LGO today announces that plans to drill the first new wells at the Goudron Field have progressed and the Company is working with the authorities to complete all final approvals. Each of the initial two wells is planned to a total depth of over 3,500 feet and each will target known productive intervals.
Neil Ritson, LGO Chief Executive, commented:
"We are delighted that the next phase of our field re-development at Goudron is about to get underway. Drilling of new wells will result in a greatly accelerated increase in oil production. We have so far reactivated 58 wells of the 90 or so available wells and we are on schedule to bring on stream a further 10 wells by early 2014. The drilling of new infill wells however presents by far the greatest potential for production enhancement in the short to medium term."
Drilling Update
The last well drilled in the Goudron Field, GY-658, was drilled by Texaco in 1981. Well GY-658 was then produced until 1986 and was recently placed back on pumped production by LGO at a rate of approximately 20 barrels of oil per day (bopd). The new wells to be drilled are targeting known productive intervals in the Goudron, Gros Morne and Lower Cruse sandstones and are conservatively anticipated to produce at initial rates of at least 60 bopd. Given the extent of advances in drilling technology since the 1980's it is considered possible that initial rates could be considerably higher.
The first well, provisionally designated H-18E J-7, lies within an area of the field where unrecovered oil is expected to be present in the Gros Morne and Lower Cruse sandstones. The Lower Cruse at a depth of 2,800 feet sub-sea is the primary target of the well, which will be deepened to approximately 4,000 feet to ensure all productive horizons are intersected. Based on the offset wells; including GY-188 (250 feet to the north-east) and GY-64 (170 feet to the north-west), net oil sand of 250 feet are prognosed in the Gros Morne and a further 100 feet in the Lower Cruse. The second planned well, H-18E H-6, has similar objectives.
Drilling programmes have been prepared and have been submitted to the authorities. Access road repairs are being undertaken to accommodate the transport of heavy machinery. Each well is expected to take 7 to 10 days to drill. Well evaluation and final completion will be undertaken after the rig has been moved and initial production is planned to commence within 60 days of spudding.
A drilling contractor has been selected and other services are being contracted at this time. The chosen rig is currently undergoing upgrade work and is expected to be available to commence operations at Goudron in the New Year.
Following the drilling and completion of these additional wells the full implementation of the 30 well field redevelopment programme will, subject to financing, be initiated in 2014. In July 2012, Challenge Energy Limited independently assessed the proven and probable recoverable reserves from primary production, prior to new drilling, as 7.2 million barrels. It is anticipated that the execution of a 30 well development campaign will move the majority of those reserves to the proven category and a new competent persons report will be produced in 2014 once new drilling results have been obtained.
Since taking over the operatorship of the field in October 2012, Goudron E&P Limited ("GEPL"), a LGO wholly owned subsidiary, has carried out 58 reactivations and the field is now producing using a combination of beam pumps, progressive cavitation pumps and a single plunger lift pump. The equipment necessary to reactivate a further 13 wells is on site or on short-term order. Additional, infrastructure improvement work at the field continues with the reactivation of Tank Battery Station No. 207 where the existing tanks have been refurbished to provide approximately 1,000 barrels of storage. A permanent camp, including workshops, offices and off duty rest accommodation is currently being constructed and will be commissioned in December.
The recent first anniversary of operations on 18 October was marked by a visit to the field by Senator the Honourable Kevin Ramnarine, Minister of Energy and Energy Affairs of Trinidad and Tobago, His Excellency Arthur Snell, British High Commissioner to Trinidad & Tobago and Mr Khalid Hassanali the President of the Petroleum Company of Trinidad & Tobago Limited ("Petrotrin"). GEPL announced that it had produced 59,339 barrels of oil in the first year and was confident that with the drilling of new wells, production of over 1,000 bopd could be achieved in late 2014.
Funding for the first two wells is already available from existing cash resources, backed by additional borrowing capacity under existing loan arrangements. Discussions are continuing with both Meridian SEZC and with other several commercial lenders in order to determine the best source of medium term debt funding for the larger development programme. Due to the improved royalty and tax allowances previously announced, the Company now anticipates requiring less than the US$20 million initial loan drawdown and will make a further announcement when senior debt facilities are finalised.
LGO holds a 100% interest in the Goudron Field and all such estimates therefore both gross and net to the Company.
