Member Info for ps200306

I'm kinda pleased with the way the SP has held up in the face of market carnage. Sometimes there's an advantage to being unloved and unnoticed. 😉

They seem to be on a wild ride over there. Anyone who "bought the dip" must be happy.

Good points i-man. I'm pretty sure the pipeline is justified on the basis of existing assets -- there's $2bn worth of gas down there -- unless the redone FEED shows a dramatic increase in costs.

Someone else (maybe you) pointed out that successful drilling on exploration wells might have a bearing on where the central processing unit goes so I don't know if that's a consideration.

All other things being equal, maybe SBK-1 makes most sense as first target. Small but has a strong chance of success, having flowed decent volumes of gas to surface already, and would be good for investor confidence as compared to a duster on M5. TE-4 also a moderate chance but (I believe) requires demonstration that stimulation can work successfully.

Keepingitfiction: "PS - the SP is set by market sentiment and not facts (particularly so on AIM) and backed up by management performance and choosing not to buy any shares. It is what it is."

Entirely agree with you. This is why I say there is no point bellyaching about the paltry day-to-day movements. (There's a scatalogical joke in there somewhere 🤡). But at some point in the future, an undervalued company with $60m of debt and up to $200m in assets (even without further exploration success) will be ripe for sale/takeover. We may need to wait for such a liquidity event to realise any value. That will be the point at which the assets are truly "monetised". As you say, no point griping that "nobody loves us". There is no guarantee that the tide of investor sentiment will change between now and then.

Adam: "Nasty 14% drop.... "

Adam, do yourself a favour. Take out an Excel spreadsheet and drop all of the price movements for the last nine months onto it. It is a random walk, i.e. going no particular direction and completely meaningless. Commenting on every intraday movement is boring as hell.

Ilovesushi: "Probably it is dawning that any money is ever earned it goes to pay off debts?"

Another person who doesn't bother reading the available material. The broker's report sets out both assets and liabilities and nets them off. SOU's debts are small compared to assets (a little over 25%). More to the point, the broker's forecast takes them all into account. READ THE REPORT!

Spencerhughes100: "zues report based price at 3.9 to 4-p but is that on o turn over of 300000 or the 1,300000 mill"

Don't know where you are getting either of those numbers for turn over. Regardless, the 3.9p is the UNRISKED share value from Phases 1 + 2 BEFORE liabilities. That is, it's the price using best case assumptions and before being reduced to 2.9p after liabilities. It does not include drilling upside.

Folks, read the information that is out there!

Would be nice to get a timeline for Phase 2 activities that is more granular than just "near term" as mentioned in the latest investor presentation:

• Update FEED and EPC contract

• Close Bank Debt

• Close GSA with ONEE

• Proceed to FID

Now that we are more than three months past the completion of sale, would some tentative dates for these be too much to ask?

I frickin' hate those "update as you scroll" website designs. Performs like a dog, especially when it's loading/running those moving picture backgrounds which, by the way, highlight a sewage treatment plant but don't show the microLNG plant at all. Hopefully SOU haven't switched to biomethane without telling us. 🤡🤡🤡

Any SP movement is just the normal daily statistical fluctuation.

Kylie: "re ChatGPT. Have to wonder if it simply trawled the Zeus workings and spat them back out again?"

I didn't mention anything about Sound Energy or Zeus to ChaptGPT so, no.

Just for fun, I fed ChatGPT with some rough numbers for SOU's expected income from Phases 1 & 2 for a term of 15 years (starting after one year and three years respectively), along with debt levels and a nominal interest rate and asked it for an NPV at a discount rate of 10%, EBITDA, FCF and value per share. I played around with a couple of different parameters (including income and debt repayment rates, and G&A costs) and found it was within the ballpark of Zeus's projections.

Now, I wouldn't trust ChatGPT with numerical calculations as far as I could kick it, but it does present all its output very neatly in tables so it could be checked. Current valuation varied from around 2.8 to 5.8 US cent per share depending on assumptions. As an extremely rough model of M5 coming good I got it to triple SOU's income after year 4, which gave a valuation of 11.8 to 13.3 cent per share. It was somewhat reassuringly along the lines of the Zeus numbers even if extremely rough around the edges.

Before anyone says anything, remember it was JUST FOR FUN.

