Po Valley Energy (ASX: PVE) is ramping up gas production at its Sillaro gas field in northern Italy to about 75,000 standard cubic metres (2.6 million cubic feet) per day from the current 65,000scm/d.
Notably, this is expected to increase overall production for the third quarter up to about 80,000scm/d, up 55% above production in the second quarter.
It is also higher than the 70,000scm/d that the company produced in the first quarter.
The lower production in the second quarter - down 25% from the first quarter - is expected to reduce second quarter revenue by about 20%.
However, this will be reversed by the higher production expected in the current quarter.
The company had recommenced production from the main PL2 C1+C2 producing level at its Sillaro field after completing the installation of a three phase separator.
Production had previously being impacted by the onset of condensate production in January 2012 that required the level to be shut-in.
Gas output levels were reduced in the second quarter of 2013 to about 43,000scm/d from the previous 53,000scm/d pending completion and certification of the new separator installation.
Po Valley then recommenced production at a rate of about 65,000scm/d and plans to increase this over the coming days to the target rate of about 75,000scm/d.
The company has reduced production rates at the Castello Field to between 5,000scm/d and 10,000scm/d due to an increase in water production during the second half of May.
Test and analysis of the water production led to the decision that it would be prudent to reduce production.
Po Valley is waiting on the final award of the Bezzecca production licence to bring the field into production.
Bezzecca has 4.1 billion cubic feet of Proved and Probable Reserves of gas. It was discovered in 2009 with the Bezzecca-1 well flowing gas at a combined rate of 3.9 million cubic feet per day during testing.
Once the production licence has been granted, the company will initiate activity on the field development plan, which primarily includes the construction of a 2 inch pipeline 7 kilometre in length needed to connect Bezzecca with the existing Castello surface gas plant from which it will be produced through.
The company has also recently being awarded the 90 square kilometre Tozzona gas exploration licence in the Bologna and Ravenna provinces that lies on the eastern border of Eni's gas production licence containing the Santerno gas field that has produced about 35 billion cubic feet of gas to date.
Initial work program for the six year licence includes the purchase of a semi-regional grid of 2D seismic lines from the former operator of the area, Eni.
It has also finalised a new gas offtake agreement with Shell Italia that is benchmarked to prices in Italy.
The ramp-up of production from the Sillaro gas field is likely to lead to a corresponding increase in cash flow for Po Valley.
Overall production will rise to about 80,000scm/d, well above the 66,000scm/d in 2012 that resulted in revenue of €8.2 million.
Further upside will come from the Bezzecca field, which will add significantly to production once it is approved and tied into the Castello gas plant.
Po Valley also maintains a significant exploration pipeline while the new gas offtake agreement with Shell provides price certainty for the company's gas.
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