Member Info for ps200306

And yet the share price is down on the day. People piling in for tomorrow's big news? :-\

I think we could WRITE Graham's presentation for him at this stage:

1) There will be no new material facts. The RNS already told you that.

2) He will say SOU is in a great position and everyone is working really hard, but it's not going as fast as he'd like.

3) He'll mention all the wonderful things happening on site, without acknowledging that they are many months behind schedule.

3) He won't mention the company's current cash position.

Adam2911: "Right girls and boys...I'm putting my reputation on the line here.. Cavalley is a done deal.clues were on the last rns..if its not then I will stop posting.thats a promise..."

An empty promise unless you give us your drop dead date. On what date, in the absence of an RNS, will you stop posting?

Lyndondavies1: "Looking at the progress on site at Tendrara ,this must be costing a lot of money,but going strong. How will we manage to keep that going without the deal?"

The Phase 1 work is being covered by the ongoing drawdown of the Afriquia Gaz loan. It doesn't cover G&A and other SOU expenses, which must be a considerable problem at this stage. Also, it's hard to imagine the lengthy overruns are not causing cost increases on Phase 1. Calvalley will pay back costs to SOU and also provide a loan facility to cover cost overruns. That would dig them out of the hole they are in now, albeit with additional dilution. I imagine there is no immediate threat to Phase 1 work, but SOU themselves must be running on fumes and desperately in need of the cash injection.

More than enough time for a top-up seeing as the Calvalley deal, even when it arrives, is not the saviour people think it is. There's still a shortfall as far as I can see, even just to pay back the bondholders in 2027. Maybe 2028-29 to see a bit of value if SOU survives that long.

In June last year SOU said they were raising £4m to provide working capital for the next six months. They only actually raised £2.5m, enough for less than four months pro rata. Ten months later they are still going. Is this some kind of loaves and fishes miracle? Indeed, it's of so little consequence that Graham hasn't even mentioned it in his Q&As. Remarkable.

This is very strongly reminding me of another ill-fated company I invested in (yes, I know how to pick them). The would-be farm in partner led them a merry dance for a year and in the end never came up with any cash. There has to be tough questions about Calvalley's seriousness if they have not managed to consummate the deal at this point, and about Graham's competence in allowing it to continue this long. What started out as one suitor among (presumably) several, has become an existential issue now. If Calvalley don't complete, SOU is as good as bust.

Earlier post got truncated. I was pointing out that GL is talking about no more dilution while failing to note that there's potentially hundreds of millions of new shares already baked in from last year's loan note. And while he says that he "hopes to be closing on Phase 2 before having to go back to SH for more money", I take that to mean as soon as he gets a lift in SP from closing Phase 2 he'll do a raise. It is the tried and tested SOU approach after all.

Apart from the cringe factor due to lack of progress, there was also actual BAD news: definitely no hope of LNG tank completion before “early 2025”. Remember, “early next year” for SOU has always without fail turned out to mean “we have absolutely no firkin’ clue”. And the alternative temporary storage is now “only if economic”. So I’m going to predict here and now: first Phase 1 revenue not before H2 2025. Call me on it when I’m wrong.

Phase 2 FID clearly going backward as well. How many times have we heard about the FEED having to be redone? Should probably save the hassle and wait till everything else is in place and then figure out what the hell year it is for the FEED price update. My prediction for Phase 2 revenue: definitely not before 2028.

And finally this absolute howler:

“As we deliver on our work (slower than I want) but as we start delivering on all of these activities that the market will start picking up and recognising that we’re not far from production, we’re not far from sales, we’re closing a large transaction to fully fund us for our project. So I think hopefully the market will start rewarding us.”

So would he at least agree that the market is punishing him for an absolutely catastrophic delivery record so far?

That entire video could have been summarised as: "ABSOLUTELY NOTHING NEW TO REPORT (except Graham's new moustache and a few bits of bad news slipped in surreptitiously)".

