Leni Gas & Oil (LON:LGO) has now mobilised a workover rig to start re-developing the onshore Goudron oilfield in south-eastern Trinidad.

As previously announced, the company plans to re-develop the Goudron oilfield in partnership with Trinidad and Tobago state-owned Petrotrin under the terms of an existing contract.

Field operations are starting imminently. LGO will first be working over up to 50 existing wells and will then drill additional wells.

The Goudron 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 oil reservoirs generally lie between 300 and 3,500 feet below surface and the oil is low sulphur and has API gravities ranging between 25 and 55 degrees.

Proven reserves, recoverable using existing wells and a small number of infill wells, have been estimated at 1.9 million barrels (mmbbls), whilst proven plus probable reserves were estimated at 8 mmbbls. 

LGO has recently engaged Challenge Energy to prepare a Competent Persons Report (CPR) on the Goudron field and the report is expected in the third quarter 2012.

Broker Old Park Lane Capital views the announcement as important as it values Goudron as the company’s core asset.

“Upon the conclusion of the partnership agreement to co-develop the field with Range Resources, we believe that LGO’s ultimate 50% interest in Goudron will be worth approximately 2.4p per share (fully diluted),” said the broker, which is a 'buyer'.

This suggests significant upside to the current price of 0.82 pence, which has dipped 0.02 pence, or 2.4 per cent, today.

“We believe that the commencement of workover operations and the publication of a CPR will act as catalysts for further value recognition for the Goudron Field,” the broker concluded.

Adds broker comment

Leni Gas & Oil (LON:LGO) said today the A-2 sidetrack well at Eugene Island has been plugged after the operator decided not to move to production.

The A2ST01 sidetrack in the Gulf of Mexico was designed to test the Cranberry Creek prospect at the Tex-X2 reservoir level. 

The well reached a total depth of 13,496 feet but the Tex-X2 reservoir was encountered slightly high to prognosis and was found to be water wet. 

Logging while drilling results showed a 5 foot thick hydrocarbon pay zone at a different level within the well, but operator Marlin decided this was not sufficient to justify installation of a production completion.  

Leni Gas has a 7.25 per cent working interest in the Eugene Island leases operated by Marlin.

The A2ST01 sidetrack was drilled from the non-producing A2 well of the Eugene Island-184 platform whilst production from the A1, A3, A4, A5 and A8 wells continued as normal.

Neil Ritson, Leni Gas’s chief executive, said:  "Although oil was encountered in this sidetrack, the economics of installing a completion appeared marginal.  

This well has shown that additional opportunities remain in the Eugene Island Field and we look forward to the operators proposals in due course.  Profitable production of the existing oil and gas reserves continues."

Old Park Lane Capital analyst Barney Gray said: "Eugene Island will continue to generate cash flow for the company going forward and we believe that the pause in activity in the Gulf of Mexico leaves LGO in a good position to focus on the divestment of its Spanish assets and the acceleration of its core development activities in Trinidad."

He added: "This current hiatus in the drilling programme reduces marginally our valuation from 5.1 to 5.0p, leaving our target price unchanged."

Old Park Lane Capital recommends a 'buy' stance.

Leni Gas & Oil (LON:LGO) said today the A-2 sidetrack well at Eugene Island has been plugged after the operator decided not to move to production.

The A2ST01 sidetrack in the Gulf of Mexico was designed to test the Cranberry Creek prospect at the Tex-X2 reservoir level. 

The well reached a total depth of 13,496 feet but the Tex-X2 reservoir was encountered slightly high to prognosis and was found to be water wet. 

Logging while drilling results showed a 5 foot thick hydrocarbon pay zone at a different level within the well, but operator Marlin decided this was not sufficient to justify installation of a production completion.  

Leni Gas has a 7.25 per cent working interest in the Eugene Island leases operated by Marlin.

The A2ST01 sidetrack was drilled from the non-producing A2 well of the Eugene Island-184 platform whilst production from the A1, A3, A4, A5 and A8 wells continued as normal.

