Trinidad and Tobago are very well established areas for oil and gas activities. While culturally part of the West Indies, these islands find themselves geologically part of Venezuela and this fortuitous location is responsible for the wealth of oil that is to be found there. But while so much attention has been placed on offshore drilling in the last few years, there has been less focus on the onshore opportunities to be had, which has created a niche for the right kind of company.

WRITTEN BY AMY TOCKNELL

FOCUSED FIRMLY ON FIELD REACTIVATION

www.littlegatepublishing.com

LGO ENERGY02074 400 645

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Founded by pioneer David Lenigas in 2007, the company’s focus has always been firmly on field reactivation, “The business model that we use has worked from day one,” Neil explains,

“We locate oil fields that have a proven reserve of oil that, for some reason, hasn’t been fully exploited, for economic, political or even geographic reasons and we bring them back to life.”

Often, onshore oil opportunities that were worked prior to the 60s and 70s ceased operation for the simple reason they lacked the equipment and technology to properly access the deposits of oil. Many decades later, LGO Energy are now approaching the same fields with better equipment for not only locating the best reserves, but also the better technology for production, “There’s always considerable potential to develop further.”

Spain was the location of their first asset, a country not particularly well known for its oil. The Ayoluengo field, in Spain, is really the only one there but it possesses a long history of oil production that stretches back to the 1960s, “A total of 54 wells were drilled within the field boundary north of Burgos, targeting reserves in mostly Purbeck aged sandstone formations,” Neil explains.

These drill sites located oil at between 900 and 1400 metres below surface and peak production of 5,900 barrels of oil per day (bopd) was achieved in 1969 however by the late 1980s, production had fallen to below 2,500 bopd. Since that time, a lack of further investment has seen production levels decrease dramatically which gave LGO Energy, who at the time were still known as Leni Gas & Oil, a good opportunity to step in and ply their trade.

“We have 12 active wells on field and are continuing to look for ways to improve production,” Neil explains, “The long term strategy is to drill new wells, as side tracks from existing ones.”

He explains the reason for this is that the oil field is on a piece of land that was declared a national park some years ago, which restricts much of what can be done, “We still continue to operate where we are and we can sidetrack from the fifty four original wells and find some sweet spots.”

There is another hurdle since the fifty-year concession they had to work the land expires in 2017. They are expecting an extension to be granted, however, until this happens investments in the area are on hold as, given the nature of the oil and gas industry, it will take longer than two years for them to see any profit from investments put down today.

So the company diversified it’s outlook by buying into the Shallow Water gas project in the Gulf of Mexico in 2009, but in light ofincreasing regulations and low gas prices, that was sold in 2012 and the company turned it’s attention to developing its business in Trinidad. A move that, suffice to say, was a good one.

“Either Trinidad was made for us or we were made for Trinidad,” Neil says happily, and goes on to say that their model fitted perfectly with the state of the onshore industry in Trinidad and the market that had not been fully tapped, “Trinidad and Tobago has a very long history of onshore drilling,” he says, “Three billion barrels produced over a hundred years, but the last thirty years has had a major offshore focus for the big companies.” These include BP, PHP, Repsol, BG and Centrica, with the onshore beening neglected

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With a firmly established model and a reputation for productivity, LGO Energy has positioned itself nicely within the niche of field reactivation and where other companies have not looked, they have found black gold. CEO, Neil Ritson, was kind enough to speak with us.

for three decades, but with the need for oil increasing it is now entering into a resurgence.

“We are at the front line,” Neil explains, “On the cutting edge of things. We got in there in a small way with the Icacos Field and once we learnt how to operate and what was available, we started to buy our way into larger fields.”

The first major acquisition was the Goudron Field, where all the media attention has been focused recently. Where two years ago it was producing approximately 30 bopd and now, thanks solely to LGO, is producing a whopping 2000 bopd!

“In truth we have outstripped our targets,” Neil admits, “We were expecting 100 barrels a day per well and we’re getting 200-1,000 barrels from the new wells. Eight new wells have been drilled and we’re completing the 7th for production at the moment.”

Now the eighth well is completed they have release the rig for a short period, to build new drilling locations, the reason for this being that there is a best time to drill in Trinidad, “We’ve had a wet period in last three weeks and it’s caused a lot of problems,” Neil says, “We are in a rainforest area and during the wet season it gets very wet. Trees fall over, they destroy electricity lines and flooding causes havoc, so we drill in the wet season and build pads during the dry season, putting up physical locations during January and February. Our aim is to drill up 30 new wells and we’ve finished 8 this year.”

Remarkably, another plus for LGO Energy is that they seem almost unaffected by oil prices which have dropped from $100 a barrel in the summer to $60 a barrel now. This drop has all but

crucified some of the smaller businesses but Neil explains that as a low cost operation, Trinidad, where the lifting and operation costs per barrel is as little as $5 per barrel, is in a good position as far as a cash point of view.

