Leni Gas & Oil says drilling at Eugene Island field may start next week

Leni Gas & Oil (LON:LGO) said drilling on the Eugene Island field in the Gulf of Mexico could begin next week with the arrival of the Ocean Columbia jack-up rig expected imminently.

The rig has now been released by the previous operator and will be mobilised to the Eugene Island platform shortly if weather conditions allow.

The company and operator of the Eugene field Marlin Energy last month approved additional drilling at the Eugene Island-184 leases, in which LGO currently holds a 7.25 percent working interest.

The drilling programme will start with the A-2ST01 well, a sidetrack of the existing A-2 well, which targets mean recoverable reserves of 0.5 million barrels of oil within the Tex X2 target level.

The slightly deeper Tex-X3 reservoir will also be tested by the well. Both reservoirs are productive in other wells throughout the field.

The partners have budgeted a total 16 days for the drilling and evaluation. The net cost to LGO of drilling, logging and evaluating the A-2 sidetrack is an initial US$280,000.

Any incremental production is expected to be realised quickly with a short payback period on the investment.

Only yesterday, LGO announced a tie-up with Range Resources (LON:RRL, ASX:RRS) to jointly develop onshore oilfields in Trinidad.

The deal will see Range taking a 50 per cent stake in LGO's Goudron oilfield by spending US$8 million. And LGO has an option to acquire a 15 per cent stake in Range's Beach Marcelle project by spending a maximum of US$7 million.