Leni Gas & Oil
www.lenigasandoil.com
www.lenigasandoil.com
Leni Gas and Oil plc is an international oil and gas exploration, development and production company headquartered in London, trading on the FTSE AIM All-Share. The Company has assets in the US Gulf of Mexico, Spain, Trinidad, Hungary and Malta. LGO’s strategy is to deliver growth through the acquisition of proven reserves and the enhancement of producing assets in low risk countries.
Leni Gas & Oil: seeing is believing
David Lenigas certainly knows a thing or two about building a company from scratch. Leni Gas & Oil is a case in point. In just two years, the company has been transformed from an unlisted cash shell to a company with equity in an interesting range of oil and gas assets in the Americas and Europe. Lenigas’ timing for this oil and gas junior was pretty good.
Listing in 2007, the company raised £23.56 million between IPO and July 2008 at 3 pence, 6 pence and 8 pence. With the capital raised, a string of investments were made giving the company exposure to both cash flow from production and reserve growth through development interests, as well as some blue sky in earlier stage projects. The timing was good because by the time the markets imploded in August/September 2008 and oil and gas prices commenced a sharp downward correction, Leni Gas & Oil was already cashed up and generating cash flow, allowing it to focus on increasing production rather than worrying about how it was going to pay for its next lunch.
This is essentially still the case 9 months later, and underlined by a recent AGM where the company received shareholder approval to buy back its own shares in the market if it wished to do so. There aren’t many oil and gas juniors, let alone mid-tier producers, who are actively considering share purchases in the market.
How did Leni Gas & Oil find itself in this position so quickly? The answer is simple: nimble acquisitions.
In the first flurry of deals, Leni Gas & Oil acquired interests in projects with other AIM listed juniors, Ascent Resources (AIM:AST), Leed Petroleum (AIM:LDP) and Mediterranean Oil & Gas (AIM: MOG).
From Mediterranean Oil & Gas, where Lenigas used to be Chairman, the company picked up a 10% interest in high potential southern offshore Malta block. Malta is pretty hot territory for oil and gas exploration in Europe – its close proximity to energy hungry markets in Continental Europe and high prospectivity to Tunisia and Libya have placed it high on the wish list of many first and second tier companies. But Malta is some way off from delivering a drill result and is certainly high risk – high reward stuff. Perhaps the kind of acreage a junior could exclusively focus on a few years ago, but nowadays this type of asset requires balancing with production cashflow assets in any junior’s portfolio. This is exactly what Leni Gas & Oil has with Malta the only non producing asset in the portfolio.
From Ascent Resources the deals were in Spain and Hungary. In Hungary the company has a 7.27% stake in Ascent’s portfolio, which includes the Peneszlek Gas redevelopment project. Gas is currently being produced from the Pen-104a well, and is connected to MOL’s gas pipeline network. Looking on the horizon, the partners in the field are looking to at least quadruple production from the current 3 million standard cubic feet of gas per day (mmscfd) through drilling four additional targets that can be tied into the current facilities.
In Spain, Leni Gas & Oil acquired Ascent’s 88.75% interest in the Ayoluengo oilfield, and subsequently acquired the remaining interest and acquired an 85% interest in several surrounding licences. The Ayoluengo Oilfield was developed by Chevron in the 1960’s and full production facilities exist for a 10,000 bbl per day operation. Ayoluengo is Spain’s largest onshore oilfield.
