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Rosso, I have asked this question a number of times and the replies have always been very rambling and politician like, so there remains a lot of uncertainty. Gary was very hard to hear and to understand. He seemed to be totally avoiding the central question by rambling on about how successful they had been at minimising running costs and how revenue would be coming in from the Badile land sale, but the drift from him and from Graham, is that they are very keen to avoid ANY further share issue and dilution of the assets, even with a farm-in partner. Gary implied that Sound's costs for getting Phase 1 to completion and revenue generation are being met by the Afriquia Gaz loan. Afriquia Gaz's considerable stake in the project is very dependent on Sound's continued existence.
From what I could understand, was that the expectation and hope is that a similar agreement can be reached with Attarijariwaffa Bank's funding of Phase 2. We don't have long to wait now that all Due Diligence issue should have been covered. Their decision will have a massive effect on Sound, either brilliant or disastrous .......so fingers crossed!!
If no new material disclosures are to be made during the Q&A, we really don't have anything material to discuss. We are waiting on a long list of announcements, most of which are positive and could have a major impact on the SP. I don't think Graham would be pleased to announce if the news was that no Farm-out partner can be found or Attarijarriwaffa has withdrawn its funding offer.
There has to be some RNS soon?
Does anyone know what became of Te-11?
Presumably, if it was considered a potential drillable resource back then, it must still be there? Still a potential resource that hasn't gone away. No one ever mentions it. It can't be the same as M-5 which is in the different Anoual permit ?
Fingers crossed that Graham doesn't give too much away to the farm out partner.
I agree with Southmead, that in the absence an RNS, nothing has changed to prompt this uplift. Graham is working hard to maintain Moroccan financial and political support. The recent RNS was the announcement that Atarijariwaffa bank was delaying its funding decision to March. Remember, that is about this time that the cash required to keep Sound running runs out and a new source of funding is needed until cash starts to come in from mLNG in just over one year. The exploration licences have been extended but even so expire very soon. Everything hinges on finding a farm-in partner and finding financing to keep the company running, hopefully without a further share issue.
Lots of bits of the jig-saw have to fall into place but if and when they do ....we have lift off!
Still living in hope that best wishes will come real.
https://www.assahifa.com/english/morocco/natural-gas-discoveries-in-morocco-will-change-the-rules-of-the-game-sound-energy-ceo-says/
Good luck Graham!
Thanks smithfields for posting this Angus update. With hindsight, a Sound - Angus merger might have made very good sense. Confirms that our GL and team do have their eyes very much on the ball and we are in good hands.
I emailed Graham to ask if there was to be a response to the Q&A session, that those who couldn't join the Zoom session could access. As usual he replied amazingly quickly for such a busy man, but avoided that question, so there may not be any formal response.
He said that the tax issue was the main focus of the Q&A. They were still adamant they were right about the tax but that judges can have different views. Regardless, he says that they have plans in place to ensure the tax doesn't reflect on PLC in the worst case.
IMO, it would be great if they can now forget this tax distraction complete the mLNG delivery and get on with the Farm out and Phase 2 FID.
Interesting to see what is going on at Angus Energy. Perhaps Graham did have the right idea with an Angus-Sound merger? I was not keen. Shows that he has his finger on the pulse and further boosts my confidence in his leadership and the team behind him.
Considering that the 25% tax waiver on ALL the gas production lasts for ten years from first gas from Te5, and then from any subsequent discoveries, this $2.5m tax demand seems trivial and a complete distraction from the real business of achieving FID for phase 2... ASAP, (which does appear to be progressing very well).
It is hard to understand the recent share sell-off and the current rock-bottom SP.
Yesterday’s meeting was very positive and upbeat.
GL had no explanation for Friday’s plunge in the SP. Like the rest of us, he was expecting a rise after announcing the agreement with Attijariwafa bank, which effectively ensures funding for 75% of the Phase 2 pipeline and pumping stations. He explained that the full details were awaiting confirmation and could not yet be revealed but hinted that this would bring even better news.
He did not think the SP drop could be explained by fears of another fund raise, causing further dilution, as he was very confident that there would be sufficient additional financial support from vendors and local interests to complete Phase 2.
They have made a farm out, to support near term drilling, very attractive by making it a three-well deal including both the low risk drills in the already proven Te4 and SBK fields with the higher risk, unproven but potentially massive M5 Anoual field. This means that all three drills can be achieved without any cost to Sound. There are a number of bids already being assessed.
I got the impression that even though the terms of the exploration license carry a commitment to drill Anoual before the end of this year, the Moroccan Government is unlikely to hold Sound to this, especially in light of the Pandemic. So there may be no rush for this drill, which I think is disappointing.
