Member Info for Exploration

zippy

you are correct about Spirit. They've just applied to develop Pegasus West in block 43/13. It you look at the report below (see link) in Section 2 there is a geological map showing Pegasus West and the neighbouring Andromeda prospect in 43/12 which will probably be drilled early 2019. Its on trend with CNRL's 43/11 and 42/15 which are low-risk drilling targets. You can also see in the link how Pegasus West will keep Cygnus on production - hopefully followed by discoveries in CNRL's blocks. So there is a short-term promise of considerable value.

https://www.spirit-energy.com//images/site/SPT-PRJ-SNS0032-ENS-0001-Pegasus-West-Development-ES-compressed.pdf

Crude

It is worthwhile taking a wider view, because the Tagi gas play is only one of the petroleum systems known in the Tendrara area. People tend to forget it was the appearance of oil, as well as gas, at SBK which triggered the initial enthusiasm and fallout.

The Saharan Atlas is a series of ‘inverted’ and deformed Mesozoic rift basins and is richer in reported petroleum seeps than many other areas in North Africa. You only have to look at the Sidi Fili oilfield in Morocco’s Rif Basin and the vast amount of petroleum seepage which has tantalised Moroccan geologists for nearly a century. As BM has told us many times, the lack of success in hydrocarbon exploration is due to the complex and generally unfavourable timing relationships between petroleum generation, trap formation and destruction – not to mention the diagentic effects which have dogged TE-8 and TE-9 and Meskala for that matter.

In the Tendrara area many post-salt structures have been eroded to levels where both the reservoir and source rocks have been exposed at the surface and any traps breached. Such features are probably the main reason for the large number of reported petroleum seeps. This is mainly seen in the Cretaceous and Jurassic structures in the Missour/Tendrara/High Plateau area where nearly all structures are breached at this level. But this however, does not detract from the prospectivity of the underlying pre-salt Tagi sequence.

This is where Scotforth’s technique is limited. Can it distinguish between pre-salt and post-salt seepage? Even with ground trothing?

Crude

I think you are correct by asserting Onhym will be influencing our programme. They know their own backyard better that anyone. They give excellent guidance and advice, but if operators ignore it, they will not intervene too much.

This helps explain what has been said before; it takes more courage NOT to drill a high risk well when the evidence says “don’t do it”. That’s where the science ends and other forces take over. If anyone is accountable for risk management it is our Chairman, via Sound’s audit committee. Without a final CPR or second opinion, how can he judge the merits of drilling TE-10? The whole Board is involved and accountable - not just BM and his team.

But, looking at it through the Board's lens there is more than geological risk. Sound can fulfil the licence commitments with TE-10 and continue work on Tendrara for a few more years as Operator until the First Extension Period. It also makes a neat package for sale with no remaining exploration commitments and a 25-year Concession for TE-5.

TE-11? It’s not a commitment well – why not just park it, and re-think the exploration plan after TE-10. But maybe Sound has a drilling contract for 3 wells with no options to stack the rig at zero cost after TE-10. Who knows?

Looking at the result reported on TE-9 it seems the Tagi reservoir was rendered impermeable by diagenesis soon after it was deposited. This is well known in Morocco from numerous studies and involves regional-scale (100's of square km) pore occlusion by dolomite cements, even before gas tried to migrate into the traps.

In plain English, this process of dolomite deposition in the Tagi pore spaces can be seen in domestic hot water pipes furring up where the water is ‘hard’. Hard water contains dissolved minerals like calcium and magnesium which form dolomite - CaMg(CO3)2 - which infiltrated the Tagi over most of Tendrara,roughly with the arrival of the hyper-saline lakes which eventually evaporated and deposited the Triassic salt. It's all about timing.

The location of the sweet spots in Tendrara where diagenesis has not ruined the reservoir is known from work done before Sound or Fastnet arrived. That’s why the TE-5 and SBK areas flow gas from the Tagi reservoir and other areas do not.

The seepage stuff is unlikely to help much but perhaps reveal the 'big picture' about where the '34 tcf' escaped to the surface. Gas seepage in the High Plateau has been known about for years, but if the is no reservoir in the Tagi seepage does not help much to reduce risk.

