Member Info for Fernan10

That will never happen.

Management will keep receiving their high salaries and bonuses (without adding any significant value to the business), paid for by us suffering shareholders, as long as they could do so.

If they take the company from us, they will have to fund their salaries, "new ventures" and other miscellaneus expenses by themselves.

They already know that the market assign a negative value to their "new ventures".

For all those reasons, a management buy out doesn´t have any economic sense for them, no matter the share price.

Regards

Surety:

You wrote: "I assume a big part of Loukos was paid upfront though."

That´s wrong.

Note 2 to Financial Statements:

"The onshore drilling campaign has successfully been completed. At the date of these financial statements the RZK-1 well was found to be sub-economic but a gas discovery was announced from the drilling of the OBA-1 well. The remaining cost of drilling these two wells over the forecast period is estimated at $6.7 million. "

The "forecast period" runs from 1 May 2024 until 31 December 2025.

Then, the cost of the 2 onshore wells should have to be paid out of the US$ 7.9 million cash balance at the end of April.

No wonder they are saying that we will be running out of cash by July.

Catastrophic financial management to say the least

Regards

Whatever value that Anchois has is being methodically destroyed by the continued need to fund "new ventures".

I was talking about that from months now.

AP is absolutely incapable of generating value to shareholders.

Current cash position is catastrophic.

They only had US$ 7.9 million by the end of April, after receiving the US$ 10 million from Energean and before drilling Loukos (note 2 to financial statements)

Hi BDC.

You are right, the share-based payments were mostly paid in kind, through the issue of shares to employees and directors .(notes 22 and 27 to financial statements)

Then, the cash flow for 2024 is as follows:

In US$ millions

Cash balance at the beginning of the year: 6

Energean funds already received: 10

Administrative expenses: -8.7 (same amount of 2023)

Green hydrogen/other business expenses: -1.3 (same amount of 2023)

drilling of 2 onshore wells: -6 (US$ 3 million per well)

Cash balance forecast for end 2024: 0

Overhead, day to day expenses and management bonuses are absolutely out of control:

In US$ millions:

Share-based payments: 5.7

Hydrogen/other business development costs: 1.3

Administrative expenses: 8.7

Total: 15.7

I understand that most of share-based payments are settled in cash. If that´s the case, the amount of cash at the beginning of the year (US$ 6 million) plus the amount received from Energean (US$ 10 million) are barely enough to pay operating expenses.

There is not money left to drill not only upcoming onshore wells. The 2 Loukos wells already drilled didn´t have the funding either. CHAR will be short of cash before the end of this year.

"They need to concentrate soley on their gas assets and sell or divest everything else. Too much capital has been wasted on these other moonshot ideas. They've earned a paltry £80k from the transitional business after spending 10's of millions."

I´ve been saying that for months....

Ok Jimmy.

I hope it's all down to the need to announce the OBA-1 well discovery in a hurry (due to the leaked news), without having the time to properly analize the results.

Regards

1. Reservoir quality

Anchois 2 discovery announcement:

"high quality reservoirs were encountered in all gas sands"

OBA-1 well: No mention of reservoir quality.

2. Likeliness of a gas discovery

Anchois:

"preliminary interpretation of the data CONFIRMS the presence of significant gas accumulations..."

OBA.1:

"confirmes the presence of RESERVOIRS (reservoirs, not gas accumulations) over an interval of...."

"elevated resistivities coincident with elevated mud gas readings, indicating POTENTIAL gas pays". The word POTENTIAL was not used in the case of Anchois.

Analizing these wordings in conjunction with the "cautious" approach adopted by Duncan in the Proactive interview, the obvious conclusion is that there is something fishy about the new "discovery". Maybe the reservoir found is of poor quality (low porosity and/or permeability). Maybe there is another reason for the "cautioned" wording, absent in the announcement of Anchois.

The share price reaction after OBA-1 well announcement was typical after a "non commercial gas discovery"

Time will tell.

Regards

I think the real issue here is that, NOBODY in the oil&gas industry have so far found SOU´s acreage worth enough to justify investing in it.

In the past, there were some frustrated non-binding farm-out and sales agreements to dispose a whole or a part of the licenses, that ended in nothing. The interested party didn´t have funding, etc.

Calvalley is just the last example of a potential bidder that remains undecided about putting their hard earnt money here.

Even SOU´s own management seem to exhibit an absolute lack of confidence in SOU´s prospects, as evident by their non-existent purchase of shares, no matter how low the share price goes.

In summary, SOU´s management keeps trying to sell a “project” that only small private investors are willing to buy.

My error when I invested in SOU, back in April 2022, was not paying attention to previous unsuccessfull efforts by SOU to sell the licenses to a third party. It should had become clear by then that the industry was not assigning any significant value to SOU´s gas discovery and prospects.

I paid for my error in 2022 by taking a few thousand dollars loss when I sold my shares last month. Lesson learnt.

Regards

"Two hits, two misses or one of each, its just luck and not really down to management judgement."

I disagree with that assessment.

These onshore wells were sold to us as "low risk".

Another miss and Duncan's credibility will be put in jeopardy.

Regards

You said:

"...one miss is just on the limits of excusable with what they advised before the campaign , 2 misses and then serious errors of judgement and professional / technical capability will undoubtably be questioned."

For the first time I fully agree with you.

Regards

Ok Jimmy.

Very informative and reasoned post from you as usual.

Regards

Fernan

Ok thanks Jimmy.

In the case of the upcoming well in Anchois, what is the geometry of the trap? is it a four way dip anticline, or another type of trap? (and hence higher risk),

Thanks

Fernan

Hi Jimmy.

I have a question about the subject, as follows: Loukos drilling campaign is based in the presence of certain seismic attributes in the prospects to drill. Supposedly these attributes were all present in previous successfull wells in the area, and absent in dry wells.

These attributes were all previously detected in Gauffrete, according to Duncan.

Does the failure in Gaufrette put this thesis into question?

What are the implications for the upcoming well in Anchois? (I understand the same exploration thesis is being applied onshore and offshore).

Thanks in advance.

Fernan

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

I ´m ready to monetize an asset currently valued at US$ 448.000, por 132 million pounds (US$ 168 million)

where do I have to sign?