RE: Te1011 Feb 2019 18:07
Worth a read.
The next six months are going to be exciting for Sound Energy as it progresses with its
Moroccan operations. The main focus will be on the Tendrara concession where
Sound Energy has a 47.5% working interest, alongside Schlumberger, and is the
operator. Here the company is looking at moving the TE-5 discovery into production or
early monetisation post de-risking the development with a GSA and FEED. On top of
this, the company has started the second well in its three well exploration programme.
The TE-5 discovery was originally made by ENI but had a tight reservoir. Sound
Energy realised the potential and acquired the licence. Subsequent wells have
achieved commercial flow rates using stimulation. The management has now
appointed an Enagas led consortium to complete FEED on the infrastructure, at their
own cost, with the hope to achieve FID in the middle of next year. The current reserve
certification estimates that this field contains 377 BCF of gas. It is hope that this will be
brought on stream in 2021. The partners have already got in place an agreement with
some midstream partners, led by Enagas, who will build a pipeline up to the main
Algeria/Europe gas trunk line. (For more information see page 5)
On the exploration programme, the company has drilled the first well in a three well
programme. This first well encountered poor quality reservoir. The rig is now moving
on to drill the next two wells. This programme is designed to test the differing
geological play type located in this licence. This will allow management to assess the
potential running room in the licence and allow it to plan any future exploration
programme as well as demonstrate additional value in the event of an early
monetisation. The next well has started drilling ahead on the North East Lakbir
prospect which is a significant size with potential gas in place of 2.8 TCF. For more
information please see page 6)
At the start of October 2018, the company had cash of approximately US$33 million.
This will be sufficient to complete the drilling programme, with the wells expected to
costs between US$7 – 9 million each. The group also has a EUR 28.8 million
corporate bond. At current exchange rates this means that the company broadly has a
small but positive net cash balance (Please see page 6).
We have looked at the industry standard valuation of the assets through a discounted
cash flow analysis. The main discovered asset is the TE-5 field. Here, using a gas
price of US$8.9/mcf, we achieve a value of 27.1 p/share. Adjusting for the balance
sheet this would imply a value for the share of 27.2 p/share. On a fully diluted basis
this would slip to 26.6 p/share. This implies a value of US$2.4million per BCF of gross
resources found. Therefore it would seem sensible to say that if Sound Energy
discovered 1TCF of net gas reserves and resources in the licence that this might
increase the implied asset value
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