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LGO to acquire Tabaquite Block onshore northern Trinidad

26th November 2014

LGO has signed a binding sale and purchase agreement (SPA) to acquire 100 per cent of the issued shares of Tabaquite Exploration & Production Company Limited (TEPCL) from Trinity Exploration & Production, with TEPCL shortly expected to receive a licence to the Tabaquite Block, the most northerly onshore producing block in Trinidad, which contains a number of existing known producing oil and gas fields which LGO plans to reactivate and expand through new drilling.

LGO to acquire Tabaquite Block onshore northern Trinidad
The Tabaquite Block covers 7,502 acres and contains four known oil and gas fields (Piparo Field, Old Field, New Field and Gas Field)

"We are delighted to add the Tabaquite Block to our portfolio in Trinidad,” said Neil Ritson, LGO's chief executive.

LGO has identified approximately 30 well reactivation targets and there is considerable infill drilling potential within the block.

The Tabaquite Block covers 7,502 acres and contains four known oil and gas fields (Piparo Field, Old Field, New Field and Gas Field).

“The Tabaquite Fields represent excellent candidates for reactivation and whilst the fields have become non-core to Trinity, LGO's proven ability to reactivate oil fields and successfully drill infill wells makes this acquisition a natural extension of our asset base in Trinidad.  Operations to reactivate wells could commence as early as January 2015 and the drilling on new infill wells later that year," added Ritson.

The block is located 27 kilometres from the Pointe-a-Pierre refinery and is only 20 kilometres from the main highway between Port of Spain and San Fernando.

The known fields have had approximately 300 original wells drilled, and existing production has averaged approximately 25 barrels of oil per day (bopd) year to date from a small number of active wells.

Production is largely derived from the Nariva Formation Sandstone at depths between 1,000 and 2,500 feet.

There is an existing Certificate of Environmental Compliance ("CEC") granted in 2007 for the drilling of 3 exploration wells and 17 infill or replacement wells.

Oil quality ranges from 35 to 45 degree API.

"We are also close to executing the previously announced acquisition of the Trinity-Inniss Incremental Production Service Contract and expect to announce the completion of the transaction shortly."

The completion of the SPA is subject to a number of commercial conditions and standard regulatory approvals including agreement with Trinity on the fiscalisation of oil from the field, and the receipt of approval from the Ministry of Energy and Energy Affairs (MOEEA) and the Petroleum Company of Trinidad and Tobago (Petrotrin).

TEPCL is presently 100 per cent owned by Trinity.

The Tabaquite Block covers an area of 7,502 acres in Central Trinidad and contains four existing known hydrocarbon accumulations known as the Piparo, Old, New and Gas Fields.

These fields are the most northerly onshore fields found in Trinidad to date and were originally discovered in 1911.

Operations for the last few years have been conducted by Coastline International Inc. (Coastline), a subsidiary of Trinity.

A new licence including Coastline's original interests and incorporating the deep petroleum rights is anticipated to be granted by the MOEEA to a joint venture partnership between TEPCL, a newly incorporated company which has yet to trade (80 per cent), and the Petroleum Company of Trinidad and Tobago (Petrotrin) (20 per cent).

TEPCL will be operator on behalf of the joint venture.

In recent years these oil fields have been produced largely by means of swabbing existing wells.  Production has averaged approximately 25 bopd year to date.

The new draft licence carries an obligation to acquire 65 kilometres of new 2D seismic data and to drill one new shallow exploration well.

Petrotrin is financially carried on these exploration commitments with LGO bearing 100 per cent of the cost for its 80 per cent beneficial interest.  All other costs and revenues are shared in proportion the working interests in the joint venture.

Oil produced from the Block will be transported by road to a suitable fiscalisation point before being pumped by pipeline to the Point-a-Pierre refinery.  For an initial period of 12 months Trinity, through its subsidiary Lennox Production Services Limited, has agreed to process oil from the Tabaquite Block at their Fyzabad Block (FZ2) tank farm on LGO's behalf.

Based on unaudited financial accounts of the previous Trinity owned operator, Coastline, to 31 December 2013, crude oil sales from the block totaled USD 1.1m in 2013.

LGO has agreed to pay a total of USD 2m to Trinity.

The asset purchase will be funded by cash in bank and from operating cashflow from the enhanced oil production from the Goudron field, which is now delivering significant cashflow for the group.

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