Member Info for Fernan10

Hi Surfit.
Thanks for your response.
You wrote:
"Simpley put Fernan: What is the price that gas is to be sold to the Moroccan Gov?"
I don´t think any gas will be sold to the Moroccan government.
I understand that the gas will be sold to an specialized gas trader, who in turn will commercialize part of it in the local market (to supply local power stations and industries). The excess gas (if any) will be sold to Spain through the existing pipeline.
CHAR has already signed an MOU with an international trader last year. No details on pricing has been provided yet

Regards

Fernan

Surfit:
You wrote:
"I just can't see any approach without knowing what the Moroccan Gov deal will be. Everything (imo) hangs on that, no third party can step in with out getting that signed off."

what Moroccan gov deal are you talking about?

Regards

Fernan

https://www.fitchratings.com/research/sovereigns/fitch-affirms-morocco-at-bb-outlook-stable-13-05-2022

https://www.iea.org/reports/global-hydrogen-review-2022/executive-summary?s=03

Of course, if we can find a potential farminee interested in investing in the Sidi Moktar license, it´s Ok for me....but so far, I haven´t seen any.....the Siki Moktar permit is not even mentioned in the Aug 9th press release announcing the opening of the farm out process....

Regards

I submitted the following question:

"In relation to the Sidi Moktar permit, we have a license commitment to shoot 500 kms of 2D seismic & well abandonment before October 2022. It seems it would be impossible for Sound Energy to fulfill that commitment.
Wouldn´t it be better for Sound to relinquish the permit, in order not to get over expanded, and concentrate all exploration efforts in the Eastern Morocco area?"

Regards

I remember Adonis saying that the green hydrogen from our Mauritanian project will be used to produced ammonia.
Here is a snahpshot of current and future ammonia market and prices.
https://www.spglobal.com/commodityinsights/en/market-insights/blogs/energy-transition/091622-ammonia-prices-supply-demand-hydrogen-power-bunker-fuel

I submitted the following questions:

1. I understand that the total potential value of the tax liability is US$ 22.25 mm, as follows:
SEMS: US$ 19.7 mm (September 14, 2022 press release)
SEME: US$ 2,55 mm (July 13, 2022 press release)
Do these amounts include accrued interest? If not, what would be the total amount of the tax liability, including accrued interest?

2. Is SOU going to appeal the Local Taxation Committee decision in relation to SEMS?
How long is the appeal process going to take?
In case the company finally loses the case, is it possible for SOU to arrange the payment of the resulting tax debt in a number of years?

3. In the recent update regarding the tax claim against SEMS, you mentioned that the SEMS is “a wholly owned dormant affiliate”
Should SEMS lose the tax case in the court, is there any legal obligation under Moroccan law for Sound Energy PLC (or any of its subsidiaries) to satisfy the claim in lieu of its dormant affiliate?

From Sound´s press release:
"By agreeing a fixed price for the initial take or pay volumes the Company will benefit from a portion of its revenues not being subject to fluctuations in the commodity prices which in turn should provide higher certainty for the funding needed for the construction of the infrastructure to achieve production."

Regards
F

Hi Jimmy.
I don´t think that an eventual take or pay contract (necessary to secure the funding) will fetch a gas price as high as US$ 13/mcf.
As an example, Sound Energy (SOU) has already signed a gas sales agreement with Morocco's Office National de l'Electricité et de l'Eau Potable ("ONEE"), the state power company of Morocco. SOU will supply gas for domestic power plants for gas-to-power generation (transit via GME line), minimum volume of 0.3 bcm/year.
The price for the minimum annual volume guaranteed by ONNE is US$ 7,93/mcf.
See SOU´s announcements here:
https://www.lse.co.uk/rns/SOU/tendrara-gas-sales-agreement-signature-of-mou-fsnd93u8g3ie3yv.html
https://www.lse.co.uk/rns/SOU/gas-sales-agreement-phase-2-tendara-development-e3qvzzki3znghkf.html

Regards

Then, we have from the Auctus Advisors report:

Gross contingent resources: 637 bcf
Gas selling price in Morocco: US$ 11/mcf
Royalty: 3,5%
OPEX: c. US$ 1/mcf
CAPEX: initially US$ 350 mm. Mid life: US$ 60mm. Total: US$ 410 mm. Equivalent to US$ 0,64/mcf
Gross Undiscounted Free cash flow (FCF)= EBITDA - CAPEX
FCF= (Gas price US$ 11/mcf - 3,5% royalty - OPEX US$ 1/mcf - CAPEX US$ 0,64/mcf): US$ 8,96/mcf X 637 bcf: US$ 5.710 mm
Net to CHAR (75% WI): US$ 4.283 mm
Almost all of this FCF will be tax free.
And this is only from the already discovered contingent resources.

Please AP: stop all this nonsense about green hydrogen and renewable energy projects. As a shareholder, I don´t want to see my (potentially very lucrative) interest in Anchois being heavily diluted, just to install a few solar panels in Zambia or Burkina Faso.

