Leni Gas & Oil close to restoring full production at Ayoluengo field in Spain and Gulf of Mexico

Leni Gas & Oil PLC (AIM: LGO) said it is launching a winter campaign to re-instate gas handling facilities at the Ayoluengo oilfield in Spain to handle a major increase in gas production that impacted liquids production, and it is near completion of major well interventions and gas export maintenance in the Gulf of Mexico.

In a corporate update covering the six weeks starting September 1 2009, the company said direct and indirect  monthly production during September totalled 12,034 barrels of oil equivalent, or an average of 411 boe per day.

LGO is seeing a change in reservoir dynamics in Spain, with a welcome major increase in gas production. This is currently limiting oil production as former owners decommissioned gas handling facilities at the Ayoluengo field, but the imminent campaign to re-instate these facilities will boost oil and gas production. “This upgrade will also prepare the field for the next major increase in production from the 2010 capex perforation and drilling program."

Net production from Ayoluengo for the company totalled 6,298 boe in September, or 210 boepd.  Oil volumes were only 10 percent higher than August due to major oil production restrictions. Re-configuration of the well production equipment during recent months has re-opened all four producing reservoir zones resulting in major increases of differential oil, gas and water production. 

Major gas production has not been witnessed in the Ayoluengo field since the late 1980s and demonstrates the high potential of the field and validates the company's investment to date, LGO said. Details of the work taking place will be issued in the October corporate update.

In the Gulf of Mexico, the group is near completion of major well interventions and gas export maintenance, and is forecasting returning Eugene Island production to near full capacity shortly. Preparations are also underway to commence additional production enhancement activities at Eugene Island, including reviewing gas lift efficiencies in the field, and installing a new gas compressor with significantly increased capacity, which is expected to enable additional gas and oil production.

The agreement to convert its near 29 percent in Byron equity to a direct working interest is almost complete and it is looking forward to greater direct involvement in operations of the Gulf of Mexico shortly.

"Looking ahead, the company forecasts the October production schedule to be similar to September with ongoing programs in nearly all countries of operations. We also expect to report the program of works in Spain and Gulf of Mexico for the next 6 months with the development of the Spain winter campaign scope and completion of the Gulf of Mexico conversion. The company shall also provide an update on the plans for Trinidad and Hungary during the remainder of 2009," LGO said.

Negotiations with the Ministry of Energy were concluded to finalise the new licence commitments for the 50 percent held Icacos oilfield offshore Trinidad to increase increase production from the existing reservoir, exploit the undepleted acreage and undertake subsurface surveys to fully evaluate the reserves and resources.  The draft licence is currently progressing legal reviews prior to commencement, expected in early Q4 2009, which shall also  include a change in control of the oilfield operations.

LGO said early October said it has resolved a dispute with Ascent Resources PLC (AIM: AST) regarding its investment in Hungary’s ZalaGasCo Kft (ZGC), in which Leni Gas & Oil holds 14.54 percent, and the announcement by Ascent in July 2009 regarding the venture between MOL Hungarian Oil & Gas and Ascent Hungary Ltd (AHL).

Under the terms of the dispute settlement, LGO shall have an option to become a 14.54 percent shareholder in a  joint venture with AHL subject to LGO conducting technical and commercial due diligence on the venture and paying its pro-rata share of all reasonable costs to date.
 
In Malta, LGO retains 10 percent in Area 4 Blocks 4, 5, 6 and 7 of Southern Offshore Malta with Mediterranean Oil & Gas PLC (AIM: MOG) retaining the balance. The Production Sharing Contract with the Maltese Ministry of Natural Resources carries a commitment to drill by July 2011. The joint venture is currently undertaking various geoscience studies and data acquisition surveys in accordance with the work program to firm the drill target and well plan.