Sum of parts valuation16 May 2018 14:11
At times like this, it is worth going back to basics, in my view. We know that Sound has confirmed T5 holds 377BCf and management is looking at how best to fund this development such as BOT (Build-operate-transfer), even if we do not undertake the actual development. This, in itself, is worth something like 35p-40p per share (depending on various factors such as gas prices but we know there is already a favourable market for this gas).
We also know that we are in the process of drilling an A1 structure, which is similar to TE5 and could be around 0.7 TCF GIIP. We will get clarity on the timing of this on Thursday but it should be within the next 2/3 months. We know a fair amount of analysis has already been done to identify the location of the drill. After this, attention will turn to NE Lakbhir for the second drill and then there may be third drill.
We know the first two seismic have been done and paid for by Schlumberger- the first one will have helped for the first drill and second one for the second one. We also know management is putting together as much data as possible to make their case for a sale. And we know there is (just about) enough money for the drill programmes. And we know the regulatory and fiscal and tax regime in Morocco is favourable.
At the moment, the share price is indicating close to zero value for the exploration, seismic, drilling, data, further gas finds and Sidi. This is possibly because short term sentiment is asking questions about the motives of the recent share sales by the CEO. But in my opinion, to put a nil value on the future prospects is a buying opportunity. As and when the news flow comes through, the opaqueness will unveil and we will start to realise these upside. There is massive potential in the share price!