14 January 2014
Sound Oil plc
("Sound Oil" or the "Company")
24 month Work Programme
Sound Oil, the European / Mediterranean focused upstream oil and gas company, is pleased to confirm its 24 month Italian work programme.
The Italian programme has been updated to reflect recent permitting and funding progress and is focused on:
· Accelerating material cash flows from existing discoveries on the Carita (Nervesa) and Santa Maria Goretti ("SMG") permits.
· Prioritising the high upside exploration prospects, including Badile.
· Funding key drills, including Nervesa and Badile, through the introduction of partners.
· Building a portfolio of producing assets to cover the Company's essential overheads
· Capturing rig cost synergies and minimising rig non availability risk.
The 24 month programme will include:
· Maintaining strong production from Rapagnano, an onshore gas field, in the Marche region.
· Field development of Casa Tiberi, a second onshore gas discovery in the Marche region, during H1 2014. Production skid construction began in Q4 2013. The combination of Rapagnano and Casa Tiberi cash flows are expected to completely fund the Italian cost base.
· Farm out, secure the drilling permission and then drill a second appraisal well addressing the southern structure of the Nervesa discovery (24Bscf, US$66 million NPV10) in Q2/Q3 2014 with a view to accelerating production and cash flow from this flagship asset. A letter of intent has recently been signed for the rig and first gas from the northern structure is expected in mid 2015.
· Contracting of a 3,000 horsepower electric rig to cover Badile and Laura, thereby securing significant cost efficiencies.
· Securing the drilling permission, farming out and then drilling the Badile prospect (178Bscfe, Euro 486 million NPV10 Best estimate), currently scheduled for Q4 2014 - Q1 2015. Badile is the largest and most strategic asset in the portfolio with an independently assessed High case NPV10 exceeding Euro 1.7 billion and Low case NPV10 of Euro 101 million.
· Drilling an appraisal well H1 2015 in the onshore SMG permit, in the Marche region. A CPR is being commissioned in Q1 2014 on this low risk discovery.
· Drilling the Laura discovery (30Bscf, US$86 million NPV10) in H2 2015 using a long reach deviated well from onshore. The permit for Laura is expected to be awarded shortly.
· Preparation for drilling the Zibido prospect (16MMbo; US$185 million NPV10), a second material exploration prospect in Po Valley, Northern Italy.
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 programme continues our intention to drill, at a minimum, two material wells every year whilst focusing our financial and human resources on the game-changing wells such as Badile, where operations should commence around the end of this year. In addition the programme builds a broad portfolio of producing assets, now with the addition of the recently awarded SMG permit.
The combination of today's announced work programme, Directorate changes and funding initiatives position our Company to fully exploit the potential of our Italian assets."
For further information please contact:
James Parsons, Chief Executive Officer
Stuart Joyner, Chief Financial Officer
Smith & Williamson - Nominated Adviser
Tel: 44 (0)20 7131 4000
Peel Hunt - Broker
Tel: 44 (0)20 7418 8900
Your attention is drawn to the announcement made today by the Company entitled "Director Appointments, Underwritten Open Offer and Loan", a copy of which is available on the Company's website: www.soundoil.co.uk.
The information contained in this announcement has been reviewed by Sound Oil's Italian Managing Director, Luca Madeddu, a qualified petroleum geologist.
The Nervesa NPV10 estimate mentioned above is based on estimated P50 contingent resources of 24Bscf. The Badile NPV10 estimates mentioned above are based on estimated gross prospective resources of 178Bscfe. The Laura NPV10 estimate mentioned above is based on estimated P50 contingent resources of 30Bscf). The Zibido NPV10 estimate is based on Best estimate prospective resources of 16MMbo. Scmd means standard cubic metres of gas per day; MMscfd means million standard cubic feet of gas per day; Bscf means billion standard cubic feet of gas; Bscfe means billion standard cubic feet of gas equivalent; MMbo means million barrels; NPV10 refers to a net present value at a discount rate of 10%; Low, Best and High case estimates refer to, and P50 refers to a 50% chance of, finding a given volume consistent with SPE (The Society of Petroleum Engineers) guidelines.