Gerry Orbell raises the volume at Sound Oil

Friday, Mar 25 2011 by
11
Gerry Orbell raises the volume at Sound Oil

Gerry Orbell was skiing in Courchevel when he got the call inviting him to run a new oil and gas company. At the other end of the line, Gavin Wilson of RAB Capital (LON:RAB) set out his plans for an AIM quoted ‘cash box’ targeting assets in West Africa. For Orbell, who says he was simply “minding my own business as chairman of Antrim Energy”, the prospect offered a new challenge and one which he concedes has proved to be a long, hard grind. Nevertheless, after five years of highs and lows, Sound Oil (LON:SOU) is about to see drilling get under way across its portfolio. The focus is on near-term gas exploration and production from its flagship projects in Italy and the prospect of high impact exploration drilling on projects in Indonesia.

Sound Oil floated on AIM in June 2005 and 12 months later diverted from its original African strategy with the reverse acquisition of Mitra Energia, an unquoted gas exploration company in Indonesia. The deal gave it a 34% stake in the Bangkanai Block onshore central Kalimantan and a 20% interest in the Citarum Block onshore central Java. However, appraisal and development of the two highly prospective assets was frustrated by slow progress by their respective operators. The good news is that both projects are now in the hands of new operators. At Bangkanai, where Sound Oil slashed its holding to a carried 5% in May 2010, Salamander Energy (LON:SMDR) has taken control and is planning two exploration wells this year and development of the Kerendan gas field, which lies on the licence. At Citarum, three new exploration wells are expected in 2011 under the operatorship of TSX-listed Pan Orient Energy (TSX-V:POE).

Meanwhile, Orbell is working hard on a range of prospects among a portfolio of 17 oil and gas exploration permits and applications in Italy. These were acquired as part of Sound Oil’s acquisition of Consul Oil & Gas last December – another of Orbell’s directorships. The first development here is expected in April when a rig is due to complete two key intervals in the Marciano-1ST well, which are estimated to contain 2.5 billion standard cubic feet of gas. The well lies on the company’s 99%-held Fonte San Damiano…

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Sound Energy plc is a Mediterranean upstream company. The principal activity of the Company and its subsidiaries is the exploration, appraisal and development to production as an operator in the oil and gas industry. Its principal activity is in Italy and Morocco. It operates through three segments: corporate; exploration and appraisal, and development and production. Its Tendrara permit is located in the Figuig Province, NorthEast Morocco. The Tendrara permit area, which is sub-divided into over eight blocks, covers a combined area of approximately 14,500 square kilometers. The Meridja permit is located next to its Tendrara license, and covers an area of over 9,000 square kilometers. The Sidi Moktar permit is located in the Essaouira Basin in central Morocco and is sub-divided into over three blocks (North, South and West). The Badile Permit is situated in the Piedmont Lombard Basin in northern Italy. Its Rapagnano Gas Field concession is located in Fermo Province, Marche Region. more »

LSE Price
8p
Change
3.6%
Mkt Cap (£m)
83.4
P/E (fwd)
n/a
Yield (fwd)
n/a





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6 Comments on this Article show/hide all

emptyend 25th Mar '11 1 of 6
5

Interesting interview - especially in the area of operatorships and partners!!

Also interesting was this comment:

For example, we have got a fantastic exploration prospect in the north of Italy, called Badile. It is about 40km from Milan and used to be owned by British Gas but they walked away and did other things like Brazil. Our competent person, Fugro Robertson, have looked at the map made by British Gas together with our calculations of what may be in place and recoverable in terms of gas, and they reckon there could be about 150 bcf of gas potential.

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djpreston 25th Mar '11 2 of 6
3

All in all Sound doesnt sound too bad at all.

My only concern is that the interview didnt really touch on the blessed red tape in Italy. I cant think of one project that has proceeded in a timely manner due to the interference of the local councils, regional govt, national govt.

Fund Management: European Wealth
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thebuffoon 25th Mar '11 3 of 6
2

The reason I sold out of Soco was to invest in Sound Oil (LON:SOU) at an average of 1.97p.

With a CPR confirming, in the event of successful appraisal and plumbing, an NPV10 of the discoveries of $226million/9.3p per share, I thought it was a strong buy. Some of the Indonesian gas assets are huge

Buffy

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MaxCashflow 25th Mar '11 4 of 6

I bought into Sound at 1.9p as well and sold out last week. The problem is that their NPV10 of 10p splashed all over ADVFN from their CPR is the unrisked number. Their CPR specifies a risking of 50% for all assets, so risked NPV should be 5p. Plus I'm not sure how they figured out the NPVs for some of the developments - they seem a bit optimistic to me for gas.

For sure there is plenty of upside in Indonesia and also in their Italian exploration.

I have a risked value of 3.3p ($83m) and unrisked 29p ($700m) across all assets.

ADVFN has got very noisy too. I'll be waiting for it to quiet down a bit before deciding whether to reenter.

Cheers, Max

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thebuffoon 26th Mar '11 5 of 6
2

The problem is that their NPV10 of 10p splashed all over ADVFN from their CPR is the unrisked number. Their CPR specifies a risking of 50% for all assets

Sound have a CPR for each of the two Indonesian PSC's, and they have one for the Consul assets that Sound bought.

When you refer to 'Their CPR' what are you referring to?

Plus I'm not sure how they figured out the NPVs for some of the developments

Fair enough.

For sure there is plenty of upside in Indonesia and also in their Italian exploration.

Agreed.

I have a risked value of 3.3p ($83m) and unrisked 29p ($700m) across all assets.

I'd love to see how you arrived at this figure; would you care to share with us? I ask these questions, as your comment that Their CPR specifies a risking of 50% for all assets just doesn't make sense to me.

I could be wrong of course. It's happened before. :^}

Buffy

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cromersimpson 13th Jun '11 6 of 6

Massive potential.
Italy figures are due any day now.
Kalimantan with a possible 5% of 3 trillion cubic feet of gas!
7 wells being drilled in the next 11-20 months and all paid for.
Short Term - Medium Term - Long Term Fully covered.
With a share price of 3.83p what do investors want?

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