Leyshon Energy Limited Update on Current Activities (2401S)

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RNS Number : 2401S

Leyshon Energy Limited

22 September 2014

22 September 2014

Update on Current Activities

Leyshon Energy Limited (AIM:LEN) is pleased to announce that the Company is well advanced in the interim testing programme at the Zijinshan gas project located in the Ordos Basin in central China and is actively progressing its interest in a number of acquisition opportunities in the region.

Zijinshan Gas Project - Interim Testing Programme

Flow testing of three zones in Well ZJS7 is underway with each of the three zones flowing flammable gas with methane contents of up to 99% recorded.

Flows in all zones tested have so far been discontinuous and work is ongoing to establish more consistent gas flows. Results from ZJS7 indicate water production along with the gas production in the tested zones; this water production could be inhibiting gas flow and preventing us from establishing commercial flow rates. We are continuing to test the upper zone and evaluate the results.

In addition similar results are being achieved on one zone in Well ZJS5. This is the same zone as the upper zone being tested in Well ZJS7. Test work is ongoing and results are being evaluated.

There has been no test work so far on Well ZJS6. Testing of this well will be largely dependent on the results from individual zones in Wells 5&7.

These results so far are below our expectations for this area of the field. The results, along with our understanding of well performance in nearby fields, are however sufficiently encouraging to proceed with drilling an additional exploration well, ZJS8. Discussions on the location and design of this well with the Company's partner have commenced.

The interim testing programme now has an estimated cost of around US$4 million and, depending on the timing and results from Well ZJS8, is expected to be completed by the end of this year. The cost includes the drilling and testing of Well ZJS8.

The purpose of the interim testing programme is to evaluate the project with a view to making a decision whether to commit to the US$17 million main exploration and appraisal programme which is scheduled to commence in 2015.

The main programme is an exploration and appraisal programme which comprises drilling, fraccing and flow testing multiple wells with the remainder of the costs covering PSC maintenance and geological costs. The number of wells to be drilled will be determined based on results progressively achieved and will to a large extent determine the overall expenditure on the programme.

The programme, which may well be modified to reflect results, is designed to upgrade the existing resources such that a Chinese Reserve Report can be obtained.

The Company has finalized the documentation related to the interim testing programme and is pleased to advise that the Exploration Licence has been renewed until 7 May, 2016.

Acquisition of Oil and Gas Assets in China

As previously advised the Company has been actively pursuing a number of acquisition and investment opportunities in the oil and gas sector in China.

The Company has made three bids for assets on a fully funded basis. In each case the Company was either outbid or the transaction failed to complete due to circumstances outside the Company's control.

The Company is in active discussions with potential vendors of assets in the region in line with the acquisition strategy previously outlined and in the normal course of business. There is no indication whether these discussions will lead to a commercially binding transaction.

The Company has received a number of requests for updates on the progress on its acquisition activities. The Company has been advised by its Nomad that the circumstances under which the Company is able to make an announcement in relation to a transaction, ahead of the transaction, are very limited under AIM rules.

Cash, Buy Back and Director Purchases

The Company has US$26 million cash on hand, this does not however take into account outstanding liabilities for the work in hand and previous creditors estimated around US$5 million.

The Buy Back approved at the AGM has not yet commenced. Once commenced there will be daily announcements on the number of shares purchased.

As previously announced, Non-Executive Director Kim Howell has purchased 300,000 shares in line with the commitment to purchase shares in the Company made by Directors at the Annual General Meeting. Further purchases by Directors will be limited by Close Periods and during those periods when the company is actively involved in transactions during which purchases by Directors are not permitted.

Executive Director Tony Meggs will be presenting an update on the Company's activities at the Proactive Investors One2One Investor Forum on Thursday 25th September at the Chesterfield Hotel, 35 Charles Street Mayfair W1J 5EB

Chairman John Manzoni Commented: "The Interim Testing Programme has confirmed the presence of gas in the target zones and has given us the confidence to drill Well ZJS8. In addition there continues to be very encouraging results being reported in adjacent operations which suggest that we remain at an early stage in fully evaluating the 700 square kilometre Zijinshan project. The information we have gained from testing these two wells puts us in a strong position to locate and design Well ZJS8."

For further information please contact:

Leyshon Energy Limited

Peter Niu Company Secretary

Tel: + 86 10 8444 2882

[e-mail]

Cantor Fitzgerald Europe

David Porter/Rick Thompson (Nominated Adviser)

Richard Redmayne (Corporate broking)

Tel: [phone]

The Qualified person, Ruby Wang, who has reviewed this update, has 15 years experience in the oil and gas industry and is a member of the Society of Petroleum Engineers. She holds a Master degree in Petroleum Engineering from China University of Geosciences. Ruby is currently the senior Geologist and is based in the Beijing office. She joined the Company in 2013, prior to this she spent majority of her career with Anadarko Petroleum Corp in China.

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