Member Info for Maldini1

We’ve reached a standoff. If SOU believes that what we have at TE5 is worth more than potential suitors are prepared to pay, then the LNG proposal is intended to show that there is a route to market without them. Fair enough...as long as we are prepared to follow through with the implied threat if necessary. ONEE in the meantime waits on the sidelines still without the certainty that it can secure all of the gas from TE5.

Possible next steps?
- A bidder comes forward with an improved offer which we feel able to accept.
- Or, the Moroccan government steps in with funding to unlock the stalemate.

If it’s the latter, the proposed pipeline and development infrastructure could be built and operated by parties appointed by Morocco and both end up as state owned assets. SOU can then concentrate on selling its gas and paying its share of the production costs from revenue, nothing more. No additional investment, retention of its 47.5% stake in the Horst and ONEE gets its gas.

This is brinkmanship, albeit with high stakes. Let’s just hope that Mr. Seghiri has calculated the risks correctly and that the other parties blink before we do. If not, we should be ready to crack on with the LNG route on our terms. Perversely, we could end up moving forward with twice the amount of gas than we would have had under the proposed JV.

All we need to understand now are the economics of any proposal. A minor point no doubt. Oh yes.. and also remain solvent in the meantime.

A couple of additional points for consideration:

It seems perfectly possible for SOU to have received some alternative bids during the exclusivity period and we might imagine that the potential would have been anticipated, even if SOU would not have been able to enter into any other negotiations during this period. However, if indeed new offers have been received, then come Friday SOU will have some decisions to make taking account of the practical, economic and political risks attached to each.

1- Decide that any new offers are not worth pursuing:- Press ahead with the currently proposals and extend the exclusivity period so that the deal can be completed.

2- Decide that one or more new proposals have merit:- Invite the incumbent bidder to improve their offer and extend the exclusivity period to allow time for further negotiation.

3- Decide that one or more new proposals have merit - open up the process again for a shortened period to allow for the submission of improved bids.

Let’s remember that the negotiation period for the GSA has recently been extended to 31 March. This may have been done for the purpose of accommodating any of the above potential outcomes. However, remaining mindful that SOU, ONEE or Morocco cannot afford any further delays to first gas, if this is to be achieved by the end of 2021, we might anticipate that the whole process will be wrapped up by early May, which by “coincidence” is the date until which our resident consultant is available.

Tapper, click on “next page” in the bottom right hand corner and then again.

No mention of 9% optional take-up by JV partner.

‘Fraid I don’t know KTF. What’s the property angle?

It ticks a number of boxes Eric.

Make what you will of the following:

http://marocgazette.com/story-z3540501

TAQA is the Abu Dhabi National Energy Company. There are a number of TAQA related companies listed at Companies House, one of which, TAQA Bratani Ltd, is into oil and gas production. The last set of accounts shows some big numbers.

Woodrow, I guess that would depend on the legal interpretation of “link” in the context of these types of transactions. It could range from people having worked for the same organisation, having transacted some business deal together or even having family ties. However I think that having asked the question in the context in which it was asked, we should have a reasonable expectation that the answer was given in the same spirit and unambiguously.

Here’s a link to the FSC: https://www.yoursoundenergy.com/app/qa-chat

FSC- Fred Lacuha @ 1.13 pm: “There is no link between the proposed purchaser and any existing or former employee or any associates of any of them obviously as far as the Company is aware”

Pont, the Company has done exactly what it said it was going to do in the RNS dated 12 Nov. “The Company announces that it intends to appoint Mohammed Seghri, currently Managing Director Morocco, to the Board, initially as acting Chief Executive, in the near future and after the Company completes the formal procedures relating to his proposed appointment.”

There’s also been some media attention recently on how both the UK and Morocco governments want to forge a partnership to attract new Uk investment and businesses to Morocco. SOU was one of the companies mentioned. Kicking SOU in the proverbials now probably wouldn’t be the best start to this relationship. I trust therefore that if the Moroccan government does indeed want to take control of SOU, that it will do it in a manner that will satisfy both them and us.

Never mind any contractual performance criteria, the real incentive for our new CEO should be to get to January 2022 and be in a position where he can exercise his 70p options and make money out of doing so. If he manages to achieve that we should erect a statue of him in Tendrara.

First the buyer(s) of the placing shares, then the agent of the placing shares and now the former exploration director...all tucking useless SOU shares under their belts. They must be mad!! Never mind some unsuspecting and deluded Pis, still topping up on the dips, but you would have thought that this former group would have known better. Maybe they do.

