Member Info for Maldini1

Trellis we’re in agreement on the cash situation. SOU said that we have enough cash to take us to the end of Q2 so at some point between now and first revenue from LNG we will need a cash injection to keep us ticking over. Whether this comes from the successful conclusion to the existing deal, a new deal, or perhaps other financing routes remains to be seen. The chairman certainly gave little hint of any concern regarding new finance so the working assumption must be that he’s got this covered..... otherwise everything else he is hoping to achieve isn’t going to happen.

Oilpimpdxb, you’re not far off the mark. There are a number of ways in which contracts/documents can be legally signed where the parties are geography apart. The following link shows some commonly used ways.
https://www.thebalancesmb.com/counterparts-and-legally-binding-signatures-398169

If the parties were really keen to sign the GSA, they could have done so by now. However, as we posted yesterday, it looks more likely that the GSA has intentionally been put on the back burner and no doubt we’ll find out soon enough what these other priorities have been. A firm sale/JV on better terms than the one that didn’t complete would be a very good start.

Try these Gregory.

https://www.africa-energy.com/article/morocco-scales-back-lng-import-plans-gas-strategy-evolves

https://www.ebrd.com/cs/Satellite?c=Content&cid=1395282056967&pagename=EBRD%2FContent%2FContentLayout&rendermode=live%3Fsrch-pg

First of all I would like to extend my sincerest wishes ?to anyone affected by the current health crisis. I hope that everyone remains safe and well.

??It sometimes helps to look backwards in order to make sense of the present. This morning’s RNS, as predictable as it was, conveniently kicks the GSA further down the road. We should expect further delays before we ever get to sign this agreement as I suspect that it’s intentionally dropped down the priority list.

The attached press report from March 2019 in retrospect offers some hints as to why deals for the BOOT and GSA were going to end up on go-slow.
https://www.africa-energy.com/article/morocco-scales-back-lng-import-plans-gas-strategy-evolves

Subsequently, the European Bank for Reconstruction and Development, acting as adviser to the Moroccan government, issued an ITT for a consultant to help design a new energy strategy for the country.
https://www.ebrd.com/cs/Satellite c=Content&cid=1395282056967&pagename=EBRD%2FContent%2FContentLayout&rendermode=live%3Fsrch-pg

These things take time and resources to develop and implement. Against this backdrop it’s therefore possible that as far back as mid 2019 SOU could begin to see that whatever long term plans they had for the Horst, they were likely to be impacted pending alignment with Morocco’s evolving energy strategy. It seems to have turned out that way. Within this context SOU’s belated strategy for micro LNG as a first step to revenue begins to make more sense. The delayed approval of the environmental impact assessment for the proposed CPF (which just happens to now include provisions for LNG) adds weight to the argument.

Will Morocco end up taking a bigger stake in the gas at TE5 and the associated BOOT pipeline? It does look increasingly likely. However, as long as MS and his contacts at ONEE, OGIF and ONHYM are working closely together for mutual benefit, then the outcome for investors looks more promising.

All fine if you’ve got the time and funds on your side of course. Let’s hope that MS’ and Morocco’s plans therefore include a deal that secures SOU’s future to first gas and beyond.

Best wishes and good health to everyone.

I think that MS has played a blinder. The delay/ non-conclusion of the partial sale now makes more sense and will save SOU a tidy packet. The LNG proposal in the meantime can be progressed without the risk in change of control... as much as any progress can be made during the current crisis of course. Moreover, if a new deal is struck during 2020, we can rest assured that we won’t be selling so much of the company that it would constitute a change of control event.

If, and it’s a sizeable if, we can get through the next few months relatively unscathed and we manage to get our hands on the money that will keep us solvent for another year then SOU will be around in 2021 and beyond. Time will tell.

Nevertheless the withdrawal of inflated payments is a positive first step under the circumstances. New BOD 1, Old BOD nil.

Thanks Exploration. So, for Sidi we need an extension of time, new seismic to highlight some promising prospects and someone else’s money to fund the lot. Not too much to ask then?.

Much appreciated Exploration.

Assuming for a moment that we do get an extension to the August deadline to undertake new seismic. Looking back at the RNS dated 5 July 2017, SOU reported the successful re-entry and flaring at Koba-1. They also confirmed a 5 metre interval of producible gas and an intention to undertake an extended well test. Did we ever get to the bottom of how much gas is in that particular well? The RNS noted the poor quality cement bonding across the lower liassic in the Koba-1. Would this present a problem in bringing the well into production?

Here’s one for Exploration to unpick if he’s looking in.

The following link, from ONYHM’s website, is an invitation to tender for services at a concession in Meskala. The concession looks to be located very close to our own licence area in Sidi.

http://www.onhym.com/pdf/10012020_CAL_for_TENDERS_Meskala.pdf

This is most probably clutching at straws but could there be any sort of positive link to our still “very secret plans” for the area?

Diver69, even if Morocco had any notions of stitching up SOU, they would also be consciously sticking two fingers up to one of the biggest global companies in Schlumberger, a company who has a 25% synthetic interest in the TE5 concession and who is also already materially involved in Morocco. Having gone out on a marketing spree recently to attract foreign companies and new investment, such a move would probably also set off a few alarm bells amongst other major players thinking of expanding or dipping their toes into the Moroccan economy. Just a couple of reasons why it should not be in Morocco’s long term interests to follow this path...but by now few things will come as a surprise to SOU shareholders.

