LGO Energy plc is pleased to announce its first significant production results from the recompletion of a new well, GY-672, in the shallow oil bearing sandstones of the Goudron formation. The well is flowing naturally to surface at rates up to 60 barrels of oil per day ("bopd") and has exceeding management expectations. Well GY-672, in LGO's 100% operated Goudron Field IPSC, was perforated on 12 August over a 272-foot interval between 1,104 and 1,697 feet MD and has been naturally flowing oil for 40 days.
The shallow Goudron Sandstone reservoir holds an estimated 343 million barrels ("mmbbls") of gross oil in place ("STOIIP") and represents over 40% of the overall current Goudron Field's estimated gross 805 mmbbls oil in place.
Neil Ritson, LGO's Chief Executive, commented:
"We are delighted that well GY-672 has significantly exceeded our original expectations by flowing oil naturally to surface. The Company is now looking to fast track new shallow wells in the Goudron Sandstones by year end. We have quickly and cheaply demonstrated the substantial economic production potential in the Goudron Sandstone, even at low oil prices. We believe that we can drill these shallow wells at low unit cost in less than 10 days per well using existing in-field equipment. LGO looks forward to rapidly capitalizing on this opportunity to continue increasing oil production from the field."
Well GY-672 was originally drilled to the C-sand reservoir and was recompleted in the shallower Goudron Sandstones in August to evaluate the potential for production from this ubiquitous reservoir, which holds 43% of the estimated oil in place within the field. GY-672 is the first new well for over 35 years to be drilled and completed in the Goudron Sandstone and its recompletion was designed to test the viability of production from this widespread shallow reservoir. The well was recompleted with a downhole pump, but unexpectedly flowed oil naturally to surface without the aid of the pump.
The Goudron Sandstone, lying at depths from just below surface to approximately 1,800 feet, is present across most of the field area and has been logged in all 15 new C-sand wells drilled on the field over the last 2 years. The average net oil pay thickness in the new wells drilled and logged to date is 286 feet. Geological control of the Goudron Sandstone is excellent since 160 wells drilling in the field have penetrated the interval.
In the 2015 reserves report prepared for the Company by Senergy (GB) Limited ("LR Senergy") they estimated that the gross P50 STOIIP within the Goudron Sandstone reservoir totals 343 mmbbls of the overall gross P50 STOIIP within the Goudron Field of 805 mmbbls. To date less than 3.5 mmbbls of oil have been extracted from the Goudron Sandstone; a recovery factor to date of approximately 1%. Economic primary recovery rates of at least 5% are anticipated by LR Senergy in their 2015 resources assessment, suggesting considerable upside in future oil reserves.
LGO is now advancing its plans to target the drilling of Goudron Sandstone wells within the field and also to potentially recomplete, or dual complete, several of the recent wells at the Goudron Sandstone level. The Company's own heavy workover rig, which is operated by LGO's wholly owned subsidiary Columbus Energy Services Limited, is available to perform this work following minor upgrades and it is therefore anticipated that Goudron Sandstone drilling could commence shortly with a number of new wells planned by the end of 2015.
An initial selection has been made for the first 10 well locations. These locations are close to existing roads where drilling of simple vertical wells to depths between 500 and 1,800 feet could be carried out without the need for extensive drill site preparations. The Company has recently received approval from the Trinidad and Tobago authorities for the drilling of 30 additional wells at the Goudron Field, increasing the available approved wells, not yet drilled, to 45.
Due to the shallow depth of the net pay, the simple well geometries and the use of a light drilling rig without the need for complicated drill pad preparation, a cost per completed production well of approximately US$400,000 has been estimated. A Goudron Sandstone drilling program is low risk given the amount of geological information available and can be executed quickly and with robust economic returns even at low oil prices. Historically Goudron Sandstone production wells have slow decline rates. Of the legacy wells, drilled between 1927 and 1980 and reactivated by LGO, 48 are producing from the Goudron Sandstone today. Well GY-275, for example, originally completed in 1958 is still producing 24 bopd at a stable rate.
During the next few months the core and pressure data collected from the recent C-sand drilling program will be assimilated and used to plan the next phase of deeper C-Sand oil extraction. In the meantime, new drilling will focus on bringing on low cost oil production from the Goudron Sandstone. Options to access the excellent C-sand reservoir observed in well GY-678 are still being evaluated and will be reported on separately in due course. The future Goudron development program will continue to be managed at a pace consistent with available cash flow.