Sound Oil, the Italian focused upstream oil and gas company, is pleased to announce a Letter of intent ("LOI") for a rig with LP Drilling SrL ("LP Drilling") for the forthcoming Nervesa appraisal well. As previously announced the Company plans to spud the Nervesa appraisal well once final governmental approval has been obtained; this is expected around the end of 2012. Preparations for spud are well advanced with long lead items delivered, land secured, service contracts awarded and site preparation expected to commence soon.
The Company has, following a tender process, signed a LOI with LP Drilling for the exclusive use of a hydraulic type TB2100 S rig on Nervesa between the period from 1 December 2012 to 1 February 2013. The Company estimates that the remaining spend for the appraisal well is approximately €2.9 million including the rig hire. Under the terms of the LOI Sound Oil also has the option to utilise the same rig for the Strombone appraisal well immediately following the Nervesa well. The LOI is conditional on Sound Oil receiving final Nervesa governmental approval and LP Drilling adequately certifying the rig in Italy.
James Parsons, Sound Oil's Chief Executive Officer commented: "The Company continues on track to drill the Nervesa appraisal well, having now secured the rig. The independently assessed annual cash flows (after tax) from Nervesa are estimated to be above US$14 million pa initially and stay above US$12 million for each of the first seven years, generating a total NPV of US$62 million."