Sound Oil announced that, through its majority held subsidiary Apennine, it has concluded a Farm-In Agreement with Servizi & Assistenza Ricerche Petrolifere spa (SARP) to acquire an interest in the Montemarciano Permit located in Ancona Province, central Italy. The permit is currently operated by SARP with 100% working interest.
Under the terms of the Agreement, Apennine will pay SARP €215,000 ($290,000) as a contribution to past expenditures and fund the 100% cost of the Casa Tiberi-1 exploration well up to €800,000 ($1,080,000) to earn a 75% working interest in the permit and the Operatorship.
The well will be drilled to 700m to evaluate potential gas-bearing sands in the Lower Pliocene Cellino Formation. Fugro-Robertson Limited (FRL) has prepared a Competent Person's Report on the prospect and identify Base Case (P50) prospective resources of 5.7 Bscf, with High Case (P10) prospective resources of 14.9 Bscf. The geological chance of success is calculated at 35%. On a success case basis the potential value (NPV10) of the project is assessed to be $11.6 million for the Base Case and $37.1 million for the High Case.
All necessary approvals to drill the well from the relevant authorities have already been received by SARP. Work on the construction of the Casa Tiberi wellsite will commence as soon as land access is finalized. It is anticipated that the well will be drilled in 3Q-4Q this year.
Commenting on the above, Gerry Orbell, Chairman of Sound Oil said, "This deal gives us an early opportunity to drill a very low cost well to explore for gas resources which if successful in the P50 case should provide near term cash flow and in the high case will have a considerable impact on our assets base. The well will be drilled as an addition to the existing operations program, using funds previously raised by the Company earlier in 2011."
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