“Don’t get me wrong, when the price of oil drops we lose about $2 per barrel from our margins,” he says, “But that still leaves us in a good position.”

A reputation for gradual and careful growth is also a notable component of the company’s success. LGO Energy is looking to buy similar assets in the Trinity Innes field, a transaction that they are expecting to close at the end of the year.

“We are also looking at Tabaquite, which is one of the oldest onshore fields in Trinidad, discovered in 1911,” he adds, “It’s been on production a number of times but we will come in with new technologies, far advanced to what was used in the past, which will promise less formation damage, much better connection to reservoir and therefore far better results. We have good perforating and better logging so we can see where the oil pay is, allowing us to be more selective and reflective. That’s why we’re getting such good results.”

Long term, Trinidad has become the main focus. Neil says that Spain may come back into focus but for now, the islands have too much potential to ignore. So in the meantime, the main focus remains building business there.

“We have quite a big footprint but we’ve been very careful in building our business. With our production model, we only go somewhere that we know there is oil, so there is no question of

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whether or not we will produce but we have to be careful not to think this is an invitation to over expand,” Neil says. Instead, their approach is to expand on a small scale to get cash flow moving to invest in larger scale operations. This philosophy means that they could now be one of the key onshore operations in Trinidad and in the coveted position to pick up other opportunities that fit their strategy and portfolio.

Focusing on long-term growth, the staff body at LGO Energy remains compact and exclusively made up of committed, expert individuals. With 25 employees in Spain and 25 in Trinidad, the operation is small, but every new field adds in the region of 10-15 additional colleagues. Neil qualifies this by explaining, “You need staff, security and a field manager. We’re growing slow and cleverly.” With a small number of skilled and committed team members, it is the intention to grow the company in line with a quality workforce. “We are careful how we grow, understanding the human resources needed to do this effectively. We have a very experienced senior management team; I have nearly 40 years experience on my own. I have been around oil for a long time and as a geologist by trade, the technical side is what I’m most interested in.”

Head office used to boast a modest team of just four people,

comprising of the company COO, Financial Director, Neil the CEO himself and a geologist, but with a need for more technical individuals, hiring has begun in London, as Neil explained, “Trinidad does have a skilled workforce but accessing it is difficult, so we’ve increased to eight people in London. We like people who are focused and committed to business, and we don’t want to simply grow a big back office.” With a host of technical studies being conducted by consultancies, such as LR Senergy, the next phase of the Goudron development can be planned. When asked why this was not being done in house, Neil explained, “That’s a big study and beyond our resources, so we put the work out to a recognised and respected consultancy.”

Onshore turbulence has been experienced by some of LGO Energy’s competitors, with some of the larger companies having completed unsuccessful exploration or better success elsewhere. This has resulted in fewer competitors, as they have all become focused on offshore projects and has made it obvious that not many companies have been as continually successful as LGO Energy, but they will grow at their own pace, confident that their approach will produce the desired results.

Expanding further on his own expertise, Neil told us, “My

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background may not immediately suggest that I’m used to small growth companies as I had 25 years with BP and six at Burlington Resources before becoming involved with a number of junior companies. Gradually and deliberately I moved to smaller companies, as I like the hands-on element and though it can be challenging and time consuming, staying in touch with the technical side of the business as well as the market facing end is important to me.”

Discussing the company’s commitment to maintaining good client relations, it becomes clear that Governments and State oil companies make up the impressive customer base. “We sell directly to State oil company at the field, straight into a pipeline, meaning that we have no direct customer interface. They are our head lease owners, so we have a close relationship with Petrotrin and the Ministry of Energy, who are very focused on oil and gas. We enjoy direct access to the decision makers and though this doesn’t mean that we always get the resolution that we are hoping for, we know that they will always talk to us. We can meet, discuss and look at how we are impacting on each other as part of a valued, transparent and open relationship. It’s much more difficult in Spain, due to the size of the country and language barriers.”

Looking to the future, what can we expect to see from LGO Energy? Neil explained, “We will be going from one to perhaps three fields in Trinidad, which is quite a step up for the company so we’re staffing, financing and planning for it.” He continued, “We changed the name of the company to LGO ENERGY to reflect the fact that we’ve matured and brought in more corporate governance. We’re growing up and it’s reflected in the fact that we are doubling the assets that we’ll be running; more drill rigs and more production.” LGO Energy is a production company, and though that may not be as ‘sexy’ as exploration, it is far lower risk. “When we go into a field, we know there is oil there and can cost a drilling project efficiently and safely, knowing that we’re going to get oil. In reality, the oil, even at the present price, that we extract is ten times more valuable than it was when people originally abandoned the fields thirty years ago, so we come back in with better technology and favourable oil prices and extract the product.”

Having outperformed the market by 300-400%, LGO Energy see no reason why they can’t continue on the same path into 2015 and neither can we. With responsible growth plans backed by numerous years of high-level management expertise, the future looks rosy.