Really, GL should proof-read his answers and weed out those in the "pathetic excuse" category. Easter happened? Who'd have guessed it, we never saw that one coming. Also, blaming the wind sock? A quick google against JUST www.moroccoworldnews.com:

11 Aug 2023 — Morocco's tourism hub Marrakech was hit yesterday by a sandstorm that plunged the city into chaos.

19 Oct 2023 — Strong wind with local dust storms of 80 to 100 kilometers per hour are expected

20 Oct 2023 — Morocco's weather office forecasts more dust storms will hit several provinces across Morocco

23 Oct 2023 — Morocco’s Highway Company Asks Citizens Not To Travel Amid Stormy Weather

1 Nov 2023 — Moroccan Drivers Warned of New Dust Storms in Coming Days

15 Dec 2023 — Morocco's Ministry of Equipment urged road and highway users on Monday to exercise caution and vigilance due to strong gusts of wind and sandstorms (for 3 days)

23 Jan 2024 — Morocco's Ministry of Equipment has warned road and highway users to exercise caution and vigilance due to strong gusts of winds and sandstorms

07 Feb 2024 — Strong winds, thunderstorms and snowfall to hit several provinces

09 Feb 2024 — Strong Windstorm Causes Flight Disruptions Across Morocco

22 Feb 2024 — The Moroccan General Directorate of Meteorology announced today the likelihood of strong winds accompanied by dust storms

02 Mar 2024 — Several provinces in Morocco are expected to see strong wind and dust storms

22 Mar 2024 — A new weather alert indicates that strong gusts of wind with dust storms ranging between 75 to 90 kilometers are expected to continue until Sunday

24 Mar 2024 — Morocco is set to see strong thunderstorms accompanied by hail and powerful winds, along with dust blowing on Sunday

08 Apr 2024 — Low or absent visibility caused by strong gusts of wind and dust storms expected this week in several provinces across Morocco.

We're not talking about freak events here. The dusty Moroccan winds from the Sahara are a regular feature, they even have a name: the sharqī (chergui). Regular events are things you plan for, not make excuses for. And for god sake stop telling us "it's not going as fast as I'd like", it makes you sound like a helpless victim. Ever heard of the concept of "the buck stops here"?

No new update whatsoever on the deal or finances. No explanation for how things run entire quarters (and even years) over time budget. Are you completely unable to learn from past experience? Lots of repeating of stuff we've heard already, but never addressing the question of WHAT IS THE CASH POSITION RIGHT NOW? It's clear there's no plan B if Calvalley doesn't come through but would be nice to know when that will cause serious trouble. Also, no plans for more dilution but fails to mention that there's hundreds of m

Great to hear the ever reliable SoundBoy has personally received a news leak. As another poster would say ... Buy, Buy, Buy.

Eid mubarak!

"If the Calvalley deal gets completed (it is concerning how long it is dragging) then most of the risk disappears. Then any success with the drill bit and it will be transformational."

Sorry to point this out yet again, but SOU hasn't got a brass farthing to pay for any drilling beyond TE-4. Nor will they have until 2027/28. They also now only own 30% of any wells on Greater Tendrara, and even less should Calvalley agree to carry their costs.

Best of luck Fernan10. I've just passed the third anniversary of selling most of my holding. It was around the time of the first bond restructuring when I decided there was something amiss. Obviously SOU has tottered on, but even I am amazed that the share price was 50% higher when I sold than it is now, three whole years later.

Why?

End of first week in Q2. Seriously, WTF is happening? Where's Calvalley? What's happening on site with Phase 1? A time lapse movie of the past year wouldn't win any awards. It would show the LNG storage tank foundations being completed a year ago and a few rusted steel sheets getting installed last week. The 2023 half year report said there would be lots of equipment arriving 2023/ early 2024. Even with the usual SOU overbroadly-specified timelines they are a mile off target.

If the pace picks up, there are months and months of construction remaining, and further months of commissioning. Chances of revenue this year are exactly zero. If things DON'T speed up, it won't be early next year either. Unless Calvalley are writing the cheque for back money right now, SOU will need to go out and look for minimum £3m. Will it be Catastrophically Bad Deal V2.0 for GL?

There is no "last 250k". That's the principal amount remaining on the convertible notes, everything else has been converted to shares. The money itself was paid to SOU in Jun 2023 and is presumably long since burned through. SOU themselves said that £4m would get them through to the end of 2023, and in the end they only received £2.5m. So they should have had a major deficit in working capital in 2023, never mind Q1 2024 which is now over. The SP Angel flash note suggests that SOU have reduced the burn rate to £3m/yr so they have probably stretched the convertible note money out a bit. I can only imagine they are now in serious difficulty for funds and are scrabbling around looking for the next source to tide them over. Let's hope it's less dilutive than the last one. Also, the Afriquia loan can only be drawn down for actual work on Phase 1, not for ongoing working capital.

