Sound Oil expects gas production in Italy to get underway by end of the year

Oil and gas group Sound Oil said it expects gas production at the onshore Nervesa field in Italy to get underway before the end of the year.

In a statement released on Tuesday, the London-listed group said all the required equipment and materials were on site and construction of the necessary skids - steel pallets built to carry machinery and equipment around - at the field was expected to be finished and installed by the end of October.

Meanwhile, the company received confirmation from the Italian Ministry of Economic Development that the Badile permit, which was due to expire on 23 March 2016, will be extended until the earlier of either 31 December next year. or 12 months from when the Ministry awards the company final authorisation to drill the forthcoming well.

In a separate statement, the group said its 55% stake in the Tendrara licence in Morocco will be granted in two tranches, with the first 37.5% awarded on completion of the transaction and the remaining stake granted once the group commits on the second exploration phase, which would include the drilling of further wells.

The company agreed the deal for the project in June and has since recruited SLR Consulting to evaluate consulting.

According to SLR, based based on Sound's potential 55% shareholding in the licence, that the company has best estimate contingent resources of 170.8bn standard cubic feet of gas net to Sound and 470,000 barrels of condensate, although it only has only a "22% chance of success" of recovering those 170.8bn cubic feet of gas.

"I am pleased to report that this evaluation validates the scale of both the existing gas discovery and the exploration upside at the Tendrara licence," said group chief executive James Parsons.

"We believe this asset provides a compelling risk/reward balance and a strong platform for further consolidation in country."

Sound Oil shares were down 2.15% to 15.90p at 1452 BST on Tuesday.