Leni Gas & Oil is paying up to US$9 million for control of the producing Goudron Field in onshore south-eastern Trinidad and is looking at to ramping up production to 2,000 barrels of oil per day.

The group has also secured a three year Equity Line Facility (ELF) of up to £5 million with Dutchess Opportunity Cayman Fund Ltd (Dutchess), enabling it to obtain funding at its own discretion at any time during the next three years by way of subscription for new ordinary shares at a 5 percent discount to the market price. Currently LGO has not drawn on the ELF facility.

In Trinidad, LGO is acquiring Goudron E&P Ltd (GEPL), a company which holds exclusive rights to acquire the incremental production service contract (IPSC) for the Petroleum Company of Trinidad Ltd (Petrotrin) owned Goudron field, from Sorgenia Trinidad and Tobago Holdings Ltd.

The field lies between the East Moruga and Beach Marcelle fields and has direct access to the Petrotrin oil export pipeline to the Pointe-a-Pierre refinery in western Trinidad. The field was originally discovered in 1927 and was developed form by Texaco between 1956 and 1986 when it passed to Petrotrin. A field reactivation contract was signed in late 2009.

LGO said the field has had very little investment over the last 25 years, and the existing production comes from about 30 wells, of which 12 are on production with beam pumps and the others flow naturally or are periodically swabbed.

Recent production has ranged between 100 and over 200 bopd. The oil reservoirs are generally between 300 and 3,500 feet below surface and the oil is light low sulphur crude with an API gravity ranging between 25 and 55 degrees and a mean of 32 degrees.

Oil in place in the existing producing zones is estimated to be between 120 and 225 million barrels stock tank barrels oil initially in place, with a P50 estimate of 166 mmbbls.

Proven reserves of 1.9 mmbbls are currently estimated within the field area and can be recovered using existing wells and a small number of infill wells. Proven and Probable reserves are estimated at 8.0 mmbbls. Additional recoverable reserves which can be produced from hydraulically fractured wells add a further 13.8 mmbbls.

LGO has assessed the opportunity for an initial work-over programme aimed at improving the production from up to 50 existing wells and estimates that production can be raised to 450-500 bopd through work involving well clean out, limited reperforation and the installation of additional electrical pumps. A preliminary estimate of the cost of that programme, which could take 12 to 18 months to execute, is US$4 million.

LGO has paid Sorgenia an initial US$1 million to acquire all GEPL shares and on completion of the transfer will pay a further US$1 million for the geological, reservoir engineering and environmental studies conducted on the field.

When and if field production reaches 1,000 bopd, LGO will pay Sorgenia another US$1 million and US$2 million if and when it reaches 2,000 bopd. Based on initial field redevelopment plans these levels will be reached in early 2013 and in 2014 respectively.

Finally, a payment of up to a maximum of US$4 million will also be due on transfer of the IPSC.

LGO said additional potential in deeper reservoirs and in underexplored portions of the concession add considerable further reserves potential.

There is also potential for gas production which was previously unexploited due to the absence of a local market, but which could now be exported through existing infrastructure.

Petroleum rights under the IPSC extend down to 5,000 feet subsea. The current term of the IPSC has 8 years remaining and the IPSC contains an extension period of 10 years running to 2030.

LGO chief executive Neil Ritson said: "We feel this offers an exciting opportunity for LGO to make a step change in its growth in Trinidad through both incremental production and exploration.

“Experience gained elsewhere, especially in Spain, will allow us to maximize the opportunities in this field. The simultaneous acquisition of the comprehensive recent studies allows us to move very quickly to exploit these opportunities. The provision of a standby equity facility will provide access to working capital if needed."

The company expects to provide an update on its ongoing operations in Spain shortly, where it is increasing production on the Ayoluengo field.

Tags: Leni Gas & Oil Plc