If you’re undecided whether these events signal something good or bad, be wary of placing your trust in the persuasive arguments on this BB. You can’t know whether someone is looking out for you or for themselves.

Ah you are absolutely right Trellis, indeed I know not of any new reports, but then that would be missing the point entirely.

The FEED/BOOT agreement is very relevant in the context of current options. If SOU chooses not to go with the consortium it would in all likelihood need to buy the FEED from the consortium at a cost of $2.2m. The £1.5m from the placing would go some way to facilitating this without dipping further into whatever remaining funds we have.

Attached is an old report which summarises the agreement relating to the FEED/BOOT. https://www.worldconstructionnetwork.com/news/sound-energy-awards-feed-contract-for-gas-production-facility-in-morocco

The last two paragraphs triggered some thoughts:
“The consortium will pay a break fee of $1.5m to Sound Energy. and provide Sound Energy and its partners with the FEED at cost in case the BOOT contract is not concluded to the satisfaction of the consortium.”
“Sound Energy and its partners have agreed to buy the FEED from the consortium for $2.2m in case the company decides not to proceed with the consortium.”
The recent RNS confirmed that SOU is continuing to work on the BOOT funding solution in parallel with progressing the proposed sale...so consider this:
Up to the end of negotiations SOU has the option of sticking with the FEED/BOOT consortium or pulling out. If it chooses the consortium, funding is sorted. However, if it chooses to go down the JV route, or even to use an alternative funding solution, the recent placing could facilitate the purchase of the FEED prior to any resulting funds from a deal becoming available.

A fanciful thought maybe, but also a reasonable possibility. Dare we hope that “the plan” is actually finally coming together?

As long as there is a novation clause in the easement agreement between SOU and the Moroccan government so that ownership can be transferred, it would make sense to keep the agreement separately from the BOOT arrangements in case it’s not the consortium that ends up constructing the pipe. Retaining options is an important element of negotiations.

Thanks Pontcanna, but do we know yet for certain if the placing was completed?

Three points for clarification on the placing please:

Sarah Dees response to a poster back in December I thought confirmed that a TR1 would be required once the shares hit the market .

If the shares haven’t hit the market does that mean that SOU have decided not to complete the placing?
If the placing has taken place and the buyer already holds more than 3% would a TR1 still be required?

Gregory, working-up these sorts of strategic options is bread and butter stuff for any senior team. Trying to second guess them from the information available is another thing entirely. How close (or far) we are from the mark remains to be seen.

And as for erroneously referring to our CEO as “Shaghiri”...my apologies to him, I’d better stick to calling him “Mo” in the future.

Ha, ha... guilty as charged TenthOfFoot. Everything still proverbially crossed.

Folks, all the bickering and sniping is a bit unedifying and a sad indictment on the BB. In case anyone is interested in some thoughts concerning SOU, please read on.
Yesterday’s RNS provided some light relief and a number of positive updates. It’s possible that in accordance with the HOT, SOU probably had some obligations to progress various planning consents in respect of the Horst, hence the updates. However confirming progress specifically on the BOOT also helped to demonstrate to the prospective buyer that SOU still has options. This from Mr Seghiri in the FSC: “The strategy in the 12 next months will be morocco centric. We have multiple options for profitable ways forward.”
Whether a deal is signed on 14 Feb remains to be seen, but it could be that the 3 month exclusivity period suits SOU as much as it suits the prospective JV partner. Consider this:
The exclusivity period means that SOU hasn’t been able to negotiate with anyone else during this time, but it wouldn’t have stopped us from talking to people and exploring other avenues in the normal course of business. We could potentially end up with the HOT deal on the table as a backstop, should we need it...but with a number of other finance options also available. We could for instance still go it alone into production as the preferred option. There’s less risk in injecting money into a production concession with secure income than exploring for new gas in the desert, so why not the following scenario?
(i) keep the Horst and fund development by a combination of BOOT and new money plus (ii) accept that we have to give away a good chunk of the exploration potential to another JV partner in exchange for a free carry on a number of new drills.
The HOT is non binding until a final deal is signed. If it turns out to be the best available then let’s move forward with that. However, if the exclusivity period has served to identify better opportunities then that’s all to the good. As Mr Shaghiri said, “we have multiple options for profitable ways forward”.