JoeCreed

That's correct. Predator will be emptying their piggy bank just to pay the Bank Guaranty. It would make more sense for Sound to farm into Predator!

Also, from the CPR you can see Predator is banking on the Neogene biogenic gas play, similar to the geology in SDX licences. The Tagi may be present, but it is the secondary, higher risk target. The CPR also shows value per bcf at $7/mcf.

Joecreed

Paul Griffiths had applied for this block 6 years ago under the Fastnet brand but as Pathfinder which was to become a subsidiary, but it fell apart.

Read all about it;

http://www.fastnetoilandgas.com/~/media/Files/F/Fastnet-Oil-and-Gas/financial-and-other-reports/cpr-report-pathfinder.pdf

mike007

Thanks - yes, it was the 2248 area which has several Bunter prospects with bright spots and sizeable Carboniferous features. Like Pegasus West, these are individually too small to support dedicated infrastructure, but the infrastructure is creeping towards them so they could be single-well tie-ins.

In terms of near term production OGA has encouraged operators to think of innovative methods to develop small discoveries as a group. If you look at page 15 of the attachment below you can see how Centrica – now Spirit Energy – see the plan to develop Pegasus West and then explore Andromeda in 43/12 next year. Added to CNRL’s adjacent prospects there is enough gas to support a development “hub”. Clearly, the positive impact on CNRL’s 43/11 and 4315 blocks is large. And that is without CNRL even drilling a well.

http://oilandgasuksharefair.co.uk/wp-content/uploads/2016/11/Share-Fair-2016-Innovation-Hub-Sessions-02.11.16.pdf

Potentially a very attractive situation, especially as an export pipeline is heading in CNRL's direction, step by step.

curlyputt

Here’s a link below to latest L’economiste.

Onhym’s GM, who was previously Energy Minister, spoke at the recent British Chamber of Commerce in Rabat on same day it must have been clear TE-9 results looked poor. But she is renowned at her ability to promote E&P and manage news flow in Morocco without going OTT about prospects. She promises and delivers within well-defined boundaries.

https://www.leconomiste.com/article/1036616-exploration-petroliere-et-gaziere-le-potentiel-se-confirme

Joe Creed

You may be on to something – time will tell.

I noticed the final video from TE-10 well-site was on November 7th – roughly when the drill bit penetrated the Tagi in TE-9.

Outside the ‘Sound Bubble’, if we think Sound’s team is concerned about TE-9 results, do spare a thought for Sound’s local partners - the network of people in Onhym, the Energy Ministry, AFG and OGIF whose connections extend right up to the royal Palace. I have not seen any press coverage about TE-9 results in Morocco and even Onhym’s GM has not mentioned the dry well.

Sound's country manager, held senior positions at Advisory & Finance Group Investment Bank, which advises Sound for the financing of the TE-5 development, pipeline, GSA etc. He is on the Board of Sounds Moroccan subsidiaries along with JJ and BM. He had also been the deputy director of OGIF in the past. AFG is run by Mohamed Benslimane, husband of Lalla Zineb, a cousin of M6. AFG oversaw the acquisition of Sound Energy's stake in Tendrara by OGIF. Maintaining alignment with this network is fundamental to Sound's prosperity.

But failing to discover free flowing gas in the Tagi Sandstone in the High Plateau is something of an achievement, based on success statistics of previous wells. There is a lot of explaining to do.

Onhym and their friends in Rabat will be keen to avoid another failure at TE-10 and TE-11 – not just for commercial reasons, but rather the negative fallout fallout at the Palace. Maybe BM’s team is in Rabat right now reviewing TE-9 results at plotting a course of action with Onhym and Schlumberger.

For TV game show fans;

James Parsons: “What’s your name?”
Geologist: “Brian”
James Parsons: “Brian?”
Geologist: “Yes”
GONG!!!
Geologist exits stage left

Hoppy 123

I expect the Board of Directors have acted already, although we do not know.. They are all experienced businessmen and understand their legal accountabilities as company directors.

