Sound Energy moves forward with plans in East Morocco

Sound Energy operates in Morocco at Tendrara and Sidi Moktar
Deal for part sale of its operations in East Morocco announced in November
That would include the TE-5 discovery where it has just received a proposal for a gas sales agreement from Morocco’s state power group

What it does

The East Morocco operation comprises three areas – Tendrara, Greater Tendrara and the Anoual Permit.

Sound Energy PLC (LON:SOU) holds 47.5% of the area, alongside Schlumberger, which has a 27.5% direct interest and the state’s ONHYM vehicle, which retains a 25% stake.

This deal also united Greater Tendrara, the Anoual permit and TPE, the 25-year production concession for the Tendrara TE-5 gas discovery.

How is it doing

Greater Tendrara

Up to 20 trillion cubic feet of gas might still be present across these exploration opportunities.

Even so, Sound said a sale of the East Morocco acreage would be a preferred option ahead of the final investment decision for the TE-5 production area.

In September, Sound said it expects completion of monetisation efforts for its Eastern Morocco portfolio before the end of 2019.

Prospects for a sale received a boost in October when an outline gas sales agreement was signed with Morocco's state energy company with the aim for a final GSA to be agreed by the end of 2019.

Sound estimates gross revenues from the prices agreed in the MOU at US$84mln in year one.

In November, Sound signed a preliminary agreement to sell just over half of its stake in its Tendrara licences in East Morocco for US$113mln.

The consideration is US$54mln cash and the rest a carry for future capital expenditure

Once the sale completes, Sound's in interest drops to 23.3% with an option to sell a further 9%.

Sidi Moktar

Sound has a 75% stake in the high potential Sidi Moktar exploration area on the west coast of the country.

It spans about 4.5 square kilometres, is close to existing infrastructure and best-case estimates suggest 9trn cubic feet of undiscovered gas.

At Sidi Moktar, Sound has said it wants a new partner to fund further exploration.

Financial

As of 14 May 2019, the company had a cash balance of over £11mln, while losses for 2018 were £11.75mln, a slight reduction on the previous year.

What the boss says: James Parsons, chief executive

"Whilst clearly disappointed with the outcome of the recent well test at TE-10, the team and I are encouraged to have delivered gas to surface from another TAGI discovery and remain confident in the potential of our Eastern Morocco basin."