Sound Oil, an upstream oil and gas company with assets in Italy and Indonesia, has appointed Italian engineering company CSTI as its engineering contractor for the Rapagnano Gas Field, onshore Italy, and has also signed an associated funding contract with CSTI.
CSTI will undertake the surface and facilities engineering for the Rapagnano project and fund directly €0.5m (52%) of the total capital required for the development of Rapagnano, of which Sound remains the 100% owner. The funds will be used to pay for facilities equipment and related services.
Based on the most likely remaining probable (P50) reserves of 1.3bn square cubic feet (scf) gas, CSTI will receive 52% of the net cash flows (net of taxes, costs and royalties) from the project for a period of 30 months from first gas.
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Should the base case revenues not be achieved then the 30 month period is extendable 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 are entitled to 52% of the net cash flows until the €0.5m capital is repaid.
If gas production is not achieved at Rapagnano for any reason, Sound Oil will have no corporate liability to repay CSTI.
The Rapagnano project requires a total of around €0.96m capital and is estimated to achieve payback in around 12 months in the base case.
The share price rose 9.52% to 0.57p by 10:20.
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