27 February 2013
Sound Oil plc
("Sound Oil" or "the Company")
Drill Programme Revision
Following a portfolio review and the recently-announced decision to retain 100% operatorship of the Badile prospect, the Company has revised its near term drill programme with the objective of:
· Increasing the upside exposure for shareholders, balancing risk and reward.
· Accelerating cash flow from the Nervesa discovery.
· Preserving cash for the Company's most material projects.
· Capturing rig cost synergies and eliminating rig non availability risk.
The revisions to the drill programme include:
· Drilling of the Badile prospect (23MMbo, US$266 million NPV10) as originally scheduled in 2014, now with 100% equity position and Sound Oil operatorship.
· Drilling of the Zibido prospect (16MMbo; US$185 million NPV10), a second material exploration prospect in Po Valley, Northern Italy.
· Drilling of a second well addressing the Northern extension of the Nervesa discovery in Q4 2013 (21Bscf, US$57 million NPV10) with a view to accelerating production and cash flow from this flagship asset. This well would likely be funded with a debt structure and remains contingent on a successful initial Nervesa appraisal well.
· Confirmation of the drilling of the Laura discovery (30Bscf, US$86 million NPV10) as originally scheduled in Q4 2014 using a long reach deviated well from onshore. It is the Company's intention to apply directly for a concession award to accelerate cash flows. The permit for Laura is expected to be awarded during H1 2013.
· Contracting of one 2,000 to 3,000 horsepower electric rig on an exclusive basis for a period of 18 months commencing Q1 2014 to cover Badile, Laura and Zibido. This ensures rig availability and secures significant cost efficiencies.
· Deferral of the Strombone appraisal well, thereby freeing up an operational window for the second Nervesa well in Q3 / Q4 2013 and freeing up US$9 million in cash to fund the increased equity stake in Badile.
· Potential inclusion of Casa Tiberi field development in the Q3 2014 operational window. The concession for Casa Tiberi is expected to be awarded in Q2 2013.
Further details of the revised programme can be found in the Company's investor presentation, available on the website www.soundoil.co.uk.
James Parsons, Sound Oil's Chief Executive Officer, commented:
"This strategic revision to the drill programme is a positive step and focuses our financial and human resources on game-changing drills whilst also capturing rig cost synergies.
The programme commences with Nervesa, our flagship asset, which is expected to spud in April this year. Assuming a successful Nervesa appraisal well, a second well will be drilled later this year on the Northern extension to exploit fully the multiple reservoir units and accelerate cash flows. During the next twenty-four months it is our intention to drill two material exploration prospects, Badile and Zibido, each with the potential to significantly accelerate our growth. The Company will also develop the Laura discovery which has the potential to provide early material cash flows to the Company.
Sound Oil continues with the intention to drill two material wells every year however the speed and scale of change will now be much greater."
For further information please contact:
James Parsons, Chief Executive Officer
Smith & Williamson - Nominated Adviser
Tel: 44 (0)20 7131 4000
Peel Hunt - Broker
Tel: 44 (0)20 7418 8900
The estimated gas and oil resource volumes and values mentioned above are based on best estimate contingent resources (Nervesa and Laura) / prospective resources (Badile and Zibido) and NPV10 success case estimates (with risk factors as follows: Nervesa 50%; Laura 50%; Badile 18%; Zibido 14%) included in Competent Person's Reports prepared by Fugro Robertson Limited in July 2010 and October 2011. Best estimate refers to a 50% chance of finding a given volume and is consistent with SPE (The Society of Petroleum Engineers) guidelines; NPV10 refers to net present value at a discount rate of 10%; Bscf means billions of standard cubic feet; MMbo means millions of barrels of oil. 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.