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I decided to cut my losses and sold my remaining shares today, for the following reasons:
1. the delay in closing the Calvalley deal, the gas sales agreement and the funding package is beyond my comprehension.
2. without additional funds, SOU should be in a very precarious financial position by now
3. the terms of the convertible notes issued last June, especially in regard to the conversion of interest into shares, are horrendous
4. there is no clarity regarding the progress of phase 1
For all those reasons, I lost my confidence in management, and got out.
Good luck to all here.
Regards
The relevant paragraph: (from June 13, 2023 press release) is the following:
"Conversion: convertible into Sound Energy ordinary shares at each tranche's fixed conversion price in whole or in part. Upon conversion, interest shall be rolled up and paid as if the Convertible Notes were held to the redemption date (being five years from draw down), with such interest convertible at the lower of the applicable fixed conversion price and the average of the five daily VWAP calculations selected by the Investor out of the 15 trading days prior to the conversion date."
The total amount of interest subject to conversion is:
£2,500,000 X 15% X 5 years: £1,875,000
Of that amount, £ 300,000 were already converted (as per March 28 press release), £1,387,500 could be converted at any time (because the principal have already been converted) and £187,500 will be converted after the conversion of the £ 250,000 principal debt outstanding (see March 28 press release)
I would like to know what SOU´s institutional investors (Afriquia Gaz and OGIF) think about this highly dilutive deal.
Regards
To be honest, the potential effect of a higher bank loan rate on the NVP is the last of my worries for the time being.
Other urgent issues come well before that: the delays in the execution of phase 1 and the closing of the farm out deal, the lack of cash, and the risk of further dilution in the short term.
Regards
You said:
"By the way, the last 4.6p valuation from the increasingly marginalised SPA excluded any interest impact from a phase 2 bank loan (as that was conveniently omitted nearly a year ago when initial terms were shared)"
You are wrong here: the 4.6p valuation is a NPV, calculated taking into account future fund flows, discounted at a given "weighted average cost of capital (WACC)" rate. The bank funding rate is part of the WACC.
From the analyst note on Oct 4th, 2023:
"We value Sound in the same way as we value all our E&P companies, with Risked NAV as the primary valuation metric. We do this by modelling a Discounted Cash Flow (DCF) model of the key assets in detail, taking the Company’s net effective interest and applying a risk factor. For Sound, we use the DCF valuations for both Phase 1 and Phase 2 of Tendrara and an evaluation of the Company’s assets and liabilities to calculate its Core valuation."
On the other hand, you are absolutely right about the dilution effect from the conversion of the interest of the convertible notes issued last June.
As per the latest press release, there are £1,387,500 interest charges remaining outstanding, that could be convertible as they are making due, until the end of the note period. That could potentially lead to an additional 138.7 million additional shares, at today´s price of c. 1p/sh
Regards
"Stifel thinks the operation, which has four projects generating 515MW of electricity, is worth $132 million, or 10p a share."
"The bank reckons the current roster of assets is worth $32 million (based on a discounted cash flow calculation) and pipeline $100 million."
Which exactly are the four projects currently generating 515 MW of electricity?
The only project that is currently operating is the 15 MW Essakane solar plant in Burkina Faso, where we have a 10% equity interest, valued at US$ 448.000 (note 12 to 2022 Annual Balance Sheet)
A very confusing (or misleading) note from the investment bank, in my oppinion.
Regards
This is the first step in the right direction.
Green hydrogen next, I hope, as soon as they can prove the economics of the project. Green hydrogen is still way more expensive than other forms of energy, so they need to solve that before spinning it out.
Regards
The Bold:
"They have got the current business model completely wrong and the market has little to no idea of exactly what it is we are trying to achieve."
You have summed it up perfectly.
AP should have some difficulty trying to explain the business model to new investors.
What exactly is CHAR now? a green hydrogen developer? an electricity trader? a water producer?? Each one of these businesses has its own competitors, legal framework, technical difficulties to overcome, etc. how could you ensure a profitable operation in each one of these diverse businesses, all of a sudden?
I suspect that the reason for the new ventures not being spinned out is that AP found these business units very difficult to fund on their own. Then, he keeps leveraging the attractiviness and economics of Anchois to get the money to pursue these "new ventures".
Nice to see an educated and well thought post from you. Keep it that way...please
Regards
My question is:
what do you think the share price would be without the renewables and green hydrogen projects (i.e., having only the onshore and offshore gas business units)?
do you think the share price would be higher or lower than the current one?
do you think that the placings and share dilution to fund those projects during the last 2 years have had a positive or negative effect in the share price?
Regards
As I said before, I'm not sure that a well drilled offshore more than 100 kms away could substantially alter the conclusions from wells drilled nearby in the same area.
Time will tell if I'm wrong.
But don't worry about my thoughts. Enjoy your life.
Goonerpete:
I think that, in order for us to realize the true value of Anchois, we need to spin out the renewable energy and green hydrogen businesses ASAP.
Having all 3 business units together is confusing to the market, and put us at a permanent risk of further dilution to fund new ventures.
Regarding the onshore gas, I have to admit, I don´t have much hope. I don´t believe that the CPR issued just 4 years ago for the area was that way wrong when informed a potential resource of just a few bcf. Time will tell.
Regards
New discoveries are getting closer to the licenses where we still have a right to get a 10% working interest back.
See the map.
https://finance.yahoo.com/news/pel-83-exploration-campaign-4-180000222.html
This latest well was drilled 8 km away from the original discovery, proving the lateral extension of the original find. Truly massive.
Regards
The Bold:
First, I asked about the geological Chance of Success .
Now, I asked about the size of the deeper interval.
Read again.
I was about to ask you for you to not bother to answer the educated questions that I make to Jimmy.
But that would be a complete waste of time.
Read again.
My questions in the past were about another prospect.
I´ve been invested in the oil & gas sector for the last 20 years.
I´ve known a lot of guys/ladies as you: young, arrogant, energetic, pretending to know a lot more that you really know, ready to attack any negative comment about your investiment.
I watched all of them going down the toilet, together with their investments in companies like Providence Resources, Caza Oil and Gas, Mart Resources, etc, etc.
So. the simple fact of having someone like you invested here makes me worry about the final result of this venture.
But I hope my gut feeling proves wrong.
Time will tell as always.