Monday, 15 February 2016

Investee Company update: Cuban Oil Update

Leni Gas Cuba Limited
("LGC" or the "Company")
London, Havana: 9 February, 2016: London listed Leni Gas Cuba Limited (London Ticker: ISDX:CUBA), the Cuban specialist investment company, is pleased to announce a significant update on the 2,380 square kilometer Cuban onshore oil Block 9 released by the operator MEO Australia Limited ("MEO") today.
The full MEO news release with maps is available on:
LGC owns 15% of Petro Australis Limited ("Petro Australis") which has the rights, under certain conditions, to back-in to 40% of Block 9 through MEO.
Highlights from the MEO announcement:
  • ?    The Operator's ongoing technical review of Cuba Block 9 confirms the significant prospectivity of the block, with initial analysis identifying previously recovered oil from a number of drilled wells on the block and a number of structural leads and prospects.
  • ?    The first half of 2016 will see important ongoing news flow from Block 9, including the results of a full prospectivity assessment and the reprocessing of seismic data.
  • ?     MEO's and Petro Australis's established position in Cuba provides a strong early mover advantage ahead of ongoing strengthening of diplomatic relations between Cuba and the U.S.
  • ??     Cuba's energy industry holds significant appeal including: low production costs (US$9/bbl), large-scale import replacement potential and an attractive fiscal regime.
David Lenigas, the Company's Chairman, commented on the announcement:
"We anticipate that the first part of 2016 will be an exciting time for this asset, with the completion of major reviews currently underway by the operator of Block 9 that will hopefully confirm its oil and gas potential. The low operating cost environment in Cuba supports strong profitability levels even in depressed oil price conditions and the improving diplomatic relations with the U.S. is expected to drive substantial foreign investment into the oil sector over the coming years."
Extracts of MEO's announcement are set out below:
MEO reported today that it has now received a considerable quantity of historical technical data from Block 9 and has commenced a detailed assessment of the prospectivity of the block.
To date, MEO confirms that a number of wells previously drilled in Block 9 have recovered oil. Amongst these are:
  • ?     Guadal-1, drilled in 1970/71 (prior to the acquisition of modern seismic data), recovered more than 30 barrels of light oil (24° API) on test
  • ?     Marti-5, drilled in 1988/89, recovered 20.5° and 24° API oil and had oil shows over a 390 metre gross interval
  • ?     Bolanos-1 drilled in 1991 recorded a recovery of 22° API oil
These historical drilling results along with the previously produced Motembo field and the extensive natural seeps and tar deposits (all within Block 9) indicate a widespread and prolific petroleum system within Block 9.
In addition, initial analysis has identified the presence of a number of prospective structural trends on Block 9, and the potential for a significant number of additional structural leads and prospects has been identified during the preliminary interpretation of the existing seismic data.
MEO expects ongoing updates over the coming months and to conclude its preliminary assessment of the prospectivity of Block 9 and the seismic reprocessing project by mid-year.
Block 9 award:
The Block 9 Production Sharing Contract ("PSC"), covering 2,380 square kilometres onshore the north coast of Cuba, was executed on 3 September 2015. The Block 9 PSC area is in a proven hydrocarbon system with multiple discoveries within close proximity, including the multi-billion barrel Varadero oil field. Block 9 contains the Motembo field, the first oil field discovered in Cuba.
Oil Industry in Cuba:
MEO also reported today that Cuba currently produces approximately 80,000 barrels per day representing only ~50% of the oil consumption of the country. The majority of the oil industry is currently operated by the national oil company, CUPET and there is only one foreign company, Sherritt International from Canada, currently producing oil in Cuba.
Operating costs for onshore production in Cuba are modest, with Sherritt International reporting operating costs of US$9 per barrel for the September 2015 quarter for their operated fields located to the west of Block 9.
The directors of Leni Gas Cuba Limited accept responsibility for this announcement.