TIDMLGO
RNS Number : 0211R
LGO Energy PLC
24 June 2015
For Immediate Release, Embargoed until 7 am
24 June 2015
LGO ENERGY PLC
("LGO" or the "Company")
Upgraded Resource Assessment, Goudron Oil Field
The Company is today pleased to announce the results of the
independent review of the LGO operated Goudron Field in southeast
Trinidad conducted on its behalf by Senergy (GB) Limited ("LR
Senergy"). Best estimate oil in place ("STOIIP") within the field
has increased since the previous independent review by Challenge
Energy Limited ("Challenge") in 2012 by over five-fold and is now
estimated to be 805 million barrels ("mmbbls"). Proved (1P) gross
oil reserves in the producing Goudron Sandstone and C-sand
reservoirs has increased by over 110% to 1.54 mmbbls, and the gross
proved and probable reserves (2P) have increased by nearly 60% to
11.37 mmbbls.
Proved (1P) net attributable oil reserves, calculated by the
Company, total 1.47 mmbbls and total proved and probable reserves
(2P) total 11.30 mmbbls.
Neil Ritson, LGO's Chief Executive, commented:
"We are delighted with the steady progress being made in
developing the very significant potential of the Goudron Field,
including the higher reserves now estimated by LR Senergy. We are
especially excited about the far larger oil in place that is now
recognized in the field. As a result we are accelerating our plans
to drill further C-sand and Goudron Sandstone wells beyond the 30
wells already approved and complete studies in order to access this
oil, for example through an EOR scheme, and we anticipate seeing
the proved and probable oil reserves continue to rise over the next
few years."
LR Senergy were commissioned in 2014 to conduct a comprehensive
review of the Goudron Field including all historic and recent
drilling and production activity in the field. Based on that work a
preliminary field development plan has been constructed that seeks
to access, through primary production alone, a best estimate STOIIP
of 490 mmbbls. On this basis reserves have been computed for the
field and are presented in Table 1 below. Recoverable volumes are
expressed as gross and net reserves. Gross volumes are defined as
the total estimated petroleum to be produced from the effective
date of 31 March 2015. Net reserves are defined as the portion of
the gross resources attributable, before royalties and taxes, to
the interest owned by LGO.
Table 1: Reserves Data (million barrels of oil)
Gross Proved Proved Proved, Net Attributable Proved Proved Proved,
(1) and Probable (2) and Probable
Probable and Probable and
Possible Possible
(1P) (2P) (3P) (1P) (2P) (3P)
---------- ------- ---------- ---------- ----------------- ------- ---------- ----------
Reserves 1.54 11.37 23.58 1.47 11.30 23.51
---------- ------- ---------- ---------- ----------------- ------- ---------- ----------
Sources: (1) LR Senergy, June 2015 and (2) LGO Energy, June
2015
In 2013 LGO's local 100% owned subsidiary Goudron E&P
Limited ("GEPL"), which operates the field, was granted improved
royalty terms by the Petroleum Company of Trinidad & Tobago
("Petrotrin") which have now been included in the economic model
for the field reserves. Petrotrin also agreed to extend the term of
the Incremental Production Services Contract ("IPSC") and the
longer contract life to 2024 and beyond is also reflected in the
current reserves estimates.
In evaluating the oil in place, LR Senergy has divided the field
into three zones with different levels of confidence. The historic
field area has the least uncertainty and is where the bulk of the
immediately accessible oil reserves are located. A wider area which
is constrained by the approximately 160 existing wells that have
been drilled on the field since 1927 gives rise to a larger oil in
place estimate and finally an upside area has been defined which
includes areas where there is less well control, but where the
geological model supports the presence of reservoirs in a favorable
structural position to contain oil. These estimates are provided in
Table 2 below.