Ayoluengo is fast turning into a very successful transaction for the company with the aim to rehabilitate the field and return production to Chevron’s plateau of 2,500 bbl per day. Several previous owners used the field as a way to acquire a producing asset in Europe that would in turn allow them to bid for other projects where a key criteria to submitting a tender was oil and gas production experience. Leni Gas & Oil has turned the project on its head however, and had opted to work-over shut in and underperforming oil wells to boost production. So far so good; production has risen threefold from less than 100 barrels of oil per day (bopd) in 2007 to 300 bopd in March. The company is targeting production 1,000 bopd by mid-year as the final stage of the first phase field stimulation program is completed. The next phase will see production rise to 1,500-2,000 bopd by year end with the ultimate goal to reach 2,500 bopd and book reserves of 15 million barrels when several new wells are drilled in 2010 to optimise field production. Lenigas is so convinced of hitting targets that the company releases monthly production updates so investors can see progress achieved. Seeing is believing…
There is another potential high reward twist to the Ayoluengo field story. The company concluded a joint development agreement in March with the Spanish Fundación Ciudad de la Energia (CIUDEN) to research, test and implement carbon dioxide (CO2) sequestration pilot sites in Spain. Carbon sequestration – pumping carbon dioxide into depleted reservoirs – is an area of considerable interest in Europe at the moment. For Leni Gas & Oil the benefits could be two-fold. First it would clearly benefit from the revenues if the project moved ahead, as it would effectively be paid a fee for storing the carbon dioxide. Second, by pumping CO2 into the field, the pressure inside the field would increase, which in theory should boost recoverable reserves from the field. How this will play out is anyone’s guess, but it if went ahead, it appears to be a win-win situation for Leni shareholders.
The company’s second major area of focus is the Gulf of Mexico and Gulf Coast region where it has built up a 28.94% stake in Byron Energy, a private company who in turn hold a 25% interest in Leed Petroleum’s (AIM: LDP) interests, giving Leni Gas & Oil a 7.25% interest in Leed Petroleum’s gross output. Byron Energy has also recently completed additional investments independent of Leed. A competent person’s report (CPR) in January 2009 calculated that Byron Energy’s share of proven and probable (P1+P2) gas reserves were 8 million barrels of oil equivalent (boe), rising to 23 million boe if you add in possible reserves (P3), these figures excluding the recent Leed and Byron investments.
The Eugene Island development is currently producing approximately 6,000 boepd on a restricted choke form three development wells, and there is capacity to near double this production. WH Ireland recently noted that reserves are large enough to double the current capacity of the 15,000 boepd handling plant, suggesting there is plenty more to come from this investment.
Last but not least in the list of investments is a 50% interest in the Icacos Oilfield, onshore, Trinidad. The plan at Icacos is similar to Spain, where lifting production through well stimulation is the name of the game. There is also the potential for additional discoveries on the block – seismic is planned – possibly later this year.
In line with the sector and the oil price, shares in Leni Gas & Oil have recovered from their low of 2 pence earlier this year, and are currently testing the 6 pence area. WH Ireland reckon the company is worth a bit more, and has placed a target price of 12 pence based on the potential to continue adding to the reserve and production profile of the company. Rome wasn’t built in a day, but David Lenigas has certainly built up a good spread of low risk, cash flow projects and higher risk, high impact interests in a comparatively short space of time.
Listing in 2007, the company raised £23.56 million between IPO and July 2008 at 3 pence, 6 pence and 8 pence. With the capital raised, a string of investments were made giving the company exposure to both cash flow from production and reserve growth through development interests, as well as some blue sky in earlier stage projects. The timing was good because by the time the markets imploded in August/September 2008 and oil and gas prices commenced a sharp downward correction, Leni Gas & Oil was already cashed up and generating cash flow, allowing it to focus on increasing production rather than worrying about how it was going to pay for its next lunch.
This is essentially still the case 9 months later, and underlined by a recent AGM where the company received shareholder approval to buy back its own shares in the market if it wished to do so. There aren’t many oil and gas juniors, let alone mid-tier producers, who are actively considering share purchases in the market.
How did Leni Gas & Oil find itself in this position so quickly? The answer is simple: nimble acquisitions.
In the first flurry of deals, Leni Gas & Oil acquired interests in projects with other AIM listed juniors, Ascent Resources (AIM:AST), Leed Petroleum (AIM:LDP) and Mediterranean Oil & Gas (AIM: MOG).
From Mediterranean Oil & Gas, where Lenigas used to be Chairman, the company picked up a 10% interest in high potential southern offshore Malta block. Malta is pretty hot territory for oil and gas exploration in Europe – its close proximity to energy hungry markets in Continental Europe and high prospectivity to Tunisia and Libya have placed it high on the wish list of many first and second tier companies. But Malta is some way off from delivering a drill result and is certainly high risk – high reward stuff. Perhaps the kind of acreage a junior could exclusively focus on a few years ago, but nowadays this type of asset requires balancing with production cashflow assets in any junior’s portfolio. This is exactly what Leni Gas & Oil has with Malta the only non producing asset in the portfolio.