Now that most of the Moroccan Tax claim has been resolved, even if the judgment went against sound for the remaining claim, this would take a long while to fully resolve and according to GL, is quite modest and would have no significant impact on Sound’s finances. He really did not appear to have any concern in this regard.
I was very reassured that Italfluid is already making good progress with what are much more massive civil engineering works than had I envisaged for a “micro” LNG plant. The storage tank is going to be huge and able to contain several day’s of production of LNG. Much of the outsourced plant has already been purchased. An American company with a depth of experience in cryo-engineering, will be supplying and supervising the refrigeration plant.
I am disappointed that it is going to be the end of 23 before first LNG and a few months beyond for first cash but definite progress is being made. The Afriquia Gaz loan will cover all costs of phase1.
Excellent find Ducati2.
It is quite clear that the Moroccans are really keen to encourage investment into hydrocarbon exploration and development with very generous tax incentives. Why would they do the opposite by pursuing this spurious tax claim? Sound is the biggest on-shore exploration licence holder. We hold a few aces!
The response to today's final results RNS is overwhelmingly muted. Considering that, this time last year, we were looking at the real possibility that the Bond could have been called in last June and that shares in Sound would have been worth zero. Nothing!
What Graham and his team have achieved is quite amazing. The Bond is resolved with much improved terms. The $18m loan from Afriquia Gaz covers the costs of Phase1 and gives the company financial security to continue. He has secured future revenue with the go-ahead to Italfluid to achieve Phase1. The highly complex Phase2 appears to be progressing with leaps and bounds. The out standing Moroccan tax issue should be resolved and in the unlikely event that it is not, will not break the company. There is very real exploration potential. Angus is a mystery but any deal is entirely in the control of Graham, who is no fool. I am sure he would not enter any agreement that was not in the best interests of Sound and its shareholders.
Sound now has a future for those prepared to wait.
I wrote to Graham expressing my concerns about the continuing drop in the SP, despite the confirmation of Phase 1 and two recent RNS, which conveyed what is really amazingly good news about the advancement of Phase 2. He replied very promptly, as usual, telling me that he was in Morocco furthering the other CPs needed for Phase 2, mostly financing.
I told him that I was not alone in my lack of enthusiasm for the merger with Angus, which I feel is a major distraction. He confirmed that Sound's priority is indeed Tendrara. As expected he could not discuss the Angus deal save to say what is in the public domain. He confirmed that for any deal to make sense to Sound shareholders, an accretive transaction needs to take place.
He didn’t feel that the share price slide was due to Angus alone but that the tax issue and the delay in revenue to the end of 2023 as well as the market volatility were factors. He said that he and the team would continue to do whatever they think will enhance the share value.
In my opinion, with all the recent and soon expected, continuing good news, it is hard to explain, why any genuine LTHs would be selling such large numbers of shares at such a low prices, unless there is some concerted effort to keep the price low; possibly pending a bid for what will now be a very major and accessible resource?
I continue to be impressed with GL and the team. The current SP does not reflect the value of Tendrara and Sound's other potential assets.
The whole production of the Te5 horst could easily be transported by a 12" pipeline, which would have been significantly cheaper to build, but from early on, the Moroccan authorities have demanded a 20" pipe so there will be plenty of extra capacity to accommodate increased production at Te5 or if additional fields come on line.
This SPA valuation dates back to the beginning of August and was based on an average LNG sales price of US$7.9/mmbtu, which was fair valuation at that time. Since then the price of LNG in Europe has touched about US$34 and Algeria has cut off supply. Graham's complex formula for calculating the price paid by AG to Sound when the market price exceeds US$8.2 will have to come into play, which means a valuation of 8.2p must be a significant underestimate.
Even though Graham is adamant that the Phase 1 LNG plant will be built, it make little sense to have the plant at the well-head and transport LNG by road running parallel to the pipeline if the Phase 2 pipe line is going ahead. Starting the ten year tax holiday clock running by processing a relatively small amount of gas through the LNG plant makes little sense if Phase 2 is going ahead. The delay in announcing the LNG contract should be looked at a a very positive sign that Phase 1, which was just to keep the lights on, is very much a side line. The Phase 2 is a far more complex deal that can't be rushed.
If Afriquia Gaz really need LNG and the LNG plant is to be built, it should be at the northern end of the pipeline, nearer customers. The purpose of a micro LNG plant is for a gas field that really is stranded, which Te 5 is not when Phase2 succeeds.
"Phase 1 will supply an annual contractual quantity of 100Mcm/y of gas (c.4Bcf/y) at an average gas sales price of US$7.9/mmbtu "
The European price recently touched $34/mmbtu.
I am sure that Graham has this worked out!
The delay in finalising the contract may not be such a bad thing.