Sound Oil, the Italian focused upstream an oil and gas company, has signed a gas sales agreement, or GSA, with Steca Energia Srl.
As previously announced, the Company expects to commence production from the Rapagnano field shortly, targeting an estimated 1.3 Bscf (P50) over a thirteen year field life. The Company will directly connect the well to the local low pressure grid, operated by Steca (a local gas distributor), who will purchase the gas.
The key terms of the GSA include: Gas priced initially at E0.316 per Scm (US$11.2 / Mscf), varying quarterly based on a basket of commodity prices (Diesel, Brent and Fuel Oil as published in Platts) with an estimated average 2013 price of E0.320 per Scm; Optionality for Sound Oil to increase production during the winter period and benefit from a E0.16 per Scm price increase; No penalties for Sound Oil in the case of reduced or a period of zero production; A guarantee deposit from Steca covering one month of production; and Contract conditional on the concession award, expected shortly.
James Parsons, Sound Oil's CEO, commented: "The Company continues on track to achieve the strategic milestone of first gas, having now secured the gas sales contract. This initial revenue stream will enable Sound Oil to cover a large portion of its overhead costs in Italy."