CERP Columbus Energy Resources Plc

TIDMLGO

RNS Number : 9364P

LGO Energy PLC

24 February 2016

For Immediate Release, 7 am

24 February 2016

LGO ENERGY PLC

("LGO" or the "Company")

Corporate and Operations Update

LGO Energy plc today provides an update on its oil field operations and corporate funding.

Strategic Review Update

The Company has continued working closely with its advisors in the USA, Wellford Capital Markets, LLC and Height Securities, LLC, on potential strategic investments in the business. Those discussions have now progressed to a point where a non-binding term sheet has been signed with an institution for a US$20 million investment and discussions are continuing to reach a possible binding agreement. Negotiations with other potential investors are also continuing after which the LGO Board will consider entering a binding exclusive funding arrangement with one of the target investors. There is however no certainty that any such financing will be completed.

Separately, the Company is continuing its formal sales process and therefore remains in an Offer Period as defined by the Takeover Code.

Discussions are continuing with the Company's bankers, BNP Paribas ("BNPP" or "Bank"), regarding the extension beyond the end of February of the waiver on payments on the funds drawn down by its wholly owned subsidiary Goudron E&P Limited ("GEPL"). The debt to BNPP remains, as previously announced, in default and on demand.

BNPP have retained funds of US$4 million drawn down by GEPL for the purposes of paying local contractors against a total balance due to the Bank of approximately US$10.4 million. Local creditors currently amount to approximately US$6.5 million of which LGO has agreed to pay several creditors approximately US$1.5 million in LGO shares which have yet to be issued.

Operational Update

The Company continues to produce oil from all three of its existing oil field interests, Goudron, Ayoluengo and Icacos. Group production in 4(th) quarter 2015 averaged 658 barrels of oil per day ("bopd").

Goudron, Trinidad

Goudron Field production in the 4(th) quarter averaged 489 bopd. Operations at Goudron have been restricted to essential maintenance and well work to optimize production and conserve cash in response to the low oil price. All discretional infrastructure and drilling projects are on hold, however, routine workover activities continue to be performed with one rig utilized in the field as necessary. In January 2016 the average production rate in Goudron was 438 bopd with the field showing some decline in the absence of ongoing capital investment.

The Company estimates that at least 200 bopd of production potential is available from existing wells in pending resolution of funding arrangements for workovers. A campaign of 20 new Goudron Sandstone wells at an estimated total cost of US$9 million is also on hold with an estimated incremental production potential of over 1,000 bopd.

The Company is also in discussions with the Petroleum Company of Trinidad and Tobago Limited (Petrotrin) on adjustments to the overriding royalty rates paid on Goudron oil production to better reflect the economics at the current oil price. At present prices and existing overriding royalty rates for Goudron production continues to make a positive cash contribution to the Group with marginal barrels estimated to generate an average net cash after tax and royalties of between US$8 and US$10 per barrel.

Ayoluengo, Spain

Ayoluengo Field production in the 4(th) quarter averaged 154 bopd and has remained at a broadly steady rate with January averaging 162 bopd. As anticipated, the La Lora Concession ("Concession") extension application has now been referred to the Spanish Council of State (Consejo de Estado) to determine the final legal status of the application. It is anticipated that the Council will review the application in the next 3 to 6 months. The current Concession runs until the end of January 2017 when its original 50-year term expires.

Neil Ritson, LGO's Chief Executive, commented:

"Despite the significant and prolonged downturn in the sector generally, the interest in investing in LGO reflects the quality of the underlying portfolio and the low cost production potential of the Company's assets especially in Trinidad. We are continuing to work with all stakeholders to ensure the optimum outcome can be achieved."

Competent Person's Statement:

The information contained in this announcement has been reviewed and approved by Neil Ritson, Chief Executive Officer and Director for LGO Energy plc who has over 38 years of relevant experience in the oil industry. Mr. Ritson is a member of the Society of Petroleum Engineers, an Active Member of the American Association of Petroleum Geologists and is a Fellow of the Geological Society of London.

Enquiries:

 
 LGO Energy plc              +44 (0) 203 794 9230 
 Neil Ritson 
  Steve Horton 
 
 Beaumont Cornish Limited    +44(0) 20 7628 3396 
 Nomad 
 Rosalind Hill Abrahams 
  Roland Cornish 
 
 FirstEnergy Capital LLP     +44(0) 20 7448 0200 
 Joint Broker 
  Jonathan Wright 
  David van Erp 
 Bell Pottinger              +44 (0) 20 3772 2500 
 Financial PR 
  Henry Lerwill 
 
 
 
 

This information is provided by RNS

The company news service from the London Stock Exchange

END

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