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Po Valley Energy Gas Production Up 35%, Revenue Up 38.5% To A$2.6M

Po Valley Energy (ASX: PVE) has increased gas production to 224 million standard cubic feet (MMscf) in the September quarter, up 35% from the previous quarter and has progressed its key Italian projects.

Revenue for the quarter was up 38.5% to €1.8 million (A$2.6 million) while cash at bank is €2.7 million as of 30 September 2013.

The production increase was due to the condensate separator equipment now installed and operational at the Sillaro gas field, which produced 208MMscf in the quarter.

It also expects the Castello field to continue producing at the current quarterly rate of 16MMscf for the foreseeable future.

Operations Update

Po Valley plans to start rigless testing of the Gradizza greenfield gas discovery in early November.

This will complete well clean-up and better evaluate the commercial potential of the well, which had produced at a stabilised rate of 247,000 cubic feet of gas during the initial production test.

The company is also reprocessing seismic and other data over the Teodorico offshore gas project to refine the structural interpretation for the discovery, providing the basis for gas volume confirmation and development well location selection.

Engineering work from the pre-Front End Engineering and Design study is currently being reviewed while the preliminary development plan and geological work already completed will be presented to the Ministry in order to pursue a fast track process towards a production concession.

Teodorico is located within the AR94PY permit and contains discoveries made previously by Italy's Eni.

At Bezecca, the company has made progress on the Environmental Impact Assessment procedure with the Lombardy Region Commission's late meeting at the end of September finding no major issues.

The production concession is expected to be awarded in the first quarter of 2014.

In parallel, the company started the feasibility study for the construction of the 7 kilometre pipeline to connect Bezzecca with the exisiting Vitalba production plant. It also plans to call for tenders for the final engineering and construction contract before year end.

Bezzecca 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.

Po Valley has also received confirmation that its Sant'Alberto project will be reviewed at the next Hydrocarbon Committee (CIRM) held by the Ministry.

It has started the Pre-Feasibility Study, which is an integral part of the Environment Impact Assessment that is itself the final step in the regional regulatory process before receiving the Preliminary Production Concession award.

An advanced blueprint of a small, low cost modular plant intended for Sant'Alberto has been finalised and the design specifications will be incorporated in the pre-feasibility study.

Sant'Alberto contains the Santa Maddalena-1 well.

Other Developments

The company has formally submitted a purchase request to ENI for the available well data and requested test reports for Bagnolo 3 and Ravizza 1 within the Cadelbosco & Grattasasso oil licences

Preliminary results of a Production, Optimisation and Economic study by an external consultant that is being reviewed by the company's technical team are encouraging.

Po Valley has selected the location for the Podere Maiar-1d at the Podere Gallina licence.

The drilling application was lodged with UNMIG at the end of June and in August the Company finalised and lodged the EIA with the Emilia Romagna Region.

The company is also reviewing and interpreting newly acquired 3D seismic survey data from Eni over the Vitalba West Prospect in the Cascina Castello production concession to finalise a well location and drilling program.

While a potentially smaller prospect in the company's broader exploration portfolio, this target is located only a short distance from the existing Vitalba gas production facility and within the current production concession licence area.

Analysis

With production up 35% and revenue rising in step for the quarter, Po Valley is well positioned to enjoy a substantial boost in earnings for the second half of this year.

Progress has also being made on its development plans with Bezecca-1 poised to increase production once the production concession is granted and the pipeline to tie it to existing facilities is constructed.

Po Valley has a strong exploration and development pipeline, any of which is a catalyst to re-rate its shares.

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