CERP.L Regulatory News (CERP)

22 Apr 2008 07:00

Leni Gas & Oil PLC22 April 2008 FOR IMMEDIATE RELEASE 22/04/08 LENI GAS & OIL PLC ("Leni Gas & Oil" or the "Company") Enhanced and Increased Production Prospectivity Identified at Ayoluengo Field Leni Gas & Oil Plc (AIM: LGO), an oil and gas development and productioncompany, announces today that the geology and production history of its whollyowned Ayoluengo Field in Spain has been reviewed by TRACS International, theAberdeen based international consultancy services company that specialises inthe petroleum industry. TRACS has re-interpreted the historic data from thefield to identify increased production prospectivity. After over 40 years ofproduction the field has produced 17 million barrels of oil ("mmbo") from aSTOIIP ("stock tank oil initially in place") in the range of 93-116 mmbo,representing an average recovery of only 17%, which is low for a good qualitysandstone reservoir. A more detailed account from the TRACS International report is noted below: Enhancement Potential At present, the Ayoluengo Field is producing an average of 37degrees API ("American Petroleum Institute") oil at a low water cut. The current lowproduction rates are due to low reservoir pressure and not depletion.Consequently the low production recovery from the field and low water cutindicates that there is considerable enhancement potential both in terms ofincreasing recovery from potentially un-depleted zones and in energising thefield to stimulate increased production. Proven Recovery Methods TRACS International has reviewed the geological and production history of theAyoluengo Field to investigate whether additional oil could be produced usingproven secondary recovery techniques. The conclusion is that there is potentialto increase oil production through a combination of proven recovery methodswhich to date have not been used. These methods include the use of waterinjection to increase reservoir pressure and sweep, the drilling of shallowinfill wells to reach potentially un-depleted zones, and stimulation of existingwells to improve individual well productivity. The report has identified multiple stacked reservoirs sands which shall requiredifferent recovery techniques to maximise production. The main historicalproduction within the Field is from the Ayoluengo reservoir zones which haveSTOIIP estimates of: o P90 27 MMbbls o P50 32 MMbbls o P10 38 MMbbls TRACS believes the best method to enhance production is via water injection tore-energise the zones and increase production as these zones have the highestnet to gross and lateral connectivity. Initial estimates on the incrementalrecoverable volumes from re-energising the Ayoluengo zones by water injectionare an additional: o P90 - 2.5 MMbbls o P50 - 4.0 MMbbls o P10 - 5.8 MMbbls. The Sargentes reservoir zones which STOIIP estimates of P90 - P50 - P10 45 - 54- 63 MMbbls respectively, is best exploited through targeted infill drillingwhich can be executed at low cost with shallow reach drilling. The estimate onthe incremental recoverable reserves from the Sargentes has not been undertakenas yet, though it would not be unreasonable to assume 10% additional recoverymay be achieved, namely a P90 - P50 - P10 of 4.5 - 5.4 - 6.3 MMbblsrespectively. Other means of increasing production have also been identified includingstimulating and re-perforating individual wells to increase production rates,and thus the overall productivity of the zones identified for enhanced recovery. It is recommended to undertake various low cost pilot programmes to assess thepotential additional recovery from water injection, to improve wellboreproductivity and to undertake detailed analysis of the Sargentes zones fortargeted shallow drilling. Once these pilots are concluded, full field programscan be scoped in order to maximise recovery and bring the potential incrementalreserves on production. Study Work Phase It is recommended now to commence the next phase of study work which is designedto implement and monitor these pilots and prepare for further work activity toincrease production. This work shall include: • a more detailed assessment of STOIIP mapping to assist with the targeting of water injectors • detailed assessment of the Sargentes reservoir zones to identify a targeted infill drilling campaign; • detailed evaluation of production data to estimate recovery factors from individual reservoirs and opportunities for infill drilling and water injection. • evaluation of re-perforation performance and identification of new perforation opportunities to open up new production zones • review of production technology data to understand the current technology used on the field, and provide recommendations to support all future well activity and equipment choices. • monitoring and evaluation of water injection and perforation pilots In addition, it is proposed the next phase of study work investigates theviability to use the Ayoluengo zones as potential gas storage to identify aresidual value for the Field once the enhanced production has been achieved. TheAyoluengo zones have the highest net to gross and lateral connectivity in theField, and are the best location for long term gas storage and to meet theincreasing domestic demand in Spain for such sites. David Lenigas, Executive Chairman, commented: "This initial re-evaluation of the Ayoluengo Field validates the substantialpotential of this asset and thus our acquisition. Proven oilfield secondaryrecovery techniques have never been used on the Field and we aim tosubstantially increase production in the near term, and use the experience todevelop the surrounding exploration licences. As the Ayoluengo Field also haslong term potential for gas storage, we are about to embark on a game changingplay in one of the oldest oil and gas operating basins in Spain. On the basis of the findings of the TRACS report; Leni Gas & Oil will now beassessing the best methods to increase and accelerate oil production to 1,000bbls per day or above in the coming months." The technical information contained in this announcement has been reviewed andapproved by Andy Spriggs, Managing Consultant at TRACS International (member ofthe SPE and PESGB) who has 19 years relevant experience in the oil industry For further information, please contact: Leni Gas & Oil PlcDavid Lenigas, Executive ChairmanTel +44 (0) 20 7016 5100 Beaumont Cornish LimitedRoland CornishRosalind Hill AbrahamsTel +44 (0) 20 7628 3396 Pelham Public RelationsCharles VivianTel + 44 (0)20 7743 667Evgeniy ChuikovTel +44 (0)20 3008 5506 This information is provided by RNS The company news service from the London Stock Exchange