Until we know for certain what’s happening behind the scenes we can only speculate on the reasons why the exclusive deal did not complete or why an almost “done deal“ for the GSA has again been put back. When we eventually do find out let’s hope that for once the reasons are positive. However, as Noodle60 suggested, some things indeed still do not seem to add up.

This is old news Jack. Just searched out the same Africa Intelligence article and found the following text with a handful of extra words from the start of a second sentence. The additional words point to the article reporting on the same RNS that’s been in the public domain since mid February. So much for “hot off the press” news.

“1 day ago · The British junior active in Morocco Sound Energy is having a much harder time selling 51% of its assets in the Tendrara block, Oriental region, than it had planned. The firm has revealed that talks with a ...”

In case anyone wants to read something of interest......

https://iclg.com/practice-areas/oil-and-gas-laws-and-regulations/morocco

Thank you exploration that now makes a lot more sense.

Exploration, do you recall the GOIP figures for TE1 and TE2? When we were chasing rainbows SOU didn’t consider it worth our while going back to these two wells, but their importance may well have climbed the priority list of potential drills since those heady days. Might they be included in the latest drill ready prospects?

Thanks Audible energy, I like the conclusion from your very helpful document, I.e.

“Conclusion:
LNG technologies are readily available making it possible for “fast-track” implementation of mini LNG facilities with relatively low investment (compared to pipelines or large scale facilities).
Small-scale LNG can enable rapid establishment of power plants or industries (fertilizers, food industry, ceramic, etc.) in areas limited by lack of infrastructure.”

By the way these units, are scalable so can provide multiples of 4000 gals of lng per day but your concerns about road infrastructure and transportation costs are certainly valid. We still need confirmation that the lng approach is economically viable, but like most on here I’m no expert so I’ll have to wait for the figures from SOU before making my mind up.

Ok, let’s simplify this then.
You only build the pipeline once so you might want to make sure that you size it correctly before throwing money at it.

Should read “get to first gas asap”

Back when SOU was riding a wave of optimism following successful drilling at TE5, 6 and 7, institutions were only too keen to fund the pipeline in expectation that other discoveries would surely follow. Following the spate of failed drills post TE7, anyone still thinking about providing the funding must now be reconsidering whether the Horst is as good as it’s going to get and whether the upsizing of the pipeline from 12 to 20” is worth the added expense. Cue, delays in GSA and BOOT.

Paradoxically, this uncertainty points to a need to accelerate the search for new gas. The LNG strategy most certainly buys additional time. Time to go after those drill ready prospects that we’ve been told about so many times. Should some of those come in, then it makes the 20” pipeline more likely to go ahead. However, if no extra gas is discovered, then we must face the prospect that the pipeline reverts back to 12”.
However, lets remind ourselves that other junior players in Morocco jump hoops every time they discover another 1BCF. Heck, we used that much gas in 56 days of flaring at the Horst. We are not lacking economic gas volumes nor options to market...the discovery we have is very significant.

We are given strong hints in the RNS that the revised strategy has a two stage approach. I.e. get to first asap and then push on from there when we have more certainty on how much new gas is available, if any. But we do need a deal, we need the right partners and we need to crack on with some drilling. No small risk of course, but at least we are eventually doing all the things that we should have been doing two years ago.

Exploration that’s quite reassuring, although I’m a tad more sceptical about the benefits of converting older legacy coal plant to gas. Not least because you wouldn’t derive the same efficiencies or environmental benefits as you would by installing new twin cycle gas turbines. Nevertheless the LNG principle appears to stand on its own merits and that’s a big plus!

Medi we cannot be certain at this stage whether the LNG proposal is a smoke screen or a credible step to first gas. In the same way that we cannot be certain whether the entire daily output from TE5 is destined for ONEE. The take or pay clause in the MOU only covers 0.3BCM/annum. That leaves a lot of other gas to sell and it could be that ONEE may not now want a commitment to take more than the 0.3 BCM so that they can retain the flexibility to buy cheaper in the spot market. That would not be in SOU’s best interests. Would it not make sense therefore to have other customers available to create competition and provide more certainty on sales volumes?

Ramping up to full production as soon as possible must be the primary objective in order to maximise revenue and if LNG can be the first step in helping to achieve this objective then all to the good. The biggest challenge we face is to bridge the gap between where we find ourselves to where we want to be and MS has a big task on his hands to achieve this. As yet the jury is out on whether he is indeed a new broom or whether he has the full support of the powers behind the throne. He needs to demonstrate that he can answer yes to both and if he can, then this could still succeed. If not then there’s been enough “expert assessments” on the BB of where this could all end up.

This has certainly turned out to be an intricate jigsaw and we don’t yet know if or when the final pieces will fall into place.
However, it is still possible that a deal for the concession can be done in Q2. Should a deal materialise, and if it included some upfront payment akin to the HOT proposal, it would be prudent for SOU to retain sufficient funds from the deal to meet its obligations all the way to first gas. That would perhaps be a more palatable approach for many than having to raise cash through another placing. It probably wouldn’t suit all investors, especially those hoping to cash up and sell out on a deal, but it would certainly put the business on a firmer financial footing whilst it implements its strategy towards profitability. A farm-out deal with another JV partner for a new drilling campaign could then also be a reasonable aspiration.