Recent news has surfaced that an application has been submitted to the Trinidad authorities on 11 June, 2015 for the drilling of an additional 30 wells.
On another note, there is a Gathering Station, GS207 which receives and treats produced oil before being piped along to Gathering Station 134. GS207 has a capacity of 1,500 barrels But in LGO's application to construct 2 x 5,000 barrels sales tank, it also also include an application to construct 2 x 250 barrels tanks to replace existing tanks at GS207 due to poor deterioration in the condition of the tanks. This could be reason why the production as been scaled down to less than 1,000 bopd owing to the capacity at GS207 which has now been reduced to 1,000 barrels.
Interestingly, in LGO's application, the reason has been stated as thus' "The production of the field now exceeds current capacity of the gathering stations, leading to the Company to restrict its production."
Projected timeline for the 2 x 250 barrels tanks is 6 weeks, while the projected timeline for the first 5,000 barrels sales tank is at the end of October, 2015 while the other, at the end of January, 2016.
The above information was disclosed by a LGO investor in Trinidad after searching through the public records. In the absence of any verifiable confirmation by the Company it should be taken with a grain of salt, but it does sound reasonable enough as LGO production has dropped almost 50% which cannot be solely due to natural depletion of the flow rate. Other onshore producers recorded depletion rate of less than 10%.
So whilst, the price of oil has entered into bear territory, I think the future for LGO remains great. In the coming months, expect to see a wave of mergers in the US shale oil industry with several bankruptcies which will result in lower production. Also, with the closing of short position by several OPEC's sovereign wealth funds, I would expect oi to finally trend higher to the US$50s. But short term price volatility could see oil testing the US$40 to US$43 per barrel.
My disclosure: I an long LGO.
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