Neil Ritson, Leni Gas’s chief executive, said:  "Although oil was encountered in this sidetrack, the economics of installing a completion appeared marginal.  

This well has shown that additional opportunities remain in the Eugene Island Field and we look forward to the operators proposals in due course.  Profitable production of the existing oil and gas reserves continues."

Leni has a 7.25 per cent interest in the Eugene Island 184 field in the shallow water Gulf of Mexico.

The operator, Marlin Energy, is preparing to drill two sidetracks and recomplete a third well over the next three months, with production set to increase from April.

Leni will receive a significant boost to cash flow in the second half of the year from this, though long term it is the Goudron oil field in Trinidad that represents the company’s core focus, suggests the broker.

The deal with Range Resources envisages the Goudron field’s production rising to over 1,800 barrels per day within four years.

Old Park Lane says it is a great deal for Leni Oil as Range will provide initial funds of US$8 million to kick start development activity.

In Spain, the 100 per cent owned Ayoluengo oil field generates cash and an enhanced oil recovery programme could boost production longer term, while a farm-out is a possibility.

According to Old Park Lane, Leni has sufficient funds to fulfil its near term obligations in the Gulf of Mexico while the deal with Range Resources in Trinidad will enable it to grow over the longer term. 

The broker has put a valuation of US$118m on Leni Oil’s core assets, equivalent to 5.1p per share on a fully diluted basis. 

“This represents significant upside to the current share price and we instigate formal coverage with a buy,” it concluded.

Last week the group revealed that the Ocean Columbia jack-up rig had been held up at the site of a previous job.

After the slight delay the rig is now stationed over the EI-184 platform in around 88 feet of water. 

The well will be sidetracked from a depth of 7,600 feet.

The sidetrack is designed to intersect Tex-X2 sandstones reservoirs. The target has an estimated mean recoverable reserve of 0.5 million barrels of oil.

It is expected that drilling and evaluation operations will last three to four weeks. And if successful, the well will be completed for production.  

A second sidetrack is also planned to target the deeper Tex-X3 reservoir.

Leni Gas & Oil has a 7.25 per cent interest in the project, which is operated by Marlin Energy.

The net cost to LGO of drilling, logging and evaluating the A-2 sidetrack is an initial US$280,000. Any incremental production is expected to be realised quickly with a short payback period on the investment.

Leni Gas & Oil (LON:LGO) today told investors that its drilling operations have been slightly delayed at the Eugene Island Field, in the Gulf of Mexico.

The delay relates to a problem with the drilling rig’s previous contractor. And LGO says there are no cost implications for the Eugene Island partners.

The current operator of the Ocean Columbia jack-up rig at Eugene Island-51 has had difficulty withdrawing the rig’s legs from the seafloor.  

Work is currently underway to free the legs so that they can be raised and the rig can be towed to the Eugene Island location, which is about 55 kilometres away.  

At Eugene Island, the drilling programme will start with the A-2ST01 well, a sidetrack of the existing A-2 well, which targets mean recoverable reserves of 0.5 million barrels of oil within the Tex X2 target level.

The slightly deeper Tex-X3 reservoir will also be tested by the well. Both reservoirs are productive in other wells throughout the field.

The partners have budgeted a total 16 days for the drilling and evaluation. The net cost to LGO of drilling, logging and evaluating the A-2 sidetrack is an initial US$280,000.

Any incremental production is expected to be realised quickly with a short payback period on the investment.

Leni Gas & Oil (LON:LGO) today confirmed additional drilling is set to get underway at the Eugene Island field in the US Gulf of Mexico.

The company holds a 7.25% working interest in 184 leases operated by Marlin Energy at the prospect.  

A programme of two sidetracks targeting reserves in the Tex-X2 and Tex-X3 reservoirs has been proposed by Marlin, commencing with a sidetrack of the A#2 well to the Cranberry Creek prospect. 