... now up on the SOU website: https://www.soundenergyplc.com/investors/research-notes/

Broadly the same as before. Still due in 2025: Phase 1 first gas revenue, Phase 2 FID, SBK-1 and M5 drills. No change to unrisked core NAV ... slightly disimproved due to slippages, slightly improved due to the new EPC contract with Italfluid replacing the lease arrangement.

Kylie, you do realise that "plotting shareholder destruction" would be grossly illegal. Apart from that, what would management have to gain from it? They have a whack load of LTIP share options at 2.4p that I'm sure they'd love to see being worth something. Their salaries are nothing amazing -- as a humble software pro I earned more than the COO and just a bit less than the CEO.

I see no reason to get all conspiratorial. "Never ascribe to malice what can be explained by incompetence". They made a dogs dinner of Phase 1 timelines. No doubt we'll see more of it for Phase 2 and drilling, even under Managem. It's the nature of complex projects. The information desert that you are predicting would not be especially notable or worrying ... there's only a handful of interesting news items we care about.

Kylie, you're letting your imagination run riot. There is no RNS, just a note on an obscure Arabic/French news service citing unnamed sources. (Admittedly the owner is "former communications director at the Ministry of the Interior and former head of Maghreb Arabe Presse", with possible connections to the Moroccan foreign intelligence service 😀).

I don't believe there's any evidence that Sound or the Moroccan establishment are out to screw shareholders. The closest we've seen, perhaps, was the kerfuffle with the tax authorities. And we don't actually know if that was SOU trying to pull a fast one or coercion on the part of the authorities. SOU *did*, after all hand over $2.5m on foot of a bill for ten times that amount. It was at a time when the Moroccan tax authorities were scrutinising a lot of foreign and domestic enterprises evading tax through shell companies.

Of course institutional risk is a fact of life. But Morocco has over $2bn in FDI annually that it is not going to want to jeopardise. Let's save the horror stories for when something actually goes amiss. A much more plausible reason for SOU's poor SP performance is investor exhaustion and the speculative nature of AIM where punters are looking out for the next instant 10-bagger, not a plodding company with solid but longer term prospects.

Acealfa posted this on March 16th:

https://www.barlamane.com/fr/les-britanniques-sound-energy-et-predator-oil-gas-envisagent-une-cotation-a-la-bourse-de-casablanca/

English translation:

https://www-barlamane-com.translate.goog/fr/les-britanniques-sound-energy-et-predator-oil-gas-envisagent-une-cotation-a-la-bourse-de-casablanca/?_x_tr_sl=fr&_x_tr_tl=en&_x_tr_hl=en&_x_tr_pto=wapp

How likely is it that SOU would delist from AIM and trade only on the Casablanca exchange? No broker I've ever used supports it. I already got screwed once when SOU moved to the SETS trading platform, leaving me unable to do electronic trades at a crucial time. But no specific sources are cited in the article.

Sound1 (14-Mar): "PS what are your expectations in terms of the share price. Plz share your view. I am also fully loaded and I have promised my self this time No More. Although it hasn't worked before but financially it is No More for me. I'm maxed out. The only problem is greed. I wouldn't know when to start selling. I've averaged down from the 60's and been loading up on the decline."

Sorry, only catching up today after the weekend. I have no crystal ball of my own, I'm going by the Zeus projections. I believe there's a recent update but I don't have access so I'm going by the research note of Jan 27th on SOU's website. The most straightforward figure is 2.9p/share, being the unrisked value of Tendrara Phases 1&2 net of debt. There's obviously a stack of things that could affect that -- schedule slippages, debt rescheduling, market price of hydrocarbons, real-world production vs. estimates of recoverable gas, and probably a host of "unknown unknowns". Then there is potential drilling upside.

Really, all I can say is that you can expect the share price to be north of where it is today AT SOME POINT. Right now the price is just drifting randomly due to very low liquidity on AIM. I've no idea when that will change. It may depend on some "liquidity event" like a sale of SOU's entire interest to a third party. I'm prepared for it to be several years. Maybe the market will work itself into a frenzy if M5 shows promising signs. I'd find it hard to resist 5p if it ever came to that. But my expectations are for a very slow burn and achieving anything above 2p or so would be success in my book (representing recovery of about half my prior losses).

If the SP goes any lower we may have to set one [just giving account] up for PS !

