As it prepares to acquire deep petroleum rights in the Cedros Peninsula for US$2.5 million from Beach Oilfield Ltd (Bolt), LGO Energy plc said it will be exploring depths below 7,000 feet.
To put in perspective, the BHP Billiton-BG Group consortium that was awarded two deep water blocks in August, have committed to drilling 7,218 feet (2.2 kilometres) at sea. On land, the only deep onshore well, FRM-1, was drilled in 2008 to a depth of 12,301 feet. It found oil at around 11,700 feet, and was later lost for mechanical reasons.
LGO is now making a refundable partial payment of US$400,000 in 6,227,329 ordinary shares to Bolt. This secures continued exclusivity for LGO to complete the transaction with an extended long-stop date of September 30, 2015, for the transfer of the deep rights.
LGO CEO Neil Ritson said: "We are currently preparing to fly a major airborne survey over all the areas under lease in 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 programme in the area."
LGO announced on October 30 that the company successfully raised �2.3 million before expenses, by way of the placement of 48,418,167 new ordinary shares on the London Stock Exchange at a placing price of 4.75 pence per share "to assist with accelerating LGO's oil exploration efforts on its various Cedros licenses in Trinidad including the recently announced airborne gravity survey."
In a letter of intent announced on June 20, 2013, "LGO and Bolt agreed to work together to cross-assign their various interests to explore the deep horizons below 7,000 feet." They also 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 Ltd, 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 September 30, 2015.
The remaining US$2.1 million LGO has for Bolt "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 September 30, 2015."Should these not be achieved by this date, then the initial consideration (the US$400,000) shall be repayable to LGO, guaranteed by Dr Krishna Persad," LGO said.
If all goes according to plan, on completion, LGO will grant Bolt a gross overriding royalty of 5 per cent 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.
LGO said: "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."
