Sound Energy´s deal. Implications for Chariot16 Jun 2024 21:29
I used to be a shareholder of Sound Energy. I left the boat when I noticed that "NOBODY" in the O&G industry was interested in assuming the risk of developing SOU´s gas discoveries.
Here is a summary of the deal, and its implications for CHAR:
in reality, there are 3 separate deals announced in the same RNS: the selling of 55.0% of the Tendrara production concession area (including phases 1 and 2), with contingent gas resources of 377 bcf gross (Sound Energy to retain 20% interest), and the partial farmout of 2 exploration permits (Grand Tendrara and Anoual).
For the selling of a 55% interest in the production concession SOU will receive:
o US$12.0 million in Concession Phase 1 development back costs through to July 2024 net to a 55% interest in the Concession and payable to the Group in cash on completion.
o US$1.0 million in back costs in respect of Concession Phase 2 development and Permits back costs payable to the Company in cash on completion.
o Up to US$24.5 million net carry through Managem funding of the Group's remaining 20% interest in future Concession Phase 2 development.
o Contingent consideration of US$1.5 million payable to the Group no later than one year after first gas from Concession Phase 2 development.
The first 2 items are simply a reimbursement of the amounts paid in advance of SOU, on behalf of the new partner. It´s what the new partner would have had to pay, had they been participating in the project from the first day.
The other 2 items (the net carry and the contingent consideration, for a total of US$ 26 million) are the components of the true “selling price”, the price SOU is receiving for assigning a 55% interest to its new partner.
Then, SOU have sold a 55% equity interest in the production concession, with a 2C resource of 377 bcf (gross), for a total of US$ 26 million. It equals to US$ 0,12 per bcf (US$ 26 million / 377 x55%).
This is what the market is willing to pay for SOU´s production concession area: US$ 0.12/bcf.
Another point to comment is that this is not an O&G company that entered the deal excited by the prospectivity of SOU´s acreage. This is the Moroccan royal family coming to the rescue of a project of national interest to their country, that nobody else showed interest in.
NOBODY in the oil&gas industry seems interested in the prospectivity of SOU´s acreage. The only company that was initially willing to take the risk (Calvalley) has run away after a second thought.
SOU had to resort to get the funding from a mining company indirectly owned by Morocco´s royal house, with no previous experience in oil&gas.
This is more the commitment from a government interested in the "energy transition theme" that the investment of an oil&g company that thinks the potential returns are worth the risk.
For that reason, SOU was obliged to farm out the acreage at a very low price (a few cents for bcf of proven gas resource), as I wrote yesterday here. This shows the r
Sign In
Follow the stocks
