Sound Energy PLC (LON:SOU) has begun drilling its second gas well on the Tendrara concession, onshore in Morocco following the recent success of the first.
Work on TE-7 got underway on Thursday with aim of assessing the potential of block ahead of putting together a field development plan.
The latest drilling is taking place around 1.6 kilometres from the site of TE-6 and will go down to 3,440 meters.
The drill bit will then be steered at an 88 degree angle into the TAGI reservoir to provide a horizontal drain of between 600 and 900 metres.
The plan is to test the well for 70 days to give a comprehensive read-out from TE-7.
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THE NEWS: Work begins on Tendara horizontal well
Drilling is likely to take 54 days, completion and simulation a month with clean up and initial well testing requiring a further 10 days.
“The company looks forward to updating shareholders on achievement of each of the three casing points and achievement of total depth,” said Sound in a stock exchange announcement.
“The final results of the well will be announced after the initial well test.”
Brokers see stock going above £1
The stock, up 320% in the last year, succumbed to a bout of mild profit-taking Friday as it fell 5% to 62.5p.
finnCap analyst Dougie Youngson said the shares were worth 104p each as he repeated his ‘buy’ call on the stock.
Cantor Fitzgerald’s Sam Wahab also said ‘buy’, but his ceiling is 101p.
“An extended well test will follow the drilling operations, and therefore provide further support for the long-term commerciality of the field in our view,” Wahab added.
“The shares have continued their strong rally following encouraging results at the company’s last well, but we believe the current valuation remains undemanding ahead of two transformational wells.”
Beefed up management team
Earlier this week Sound bolstered its management ahead of what chief executive James Parsons described as “pivotal time” for the company.
Not only is it drilling in Morocco, but preparations are being made for work on a possibly transformational play in Italy; a well called Badile.
So Sound has added Brian Mitchener to the team as executive vice president of exploration. He has 35 years at BG (LON:BG) where he was regional general manager, as well as previously working for Statoil and BP.
Meanwhile, Leonardo Spicci, formerly Sound’s managing director in Italy, will assume the role of executive vice president of development and production, but will be based in the UK.
Business development director Leonardo Salvadori will assume Spicci’s previous role.
Don’t forget Italy
Badile, which has a net present value of over £400mln, is part of a portfolio of Italian assets on which the original Sound Oil was founded.
It includes smaller producing assets Casa Tiberi and Rapagnano as well as a host of exploration and appraisal opportunities that could help turn the valuation dial.
Recently Sound expanded its collaboration with oil service giant Schlumberger from Morocco to Italy with the latter helping fund Badile after agreeing to provide €7.5mln of drilling services.
Top partnership
It stands to receive 20% of the profits from a successful well for effectively stumping up 30% of the costs.
The collaboration started with Schlumberger footing a significant portion of the bill for the Tendara appraisal well.
And as CEO Parsons pointed out the partnership “remains a critical differentiator for our company which technically de-risks and funds our key asset”.