Sound Oil (LON:SOU) , the exploration and production group run by Antrim Energy chairman Gerry Orbell, has agreed to acquire an interest in the Montemarciano Permit, which lies in the Ancona Province, of central Italy. The deal gives the company an early opportunity to drill a low cost gas exploration well, which, in the best case, could provide near term cash flow and, in the high case, deliver significant upside to its overall asset base.

The farm-in has been struck between Sound Oil’s majority held subsidiary Apennine Energy and Servizi & Assistenza Ricerche Petrolifere (SARP), which currently holds a 100% working interest. Apennine will pay SARP €215,000 (£191,000) as a contribution to past expenditure and fund the 100% cost of the Casa Tiberi-1 exploration well up to €800,000 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. Independent consultancy Fugro-Robertson has prepared a Competent Person's Report on the prospect and identified base case (P50) prospective resources of 5.7 billion standard cubic feet (bscf) of gas, 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.

SARP has already received the necessary approvals to drill the well and work on the construction of the Casa Tiberi well site will begin as soon as land access is finalised. It is anticipated that the well will be drilled in either the third or fourth quarter of this year.

Gerry Orbell, the 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 programme, using funds previously raised by the company earlier in 2011.”

Sound Oil floated on AIM in June 2005. The company holds a portfolio of nearly 20 oil and gas exploration permits and applications in Italy that were…

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