LENI GAS & OIL PLC
Production
ramp up in Trinidad on track as LGO Heads for a Very Positive 2014
When
Leni Gas & Oil plc (LON: LGO) first acquired oil & gas interests in
Trinidad (a 50% interest in the producing 1,900-acre Icacos Oilfield announced
in December 2007), Executive Chairman David Lenigas wrote of gaining “a
foothold in one of the richest oil and gas bearing areas of the world”. Onshore
Trinidad ticked every box in the Company’s investment wish list: current
production, potential for enhanced production from existing wells and low-cost
exploration potential.
The
“foothold” has been engineered into a firm solid platform for growth and
shareholder value.
Fast-forward
to December 2013. After just over a year of driving its core 100% owned Trinidad
asset at Goudron – and reactivating almost two-thirds of the available 90 wells
on Leni Gas & Oil acreage – the Company is generating in excess of
US$300,000 per month through the sustained production of around 500 barrels of
oil per day (bopd) and has control over 10 million barrels of proven and
probable reserves. Confirmation of the how important Leni Gas & Oil is seen
as an oil producer by the Trinidad and Tobago authorities came on the 18th
October 2013, when Minister of Energy and Energy Affairs Senator the Honourable
Kevin Ramnarine visited the Goudron oilfield in Guayaguayare. He was
accompanied by the President of Petrotrin, Khalid Hassanali, British High
Commissioner, His Excellency Arthur Snell and the CEO of Leni Gas and Oil, Neil
Ritson. It is clear that the Trinidad authorities are impressed by the
re-activation investment programme LGO is undertaking at Goudron. LGO has so
far reactivated 60 of the 154 wells and is clearly raising the profile of
Goudron making it one of Trinidad’s leading production oilfields (current 2P
oil reserves total 7.2 million barrels)
Further,
production is set to ramp up further as Leni prepares to reactivate another 10
wells by early 2014, undertake a new round of exploration drilling at Goudron
(which will be the first such campaign since 1981) and vigorously pursue
recently announced farm-in and joint venture opportunity with Beach Oilfield.
This
activity is taking place against a backdrop of heightened international
interest in the Trinidad & Tobago oil & gas sector. Fuelled by a range
of pro-business Government initiatives introduced over the past year to
incentivise exploration and production (measures included increased tax
write-offs for exploration activities and generous tax provisions throughout
the operation development phase), Trinidad is now well and truly back in the
global oil & gas spotlight.
Indeed,
December 2013 has proven to be a very productive month for the T&T energy
sector, with Anglo-Australian multinational BHP announcing a US$1.54 billion
vote of confidence in the islands (“We are very excited about Trinidad,” said
Tim Cutt, President of BHP’s petroleum and potash unit, before revealing that
the company intended to drill its first Trinidadian well in three years) and
Australia’s Range Resources extending its footprint in Trinidad by 280,000
acres through a farm-in with fellow international energy company Niko
Resources.
News of
the islands’ first major oil & gas discovery in 2013 coincided with these
announcements and provided a timely reminder – if a reminder were necessary –
that Trinidad & Tobago remains a resource-laden frontier on the global
natural gas and oil map. In December, Trinity Exploration announced that its
TGAL-1 exploration well had located a substantial oil reservoir with estimated
volumes of between 50 and 115 million barrels.
Whilst
this news is encouraging to all those who explore for hydrocarbons in the
region, it only accentuates the key difference between most Trinidad &
Tobago’s oil & gas developers, whose focus is almost exclusively offshore
in deep water, and Leni Gas & Oil. For the latter, the low-cost, proven
onshore fields remain the asset of choice. As such, this junior resource
company is growing carefully and in a sustained fashion, without taking on unrealistic
levels of debt to finance development.
Careful,
sustained growth has been the story for Leni Gas & Gas over the last 12
months.
The
Company’s last set of published financials (for the six months to 30 June 2013)
highlighted revenues of £2.3 million, up from £1.75 million year-on-year and
oil sales of 45,969 barrels (30,155 barrels in H1 2012). Since mid-year,
production has risen above the 500 bopd threshold and Leni has announced:
·
A six-month
extension for the completion of a joint venture with Maxim Resources from
October 2013. Maxim is currently in litigation with another junior over rights
to a working interest and revenue from the South Erin Block, Trinidad, hence
the need for more time.
·
Plans to start
new drilling at the Goudron Field, which is expected to accelerate oil
production. Two wells are planned in the initial period, to a total depth of
3,500 feet, targeting known productive intervals. The conservative expectation
is that these wills will produce initial rates of at least 60 bopd. Final
approvals are pending.
·
Exclusivity and
consultancy agreements signed with Beach Oilfield Limited (BOLT) over the
Cedros asset (7,500 gross acres of under-explored leases), onshore Trinidad,
with a potential farm-in agreement to follow. BOLT has already received its
assignment of leases covered by the farm-in; Leni Gas & Oil has applied for
its own private petroleum licences for the Cedros leases (Perseverance and
Columbia estates) and anticipates that these applications will be granted in
early 2014.
Leni Gas
& Oil is in good financial shape, with current oil production putting the
group’s existing operations on a sustainable financial position. On the 23rd
December LGO announced that it had
successfully secured an additional US$4 million of funding prior to
commencing the programme of 30 new wells at Goudron.
The
Environmental Management Agency ("EMA") of Trinidad and Tobago also
confirmed in writing that it had now received all the data required for the
final issue of the Certificate of Environmental Compliance ("CEC")
for the planned drilling campaign at Goudron anticipating that the CEC will be
issued by 16 January 2014. This will coincide with the arrival of ten new pump
jacks on site.
Already
producing oil and generating solid cash flows, Leni Gas & Oil is at a
transformative point in its development. The intention is to build operations
over the medium to longer-term and to cement the Company’s status as a
cost-effective mid-tier oil & gas opportunity with large-scale resources
and value upside.
Leni Gas
& Oil plc is listed on the London Stock Exchange AIM Market (LGO).
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