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Then, how will the borrower (the SPV) contribute the required equity of US$ 128 million?
*Phase 1 equity
From June 13th press release: “Calvalley will fund its 40% working interest share of all Phase 1 costs to a cap of US$16.4 million (net to the 40% working interest)”.
If Calvalley´s 40% working interest amount to US$ 16.4 million, it means that, on a 100% interest, the SPV partners (Sound 35%, Calvalley 40%, ONHYM 25%) will have to contribute US$ 41 million for the development of phase 1.
I know that SOU´s equity contribution is partially funded by the Afriquia loan. But this loan was taken by SOU, it doesn´t have anything to do with the SPV in charge of the production concession. After the farm out, SOU will partially repaid the loan, since it won´t be required to draw it down entirely.
*phase 2 equity
Calvalley will put up US$ 48 million for phase 2, representing both SOU and Calvalley´s equity contribution for phase 2.
Then, if the entities that have a 75% interest in the SPV (Sound and Calvalley) jointly put US$ 48 million of equity, ONHYM will be obligated to fund US$ 16 million for its prorrata share of the project.
So, we have:
Phase 1 equity: US$ 41 million
Phase 2 equity: Sound/Calvalley: US$ 48 million
ONHYM: US$ 16 million
Subtotal: US$ 105 million
There is still a gap of US$ 23 million to get to the required US$ 128 million, in order to have a 65% gearing for a US$ 237 million loan.
I expect SOU to pay its prorrata share of that gap (US$ 8 million) by reinvesting part of the free cash flows to be generated by phase 1 of the project.
I hope it helps
Regards
Fernan
The moroccan bank will lend up to US$ 237 million, “subject to a maximum gearing level of 65%”.
In order to accomplish with that condition, the borrower will have to put up to US$ 128 million of its own equity (237 / 65% X 35%).
And who exactly will be the “borrower”?
June 28th press release:
“Borrower: A to be newly incorporated Tendrara Production Concession partner special purpose vehicle incorporated under Moroccan law (the "Borrower")”
Then, the JV partners (Sound, Calvalley and ONHYM) will have to incorporate a new local entity (an SPV) that will be entitled to the right to produce gas in the area of the production concession.
Owners of the SPV will be: Sound (35%), Calvalley (40%) and ONHYM (25%)
The Tendrara Production concession will be set up by curbing the area where the producing gas wells and the infrastructure will be located, out of the rest of the Tendrara Exploration License. The rest of the area will be kept under the Exploration License
According to Sound´s website, the production concession will have an area of 133,5 km2, versus 14,411 km2 for the whole Tendrara exploration license.
The Tendrara Production Concession will encompass both phase 1 and 2, since both phases will take place in the same production area. See description of the Tendrara production concession on Sound´s website.
This is confirmed by the fact that Calvalley will not only fund phase 2, but phase 1 also, with the same percentage (40%) in both phases.
At the end of 2022, the were c. 80 million outstanding share awards that, with the passing of time, will be eventually converted into shares, for an 8% dilution to us (see note 26 to the financial statements).
This 80 million number includes shares awarded under both the Long Term Incentive programme (LTIP) and the Non-executive directors restricted share unit scheme (RSU).
Just during 2022, more than 44 million shares were awarded to management and employees under both programmes. As far I as know, only 16 million of those awards were informed to market.
At the current rate, management will own 25% of the company (at no cost) within the next 4 years. By the end of the decade, c.40% of the shares will be controlled by management, at no cost for them.
What do you think of that?
Regards
Hi Jimmy.
We have a preliminary agreement to supply 60 mmcfd to the state energy company (ONEE) at an unknown price.
Sound Energy has a gas sales agreement with ONEE, for 30 mmcfd, at aprox US$ 8/mcf. I think we have cut a similar selling price for our future gas sales to ONEE.
Then, I see an average gas sales price (for ONEE, local industrial customers and potencial exports) of US$ 9/mcfd as more realistic and conservative.
Regards
Ferna
Hi Jimmy.
You've always said that, in the onshore part of the basin where the Lixus license is located, the chance of success of exploration has been 85%.
