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UPDATE - Leni Gas & Oil soars as production from new Goudron well beats expectations

Published: 21:08 02 Jun 2014 AEST

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Leni Gas & Oil (LON:LGO) shares are now up more than 200% since the beginning of April, thanks to the emphatic success of the first new well on the Goudron field in Trindad.

Already the well encountered thicker-than-expected Goudron sands, and successfully found oil in the deeper the Gros Morne and the Lower Cruse Sands.

Today, the latest update on the GY-664 well revealed strong, expectation-beating oil flows. 

Neil Ritson, Leni’s chief executive, said: "This is a very significant outcome and I am sure it will be completely transformational for the field and the company.

"We fully expect many more similar results as the drilling campaign progresses and indeed well GY-665 [the second well] is already showing considerable potential."

GY-664 is now producing at a stabilised free flowing, post-clean up, rate of 240 barrels of 37 API oil per day.

Initially, the well flowed naturally at a rate up to 326 barrels of oil per day (bopd) before settling down to 240 bopd after a number of flow tests at various choke settings.

The significance of this apparent ‘over achievement’ is reflected in comments from Barney Gray, analyst at Old Park Lane Capital, which rates LGO as a ‘buy’ with a 3.3p target.

“Our target price for LGO is based on new wells commencing production at 90 bopd and declining thereafter,” the analyst said in a note.

“If the first tranche of new wells in the current programme perform as well as GY-664, Goudron output will be accelerated significantly and we will be in a position to upgrade our target price for the shares.”

LGO has already begun drilling the second of thirty new wells. The GY-665 well is now at a depth of 1,606 feet and has encountered 310 gross feet of oil sand in the Goudron target.

GY-665 is located just 800 feet from the GY-664 location, and three further wells will be drilled from the same pad.

It is believed that modern well completion methods were partly responsible for the GY-664’s impressive early production rates and no doubt investors will be watching upcoming results to see whether the success can be repeated.

On AIM, LGO shares were up 0.54p or 36% trading at 2.03p each by midday.

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