LGO Energy by The Sustainable Business Review

LGO ENERGY PLC

DELIVERING

GROWTH

LGO currently has two fields in Trinidad: the Icacos Field, which was their entry point into the market several years ago, and a more recent purchase, the Goudron Field, which has become the company’s cornerstone asset in the past two years. The company’s remaining wells are located in Spain at the Ayoluengo Field. The Goudron Field is somewhat iconic in Trinidad. It had about 150 wells drilled between about 1927 and 1990. Through new drilling technology, LGO has been able to reuse several of these: at the moment, they’re producing about 60 to 70 of the old wells in total. Last year, they drilled 8 new wells in the field. They’re new not only because they’re in parts of the reservoir which had previously not been drained, LGO are constraining production levels at Goudron to get the best long-term production management with some suggestion that the recent fall in oil prices has played its part.

OILIS RITSON NOTES,

“

A CYCLICAL BUSINESS, SO YOU ALWAYS PLAN FOR THE NEXT DOWNTURN AND THE UPTURN AFTER THAT.” LGO plays a long-term commercial game which seeks to keep overheads down to avoid the impact of downturns. Because of the manner in which the Trinidad wells are

so concentrated, LGO is able to maintain a very low-cost operation. The old wells are “tied back,” meaning there are flow lines back to the production facilities. It’s a simple, compact facility that needs very few people to run it. It’s not as if they’re trying to produce a lot of oil to cover a fixed overhead. Thus, the company has been able to maintain its low overheads but it hasn’t always been straightforward.

The Trinidad wells are a jungle operation and access is difficult. They don’t just drill one well per location but rather several wells near to each other. This has involved developing special pads to hold the rig while it drills the wells sequentially before being moved out again. Two such pads are being built at the moment and are expected to be ready in early April, at which stage the drill rig will be returned to the field. The firm then plans to drill deviated wells from the pads to new points in the reservoir where they know there hasn’t previously been any oil drained. Their reservoir management philosophy is not to produce the wells too rapidly and to make sure they don’t produce water or sand – both by products of excessively rapid production. The sandstones in the area where the drilling is based are sensitive, meaning that if they put too much pressure on them, they can draw in sand to the well bore. LGO is careful to manage those two issues and ensure that the production is as high as it can be, consistent within those parameters. Likewise, the water which is returned to the local environment has to match the chemical balance there. In 2015, the company plans to drill seven more wells in Goudron and continue to work to improve production at its Ayoluengo field in Spain, together with further work the

LGOis

committed to using environmentally friendly methods which exceed the requirements of the local government, which has granted it an extendable license for up to 30 more wells. The company has been able to achieve all this at the same time as sourcing equipment through the local supply chain and employs exclusively Trinidadian nationals there. It may be that oil prices might not rise for some time, but by maintaining low overheads, using environmentally sustainable practises and innovating where ever possible

TBSR Q&A WITH

NEILRITSON

1. Outside of Oil and Gas,

which industry do you most admire and why? ANS: Oil and gas is a high technology business, a fact which is often overlooked by outsiders, and therefore we have to look to other hi-tech sectors to get insights. Of late it has been hard to ignore the rapid growth in the telecommunications industry and the consumer electronics that have followed â&#x20AC;&#x201C; especially smart phones and tablets - where the rapid growth in capability has driven retail products. How we harness this potential in other business sectors is of great interest just now.

2.WHAT HAS BEEN YOUR BIGGEST BUSINESS

CHALLENGE TO DATE? ANS:I could look back to major development projects in BP or to resolving the Regal title dispute in Ukraine, but more recently in the small cap world the biggest challenge is always funding the growth business. This is never more difficult than when the oil price turns south and investors flee the sector. Picking the right sources of capital and using them intelligently is key to all successful small businesses. Remaining low cost keeps this challenge more manageable. Oil price is a cyclical so always plan for the next down-turn.

3.WHEN RECRUITING A SENIOR EXECUTIVE TO YOUR TEAM, WHAT ARE THE MAIN CHARACTERISTICS YOU LOOK FOR?

ANS: Number one factor is the cultural fit of the individual to the companyâ&#x20AC;&#x2122;s core values. Obviously we need people with the capability to do the job and to grow into an enlarged role over time. But much more fundamental is how the person will interface with the value set of the existing team and how that drives performance. If the new executive doesnâ&#x20AC;&#x2122;t share the core values of the organisation then there will eventually be a problem down the road.

THE SUSTAINABLE BUSINESS REVIEW

4.WITHIN BUSINESS,

WHO OR WHAT HAS BEEN YOUR

GREATEST INSPIRATION? ANS: This is a relatively easy one. At BP I worked for many years with John Browne, now Lord John Browne of Madingley, and John’s grasp of business was quite exceptional. For a number of years under John’s leadership BP was very much at the forefront of business innovation and performance. There was a very good reason why John was Businessman of the Year, and it was highly instructive to work in the organisation under his direction.

FOR SOMEONE STARTING OUT IN BUSINESS, WHAT WOULD BE THE STRONGEST PIECE

OFADVICEYOU WOULD GIVE THEM?

ANS: The two things that every new startup needs are a clear vision and masses of perseverance. Nothing will come easily, if it does then you have either the one of the one-in-ten-thousand new businesses that has hit the miracle combination or more likely you have not seen the crash coming. The one thing that you must avoid at all costs is litigation. The courts only hand out judgments, not always justice, so no fight is worth the distraction from the business you are trying to build. Always find a way to settle without court litigation and then let it go and move on.

The Sustainable Business Review - Quarter 2 2015