The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
For those looking to get some info about the current status of the Project, I think they have to look at last Auctus advisors´ report (issued on early September).
I understand that CHAR´s management can not inform the market about issues that are still under analysis and/or negotiation with third parties.
But nothing prevents an “independent analyst” to issue an “external” report on those same issues.
More likely than not, the following pieces of info in the last Auctus advisors´ report are based on what Chariot´s management informed to its author:
1.Timeline to FID and first production
"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.”
2.CAPEX
“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). "
3.Debt funding. Participating banks
“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.”
Note: a moroccan bank with close ties with the monarchy is currently arranging the debt funding for Sound Energy
4.Equity funding. Potential investors
“The balance of the cost of the project is likely to be funded by a combination of pre-pay and industry participants”
5.Terms currently being negotiated for a potential farm out
“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$55 mm.
Note:
After farming out 50% of the equity, CHAR´s exposure (before the carry and the refund of past costs) will be:
CAPEX (1-% debt) X (1-% farm out) = US$ 350 mm (1-70%) (1- 50%)= US$ 52,5 mm
6.Production profile
"We are forecasting 70 mmcf/d gross production at Anchois from 2025 increasing to 100 mmcf/d in 2027.”
7.Conclusions:
Of course, one or more of these assumptions could change over time. But overall, I think they provide a comprehensive overview of the current status of the project.
Regards
Fernan
Continuing with my previous post, they plan to fund the license commitment for the new period (drilling of one exploration well) by getting a farm-in partner, as it was previously announced:
"The work commitment for the first extension period comprises the drilling one exploration well with a Triassic objective. The Company expects to fulfil this commitment by the planned subsalt drilling opportunities within the Trias Argilo-Gréseux Inférieur ("TAGI") gas reservoir as announced by the Company on 9 August 2022. "
Regards
F
PS:
In relation to the Tendrara exploration permit, it´s standard industry practice for the oil company to relinquish the less promising parts of the license at the time of entering into a new exploration phase.
Regarding the Sidi license, it´s clear for me that the industry finds that the potential rewards of any exploration campaign don´t justify the risks. Hence we have no partners willing to invest here. I understand that, different from Tendrara, so far there isn´t any discovery in the Sidi license, in the exploration horizons that the company think are more promising.
I wouldn´t be worry if we relinquish the Sidi license once and for all, and concentrate our scarce resources in exploring/develop the more promising Tendrara and Anoual licenses.
Regards
Fernan
The lack of progress in the Sidi license doesn´t have anything to do with Covid. I think it´s more related to the lack of interest from third parties to fund any exploration activities, due to a perceived unfavorable risk-reward profile, in spite of the current tighteness of the gas market.
Hi Jimmy.
I understand that the MOU signed last year has 2 parts:
1. a minimum (take or pay) 40 mmcfd production designed to support the repayment of the future debt funding. The banking consortia will lend the money based on, among other things, the credit rating and reputation of the gas offtaker.
All terms for this take or pay quantities (including price) should have been agreed last year and included in the MOU. The arranging bank (Societe Generale) should have been working on the terms of the debt, based on what was agreed on this part of the MOU
2. a "long term partnership", relating to the way the excess gas (above the take or pay quantities) will be commercialized. This is what the signing parties of the MOU should be discussing now. Undoubtedly, the war in Ukraine and the interruption of the flows of algerian gas to Europe through the GME pipeline have substantially changed the outlook for this part of the MOU, increasing the advantages of selling any excess gas to Europe.
Regards
Fernan
Hi Jimmy
I noticed yesterday´s announcement by IOG PLC (IOG.L), informing the market (among other issues) about a substantial downgrade of production and reserves in 2 of their North Sea gas fields: Blythe and Elgood.
In the case of the Blythe field, “Latest analysis of production and reservoir pressure data from the first six months of H1 production indicates that the well is located in a reservoir compartment which is materially baffled from the central and northwest areas of the field and will ultimately recover an estimated 29 billion cubic feet (BCF), compared to the management estimated reserves of 1P/2P/3P 25.4/42.5/55.8 BCF”.
Regarding the Elgood gas field, “production rate recently fell below 10 mmscf/d and is expected to decline further by year end. The decline in flow rate has been faster than anticipated given the pre-production estimated reserves range of 1P/2P/3P 9.7/14.1/18.3 BCF. The latest analysis indicates that gas is not flowing across the NW-SE oriented intra-field fault to the wellbore as expected”. As a result,“…Elgood is a smaller structure than previously estimated”
By the way, IOG´s CEO (Andrew Hockey) is one of our non-executive directors.
The company´s share price went down by about 57% on the news, and it´s down again today.
Both fields were given the go ahead (FID) in 2019, after the drilling of a few exploratory/appraisal wells.
Is there any chance of something similar happening in Anchois? Have you already evaluated those risks, taking into account the info available?
I would like to know what you think Jimmy
Thanks in advance, as always.
Fernan
I noticed the scope of the FEED that is being carried out by Schlumberger/Subsea 7, as follows (June 20th, 2022 press release):
"o offshore components including well completions, subsea production systems ("SPS"), and subsea umbilicals, risers, and flowlines ("SURF") that will be delivered by Subsea Integration Alliance, and
o onshore components including a central processing facility ("CPF") and flowlines and controls from the CPF to the shore crossing that will be delivered by Schlumberger."
The announcement doesn´t have any reference to the onshore pipeline required to transport the gas to, for example, the GME pipeline, or to local customers in Morocco.
Does it mean that we are going to sell the gas on a "FOB CPF" basis? If that´s the case, then our selling price will be lower than prevailing gas prices in Morocco ( around US$ 11/mcf), in order to account for transportation costs from the CPF to the GME pipeline or, alternatively, to the local customer.
who is going to build the necessary pipeline connections to the GME or, alternatively, the local consumers?
On the other side, I noticed that CHAR signed a "pipeline tie in agreement" with ONHYM, in order to have access to the GME pipeline (September 7th, 2022 press release).
I find it strange for CHAR to sign that agreement, without executing at least the FEED required to connect the CPF to that pipeline.
was that "tie in agreement" required by a potential "gas offtaker", as a previous step before signing the "gas offtake agreement"?
Comments?
Regards
Fernan
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.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