Sound Oil Q&A with CEO James Parsons

By James Moore


Today ValueTheMarkets managed to get the early call to Sound Oil CEO James Parsons.

 1.) During the last 12 Months we have witnessed significant changes to the shape of Sound Oil with the appointments of a number of personnel to the management team. Could you share a few salient points of the importance these changes will make for Sound Oil moving forward?

People are key to every business and Sound Oil is no different. We have built an Executive Team of skilled, dynamic, professional staff who are focused on transformational growth. My team and I are ambitious and we have carefully blended the London / Milan axis to ensure the right balance of technical, commercial and financial skills. Last year we complemented this by hiring Leonardo Spicci as “Badile Project Director” and we now have in Milan a critical mass of skill, external relationships and credibility. I believe our people are one of the unique selling points of this company.

 2.) Recently you have announced smaller assets are on track as Rapagnano and now Casa Tiberi are soon due to move into fully producing wells, coupled to the larger sized outlook the balance appears to be now finding its fulcrum point. What are your thoughts in keeping a realistic approach and balance moving out of tier 3 and into a more reflective sized company within the alternative investment market?

The plan here is relatively simple and unchanged from when we started the journey in October 2012 :

(I) Focus on the game changing drills– Badile, Laura, Zibido, SMG (success on these drills will deliver significant returns to our shareholders)

(ii) Grow the business, in Italy and around the Med such that we establish critical mass and become the leading mid cap upstream player in the region

(iii) Bring Nervesa and Casa Tiberi into production as soon as possible,which (together with Rapagnano) will cover our cost base and provide a desirable balance between production and exploration.

Our stated aim is to be a mid cap upstream regional player within a few years. We have build, and now funded, a portfolio in Italy which enables that. And there is more to come…..

 3.) Last Friday you announced a cash injection of £14m on what appear to be favourable terms of 9p, clearly continental Investment partners believed that the company’s valuation was disconnected to markets, as they deal at a 69% premium to the closing share price Thursday. As the great Winston Churchill would say ” attitude is a little thing that makes a big difference ” – With a funded program over the forthcoming year with an eye on game changing assets do you feel the attitude is now right to reward new and old shareholders respectively?

Providing returns to our shareholders has been, and will remain, our primary objective. I believe this is best delivered by focusing on building strong fundamentals, and this has been our approach for the last 18 months. We have therefore built, carefully and professionally, a high quality portfolio of assets, an expert team and strong relationships with partners and the permitting authorities. It is no co-incidence that these fundamentals are now being recognised – and this is what enables us to secure institutional investment at a significant premium and farm in partners at attractive terms.

I also believe these last two announcements confirm to shareholders that we “do what we say”. We told investors we would be institutionalising the register and securing farms outs and now we have delivered both. This credibility, trust and seriousness distinguishes us, I believe, from many other AIM stocks.

 4.) The Nervesa news todays is clearly an addition to the strong business Sound are conducting under your stewardship, can you elaborate further as the Nervesa projects moving nicely into the second drill under Niche farm-in. 3.6 to 1 has to be pleasing?

To be able to retain 72.5% of Nervesa whilst achieving a full carry on a Euro 6 million well is a great achievement. It validates our asset valuation, it confirms the dislocation between asset and corporate valuations, it de-risks the well and it means we are substantively fully funded for our entire drill programme. It also, critically, paves the way for Badile – a strong balance sheet is critical to achieving a great farm in deal and receiving the permits.

We are one year away, possible less, from “first gas” on our flagship asset, Nervesa. And now that is achieved without material capital.

5.) Badile reported a significant upgrade (60%) Nav of up to $2Billion, the sound oil elephant in the room is penciled to commence in the second half of the year. Do you have any further comments on Badile and Laura outlook?

The numbers on Badile speak for themselves. Badile is one of the reasons why I joined this company and one of the reasons why our price upside potential is one of the highest across the entire sector, globally.

We here at ValueTheMarkets would like to thank you for taking the time out at what can only be described as a busy period for the company.



Author: James Moore

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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