Member Info for ericnat17

Hi Job

I got a response from Sound. Not much in the form of a clarification it is just a link to the 1Jun 21 RNS. Sound don’t appear to be keen on sorting out this confusion. I asked a very clear question about the full potential amount of exposure we have on the Tax issues.

From that RNS the additional amount of liability looks like $22.5 million. As they have sent that link I think we are being asked to assume that is the outstanding amount.

Have you asked for clarification as well?

Hi Joe

No not received anything from Sound. Which is a bit unusual, maybe they are taking some time due to the heatwave…..?

Not sure of the relevance there KTF but it’s just a discussion board.

From Fern over the weekend.
It seems that the current status of the tax claims is the following:

SEME subsidiary: There is liability of US$ 2.75 million that has been confirmed both by the Local Tax Comitee (LTC) and a court. The company is currently appealing the judge decision.

SARL AU: the company has a contingency of US$ 22.5 million, with the following breakdown:
- Value Added tax and witholding taxes: US$ 22.2 million
- penalties: US$ 0.3 million
The company has appealed these claims to the Local tax commitee (LTC), which has up to 12 months to make a decision.
See note 8 to 2021 Annual financial statements

Regards

Hi Job

Yes I have emailed Friday evening.

The RNS stating some of the TAX was resolved came out before the financial report. So on the face of it, looks like Fern is correct 2.5 plus a potential 22.5. That is a shame because I thought the 14 million was the maximum extra. Let’s see how the company responds to emails requesting clarification.

Hi Fern

So 2.5 million plus a potential of another 22.5 million.

To be frank I thought it was 2.5 million with a potential of another 14 million. Well I will be happy when we know for sure. Then we can at least hope for the best but prepare for the worst.

Hi Fern

Yes time will tell. I hope that you are right that we are not liable. If we find out we are liable then it certainly seems that the senior sound team have been using legal ease and semantics to try to limit exposure.

But I need to understand why it is in the RNS and I have been given a different response. Maybe it is the way I asked the question?

Sorry Fern

But I think one lead to the other. The TAX authorities have lodged this claim and Sound energy are fighting it. For me I think that is pretty clear that Morocco Tax authorities think that Sound Energy PLC are liable for the the Claim.

Fern…And now you have got it….for the RNS about the transfer on intangible assets from the dormant to the active. This is what the tax charge is all about

In addition to the Remaining SEME Charges, the Moroccan tax claims against Sound Energy Morocco SARL AU ("SEMS") related to the Tendrara Lakbir Exploration Permits and the transfer of Operatorship from SEMS to SEME (the "SEMS Claims") remain in due process. Under the SEMS Claims the Moroccan Tax Administration purports a so-called disposal for nil consideration of intangible assets by SEMS to SEME.

PS

This is part of the problem, GL is trying to clear up the mess left by the previous team. I don’t think the change of corporate structure was to avoid tax….it just appears that it was. Mistakes were made and now they are all coming home. It is not going to be a big issue it’s just some thing to deal with.

If assets transferred from a dormant to an active then tax liability also moves. This is relatively common in most tax jurisdictions.

Yes I have listened to the Q&A several times. He does not say that we are not liable for the 14 million….he just says that it want affect the cash flow of the the current operator company. Again very carefully chosen words. It will affect the liabilities of the Sound Energy PLC.

It appears that we have a bit of confusion about how company finances work. I have asked Sound for some clarification. But hopefully we can agree on one thing the 2.5 million is only one issue. We have a second Tax issue that is clearly mentioned in the Latest RNS. I just want it to be Clear now so we do not get a shock when the next one lands , it is priced in. That’s try and get that mentality fixed…..otherwise…

Sorry Fernam

If it was as easy as that to get out of a TAX claim don’t you think that everyone would be making their companies Dormant. The RNS is clear and I spoke to the one of the presenters at the AGM and he confirmed the status as I have described. The initial presentation did mention approximately $3 million, but is was very clear that they appeared to be using semantics in the description of the tax liability.

It comes down to this. They Morocco tax authorities have specifically defined 2.5 million as a shortfall, which has been through Due process and is therefore is tangible. The Morocco tax authorities have also said that $14 million is a potential liability, but this charge is still going through Due process and therefore is not currently a tangible liability. This is the wording that has been used and is probably why we have some confusion.

It is not a very exciting read but if you go through each one of the RNS you can se the detail.

Hi Job

I asked the same question at the AGM and there is is an additional 14 million that is is Due process. I have clarified it again this week on email with the company and the same was confirmed. The additional 14 million is the initial Tax demand that was made in the first RNS many months ago. And this is the part of the latest RNS that covers it.

“ In addition to the Remaining SEME Charges, the Moroccan tax claims against Sound Energy Morocco SARL AU ("SEMS") related to the Tendrara Lakbir Exploration Permits and the transfer of Operatorship from SEMS to SEME (the "SEMS Claims") remain in due process. Under the SEMS Claims the Moroccan Tax Administration purports a so-called disposal for nil consideration of intangible assets by SEMS to SEME.”

It is not easy to follow but if you read each RNS on the tax issue you can see that we have a current potential charge of 16.5 million with the fine for late payment and interest since 2018.

I am happy to send the email that I received from the company this week. Just let me know.

I think it is best to get this clear now, because when the next claim comes I do not want to see a shock drop on the SP again. The tax bill is priced in and it is 16.5 million+.

L2 strengthened 4v2

This could also represent the reason for some of the fall in SP

Change of subject I think

So we need to get moving on Sidi. The initial period with extension up to 4 years and 6 months set from April 2018 is up in less than 12 weeks and we have to undertake 500km of 2D seismic to keep the license. Now of course we could get another extension and hopefully that is the plan. That will be news expected soon

Eastern Morocco Anoual permits
Initial Period of 5 years and 4 months from 8 September 2017: FTG-aerogradiometry and 600 kilometres of 2D seismic and 1 exploration well with Triassic objective (to be scheduled in 2022). So that gives us until the end of the year to get drilling. This permit has been extended twice already so I doubt we will get another go. So again news due here.

A few big trades at the end of the day but nothing large enough to to be institutions.

But the massive trades leading up to the AGM are now very suspicious given this news today.

And then there was the drop prior to the 2p fundraiser..

You have to admit that sound is still a very leaky company. And with that in mind we need to think about where the next news is coming from and how the trading days leading up to that news.

For me I am invested in the asset, but it is sometimes seems like Morocco does not want sound in the driving seat for Tendrara. Looking in detail at the additional SEMS tax claim for $14million that is in Due Process. We have been waiting for awhile for that, and PS could be right that this decision today was the trigger for a decision. But from the SP reaction today it looks more than likely it is priced in.

Do we really all think that the TAX authorities are going to be malicious and force our cornerstone investor OGIF to have worthless shares in Morocco gas future.

No of course not. Looking at the very worse case scenario of $16.5 million in charges. They will allow Sound to pay off over an elongated period of time. It will be a pain in the ar5e but it is fine. OGIF will also have to pay their TAX bill. That will not go down too well. Never mind the effect this will have on international investment.