Also, there are other checks and balances creating increased awareness of risks to the business. OGIF has plenty of technical/geological expertise at its fingertips. Schlumberger will be addressing what can be done to find more gas. Onhym can be very influential, technically - of course politically/commercially.

On the public-facing side, CIP has a lot to lose, the market sell-off shows a level of shareholder disapproval and I dare say this bulletin board illustrates the concerns of PIs in detail.

The Board of Directors report to shareholders annually according to the AIM Quoted Companies Code of Conduct which is a template for governance. In short, we must trust the team to get on with the job.

Jarrovian

That is an excellent post and shows how oil and gas professionals continuously assess and mitigate risk. It becomes a way of life. Sound does have systems and procedures to address the concerns you outline in your comments. It’s called Governance and requires vigilance and leadership as you say.

Poor governance can wipe massive value from any company, although E&P companies are particularly vulnerable - not just from dry wells. We’ve seen it even with majors in recent years; BP/Macondo, Shell/reserves reporting, Statoil/corruption in Iran – the list goes on.

I have no doubt Sound’s Chairman and Directors are committed to compliance with Sound’s standards of governance shown on their website. The Board is collectively accountable, which is why the nasty personal ‘attacks’ of recent days were not justified.

So what? Early this year investors eagerly anticipated a formal CPR for the whole of Tendrara which, in the normal course of events would have included a risked prospect inventory, scoping economics etc and enabled investors to assess a RENAV, the value of our shares and whether to sell or buy. Yes, we did get a CPR summary for TE-9 and an independent assessment by a consultant for Sidi Moktar which was not PRMS compliant and showed numbers similar to work filed in Onhym’s library in Rabat.

The full Tendrara CPR never came, and at the DD we were told CPRs are expensive and tell Sound what they already know.

Given the obvious discomfort and confusion of investors, the Audit Committee, which is chaired by Marco Fumagalli with Richard Liddell’ need to act to “address the effectiveness of the risk management/ internal control” at Sound by commissioning an independent CPR and “manage the integrity of the Company’s financial statements (e.g. “£1.5 per share e-mails”) and other semi-formal announcements relating to the Company’s financial performance” (e.g. heresay from meetings).

Marco’s company, CIP, is required to routinely report the NAV of its investments – so he should need an auditable summary of Sound’s value. Besides, CIP is listed on AIM and Sound’s loss of value is affecting his fund too. See charts on this link;
http://www.lse.co.uk/ShareChart.asp?sharechart=CIP&share=cip_merchant

All PE companies have an 'operations manager' specifically tasked with constantly assessing the NAV of their funds and mitigating risk on behalf of their investors. There is no escape.

Ericnat

As long as Sound’s equity was growing debt to equity was modest. Now equity has shrunk bond holders will be paying attention! See link below - there are several similar articles on same topic.

Another set of plates for Sound to keep spinning.

https://simplywall.st/stocks/gb/energy/aim-sou/sound-energy-shares/news/is-sound-energy-plcs-lonsou-balance-sheet-a-threat-to-its-future/

€28.8mln bond background and Greenberry.

Sound Energy PLC (LON:SOU) has unveiled details of a bond deal which will raise €6mln of new capital and refinance existing debts.

The Italy and Morocco focussed company said it is issue bonds with a face value of €28.8mln, carrying a 5% coupon, to Greenberry Plc and other investors. It is issuing the bonds at a 32% discount to par (i.e. at 68 cents in the Euro).

James Parsons, Sound Energy chief executive, highlighted that the new arrangement extends the group’s debt maturity out to 2021.

"I am pleased to announce these heads of terms ahead of the results of our first strategic play at Tendrara, onshore Morocco, and in spite of the difficult sector backdrop,” Parsons said.

“The bond demonstrates both the growing maturity of our portfolio and our proactive approach to financial management.”

Sound Energy will receive €6mln of new cash resources which it says will support its growth plans.

At the same time it will repay in the full €7mln Nervesa reserve based lending facility, at a 50% discount to par. It will also now repay in full a £7mln corporate loan from Greenberry, at par.