It's anyone's guess what the hold-up with Calvalley is. For something that was supposed to be substantially done in 45 days from last June, it's inexplicable. Also, the SP Angel note says that first gas has slipped from H1 to H2 2024. All part of GL's creeping deadlines -- first gas was never "H1 2024", it was supposed to be end of 2023, possibly slipping into this year. On the other hand, if we go back to the start of the Micro LNG project it was supposed to be first revenue in 2021 !!! That was according to Mohammed Seghiri, before GL joined. Good thing Mohammed pocketed 13 million shares for his efforts on Phase 1 FID before the project turned out to be more than three years late.

I wonder did GL think that Calvalley would come through earlier? With the Phase 1 back money the convertible notes could have been redeemed at 110% plus accrued interest which, while painful, would have been been much cheaper than paying ALL the interest. I presume he knew the risk he was taking. Maybe he just didn't have a choice. (I'll discount the possibility that he just didn't care).

No matter what happened, the note owners were on an incredibly sweet deal at the expense of shareholders. Worst case for them, SOU can pay the money back early and they pocket 10% plus accrued interest after maybe just a few weeks. If the share price goes up they can convert and dribble shares onto the market, making a profit on the shares AND collecting 75% interest on everything converted. And if the share price goes down -- as it did -- they can convert and buy new shares at a massive discount with their 75% interest.

Almost immediately after the convertible notes were issued in June the share price began to nosedive, allowing the note holder to convert large tranches in July, September, October, November, and now again in March. The holder can cherrypick the worst five days in a three week period and convert the interest due to shares at that price. In December we saw that puzzling RNS which indicated that Afriquia's share of the company was falling. Little did most people suspect that EVERYONE's share was falling due to the loan note conversions -- only Afriquia were obliged to report it.

It remains to be seen exactly how things pan out. But this horrendous loan along with the ongoing unexplained delay with Calvalley may just end up costing SOU one sixth of the company for a tiny pittance. I'd love to see GL explain this disaster to shareholders in a proper open forum instead of a selective Q&A. Only once to my knowledge has he hinted (in a recent interview) at how hideous the financial situation has been during his tenure. A bit of straight talking would be appreciated. However, I guess that's not what CEOs are paid for. He's supposed to rally the investors, not spook them.

Actually, hold that thought. It's much, MUCH worse than even I imagined.

The notes investor will be taking their principle PLUS 75% interest and buying at a little over a penny per share. You can see that in Thursday's RNS ... 30 million new shares issued at 1p but an eye-watering £1,387,500 of interest still outstanding (as well as £250,000 of principal). That's another 140 million shares to go at 1p (on top of the 140 million already issued) and still a sizable chunk of principal and associated interest that could be converted. By my reckoning the final tally could be just shy of 350 million shares if the investor has enough time -- there's a limit on how much they're allowed convert in a calendar month. (And can I just say, it would be a very happy "coincidence" for them if they were to manage to cash out the last remaining notes in April or May just before Calvalley comes through).

The note owner will have gotten 75% interest and spent both it and the principal on shares at around 1p. If they can sell into a rise they could end up with 350% of their initial investment after a year. The perennial rampers on here will cheerlead the crowds into buying this crud, and the hapless LTHs will not only not notice that they've already been diluted another 18%(!) but will be left holding a shiny new turd as well.

I can see the scene being set for a classic bull trap. When the Calvalley news breaks (assuming it does) people who wouldn't buy shares at 0.8p will be rushing to buy them at 1.8p. After all, we're on our way to 4.6p and well beyond that according to some. Of course, there will be lots of people looking to exit along the way, breathing a sigh of relief that they got out intact. They're the lucky ones with the low breakeven prices.

But ahead of all of this posse will be the convertible notes investor who has been buying newly minted shares at low, low prices. By the time of the temporary spike they will be the proud owners of 150 million shares which they will dump on those panicking to buy into the rise. I mean, why wait for five years at "only" 15% pa interest when you can make 100% in ONE year.

Guess who's going to be left holding the baby?

Any particular Tuesday?