Thanks for the generous thoughts. No need, I've finished accumulating my 1% and trading at par this morning. Quite happy to sit back now and watch Managem do all the work. I hope Graham is too. 😀

I'd have said Ducati's posts are generally relevant and factual. I find them useful at least. Also, one of the posters that manages to keep above the fray of bickering and trolling. 👍

A tangentially interesting vid about the importance of Maghreb energy production for Europe. Spoiler: lots of history before it gets to energy issues and says that Morocco has no hydrocarbons which, I guess, is true to some approximation.

https://www.youtube.com/watch?v=5l_KVTN4yLI

Kylie, no idea who the seller(s) is/are. Since AIM has gone down alongside other markets I presume there are some stressed individuals out there with margin calls to cover etc. My broker is Saxobank and yes, I'm generally happy with their execution (but not much else) though I'm having more difficulty filling the last couple of million.

StMary, I'm certainly not as young as when I started. And I've got nothing to gloat about, I was one of the bigger idiots around here. Those potential future returns are really quite unlikely to cover my past losses even if SOU does well. Overall I'm just another punter with a high average, only difference being that I sold out and realised my losses quite a while back (four years ago tomorrow as it happens). Perhaps that makes it easier for me to recognise that this turkey is now good value, and with less chance for management to screw things up.

Kylie, I'm not disagreeing with you. The Parsons "dreams in the desert" were predicated on a) an exaggerated chance of drilling success in a province known for extensive carbonate cementation (but not prominent in presentations to investors), b) completely ignoring the cost of extraction which SOU could never have borne on its own. On that second point, any prospective partner/purchaser had SOU over a barrel with the clock ticking on permits and concessions as well as on SOU's own dwindling finances. Nevertheless, even after the 98% collapse in share price leading up to early 2020 SOU managed to suck in new investors several times with news of negotiations that eventually fizzled. The end result has been horrendous dilution and exasperated investors of whom even the later cohorts will struggle to ever get their money back. So you are correct. The abortive Calvalley deal was crappy and the Managem one is much worse again.

All of that is water under the bridge. The deal is now done with a company that is highly incentivised to finish the job, and SOU management have not much more than a spectator role in that. SOU have got the cash to get them most of the way to Phase 2 revenue (assuming they don't squander it, which they could) including a few hundred grand to amuse themselves doing seismic on Sidi Moktar. They need only sit back and watch the SBK-1 and M5 drills and could probably finance their part of TE-4 if required. There is a moderate chance of at least one of those coming good. But here's the thing: THEY DON'T NEED TO. The existing assets in the ground and associated development funding are worth way more than the current SOU share price.

I'm not suggesting things couldn't go wrong. And the share price may very well go DOWN from here before it goes up. We've got the US teetering on the brink of recession and jittery stock markets that could nosedive a lot further. The AIM market does not exist in a parallel universe: it has done down in tandem with the others over the past month. But whereas the big market indexes are probably still way overvalued and leading stocks even more so, SOU stands out as being exceptional value. In the cycle of market emojis (😀https://imageio.forbes.com/blogs-images/robisbitts2/files/2018/07/Cycle-Emojis.jpg?format=jpg&width=1440😀) it is firmly in the slough of despond, between anger and depression. We are near the point of maximum financial opportunity BECAUSE exhausted Investors have given up. That's my take anyway. I may be completely wrong. As I've discovered to my cost, there's nothing stopping a share that has already fallen 90% from doing the same again. But I'm putting my money where my mouth is -- those 7 x 1 million trades in the last 36 hours are me, with a few more to go.

"The current SP is insane!"

Ironically the Phase 1 completion will make very little difference to SOU, its share of the income is so small. But if you believe that Phase 2 will go ahead without too many hitches (which, with my Chief Neg Head hat on, is far from guaranteed) then, yes, the SP is nuts. Consider this -- SOU's entire market cap is roughly *one year* of gross income from Phase 2 and, with any success at drilling, potentially approaching its net income. People are spending 50 x earnings on NVIDIA and other market darlings. Where on the planet are you going to find a company with P/E of 1x? Answers on a postcard. I really shouldn't really be saying this because I haven't quite filled all my orders to take me up to my target 1% of SOU. But I trust the market repulsion for this share is such that I should be mostly there by end of today. Lots of sellers out there at low prices.😊