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Anyone who glanced at the trading board on the London Stock Exchange will definitely be prompted to ask what’s going on at Sound Oil plc (LSE:SOU). Looking at the turnover and the frequency at which the shares are being traded would make one trader initially think the oil and gas industry player has struck multi million barrels of hydrocarbon; hence the sharp rise in stock price.
Well, the guess is almost close, at least in probability of things. At 12:24 PM GMT, the independent oil and gas producer said it has commenced drilling the Geulis-1 exploration well to hopefully reach a depth of nearly four thousand feet below the ground and strike gas.
In fact, the standard announcement is as plain as one exploration company would advise the market of a commencement of drilling an exploration well.
What triggered the hype in the massive buying of shares of the UK-incorporated AIM-quoted Sound Oil may probably be the target pay-out of some 9 billion cubic feet of gas with a 90% probability that the natural gas is there.
That’s 8.1 billion cubic feet, giving Sound Oil about 1.62 bcf if the independently assessed estimate is true, as the owner of 20% interest in the licence. A 50% probability nearly triples the reserve at 26 bcf and a 10% chance multiplies the estimates five-folds at 55 bcf, with 5.2 bcf and 11 bcf net to Sound Oil, respectively.
Best Is Yet To Come
New owners of Sound Oil who will keep the stocks in their portfolio (after heavy trading) until the well reaches its target depth will have to wait 42 days to confirm if Fugro Robertson Limited, the assessor of the report from which the operator of the well, Pan Orient Citarum Energy – 69% owner, is right with its independent assessment.
Sound Oil itself, seemed to bank on the fact that the well is located 16 kilometres south of five known oil and gas discoveries and the reputation of Fugro Robertson – a company of choice by “all major and large independent oil companies”.
Well, investors had to be absolutely certain of their bets in Sound Oil as this is the company’s third well to be drilled within the licence during the year, with the two previous ones having given disappointments during drilling.
Company Spotlight
At 3:00 PM GMT, share volume has reached 300 million with the price change at 68.2% higher to 0.925 pence with more than an hour to go before London trading closes.
Yesterday, over 71 million shares were traded and raised the share price over 13% to 0.55 pence after Sound Oil announced it expects to produce gas from one of its Italy projects.
