 March 2010 and averaged 170 boepd on a net revenue interest during the month of May, prior to the field shut in.
The 14-1 well was placed on production on June 16, 2010 and produced intermittently for 6 days prior to being shut in to resolve gas quality issues with the transmission company. Production is expected to resume early in the month of July.
As previously announced, the Company has a credit facility with its bank, UniCredit Bank AG (UniCredit), comprised of two tranches totaling US $29.5 million, namely a revolving credit line fully utilized at US $25 million (subject to semi annual re-determination) and a term loan of US $4.5 million.
Following discussions with UniCredit at which the Company disclosed certain technical defaults on the credit facility likely to exist at the June 30, 2010 review date (relating to historical EBITDA ratios and principally due to the Eugene Island A-8 well performance), the Company agreed to a 2 per cent increase in the credit facility interest rate on both the term loan and the credit line facility loan in exchange for the likely defaults being waived so as to ensure the Company will remain in full compliance with the terms and conditions of its banking facilities. Accordingly, the revolving facility will bear a rate of 90-day Libor plus 6.25% and the term loan a rate of 90-day Libor plus 6.75%. Additionally, the Company will make a principal repayment to Unicredit of US $3.0 million pertaining to the term loan, resulting in an outstanding balance of US $1.5 million on that portion of the credit facility and reducing the total credit facility debt outstanding to US $26.5 million. The Company's next scheduled repayment of US $250,000 on the term loan is due on September 15, 2010.
As at June 30, 2010, the Company had cash and cash equivalents of approximately US $10.8 million, after the US $3MM repayment referred to above. Leed is currently working on adjusting its plans to ensure that it can execute on its existing development and exploration program.
Howard Wilson, President and Chief Executive of Leed Petroleum, commented, "While we are happy with the quarter over quarter improvement in production, we expect cash flows to improve as the Company continues to execute its work program in this financial year."
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