Table 2: Oil in place Data (million barrels of oil)
Gross Oil in Place (STOIIP)
-------------------- -------------------------------------------------
Low Estimate, Best Estimate, High Estimated,
P90 P50 P10
-------------------- -------------- --------------- ----------------
Historic Field
Area
-------------------- -------------- --------------- ----------------
Goudron Sandstone 50 112 191
-------------------- -------------- --------------- ----------------
C-Sands 68 125 209
-------------------- -------------- --------------- ----------------
Consolidated Total 118 237 400
-------------------- -------------- --------------- ----------------
Well Constrained
Area
-------------------- -------------- --------------- ----------------
Goudron Sandstone 80 170 287
-------------------- -------------- --------------- ----------------
C-Sands 179 320 524
-------------------- -------------- --------------- ----------------
Consolidated Total 259 490 811
-------------------- -------------- --------------- ----------------
Upside Area
-------------------- -------------- --------------- ----------------
Goudron Sandstone 168 343 564
-------------------- -------------- --------------- ----------------
C-Sands 252 462 771
-------------------- -------------- --------------- ----------------
Consolidated Total 420 805 1,335
-------------------- -------------- --------------- ----------------
Source: LR Senergy, June 2015
This table indicates the significant uncertainty that still
remains in the in-place volumes for the field notwithstanding the
significant number of existing wells. The Upside Area is currently
excluded from the LR Senergy reserves analysis due to the limited
appraisal, but represents another potential 150 to over 500 mmbbls
of STOIIP not yet considered for development.
Since the Challenge report in 2012 LGO has drilled a total of 11
new C-sand wells in the field and had a production history from
eight of these new wells in March 2015, including the first new
well GY-664 which has now been on primary, free flowing oil
production for over 12 months. Electric logs for the overlying
Goudron Sandstones have also been acquired in the new wells and
these have been used in the studies, however, no production has yet
been initiated from the Goudron Sandstones as the wells have all
been completed for production in the deeper C-sand interval. The
Company feels that there is considerable potential in the Goudron
Sandstone which has been attributed by LR Senergy with a best
estimate STOIIP of between 112 and 343 mmbbls. As a result the
Company is now preparing plans for the drilling of new Goudron
Sandstone wells as part of its short to medium term development
plans.
Due to data constraints, which are currently being addressed
through data collection in and location of the new wells being
drilled at this time, LR Senergy were not requested to consider the
contingent resources that could be accessed through a future
enhanced oil recovery scheme ("EOR"). In 2012 Challenge estimated
gross upside (3C) contingent resources of 63.2 mmbbls from a STOIIP
of 350 mmbbls associated with a prospective water flood scheme. The
equivalent STOIIP estimated by LR Senergy is in excess of 1.3
billion barrels and therefore the Company feels there is
considerable further upside on the contingent resources compared to
those previously estimated.
Water flooding has been assessed by previous operators on the
field, but it has so far not been considered practical to implement
a pilot project. Water floods have been carried out at the nearby
Navette, Beach and Trinity-Inniss fields and it is considered that
ultimate oil recovery of the Goudron Field could be similarly
enhanced and this has the potential to add significant reserves.
Studies aimed at assessing the most practical and economic means to
access and develop the contingent resources in the field are
planned and are likely to be included in future reserves
reports.
LGO currently has capital available from the undrawn portion of
the BNP Paribas US$25 million loan facility and free cash flow from
the operations of the field. At this time those funds are
considered sufficient to carry out the work program sanctioned by
the LGO board of directors and approved by the Trinidadian
authorities and Petrotrin. Additional sources of capital may be
required to ensure full access to the proved and probable reserves,
and to an EOR scheme designed to access possible reserves and
contingent reserves.
GEPL has a 100% working interest and operatorship in the IPSC of
the Goudron Field. Under the IPSC arrangements an initial volume of
oil each month, the First Tranche Oil, is provided to Petrotrin who
pay a lifting fee to GEPL. The computed First Tranche Oil declines
annually and the volume is currently approximately 40 bopd. Over
the remaining life of the contract the First Tranche Oil is
calculated to be 67,800 barrels and has been subtracted from gross
reserves. All other oil production is sold to Petrotrin within the
Trinidadian tax and royalty regime and royalties are paid in
cash.