For example here:
"Now technically chariot is correct to report that the chances of success of increasing proven gas volumes to over 1.6 tcf are between 49% to 61% , however the success rate onshore for similar geology with similar geophysical seismic signatures is 85%."
Could you please elaborate on that? Who reported that high chance of sucess onshore? Do the onshore seismic prospects exhibit similar atributes to our own prospects in Lixus?
Thanks in advance Jimmy
Regards
Fernan
I sent the following email to Investor relations:
__________
I have a question about the awarding of shares to the directors and employees of the company under the Long Term Incentive Scheme (LTIP”), as follows:
I noticed that the company granted c. 16 million share awards on 12 August 2022 to the following officers and directors:
George Canjar 2.788.104
Adonis Pouroulis 5.111.524
Julian Maurice-Williams 4.182.156
Duncan Wallace 4.182.156
In spite of that, according to note 26 to the financial statements for 2022, 40.888.091 shares were awarded during the year to employees and directors, under the Long Term Incentive Scheme (LTIP”)
My question is: when were the remaining 24 million shares awarded, and to whom? When did the company inform the market about those share awards?
Regards
The analyst´s new target price of 4.6p/sh is much more realistic than previous ones, and adecuately reflects the economics of the non-binding term sheet agreed with the farm-in partner.
I think this substantially lowered TP is the reason for the fall in the share price during the last few days.
Regards
1 barrel of oil has the energy content equivalent to 47,3 kg of hydrogen
https://h2tools.org/hyarc/calculator-tools/energy-equivalency-fuels
Current production cost of green hydrogen is US$ 5-6 per kg.
https://energypost.eu/financing-renewable-hydrogen-globally-ramp-up-to-2030-only-needs-150bn-year/
Then, current cost of green hydrogen is equivalent to a price of aprox US$ 250-300 per barrel of oil.
"Amin Nasser, CEO of Saudi Aramco, previously stated that blue hydrogen costs $250 per barrel of oil equivalent (boe), which suggests that customers in the EU, Japan, or South Korea would not be willing to procure it at such prices"
https://oilprice.com/Alternative-Energy/Fuel-Cells/Is-Green-Hydrogen-Being-Overhyped.html
In times like these, I like to remember what certain sucessfull investor (born in the city of Omaha, USA) always say: "the stock market is a mechanism to transfer money from the impatient to the pacient investor"
Regards
Very informative as always Jimmy.
By the way, with each new elephant oil discovery, your thesis 10 years ago about the potential of Namibia to become a large scale oil province proves more and more accurate.
thanks
Fernan
Hi Jimmy.
I have a few questions about the projected capacity of the onshore facility.
Excerpt rom a recent analyst report:
" the onshore facility that is being sized to handle 105 mmcf/d would be the main bottleneck but it is modular in design and its capacity could be increased quickly."
How long will it take to add 50 mmcfd of liquids processing capacity, after deciding to do that?
Wouldn't it be better to build a 150 mmcfd facility from the beginning?
Regards and thanks in advance Jimmy
Fernan
OK KTF.
By the way, I sent this email this morning to Investor Relations:
______________________________
Dear Sarah:
continuing with my previous emails, Gary said, en relation to the funding of G&A expenses for the current year, that the company is trying to monetize some receivables.
I noticed that Sound had Other receivables accounted for in the balance sheet for June 30th, 2022, for a total amount of £ 2.345.000
No additional detail was provided about this account.
Would you please provide some colour about these accounts receivable?
Thanks in advance
____________________________
Hi keeptofacts, thanks for the repply.
Not looking at the screen during the weekends is a healthy practice, I should follow that.
I checked the press releases. We still have Euros 350.000 to receive from the Badile land sale. As you have said, a small amount.
I can't understand what we have to receive from OMHYM. The partial sale of the Tendrara acreage announced on Nov 2019 finally didn't materialize, because the potential buyer didn't have the required funds. Apart from that, that was a proposed sale of Sound's interest in the license, without any imvolvement of ONHYM. Why are they owing us any money now from that failed transaction?
Regards
Fernan