From Ascent Resources the deals were in Spain and Hungary. In Hungary the company has a 7.27% stake in Ascent’s portfolio, which includes the Peneszlek Gas redevelopment project. Gas is currently being produced from the Pen-104a well, and is connected to MOL’s gas pipeline network. Looking on the horizon, the partners in the field are looking to at least quadruple production from the current 3 million standard cubic feet of gas per day (mmscfd) through drilling four additional targets that can be tied into the current facilities.
In Spain, Leni Gas & Oil acquired Ascent’s 88.75% interest in the Ayoluengo oilfield, and subsequently acquired the remaining interest and acquired an 85% interest in several surrounding licences. The Ayoluengo Oilfield was developed by Chevron in the 1960’s and full production facilities exist for a 10,000 bbl per day operation. Ayoluengo is Spain’s largest onshore oilfield.
Ayoluengo is fast turning into a very successful transaction for the company with the aim to rehabilitate the field and return production to Chevron’s plateau of 2,500 bbl per day. Several previous owners used the field as a way to acquire a producing asset in Europe that would in turn allow them to bid for other projects where a key criteria to submitting a tender was oil and gas production experience. Leni Gas & Oil has turned the project on its head however, and had opted to work-over shut in and underperforming oil wells to boost production. So far so good; production has risen threefold from less than 100 barrels of oil per day (bopd) in 2007 to 300 bopd in March. The company is targeting production 1,000 bopd by mid-year as the final stage of the first phase field stimulation program is completed. The next phase will see production rise to 1,500-2,000 bopd by year end with the ultimate goal to reach 2,500 bopd and book reserves of 15 million barrels when several new wells are drilled in 2010 to optimise field production. Lenigas is so convinced of hitting targets that the company releases monthly production updates so investors can see progress achieved. Seeing is believing…
There is another potential high reward twist to the Ayoluengo field story. The company concluded a joint development agreement in March with the Spanish Fundación Ciudad de la Energia (CIUDEN) to research, test and implement carbon dioxide (CO2) sequestration pilot sites in Spain. Carbon sequestration – pumping carbon dioxide into depleted reservoirs – is an area of considerable interest in Europe at the moment. For Leni Gas & Oil the benefits could be two-fold. First it would clearly benefit from the revenues if the project moved ahead, as it would effectively be paid a fee for storing the carbon dioxide. Second, by pumping CO2 into the field, the pressure inside the field would increase, which in theory should boost recoverable reserves from the field. How this will play out is anyone’s guess, but it if went ahead, it appears to be a win-win situation for Leni shareholders.
The company’s second major area of focus is the Gulf of Mexico and Gulf Coast region where it has built up a 28.94% stake in Byron Energy, a private company who in turn hold a 25% interest in Leed Petroleum’s (AIM: LDP) interests, giving Leni Gas & Oil a 7.25% interest in Leed Petroleum’s gross output. Byron Energy has also recently completed additional investments independent of Leed. A competent person’s report (CPR) in January 2009 calculated that Byron Energy’s share of proven and probable (P1+P2) gas reserves were 8 million barrels of oil equivalent (boe), rising to 23 million boe if you add in possible reserves (P3), these figures excluding the recent Leed and Byron investments.
The Eugene Island development is currently producing approximately 6,000 boepd on a restricted choke form three development wells, and there is capacity to near double this production. WH Ireland recently noted that reserves are large enough to double the current capacity of the 15,000 boepd handling plant, suggesting there is plenty more to come from this investment.
Last but not least in the list of investments is a 50% interest in the Icacos Oilfield, onshore, Trinidad. The plan at Icacos is similar to Spain, where lifting production through well stimulation is the name of the game. There is also the potential for additional discoveries on the block – seismic is planned – possibly later this year.
In line with the sector and the oil price, shares in Leni Gas & Oil have recovered from their low of 2 pence earlier this year, and are currently testing the 6 pence area. WH Ireland reckon the company is worth a bit more, and has placed a target price of 12 pence based on the potential to continue adding to the reserve and production profile of the company. Rome wasn’t built in a day, but David Lenigas has certainly built up a good spread of low risk, cash flow projects and higher risk, high impact interests in a comparatively short space of time.