This will be followed by a sidetrack to a separate proven undeveloped attic oil reserve in the Tex-X3 reservoir. 

Leni Gas said work will start almost immediately with preparatory operations in the A#2 well to abandon the existing well below 7,600 feet ahead of the arrival of a drilling rig, Ocean Columbia. The rig is scheduled to be on site by early January 2012. 

The A#2 sidetrack is targeted to reach a downthrown fault block with an estimated mean recoverable reserve of 0.5 million barrels of oil within the Tex-X2 target level at a depth of approximately 13,000 feet subsea. 

The slightly deeper Tex-X3 reservoir will also be tested by the well.  Both reservoirs are productive in other wells throughout the field. 

The net cost to Leni Gas of drilling, logging and evaluating the A#2 sidetrack is an initial US$280,000. 

Neil Ritson, Leni Gas chief executive, said: “We are delighted to participate in these opportunities which were deferred from 2010.”

Any incremental production is expected to be realised quickly with a short payback period on the investment, he added.

Leni Gas & Oil (LON:LGO) has raised a total of £1.585 million through an equity placing and a subscription by the directors to develop the firm's work programmes.

The company said that 302 million shares were issued to investors at 0.5 pence per share - a 33 per cent discount to yesterday's closing price of 0.75 pence - to raise total funds of £1.51 million.

The firm confirmed that chairman David Lenigas and CEO Neil Ritson were also participating in the share placing announced this morning.
 
The directors' subscriptions take the total funding to £1.585 million.

Lenigas bought 10 million shares and Ritson bought 5 million shares.

Today's fundraising comes seven days after the firm announced it had raised £176,000 - also through a placing - to maintain "momentum" behind its activities in Trinidad.

Chairman David Lenigas said this morning: "The company has successfully raised the funds needed to maintain the highest value elements of the company's growth agenda despite extremely difficult market conditions.

"We have imminent drilling opportunities in the Gulf of Mexico and in Trinidad, and a high value program in Malta and look forward to positive results from these activities."

It is proposed that the drilling of a sidetrack to the Eugene Island-184 A2 well in the Gulf of Mexico will begin in mid- December this year, said Leni.

If successful, the well will be completed in January next year and will boost production from the field. The company has a 7.25 per cent working interest in the Eugene Island property.

Offshore Malta, a 1000 sq km 3D seismic survey is currently being acquired in Area 4, in which Leni holds a 10 per cent working interest, to prepare for possible drilling next year on prospects already identified from existing data. The data will be available for interpretation late in Q1 next year.

This will support an ongoing farm-out effort by the company and the operator - Mediterranean Oil and Gas -  before drilling of a well in late 2012.

Meanwhile, in Trinidad, at the Moruga North leases, two existing wells could be brought into production to produce 120 bopd (barrels of oil per day). A three well exploration programme has been agreed.

"In order to secure this opportunity for early 2012 drilling, financial commitments to a drilling rig and services are required to be made.  LGO will earn a 49 per cent interest in the Moruga North leases and associated private petroleum licence.

Elsewhere, LGO recently acquired land leases on the Cedros peninsula in south west Trinidad, where it now holds a 50 per cent interest in the Icacos Field and 100 per cent interest in all other Cedros land leases.

LGO also said it planned to fund further investment in the Goudron reactivation project in Trinidad through mezzanine debt or reserves backed lending or a combination.

The company is paying up to US$9 million for control of the producing Goudron field in onshore south-eastern Trinidad and is looking at ramping up production to 2,000 bopd.

It is also anticipated that a data room will be opened for third party participation in the Ayoluengo EOR project in Spain during early December.  Development of project with a partner will reduce the execution risk and reduce the costs to LGO of this project.

Following the director subscriptions, Lenigas now holds 146.5 million shares, or 11.87 per cent of the company. Ritson now holds17.5 mln shares, representing 1.39 per cent of the total issued share capital.