Greenbury will also receive warrants to acquire 70.3mln new shares at an exercise price of 30p, for up to 5 years.

Greenbury is an affiliate of Continental Investment Partners a 12.98% stakeholder in the company.

dessaco

yes, that is the correct link - scroll down to page 4 and there is a table showing 'SBK STRUCTURE'

Jacklevi

Thanks - I had not realised it was discussed at the FSC.

The CPR for Fastnet, also published by Edision shows following gross recoverable resources figures for the SBK structure;

low estimate; 62 bcf
Most likely estimate; 205 bcf
High estimate; 982 bcf

This work done by SLR.

So who does one believe? Well, I assert this is why the Chairman and the Board need an independent, new CPR.

Jez

Let’s take a wider view of the situation at Sound because it is really the whole Board who are accountable. Their performance can be judged against established rules for corporate governance which Sound show on their website.

In terms of Governance – which the recent posts are mainly about, compliance with the Quoted Companies Alliance Code is a starting point. See below.

In most oil and gas companies 'risk management' is pretty much top of the list. Currently, and following the TE-9 results one wonders if the Board has really considered their position. It is now clear the only option available to them is to commission a Competent Persons Report, including an independent valuation of the the properties involved. They will need that anyway to enable Rothschilds to market the company.

The Chairman and non-executive Directors have a responsibility to promote long-term value for us all. For example, drilling a risky exploration well may be a worse decision than, say, changing course to consolidate the TE-5 resources with the ~ 200+ bcf recoverable in the SBK field, which already has a CPR from the Fastnet era.

The QCA Code has ten principles of corporate governance that the Company has committed to apply within the foundations of the business. These principles are:

1. Establish a strategy and business model which promote long-term value for shareholders;
2. Seek to understand and meet shareholder needs and expectations;
3. Consider wider stakeholder and social responsibilities and their implications for long tern
success;
4. Embed effective risk management, considering both opportunities and threats, throughout the organisation;
5. Maintain the board as a well-functioning balanced team led by the Chair;
6. Ensure that between them the directors have the necessary up to date experience, skills and capabilities;
7. Evaluate board performance based on clear and relevant objectives, seeking continuous
improvement;
8. Promote a corporate culture that is based on ethical values and behaviours;
9. Maintain governance structures and processes that are fit for purpose and support good
decision-making by the Board;
10. Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.

Fishysaurus

Finding the sweet spot in the Tagi in Tendrara is critical as you say. One only has to study the wells and 3D seismic around the TE5 Horst to see why it ‘works’ in that area. Beyond that one has rely on depositional and diagentic models.

Fortunately, there are several excellent petroleum geologists in Morocco with detailed knowledge of the Tagi. I am assuming Sound has sought their advice. Onhym’s own geological staff are all first class and are fully kitted out with the latest seismic workstations etc. They may have tried to guide Sound to the best drilling locations, but Onhym usually defer to the Operator’s technical decisions and strategy in the end. This may seem odd, but if a well fails they are not responsible for the loss.

Also, there is an excellent research group at Manchester University which has published extensively on the Tagi throughout North Africa and its equivalents in Europe and Nova Scotia. The type locality for the Tagi in Morocco is the Argana Valley which is a compulsory field trip for all explorers.

Just click on this link and scroll down to see whole paper;

http://www.academia.edu/11210616/Permo-Triassic_structural_evolution_of_the_Argana_Valley_impact_of_the_Atlantic_rifting_in_the_High_Atlas_Morocco

Figure 8 on link below shows depositional environments between fault scarp and areas domininated by silty overbank and playa deposits similar to those encountered in TE-8 and TE-9. This paper is based on field observations in the Oukaimeden Valley near Marrakech;

https://www.researchgate.net/figure/a-Structural-cross-section-across-the-Oukaimeden-Valley-showing-the-main-ENE-striking_fig8_235224177

Actually, the Edison wording is directly from Fastnet's CPR - but seemingly BM has not bothered to read it.

