Proactive Investors UK
By Jamie Ashcroft
Sound Oil (LON:SOU) has signed what chief executive James Parsons calls the first “transformational” deal in the company’s Mediterranean gas strategy.
In Morocco, a deal with OGIF could see Sound take a 55% stake in an onshore gas development.
The Tendrara licence area, in North East Morocco, hosts a number of discoveries and is deemed to have low-risk appraisal potential and significant exploration potential.
Investors may well recognise the name, however, as AIM rival Fastnet (LON:FAST) in January walked away from the project after a lengthy process failed to bring in a larger development partner.
Sounds deal with OGIF gives it the exclusive right to acquire 55% of the project, and become the operator, in return for funding up to three wells.
Sound would initial acquire 37.5% with the completion of the first well and a further 17.5% stake would be earned if the company commits to a second phase of exploration (including further drilling).
The first well, which is the only firm commitment well in the agreement, would appraise the larger of two existing discoveries in order to address uncertainties, such as well deliverability and the discovery’s continuity. It would also prove up additional reserves, required to commercialise the stranded gas field.
Sound told investors that it anticipates drilling its initial commitment well in the fourth quarter of this year, at an estimated cost of £6mln.
“This transaction is our first transformational deal in pursuit of our Mediterranean gas strategy,” said chief executive James Parsons.
“The Tendrara asset, with two existing discoveries and resource potential of multiple Tcf, has a very attractive risk / reward profile, builds on our core technical and commercial strengths in Milan and dovetails perfectly with our Italian portfolio.
“We look forward to updating shareholders on the conclusion of negotiations and the exciting potential of the enlarged portfolio.”
Fastnet previously had the right to acquire 50% of Tendrara by funding two wells, and it intended to bring in an additional partner for the project.
In January, Fastnet’s newly promoted chief executive Carol Law said market conditions for oil companies had “severely hindered” Fastnet’s ability to attract partners.
Sound Oil, separately, this morning told investors that the drilling of the Nervesa project’s second appraisal well is now about 200 metres from the first reservoir target.
