gulf of mexico

Lion Energy buys into Gulf oil field
December 12, 2004 - 3:44PM

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Lion Energy has announced plans to purchase a stake in a producing oil field off the Gulf of Mexico.

The oil producer said it would pay $8 million to acquire a 14 per cent net interest in Main Pass-59 from Canadian-based International PetroReal Oil Corporation.

The acquisition would more than double Lion Energy's current daily oil production of about 1,000 barrels per day (bpd), the company said.

"The acquisition is expected to generate pre-tax revenue entitlements net to Lion Energy totalling more than $US25 million over the next six years," chairman Joe Mercorella said.

"Production should continue from the field for the next 20-30 years, subject to the amount of additional reserves proven by further drilling, so in every sense the Gulf of Mexico will become our powerhouse.

"As operating costs and development expenses are likely to be funded from cash flows derived through the MP-59 investment, the acquisition provides substantial revenue and earnings upside in a low-risk and proven oil province, with exposure to a world-class operating partner," Mr Mercorella said.

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Advertisement"In addition, we are acquiring proven producing oil reserves in an area where the considerable developed infrastructure ensures operating costs are highly reasonable."

PetroReal announced in May that it would acquire a 70 per cent stake in MP-59 from Ridgelake Energy Inc. of the US for US$78 million.

The company has now agreed to on-sell 20 per cent of its planned ownership to Lion Energy.

Sale agreements over the acreage are expected to be finalised in the New Year, subject to due diligence.

Lion Energy plans to fund the acquisition through the sale of its Bula oil field in Indonesia and the private placement of 295 million ordinary shares at $0.01 cents per share.

MP-59 is located in the Gulf of Mexico about 25 miles due east of Venice, Louisiana in US federal waters.

It currently consists of 15 wells and 17 active oil completions on one platform and one satellite structure, located in 70 feet of water.

Mr Mercorella said a planned de-bottlenecking program in the first half of 2005 should raise MP-59's production by 4,000 bpd, with subsequent developed drilling expected to further raise the figure to 6,000 bpd.

MP-59, which recently suspended production after being damaged by Hurrican Ivan, is due to resume production later this month.

Prior to the hurricane, the field was producing 2,700 barrels of oil and 0.8 million cubic feet of gas per day.

Lion Energy's Gulf of Mexico acquisition is its second foray into international oil production, adding to its 2.5 per cent interest in the onshore Oseil field in Indonesia's Seram PSC.

© 2004 AAP