LGO announces the signing of a further agreement with Beach Oilfield Limited (BOLT) concerning the acquisition of BOLT's deep petroleum rights in the Cedros Peninsula (Deep Rights). The total consideration remains as previously announced at US$2,500,000, of which LGO is now making a refundable partial payment of US$400,000 in shares. This secures continued exclusivity for LGO to complete the transaction with an extended long-stop date for the transfer of the Deep Rights of 30 September 2015.
Neil Ritson, LGO's Chief Executive, commented:
"We are currently preparing to fly a major airborne survey over all the areas under lease in the Cedros, and further afield, and are delighted to have agreed a further step in securing LGO's exclusive access to the area, which we consider to have major untapped potential for future oil discoveries. This is one of the most underexplored parts of Trinidad however due to its close geological and geographical proximity to the major accumulations in Venezuela and offshore in the Gulf of Paria LGO is keen to pursue an active exploration program in the area."
Background
In the Letter of Intent (LOI) announced on 20 June 2013, LGO and BOLT agreed to work together to cross-assign their various interests to explore the deep horizons below 7,000 feet. Also under the LOI, it was agreed to share data, create an Area of Mutual Interest and for LGO to employ Dr Krishna Persad as a consultant through South Western Oil Limited, agreements for which were subsequently entered into by the parties. In 2014, a surface geochemistry sampling survey was conducted jointly by the parties.
The Deep Rights agreement has not yet been concluded however the parties are now in agreement that the required licences can be obtained and have therefore agreed that BOLT will sell the Deep Rights to LGO and exclusivity has been extended to 30 September 2015.
Consideration and further Terms of the Acquisition
- LGO has agreed to pay a total of US$400,000 to BOLT (Initial Consideration) in part payment of the US$2.5 million sum agreed in 2013 for the purchase of the rights below 7,000 feet in the leases owned by or obtained by BOLT.
- The Initial Consideration will be satisfied by the issue to BOLT of 6,227,329 new LGO Ordinary Shares of 0.05p each ("Ordinary Shares") issue at a price of 4.05p.
- The remaining US$2.1 million will be payable in some combination of cash and shares at LGO's discretion subject to the effective transfer of the Deep Rights and the receipt of an appropriate exploration and production licence by 30 September 2015.
- Should these not be achieved by this date, then the Initial Consideration shall be repayable to LGO, guaranteed by Dr. Krishna Persad.
- LGO will on completion grant BOLT a gross overriding royalty of 5% on the gross production of petroleum won and saved pursuant to the Deep Rights.
- LGO is undertaking to drill an exploration well into the horizons of the Deep Rights within 72 months of completion.
Cedros Peninsula
The Cedros Peninsula, where LGO already has production from the shallow Icacos Oilfield, is significant as it is largely unexplored with regard to deep potential and in its close proximity to the prolific East Venezuelan Basin of which the Cedros is geologically a part. The only deep onshore well, FRM-1, drilled in 2008 to a depth of 12,301 feet found oil shows in the Lower Cruse and Lengua formations at around 11,700 feet before the well was lost for mechanical reasons. The Herrera Sandstone formation was not reached. The en-echelon structures offshore at Soldado have yielded major oil fields up to over 200 million barrels and it is LGO's view that similar structures may lie onshore beneath the Cedros.
Following the transaction envisaged in this agreement, which covers approximately 5,450 acres, LGO will hold rights to approximately 10,900 gross acres of petroleum leases in the Cedros Peninsula where it has recently conducting a soil geochemistry study in collaboration with BOLT. The Company is also integrating all existing well and seismic data prior to planning a deep (approximately 12,000 feet) exploration well to test the presence of potentially oil bearing Lower Cruse and Herrera Sandstones that have previously been successfully tested by wells offshore in the Soldado complex of oil fields. The recently announced Full Tensor Gravity Gradiometry data which will be acquired in late 2014 and early 2015 will be deployed alongside existing data to improve structural interpretation.
