Investors in Leni Gas & Oil PLC (AIM: LGO) liked what they heard from the company today: a comprehensive geological re-interpretation of the Ayoluengo oilfield completed with reprocessed 3D seismic has substantially de-risked the future production expansion programs there and led to a major increase in STOIIP (Stock Tank Oil Initially In Place) estimates for the producing Lower Cretaceous and Upper Jurassic reservoirs.
Total STOIIP of the currently assessed prospects across the acreage which can be developed is now 173.8 million barrels of oil Mean, 265.2 mmbo P10 (Possible), 151.4 mmbo P50 (Probable), and 108.3 mmbo P90 (Proved). Mean STOIIP had previously been 104 million barrels. The field had a historical production of 17 mmbbls of 37 API oil.
Shares in the company were up nearly 18 percent in early afternoon deals.
Things are hotting up in the country: only last week the group announced completion of a heads of agreement with BP’s (LSE: BP) Spanish unit to negotiate a crude oil sales agreement to offtake its current and future production to BP's Castellón refinery on the east coast of the country. The planned agreement is for at least five years and shall include Ayoluengo and future production from other development assets across LGO’s petroleum production and exploration acreage in northern Spain which covers an area of over 550 square kilometres.
Reprocessing the Ayoluengo 3D seismic data has resulted in a clearer structural image of the field and a more accurate determination of the fault positions. The result of the reprocessing and re-interpretation is a better understanding of the structure of the Ayoluengo field with revised deterministic and probabilistic estimates of STOIIP for the producing Lower Cretaceous and Upper Jurassic reservoirs.
The interpretation has also redistributed the oil between east and west and within each reservoir zone. Oil in place has slightly reduced in the east flank and considerably increased in the west, particularly in the shallower zones with significant height above the water contact. Recovery factors to date in the east flank are 21 percent and only 5 percent in the west flank. Ultimate recovery factors within sandstone formations can reach 50 percent with the effective use of artificial stimulation and enhanced recovery methods.
Currently of the 53 wells drilled on Ayoluengo, all of the fourteen producers are located in the east flank of the field. The new interpretation, remapping of primary and secondary faults and identification of increased resources in the west flank, has revised and de-risked the company's future production expansion plans for Ayoluengo. The previous development strategy of maximising the productivity of the existing aging wells and conducting selected infill drilling has been determined to be sub-optimal and therefore will not maximise production.
LGO said the work has also identified two new deeper hydrocarbon carbonate structures approximately 1000 metres below Ayoluengo in the Lower Jurassic, Ayo D1 and Ayo D2. Ayo D1 is a conventional hydrocarbon reservoir in limestones within the Lias Calcarenite interval (at a depth between 2000 and 2300 metres subsurface, and Ayo D2 is a deeper unconventional gas play in the Liassic interval at depths to 2700 metres subsurface.
Chairman David Lenigas commented: "The company is tremendously excited about the recent achievements and potential of Spain, the core investment in LGO. Considerable effort by LGO, our staff in Spain and external providers, has positioned Spain for several orders of magnitude increase in activity, production, potential and contribution to both LGO and Spain national production revenues."
"The achievements in Spain are too numerous to mention, though the key ones are the improved understanding and new development strategy for Ayoluengo, the deeper resources identified below Ayoluengo, progress on other prospects, modernisation and expansion of the infrastructure to handle very high production volumes and the potential of a new oil sales off-take agreement with BP," he added.
The reserves and potential resources of the acreage are located in thirteen prospects which are at all stages of exploration, appraisal, development and production. One prospect is currently in production (Ayoluengo), two in development (Hontomin and Tozo) and nine in varying stages of exploration and appraisal (Bas A, Bas B, Ayo NE, Val A, Val B, Val C, Val D, Ayo D1 and Ayo D2). The Huidobro prospect has been relinquished due to its location within an area of high environmental sensitivity.
Updates on Trinidad and Malta shall be issued shortly, with quarterly reporting on all countries issued as a norm during the remainder of 2010.
The company owns 28.94 percent in Byron Energy, which in turn owns varying working interests, between 10 and 25 percent, in the Eugene Island joint venture in the Gulf of Mexico.
In Trinidad the company owns a 50 percent interest in both the Icacos Deep prospect and the Icacos oilfield. LGO also has a 10 percent stake in the Malta Southern Offshore exploration play.