SOUND OIL - Marche Rapagnano Concession Development

Project Status

As of end August 2011, Sound Oil has announced that the Italian Ministry for Economic Development has awarded the Rapagnano Concession, located in the Marche Region of central Italy, to the Company's wholly-owned subsidiary Apennine Energy. The award is subject to the acceptance of any environmental impact assessment that may be required by the Marche regional authorities. In view of the previous production history at the site which is within an industrial area, the Company anticipates that this acceptance will be granted.

The Rapagnano gas field on the concession had previously produced 4.1 Bscf of gas into the national network until it was shut-in in 2001. A recent reservoir engineering study by consultants Senergy (GB) has estimated that an additional 2.45 Bscf of gas is potentially recoverable from the field. Apennine's objective will be to put the field back on stream at an approximate estimated cost of US$0.5 million with expected first revenue in Q2 of 2012.

Sound Oil, the upstream oil and gas company with assets in Italy and Indonesia, has announced the appointment of the Italian engineering company CSTI as engineering contractor for the Rapagnano gas field and a related funding contract. Sound Oil has appointed CSTI to undertake the surface and facilities engineering for the Rapagnano project and has also signed an associated funding contract with CSTI.

Sound Oil calculates that this would result in CSTI receiving 8.3% of the project's NPV10 in the base case.

The Rapagnano field, located in the Fermo Province (Marche), onshore Italy, was discovered in 1952 and produced 4 Bscf gas from the Pliocene interval until 2001, when the well was shut down because of water influx from the upper of two separate gas-bearing reservoirs. Sound Oil intends to re-complete the lower reservoir which has produced gas with minimal water for over 40 years. This interval has an estimated 1.3 Bscf gas reserves (P50) remaining which will be produced over a period of more than 10 years.

Under the terms of the funding contract:

CSTI will fund directly €500,000 (52%) of the total capital required for the development of Rapagnano. These funds will be used to pay for facilities equipment and related services.

Based on the most likely remaining P50 reserves of 1.3 Bscf gas ('base case'), CSTI will receive 52% of the net cash flows (net of taxes, costs and royalties) from the project for a period of 30 months from first gas. Should the base case revenues not be achieved then the 30 month period is extendable by six months on the same terms and conditions. If following the six month extension the base case return to CSTI is still not achieved, then CSTI are entitled to 52% of the net cash flows until the €500,000 capital is repaid.

Aug 2012 Sound Oil announced Rapagnano gas field engineering and funding contract .  (Topco)