Leni Takes Major Trinidad Stake
Leni Gas & Oil announced the acquisition of Goudron E&P Limited ("GEPL"), a company which holds exclusive rights to acquire the Incremental Production Service Contract ("IPSC") for the Petroleum Company of Trinidad Limited ("Petrotrin") owned Goudron Field in onshore south-eastern Trinidad.
- The Goudron Field was originally developed by Texaco
- The existing producing zones have reserves of proven 1.9 MMbbls and estimated 3P reserve of 21.8 MMbbls
- The concession covers a total of 2,875 acres (11.4 sq km) which more than doubles LGO's land holding in Trinidad
- The current production comes from a small number of active wells out of a total of 152
- Production potential has been estimated to be in the range 1,000 to 4,000 bopd
- The drilling of new infill wells could commence in early 2012
- Additional undeveloped reservoirs in the Gros Morne (Upper Cruse) and Lower Cruse formations provide considerable opportunities for future reserves growth
- Much of the concession is underexplored and significant exploration opportunities exist
- LGO is acquiring 100% of the rights under the IPSC and will become operator
The Gourdon Field lies between the East Moruga, and Beach Marcelle fields in south-eastern Trinidad and has direct access to the Petrotrin oil export pipeline to the Pointe-a-Pierre refinery in western Trinidad. The field was originally discovered by Trinidad Leaseholding Limited in 1927 and was developed in its current form by Texaco between 1956 and 1986 when it passed to Petrotrin. A field reactivation contract was signed in late 2009.
The field has had very little investment over the last 25 years, and the existing production comes from about 30 wells, of which 12 are on production with beam pumps and the others flow naturally or are periodically swabbed. Recent production has ranged between 100 and over 200 bopd. The oil reservoirs are generally between 300 and 3,500 feet below surface and the oil is light low sulfur crude with an API gravity ranging between 25 and 55 degrees and a mean of 32 degrees. GOR is variable and generally higher in the deeper Gros Morne (Cruse equivalent) reservoir zones.
GEPL was previously owned by Sorgenia Trinidad and Tobago Holdings Limited ("Sorgenia"), and based on studies carried out by Sorgenia the oil in place in the existing producing zones is estimated to be between 120 and 225 million barrels STOIIP, with a P50 estimate of 166 MMbbls. Proven reserves of 1.9 MMbbls are currently estimated within the field area and can be recovered using existing wells and a small number of infill wells. Proven and Probable reserves are estimated at 8.0 MMbbls. Additional recoverable reserves which can be produced from hydraulically fractured wells add a further 13.8 MMbbls. Contingent Resources are also attributed to future potential water injection or other EOR schemes.
Cumulative historic production from the field has totaled only 4.8 MMbbls, most of that between 1956 and 1980 when Texaco were actively operating the field and during which time most of the field wells were drilled. Studies by various companies have concluded that the existing field has the immediate potential for roughly 40 routine simple work-overs, up to 20 recompletions and numerous possible hydraulic fracturing operations. Further areas of unswept and undeveloped oil pay could be developed with infill wells.
LGO has assessed the opportunity for an initial work-over program aimed at improving the production from up to 50 existing wells and estimates that production can be raised to 450-500 bopd through work involving well clean out (sand removal), limited reperforation and the installation of additional electrical pumps (either beam and downhole PCP). A preliminary estimate of the cost of that program, which could take 12 to 18 months to execute, is US $4 million.
During their operations Texaco hydraulically fractured 23 wells in the main Goudron Sands and a further 5 wells in the deeper Cruse equivalents. These wells had average production increases of between 5 and 10 fold after fracking and it is anticipated that with modern hydraulic fracking techniques, especially on new wells, better results can be obtained due to the significant advances in technology over the last 50 years.
Additional potential in deeper reservoirs and in underexplored portions of the concession add considerable further reserves potential. There is also potential for gas production which was previously unexploited due to the absence of a local market, but which could now be exported through existing infrastructure. Petroleum rights under the IPSC extend down to 5,000 feet subsea. The current term of the IPSC has 8 years remaining and the IPSC contains an extension period of 10 years running to 2030.
GEPL was incorporated in March 2011 as a special purpose vehicle in Trinidad to hold the IPSC option rights and had no accounts.
The assignment of the IPSC requires the approval of both Petrotrin and the Trinidad and Tobago Ministry of Energy and Energy Affairs. The application process was started in August and it is anticipated to take up to a further 3 months to conclude.
Mr. Alex Almandoz, a Trinidadian with 26 years of experience in the oil and gas industry and owner of Altech Services Limited, a local rig service company, has been appointed as LGO's Country Manager in Trinidad and will be directly responsible for all LGO activities.
In early 2011 the Company indicated that it wished to increase its portfolio in Trinidad. Since that time LGO has acquired leases to 815 acres of previously unexplored prospective land adjacent to the Icacos Field where the Company owns a 50% interest, and has farmed-in to the Advance Oil Company (Trinidad) Limited Moruga North leases with a view to drilling up to 9 wells in the next two to three years. The first well is anticipated to be spudded in spring 2012. The acquisition of the rights to be assigned the operatorship of the Goudron Field considerably enhances the Company's position in Trinidad.
- LGO has paid Sorgenia US $1 million to acquire 100% of the outstanding shares in GEPL
- Contingent on the successful completion of the transfer of the IPSC to LGO a further consideration of US $1 million will be paid to Sorgenia International BV for the geological, reservoir engineering and environmental studies conducted on the field
- Conditional payments to Sorgenia International BV will also be payable when and if field production reaches 1,000bopd (US $1 million) and 2,000 bopd (US $2 million). Based on initial field redevelopment plans these levels will be reached in early 2013 and in 2014 respectively
- A payment of up to a maximum of US $4 million will also be due on transfer of the IPSC
The Company also announces that it has secured a three year Equity Line Facility ("ELF") of up to £5 million with Dutchess Opportunity Cayman Fund Ltd ("Dutchess"). The ELF has been arranged by First Columbus LLP ("First Columbus"), Dutchess's joint venture partner in the UK.
The ELF offers the Company ongoing access to capital as it enables the Company to obtain funding from Dutchess at any time during the next three years by way of subscription for new ordinary shares in the Company. Subscriptions will be priced at a 5 per cent discount to the market price and will take place at timings and intervals and in sizes solely determined by the Company, subject to the agreed mechanisms specified under the ELF.
The ELF may be drawn down in tranches linked to the Company's average daily trading volume in the three days prior to the notice of draw down or in other specified amounts. The Company is able to specify a minimum acceptable price for each tranche to prevent shares being sold in the market at an unacceptable discount. Currently LGO has not drawn on the ELF facility.
The Company expects to provide an update on its ongoing operations in Spain shortly.
Neil Ritson, LGO's Chief Executive, commented, "We are delighted to have been able to acquire the rights to the Goudron Field since we feel this offers an exciting opportunity for LGO to make a step change in its growth in Trinidad through both incremental production and exploration.
"Experience gained elsewhere, especially in Spain, will allow us to maximize the opportunities in this field. The simultaneous acquisition of the comprehensive recent studies allows us to move very quickly to exploit these opportunities. The provision of a standby equity facility will provide access to working capital if needed."
- Leni Sees Goudron Well Flow at 700 Barrels per Day (Sep 17)
- Leni Drills 5th Well in Trinidad Development Campaign (Aug 21)
- Leni Appoints New Finance Director (Aug 07)