In Trinidad, LGO has a 100% interest in the Goudron field. This field has booked gross 2P reserves of 11.4mmboe along with the potential for further recovery through EOR (most likely water-flood); however, we note that well results during 2014/15 may adjust these numbers once an updated CPR is prepared. While the development of the full 2P reserves requires a larger exploitation programme than is currently funded, the near-term focus for LGO is development of the shallow Goudron and upper C-sand horizons.

The Goudron field benefits from low operating costs, with LGO reporting incremental barrels being cash flow positive even at oil prices lower than $20/bbl. Furthermore, royalties to state partner Petrotrin have been further reduced, with the majority of barrels produced incurring royalty rates of less than 10%. Funding constraints dictate that only workovers are possible at present on the Goudron and upper C-sand horizons, but the company is confident it can increase production by 100bopd (a likely 25% increase in overall production for the group) through a modest $150k programme on two wells producing from these. A second rig has recently been mobilised to site to accelerate this workover programme.

Ultimately the development of Goudron and the fate of LGO will depend on refinancing of $10.6m of creditors. The net loan repayable on LGO’s senior facility has been reduced by c $8m, leaving only $4.9m remaining. The company recently terminated a formal sale process thereby allowing it to raise £1.06m of valuable equity to service debt and progress the Goudron workover programme. LGO is currently under a strict repayment plan with its principal creditor, BNP Paribas, with much of its funds frozen or under control of the bank. A longer-term deal will be required either with existing creditors or new partners to both service debt long term and realise the cash flow potential currently locked up in Goudron’s reserves.