Sound Oil shares plummet after mixed Nervesa well update

Sound Oil fell nearly 11% on Monday following a mixed update on the company’s Nervesa appraisal well in Italy.

Sound Oil said it has successfully perforated and completed seven intervals in the lower section of the reservoir where the most significant gas shows were identified at the onshore Nervesa discovery.

Initial gas flows have identified that multiple perforated intervals, between 1,929 and 1,988 metres’ depth, are indeed gas bearing, but are however of relatively low permeability, the company said.

Sound Oil said that clean-up operations are underway and, similar to the first Nervesa well drilled in 2013, are expected to continue for a few days. After the clean-up, the company will decide whether to initiate a well test directly or to utilise stimulation techniques beforehand.

In a separate statement, the company said that it has entered into a farm-in agreement with the Morrocan Oil and Gas Investment Fund in relation to the Tendrara Licence, onshore Morocco.

Upon completion of the deal and subject to regulatory approvals, Sound Oil will assume operatorship of the Tendrara licence and take a 55% working interest. The Moroccan Oil and Gas Investment Fund will hold a 20% stake while the Moroccan NationalOffice of Hydrocarbons and Mine will keep the 20% stake it already holds.

The working interest will be granted in two tranches, with 37.5% awarded on completion of the transaction and the remaining 17.5% granted ounce the company commits on the second exploration phase.

The Tendrara licence includes two stranded gas discoveries with low-risk appraisal potential and significant blue sky exploration upside, said the company. It noted that preliminary internal estimates of existing discovery volumes are broadly comparable to estimated volumes at the company's Badile licence in Italy.

Under the terms of the agreement, Sound Oil will pay 100% of the cost of three wells, of which only the first will be a firm commitment.