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Sound Oil appoints contractor and funding partner for Rapagnano gas field in Italy

Sound Oil (LON:SOU) has contracted an engineering firm for work on the Rapagnano onshore gas field and as funding partner, and it expects to receive final approval from the Italian authorities for the development shortly.

The upstream oil and gas company with assets in Italy and Indonesia has appointed domestic group CSTI Srl as engineering contractor for Rapagnano.

CSTI will undertake the surface and facilities engineering and will directly fund €500,000 of the total €950,000 capital required for the development of Rapagnano.

CSTI’s funds will be used to pay for facilities equipment and related services.

The project is estimated to achieve payback in approximately 12 months in the base case.

Based on the most likely remaining P50 reserves of 1.3 billion standard cubic feet of gas (Bscf), CSTI will receive 52 percent of the net cash flows from the project for a period of 30 months from first gas.

Should the base case revenues not be achieved, this period will extended by six months on the same terms and conditions.

If following the six month extension the base case return to CSTI is still not achieved, then CSTI is entitled to 52 percent of the net cash flows until the €500,000 capital is repaid.
Should gas production not start at Rapagnano for any reason, Sound Oil has no corporate liability to repay CSTI.  It also retains 100 percent ownership and control of the concession.

The Rapagnano field, located in the Fermo Province of the Marche region, was discovered in 1952 and produced 4 Bscf gas from the Pliocene interval until 2001, when the well was shut down because of water influx from the upper of two separate gas-bearing reservoirs. 

Sound Oil plans to re-complete the lower reservoir which has produced gas with minimal water for over 40 years. This interval has an estimated 1.3 Bscf gas reserves remaining which will be produced over a period of more than 10 years.

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