CERP.L Regulatory News (CERP)

23 Apr 2008 07:00

Leni Gas & Oil PLC23 April 2008 FOR IMMEDIATE RELEASE 23/4/08 LENI GAS & OIL PLC ("Leni Gas & Oil" or the "Company") Expanded Acreage Position in Spain and trial Oil production at Hontomin 2 Further to the announcements made by the Company on 15 November 2007, inrelation to the completed acquisition of Compania Petrolifera de Sedano S.L.("CPS"), the Company today announces that following a review of the potential ofthe existing Exploration acreage, the 50% interest in these licences within theJunta de Castilla y Leon in the Province of Burgos in Spain, covering thepermits "Huermeces, Valderredible and Basconcillos H", have been increased to85% through a farm-in agreement with Tethys Oil A.B. of Sweden. Under the terms of the Farm-in Agreement which is valid from 01 March 2008, theCompany: 1. Leni Gas and Oil retains an 85% equity interest in the licence permits, covering an acreage of 662 sq.kms surrounding the production Ayoluengo field, with proven gas and oil discoveries. The previous Operator estimated the discovered mean reserves at 13 mmboe, however it is necessary to undertake a full assessment of the Exploration licences to identify all prospects and associated volumetrics. 2. The Company has agreed with Tethys Oil A.B. in exchange for the additional equity, to cover their 15% costs of an agreed Preliminary Exploration & Appraisal Program during the next 12 months, which shall undertake a full geological re-interpretation and historical well analysis of the area, in order to develop a full identification of prospects in the area with relative volumetrics and chance of success. 3. The Company has agreed with Tethys Oil A.B. at completion of the Preliminary Exploration & Appraisal Program, all prospects proposed to be explored or developed will be subject to the normal joint venture conditions, wherein, Tethys Oil A.B. shall either cover their 15% equity share of all activity, or have the option to decline involvement in which case their equity will be assigned to CPS, who then shall retain 100% equity interest in the licences. 4. The Company proposes to execute an extended well test on the shut-in Hontomin 2 well in the Huermeces permit, at an estimated cost of €60,000, in order to appraise the future long term production of the well, and to determine the optimum exploitation plan for the reserves in the Hontomin asset which the previous Operator estimated at mean 2mm bbls. Hontomin 2 was drilled by Chevron in the 1960s and produced an average of 113 bbls/d during exploration drilling which only penetrated the flank of the structure. The oil production equipment required to test Hontomin 2 has been ordered and will be commissioned during the next quarter. 5. The Company also proposes to re-enter the Tozo 1 well in the Basconcillos H permit in order to test prospective gas bearing zones, and develop the asset for near term production. The current estimated cost of this re-entry is €617,000, however the Company aims to reduce this proposed expenditure through redesign of the well entry program. The Tozo wells which were drilled in the 1960s and encountered oil saturated sandstone at shallow depths of less than 500 metres, and an un-tested potential gas bearing zone. In addition, the Company has decided to extend the validity period for theHuermeces and Valderredible licences, for an additional three years, to January2011. The Basconcillos H licence is valid until June 2010. David Lenigas, Executive Chairman, commented: "This increase in our position of the CPS exploration licences in Northern Spainis another significant milestone for the Company. "The completion of this agreement builds upon our recently increasing productionfrom the Ayoluengo Field, and specifically increases our position in thesurrounding exploration permits allowing CPS to undertake a fullre-interpretation and analysis of all prospects in the acreage. The explorationacreage has a number of historical oil and gas discoveries and CPS aims toidentify both near term and long term developments to increase our productionposition in Northern Spain." The technical information contained in this announcement has been reviewed andapproved by Fraser S Pritchard, Consultant to Leni Gas & Oil plc (member of theSPE) who has 20 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 PRCharles VivianTel + 44 (0)20 7743 667 Evgeniy ChuikovTel +44 (0)20 3008 5506 This information is provided by RNS The company news service from the London Stock Exchange