LGO Increases Ayoluengo Production with Enhanced Recovery Program

Leni Gas & Oil plc (LGO) the AIM listed international oil and gas exploration, development and production company, today provides an update on the Ayoluengo enhanced recovery program and a summary of plans to further increase production.

Highlights

•  Initial results of the first phase perforation program showed a total production increment of over 145 bopd (“barrels of oil per day”), an increase of over 130% on the historical average pre-perforation production levels to a new average of 255 bopd (monthly average forecast 7650 barrels, pre-perforation monthly average 3300 barrels).
• The first phase water injection program continues to inject 1600 bwpd (“barrels of water per day”) into the field with positive signs of pressure support.
• Preliminary approval from the regulatory authorities has been issued to extend the Ayoluengo enhanced recovery program.

As announced on June 12, 2008, LGO has begun a full field enhanced recovery program, through multiple phases of water injection, well stimulation to increase productivity and in-fill drilling on the Ayoluengo oilfield to substantially increase production towards the recently announced new incremental recovery target of 15%.

The Phase 1 Stimulation program that commenced at the start of Q4 2008 has five key objectives, including perforating of new and existing zones in five wells, re-configuring water injectors to maximize injectivity, de-scaling the production zone well-bore in all active wells, optimizing production equipment efficiency and implementing a long term regime to maximize well bore integrity and remove well fluid impurities. LGO’s target production increment for the Phase 1 Stimulation program from all of these activities is 120 bopd.

The first Stimulation program objective of perforating new and existing zones in wells has been successfully completed. A total of 57m of reservoir zones were successfully perforated across five wells with all reporting an initial incremental production of at least 100% from three of the four main reservoir zones. Initial results of the perforating campaign have observed a total production increment of over 145 bopd of which approximately 60% production is from a new shallow reservoir zone in the Unit A sands. This increment represents an increase of over 130% on the historical pre-perforation production from the field from 110 bopd to 255 bopd. The remaining four Stimulation program objectives are planned to conclude by the end of January 2009 when the stabilised total incremental production will be reported.

The Phase 1 Water Injection program commenced at end Q3 2008 and currently 1600 barrels of water per day are being injected into the reservoirs. Although up to 6 months is normally required to observe incremental production, positive signs are being observed of increasing pressure support in the field.

The further phases of enhanced recovery planned for 2009 will include a second phase of water injection, a second phase of perforation in the balance of the production wells as well as re-perforating currently shut-in wells and low-cost drilling of in-fill wells to produce from the un-depleted areas in all four reservoir zones. As identified by the recently announced remaining potential interpretation, the greatest concentration of un-depleted areas is in the northeast part of the field which will be the target for imaging surveys and drilling, with the southeast part of the field targeted for secondary recovery.

Preliminary approval has already been issued by the Spanish governmental ministries to progress these programs with final permitting due to be completed in Q1 2009. The 2009 investigation will also continue to assess the viability of recovering un-depleted reserves from the western flank of Ayoluengo using gas flooding methods.

LGO has a 100% interest in the La Lora production concession which contains the Ayoluengo producing oilfield.

David Lenigas, Executive Chairman, commented, “The increase in Ayoluengo production over double historical levels from a limited perforation program reinforces our strategy and the enhancement capability of the Ayoluengo field, in particular as it follows the recent announcement of the increased incremental recoverable reserves target.

“We are now in the final stages of developing and permitting the 2009 work programs to expand the enhancement plans at Ayoluengo.”