During 2010, Po Valley continued production from the Castello gas field and commenced production from the Sillaro gas field in May. The Company's 2010 full year production was 26.8 million cubic metres of gas (946 million cubic feet).

Castello, which started on 17 December 2009, produced 8.3 million cubic metres during the full year. The newly installed plant ramped up smoothly to around 60,000 cubic metres per day through the period to April 2010. At this point the Company became concerned with the rate of pressure decline and the field was stopped for testing. Following evaluation work the ensuing three month period, the Company concluded that future production from the Vitalba-1dir well would be limited and that a new deviated well Vitalba-1dirA would be required to access the original reserves updip of the older Agnadello 1 well 400m to the South of Vitalba-1dir. Production continues from the Castello well at a low rate ahead of drilling the new Vitalba-1dirA well. The planned Vitalba-1dirA well will be deviated from the current Castello plant location and connected to the existing Castello production plant. Subject to drilling success, production is planned to recommence in the second half of 2011.

The development plan has been modified to incorporate the new well and submitted to the responsible Italian regulatory authorities. The final authorisation was issued in the 1st Quarter of 2011. In the interim, Vitalba- 1 dir has been operating at limited rates and is currently producing at approximately 3,000 cubic metres per day.

Sillaro commenced production initially from Sillaro-2dir (Pliocene PL2-A and PL2-E levels) on 18 May 2010, followed by Sillaro-1 (PL2 C1/C2 levels) on 14 June 2010. The Sillaro gas field demonstrated stable plant and pressure performance during the balance of 2010. The rate of production from the Sillaro field was gradually increased during the commissioning period and subsequently stabilised at the start of the Gas Thermal Year, 1 October 2010. In 2010, Sillaro produced 18.5 million cubic meters following May start up and is currently running at approximately 83,000 cubic metres per day (2.9 million cubic feet per day) in accordance with the contracted gas rates for the 2010 - 2011 Gas Thermal Year.

Progress was also made on the development front with plans and applications for Bezzecca and Sant' Alberto gas fields. New seismic will be shot on the Sant'Alberto field in the first quarter of 2011. As reported in detail in the 2010 March quarterly, the 3.1 bcf of 2P gas reserves of the Bezzecca field were significantly decreased compared to the pre-drilling reserve estimates of 44 bcf. Detailed field reservoir modelling and production forecast simulations on the Bezzecca gas field were carried out by independent experts during 2010 (based on the appraisal well drilled and tested in April 2009). The Company has finalised a phased development plan for the field which was submitted to the relevant authorities in January 2011.

Geological, exploration and appraisal work advanced on a number of the company's prospects. Based on this work our forward drilling program for the next 24 months is expected to cover the appraisal of the Fantuzza gas field, the appraisal of Quaternary gas prospects in Correggio and the drilling of the exploration gas prospects of Gradizza and Cembalina, subject to ongoing technical assessments, regulatory approvals and available finance.

In 2010, with the production from the Castello and Sillaro gas fields, the company generated €7,157,331 in revenues. Operating efficiencies were achieved and evidenced by the improvement in operating margin during the last six months of the year. Earnings before interest, tax, depreciations and amortisation amounted to €2,218,895 for the full year 2010.

Tags: Po Valley Energy