Regards

Excerpts from Auctus advisors´ report:

"Following the Anchois-2 well result, 2C contingent resources have been upgraded to 637 bcf."
"A final investment decision is expected to be taken in early 2023. The development of Anchois is expected to be based on 3 subsea wells to achieve first gas in early 2025 and production of 70 mmcf/d (gross) initially increasing to 100 mmcf/d by the end of year 2. The overall remaining development cost for the A and B sands to first gas is estimated at ~US$350 mm (gross) based on the re-entry of the Anchois-2 well and most of the capex associated with the subsea infrastructure and a 100 mmcf/d onshore processing plant. Additional compression could also be required after 3-4 years of production, estimated to cost ~US$50-60 mm (gross). "
"Financing: The key steps to funding the project include the securing of gas sales contract (see above), debt funding (Reserves Based Lending) and equity funding. 70% of the project cost to first gas is likely to be funded with debt (~US$245 mm). Société Générale has been appointed as lead bank with the potential participation of Moroccan banks. The balance of the cost of the project is likely to be funded by a combination of pre-pay and industry participants. Given the strategic nature of natural gas, the very strong economics of the project and very large running room with regards to the resources volumes, we have assumed that the company would secure a farm-in partner, where a stake (we have assumed 25% WI) in the company’s licences would be sold in return for a carry and a refund of past costs (~US$40 mm). The overall net equity funding exposure of Chariot post farm-out and pre carry and past costs refund is only US$55 mm. In 2019 and for a project with smaller resources (410 bcf for IOG compared to 637 bcf for Anchois) and lower gas prices at the time, IOG was able to sell 50% of its UK SNS gas development to CalEnergy (Warren Buffet) for £40 mm in cash plus a net carry of up to £125 mm. Given the strength of the economics of the Anchois, we believe Chariot should be able to attract a 25% farm-in partner on terms sufficient to reduce its net equity exposure to zero."
"We are forecasting 70 mmcf/d gross production at Anchois from 2025 increasing to 100 mmcf/d in 2027. Fiscal terms in Morocco consist of 3.5% royalty, and 31% corporation tax but there is a 10 year corporation tax holiday from start of production. "
"With heavy fuel oil being the main substitute for gas, domestic Moroccan gas prices are very high. We note that SDX Energy’s gas realizations are ~US$11-12/mcf in Morocco. "

"Is it possible that future phases of Anchois / Lixus / Rissana could have their own pipeline to Europe?"
Totally unnecessary, in my oppinion.
There is enough capacity in the GME pipeline to transport all the gas we could produce.
There is not need to overcomplicate the business model.
Regards

Hi Jimmy.
You wrote:
"There are two gas powered electricity power stations that consume most of the gas in Morocco, so once they are fully supplied, the balance can be exported."
Sound Energy (SOU) has already signed a gas sales agreement with Morocco's Office National de l'Electricité et de l'Eau Potable ("ONEE"), the state power company of Morocco. SOU will supply gas for domestic power plants for gas-to-power generation (transit via GME line), minimum volume of 0.3 bcm/year.
It´s highly likely that, by the time Anchois gets online, the domestic demand for power generation will already be attended by Sound.
The price for the minimum annual volume guaranteed by ONNE is US$ 7,93/mcf.
See SOU´s announcements here:
https://www.lse.co.uk/rns/SOU/tendrara-gas-sales-agreement-signature-of-mou-fsnd93u8g3ie3yv.html
https://www.lse.co.uk/rns/SOU/gas-sales-agreement-phase-2-tendara-development-e3qvzzki3znghkf.html

Regards

Local gas demand in Morocco was c. 120 mmcfd in 2021.

Future gas production:
- Sound Energy is expected to be producing c. 65 mmcfd by 2025. It already signed 2 gas sales contracts: one with local group Afriquia Gaz, to provide c. 10 mmcfd to local industrial customers, and one with ONEE (local electricity distributor) for c. 30 mmcfd
- SDX is currently producing 7 mmcfd, and they expect to keep increasing production.
Assuming they produce c. 15 mmcfd by 2025, we have:
Demand: 120 mmcfd
Production:
Sound Energy: 65 mmcfd
SDX Energy: 15 mmcfd
Total production (before taking account Anchois): 80 mmcfd
Local market déficit forecast for 2025 (before Anchois first production): 40 mmcfd
I´m sure that our partner, the state company ONHYM, will ask us to first attend the local demand, before sending any remaining gas to Spain.
Then, if CHAR produces 70 mmcfd in 2025, we will have to sell the first 40 mmcfd in the local market, and will have a surplus of 30 mmcfd to export to Spain.
This is exactly the breakdown of oil sales forecast by Cenkos in their March 2022 report (see page 16 of the report).
One consequence of this reasoning is that we can not fully take forecast european gas prices as the basis for the calc of the NPV of our contingent resources. For the amount of gas to be sold locally, these prices are not relevant at all.

Regards

Ok Jimmy.
Thanks very much
Regards
Fernan

Hi Jimmy:
do you have any confirmation from the company that the planned pipeline will be 18 inch wide?
Regards

Yes Jimmy.
The upside is enormous. The current price in Spain is Euros 172/MWH (equivalent to US$ 50/mcf)
Source: https://www.mibgas.es/es
I would like to see a revised development plan with enhanced facilities/pipelines, and lots of drilling in 2023 and 2024, in order to have explosive (and tax-free) production numbers from 2025.
Regards
F

Thanks very much Jimmy
Regards
F

Hi Jimmy:
When CHAR inform the best estimates of contingent resources assigned to Anchois (previously 361 bcf, now 637 bcf) are they talking about gross resources, or net to Chariot?
I always understood that they were net recources to CHARIOT.
But, looking at last December presentation (page 21), it showed 361 bcf of best estimate contingent resources (the estimate before recent drilling), with the following foot note: "Source: Estimates of Gross Contingent & Prospective Resources from NSAI Independent Resource Assessment 2019, 2020"

What do you think?

Regards

Fernan