The CPR says; "Years ago, the work by MPE and Onhym with surface geological mapping and 2D seismic revealed a number of leads of which the TE-5 structure was the largest in Tendrara. The 3D seismic survey, acquired in 2004, radically changed the understanding of the structural complexity. Indirectly, it explained the distribution of the Tagi reservoir in Tendrara. I say indirectly, because prediction of good Tagi reservoir does not come directly from the seismic, but rather good, old-fashioned, petroleum geology. TE-9 failed because the reservoir model is faulty.

The TE-5 horst turned out to be a series of half grabens formed as the Tagi basin developed. The 3D seismic area shows faults that have a major control on the post-Palaeozoic history of the area. A series of NE-SW trending second order faults bound smaller structures in the 3D seismic area. All these faults offset the Top Hercynian Unconformity seismic horizon and define the basin geometry during the Triassic rifting phase."

You can see all this on various Fastnet presentations.

As we now know from TE-8 and TE-9, the distribution of Tagi reservoir properties are difficult to predict. We saw at the DD the Tagi alluvial fans from the surrounding ‘hills’ probably merged along downthrown fault scarps. The ‘radius’ of the alluvial fans we saw at the DD were around 1 km; this suggests the good Tagi reservoir facies is confined to a relatively narrow, approximately 1 km wide zone along the downthrown side of faults active during Tagi deposition. The Tagi rocks closest to the fault scarp stand a slightly better chance of being coarser grained, better sorted and less clogged by diagenetic minerals than other rocks further away from the scarp. This is consistent with what has been found in the TE-5 area, not to mention TE-8 and TE-9 which were much further away from active faults.

Drilling TE-10 with a high risk is just going to wipe a huge amout from our value.

Also, most of the TE wells have penetrated the Pz with no shows and few reservoirs.

Sundaysun

There is an obligation to drill a second well - but only sometime in the next 4 years. So no need to hurry and certainly no need to drill TE-11 until 2022. There is the small matter of the drilling contract with Saipem but I assume that has the usual break clauses and notification periods.

The Greater Tendrara Petroleum Agreement will have a duration of 8 years from award (October 2018) and will be divided into 3 phases, with each phase having pre-agreed work commitments. The work commitments under the Greater Tendrara Petroleum Agreement will be:

Initial period of 4 years: 2 exploration wells with the minimum Triassic objective. It is expected that the approaching TE-9 and TE-10 wells will fulfil this commitment.

Optional first complementary period of 2 years: 1 exploration well with the minimum Triassic objective.

Optional second complementary period of 2 years: 1 exploration well with the minimum Triassic objective.

V5Honda

Fastnet's CPR from 2011 quoted a range of gas resources as 62 - 205 - 982 bcf for the SBK horst. Note these numbers are prospective resources - not Gas Originally in Place. Potentially similar recoverable volumes to TE-5.

Attention then drifted to the TE-5 area which clearly had the best chance of early commercialisation.

Shaugreen47

Success in exploration obviously depends on not drilling dry wells. I'm hoping BM's team are re-considering the merits of drilling TE10 for the Tagi play and will re-examine the merits of TE10 Carboniferous objective, even at this late stage. Indeed, Schlumberger and Onhym may have started this discussion at the JV management.level. There is plenty of time on the licence but only a limited amount of money.

Believe me, it takes more guts to stop a dry well being drilled than to decide to drill it in the first place. Frankly, a sub horizontal well on the SBK Horst, with stimulation, might just prove more gas and expose Tendrara's true value. Also, there were oil shows in SBK-1 suggesting a liquids petroleum system may exist.

Fastnet recognised the high risk of TE-10 which they had mapped years ago. The sediments in the area of the TE-10 stratigraphic trap created by the onlap of the Tagi deposits on the Hercynian unconformity have probably been deposited along the low relief edges of the Triassic basin. Therefore, these rocks do not belong to a more porous and permeable 'alluvial fan' rocks as seen around the TE-5 Horst, but to the TE-9 and TE-8 style 'playa lake' silty rocks. This implies that the TE-10 Tagi stratigraphic trap probably contains no significant primary reservoir rocks and, besides, was later rendered impermeable by halite and dolomite diagenisis.

Perversely, not drilling TE-10 might re-assure investors and even boost the share price!