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Leni Gas & Oil set for step-change in production when new wells come online

Published: 18:00 25 Aug 2014 AEST

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Investors will soon see the fruits of Leni Gas & Oil’s (LON:LGO) labours at the Goudron field, onshore Trinidad, which could soon be producing about 1,000 barrels of oil per day.

Drilling of the GY-668 well is now being nearing its target depth.

The company last week reported that the well, the fifth of thirty new wells scheduled in the current programme, had encountered 191 feet of net oil pay in a secondary target and was nearing the priority Gros Morne reservoirs.

Crucially, GY-668 is the fourth and final well at the current drilling location. Once this phase of work is finished the site can be cleared and company can begin to bring the set of wells online.

“This route, where we’re drilling on pads, is the right economic thing to do and it is the thing to do environmentally," chief executive Neil Ritson told Proactive Investors.

“But it does create this hiatus (between two or three months) in production which is obviously quite a strain for people to be patient as we wait for production results.

“That is what everybody is now waiting for, including us.”

Production stats are due by mid-September and once the well’s come online the Goudron field will see a significant jump in production.

Goudron currently produces around 450 barrels a day, from existing wells that were recently worked over and the first new well of the current programme.

GY-664, the first of thirty new wells, is now producing at a constrained rate of about 200 barrels per day in order to optimise recoveries.

It is expected, based on observations during the programme thus far, that the next four wells will be very similar, if not better in some ways, to GY664. 

“Everything we’ve had from this pad is encouraging.

“What we’ve seen has been at least a good – and in most cases – far better than our pre-drill estimates. But, we do still need to see ‘where the rubber hits the road’ when it comes to the actual production results.”

Leni has, indeed, already said the four latest wells have had similar production potential to GY-664.

It would not be unreasonable, therefore, for investors to roughly extrapolate that the additional wells could potentially add as much as 800 barrels of oil production per day.

Leni itself puts forward a cumulative forecast of approximately 500 barrels per day for these wells, though chief executive Neil Ritson acknowledges that the company’s view is conservative.

“It will hopefully be better than that, though it is not very likely to be worse.”

Importantly this four well pad firmly gives Leni momentum on this ‘production line’ style development of the Goudron field. 

As wells GY-665 through 668 are being brought online drilling will be again be underway at the next locations. 

The development will, as such, make a number of similar steps up like this over the course of the thirty well programme.

At the same time the recently struck deal to acquire the nearby Trinity Innis field will also boost group production once it completes, anticipated in second half of next month.

Whilst the field is more mature - over 20mln barrels have already been recovered there - Ritson describes as “very good add on business”.  Before Leni carries out any enhancements or work-overs, the field currently produces around 150 barrels a day. 

Although distinctly different in terms of geology Trinity Inniss is “very similar” to Goudron in a number of ways.

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