LGO Energy PLC La Lora Concession, Spain (4151V)

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RNS Number : 4151V

LGO Energy PLC

30 January 2017

For Immediate Release, Embargoed until 7 am

30 January 2017

LGO ENERGY PLC

("LGO" or the "Company")

La Lora Concession, Spain

LGO today provides a further update on its 100% owned Spanish concession, La Lora ("the Concession"), in northern Spain, which is operated by its wholly owned subsidiary Compañía Petrolífera de Sedano, S.L.U. ("CPS"). Further to its announcement on 13 January 2017 the Company has now been informed that the Spanish Cabinet of Ministers has not approved the extension of the Concession as requested. As a consequence the Concession will terminate at midnight on 31 January 2017. This decision appears to have been made on purely legal, and not technical or commercial, grounds and despite the advice that LGO received from its Spanish lawyers on the fundamental strength of the legal case. The Spanish Ministry of Industry, Energy and Tourism ("Ministry") has already indicated that it will offer the Ayoluengo Field to CPS for a new concession as soon as possible.

The Ministry has yet to issue the text of the Royal Decree so full details are not yet available, however, in anticipation of this possible outcome CPS is already in the final stages of a process to temporarily suspend all field operations and to complete the envisaged sale of all oil stocks from the Ayoluengo Field by the end of the Concession. Employment contracts for the vast majority of CPS's 17 staff members will also be suspended, initially for a period of up to one year.

Over the past four years LGO has actively sought an extension to the Concession and has carried out extensive legal, technical and commercial evaluation work that was submitted to the Ministry in August 2015 in support of a formal request for a 20-year extension. As previously indicated it would do in these circumstances, LGO now anticipates making a new application for a 30-year concession on the same overall technical basis as the extension and believes that its extensive experience at the field and its technical and commercial knowledge place CPS in a competitive position to regain the production rights in a situation with far better investment prospects with a new concession.

The Board of LGO wishes to reiterate that without new investments having been made in recent years, pending the extension decision, and with present oil prices, the temporary suspension of operations at CPS will have minimal impact on the Group's operating finances. LGO will remain focussed on its high impact Trinidad production and exploration business. The carried value of the La Lora asset, including land and physical plant owned by CPS, is approximately GBP7 million.

Neil Ritson, LGO's Executive Chairman, commented:

"Naturally we are disappointed with the decision and it will inevitably cause some hardship to our employees and their communities in the Burgos area, where Ayoluengo has been a significant source of employment for the last 50 years. We will be working with the Spanish authorities to seek a new concession as soon as possible."

Enquiries:

 
 LGO Energy plc              [phone] 
 Neil Ritson 
 Fergus Jenkins 
 
 Beaumont Cornish Limited    [phone] 
 Nomad 
 Roland Cornish 
 Rosalind Hill Abrahams 
 
 FirstEnergy Capital LLP     [phone] 
 Joint Broker 
 Jonathan Wright 
 David van Erp 
 
 Bell Pottinger              [phone] 
 Financial PR 
 Henry Lerwill 
 

This information is provided by RNS

The company news service from the London Stock Exchange

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January 30, 2017 02:01 ET (07:01 GMT)