Qualified Person's Statement:
The information contained in this announcement has been reviewed
and approved by Neil Ritson, Chief Executive Officer and Director
for LGO Energy plc, who has over 35 years of relevant experience in
the oil industry. Mr. Ritson is a member of the Society of
Petroleum Engineers (SPE), an Active Member of the American
Association of Petroleum Geologists (AAPG) and is a Fellow of the
Geological Society of London.
The estimates provided in this statement are based on the
Petroleum Resources Management System ("PRMS") published by the
Society of Petroleum Engineers ("SPE") and are reported consistent
with the SPE's 2011 guidelines. A copy of the PRMS is available at
http://www.spe.org/industry/reserves.php All definitions used in
the announcement have the meaning given to them in the PRMS.
Enquiries:
LGO Energy plc +44 (0) 203 794 9230
Neil Ritson
Fergus Jenkins
Beaumont Cornish Limited +44(0) 20 7628 3396
Nomad
Rosalind Hill Abrahams
Roland Cornish
FirstEnergy Capital LLP +44(0) 20 7448 0200
Joint Broker
Jonathan Wright
David van Erp
Bell Pottinger +44 (0) 20 3772 2500
Financial PR
Henry Lerwill
Glossary:
1P proved reserves
--------------------- ----------------------------------------------
2P proved plus probable reserves
--------------------- ----------------------------------------------
3P proved plus probable plus possible
reserves
--------------------- ----------------------------------------------
best estimate the most likely estimate of a parameter
based on all available data, also
often termed the P50 (or the value
of a probability distribution of
outcomes at the 50% confidence level)
--------------------- ----------------------------------------------
bopd barrels of oil per day
--------------------- ----------------------------------------------
contingent resources those quantities of petroleum estimated,
as of a given date, to be potentially
recoverable from known accumulations,
but the applied project(s) are not
yet considered mature enough for
commercial development due to one
or more contingencies. Contingent
Resources may include, for example,
projects for which there
are currently no viable markets,
or where commercial recovery is dependent
on technology under development,
or where evaluation of the accumulation
is insufficient to clearly assess
commerciality
--------------------- ----------------------------------------------
C-sand sandstone reservoirs below the pre-Mayaro
unconformity and above the pre-Lower
Cruse unconformity encompassing sandstones
of equivalent age to both the Gros
Morne and the Lower Cruse formations
--------------------- ----------------------------------------------
EOR enhanced oil recovery
--------------------- ----------------------------------------------
Goudron Sandstone sandstone reservoirs above the pre-Mayaro
unconformity
--------------------- ----------------------------------------------
IPSC Incremental Production Service Contract
--------------------- ----------------------------------------------
mmbbls million barrels of oil
--------------------- ----------------------------------------------
proved reserves those quantities of petroleum, which,
by analysis of geoscience and
engineering data, can be estimated
with reasonable certainty to be commercially
recoverable (1P), from a given date
forward, from known reservoirs and
under defined economic conditions,
operating methods, and government
regulations
--------------------- ----------------------------------------------
probable reserves those additional reserves which analysis
of geoscience and engineering data
indicate are less likely to be recovered
than Proved Reserves but more certain
to be recovered than Possible Reserves.
It is equally likely that actual
remaining quantities recovered will
be greater than or less than the
sum of the estimated Proved plus
Probable Reserves (2P)
--------------------- ----------------------------------------------
possible reserves those additional reserves which analysis
of geoscience and engineering data
suggest are less likely to be recoverable
than Probable Reserves. The total
quantities ultimately recovered from
the project have a low probability
to exceed the sum of Proved plus
Probable plus Possible (3P) Reserves,
which is equivalent to the high estimate
scenario
--------------------- ----------------------------------------------
PRMS Petroleum Resources Management System
--------------------- ----------------------------------------------
reserves those quantities of petroleum anticipated
to be commercially recovered by application
of development projects to known
accumulations from a given date forward
under defined conditions
--------------------- ----------------------------------------------
STOIIP or oil stock tank oil initially in place,
in place those quantities of oil that are
estimated to be in known reservoirs
prior to production commencing
--------------------- ----------------------------------------------
This information is provided by RNS
The company news service from the London Stock Exchange
END
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