Sound Oil Inks Gas Sales Deal

PUBLISHED: 01 Dec 2012 @ 02:00 | Comments (0) | More info about Kenneth G. Mondero

Independent oil and gas explorer, Sound Oil plc (LSE:SOU), has signed an agreement to sell gas it will soon produce from the Rapagnano field in Italy, sparking heavy trading of the AIM-quoted stock on the London Stock Exchange today.

Sound Oil, which is now focusing its exploration efforts in Italy, has agreed to sell the Rapagnano gas Steca Energia Srl, a gas and electricity provider in the Marche region in central Italy.

In a statement, Sound Oil said gas will be sold at an initial price of €0.316 per standard cubic metre scm, after which it will be adjusted on a quarterly basis, based on price benchmarks of other commodities such as diesel, brent, and fuel oil, as published by Platts.

The company is given an option to increase production during winter, as well as a price increase of €0.16 per scm. Next year’s average price of gas is estimated to be at around €0.320 per scm.

Over 71 million shares were traded after the company announced the deal, moving the share price up by 16.2% to 1.075 pence by 2:30 PM GMT.

Re-start

Approval of permit to operate the Rapagnano field has been granted to Sound Oil, according to the company. The field had produced around four billion cubic feet of gas since it was discovered in 1952 until 2001, when it was shut in.

Sound Oil has a 30-year concession on the 8.5-square kilometre acreage, which still has about 1.3 billion cubic feet of gas that can be extracted for 13 years, according to the company’s estimate.

“Operations on the site will commence within a week,” said Sound Oil’s Chief Executive, James Parsons.

The company estimated a further US$600,000 capital expenditure is needed to re-start operations in the said field and will be funded from the company’s cash balance.

Earlier on, Sound Oil signed an agreement with Italian engineering firm, CSTI Srl, wherein CSTI will shoulder 52% of the capital needed to develop the field, with Sound Oil retaining 100% ownership of the concession.

Payback, according to Sound Oil’s previous statement will be achieved after 12 months with the field having a net present value of US$4 million.

“This initial revenue stream will enable Sound Oil to cover a large portion of its overhead costs in Italy,” Mr. Parsons closed in a comment.

CLICK HERE TO REGISTER FOR FREE ON ADVFN, the world's leading stocks and shares information website, provides the private investor with all the latest high-tech trading tools and includes live price data streaming, stock quotes and the option to access 'Level 2' data on all of the world's key exchanges (LSE, NYSE, NASDAQ, Euronext etc).

Follow @kennethgmondero

This area of the ADVFN.com site is for independent financial commentary. These blogs are provided by independent authors via a common carrier platform and do not represent the opinions of ADVFN Ltd. ADVFN Ltd does not monitor, approve, endorse or exert editorial control over these articles and does not therefore accept responsibility for or make any warranties in connection with or recommend that you or any third party rely on such information. The information available at ADVFN.com is for your general information and use and is not intended to address your particular requirements. In particular, the information does not constitute any form of advice or recommendation by ADVFN.COM and is not intended to be relied upon by users in making (or refraining from making) any investment decisions. Authors may or may not have positions in stocks that they are discussing but it should be considered very likely that their opinions are aligned with their trading and that they hold positions in companies, forex, commodities and other instruments they discuss.