22 October 2012
Sound Oil plc
("Sound Oil" or "the Company")
Rig Letter of Intent for Nervesa
Sound Oil, the Italian focused upstream oil and gas company, is pleased to announce a Letter of intent ("LOI") for a rig with LP Drilling SrL ("LP Drilling") for the forthcoming Nervesa appraisal well.
As previously announced the Company plans to spud the Nervesa appraisal well once final governmental approval has been obtained; this is expected around the end of 2012. Preparations for spud are well advanced with long lead items delivered, land secured, service contracts awarded and site preparation expected to commence soon. The Company has, following a tender process, signed a LOI with LP Drilling for the exclusive use of a hydraulic type TB2100 S rig on Nervesa between the period from 1 December 2012 to 1 February 2013. The Company estimates that the remaining spend for the appraisal well is approximately €2.9 million including the rig hire. Under the terms of the LOI Sound Oil also has the option to utilise the same rig for the Strombone appraisal well immediately following the Nervesa well. The LOI is conditional on Sound Oil receiving final Nervesa governmental approval and LP Drilling adequately certifying the rig in Italy.
James Parsons, Sound Oil's Chief Executive Officer commented:
"The Company continues on track to drill the Nervesa appraisal well, having now secured the rig. The independently assessed annual cash flows (after tax) from Nervesa are estimated to be above US$14 million pa initially and stay above US$12 million for each of the first seven years, generating a total NPV of US$62 million."
For further information please contact:
James Parsons, Chief Executive Officer
Smith & Williamson - Nominated Adviser
Tel: 44 (0)20 7131 4000
Westhouse Securities - Broker
Tel: 44 (0)20 7601 6115
Tel: 44 (0)20 7466 5000
The annual cash flow and NPV (net present value using a 10% discount rate) estimates shown above have been estimated on a success case basis and are from a Competent Person's Report prepared by Fugro Robertson in October 2011 (this is available on the Company's website www.soundoil.co.uk.) The information contained in this announcement has been reviewed by Sound Oil's Chief Operating Officer, Dr M. J. Cope BSc PhD CGeol FGS, a qualified petroleum geologist.