Sound Oil farms-out interest at Kalimantan block

UK firm Sound Oil plc announced on Tuesday that it has entered into an agreement to farm-out part of interest in the Bangkanai Production Sharing Contract (PSC), onshore Central Kalimantan to Elnusa Bangkanai Energy Limited, the operator of the PSC.

Under the agreement, Sound Oil has transferred a 29.99% interest in return for which its remaining 5% interest will be carried through all obligatory costs in the PSC including two forthcoming exploration wells. Sound Oil will also be covered for 5% of field development costs up to the first delivery of commercial gas. This agreement also applies to the discovered gas field at Kerendan.

Sound Oil will not receive any cash for the transaction.

Commenting on this farm out Gerry Orbell, Chairman said: "For several years and for a number of reasons, the Operator has not undertaken the obligatory work on this PSC which should have been addressed before the end of 2006. Now that this farm out has been concluded we expect that this work will move forward to the satisfaction of the Indonesian Authorities. The two anticipated wells give Sound Oil exposure to a possible unrisked net 220 billion cubic feet of gas recoverable, at no risk and at no further cost to the Company. We also have the potential of a future revenue stream from gas production, again at no upfront cost to Sound Oil.? (alex)