Member Info for Soundingoff

What was the BB event about?

They told everyone there that we were done drilling whether TE10 was successful or not. At least that's what some attendees interpreted. Then we communicated it here. A FSC couldn't have done that and I'm glad I had that information along with the details on what they have been working towards over the last 6 months.

My view is they took so long about TE10 because they wanted to get everything in order prior to knowing the results.

Now we wait. Some more patiently that others. There will be plenty of time afterwards to be angry and upset. If we need to be.

We are comparing exploration drilling with a mostly complete development plan though Exploration. Let’s see if Predator have any gas before comparing them ;) As Davey has noted, the updated economic for TE5 would be very interesting to see.

Blimey, that's a cheap shot!

But the point remains, what's the point in finding gas if it doesn't add value? Sound have taken a different route and the next few months will tell if it was the right one. You can't just apply the same strategy to assets of vastly different sizes.

I don't know about that, he's been very successful.

He came up with the well remembered comment:

The largest returns for our shareholders, it’s particularly in small-cap companies like Predator Oil an'd Gas Holdings, occur where such a company has exposure to what you could call ‘the big one’ and that’s how Cove Energy in East Africa and more recently, Sound Energy in Morocco.'

SDX hasn't quite worked out as planned in Morocco. They have been very successful, but as John Argent said, it's like shooting fish in a barrel. Personally those pools of gas were too small and they have had to continually drill to build up any sort of reserves- 40bcf right now? Unfortunately demand is not as planned either and they are struggling to achieve the uptake required for the gas. Predators plan (like ours) appears to be the right one given the current demand for gas and links to Europe.

It'll be interesting to see how much of their license they have to give away to (hopefully) attract a drilling partner.

Exploration- Sound have already confirmed they will put any offer they recommend to the shareholders.

Indeed wh0s, it's a fool's errand trying to second guess. We also have to be aware that we don't just have the Board to rely on here. Whatever we think of the Board, you'd be a fool not to be happy we have Rothschild & Co sitting in the chair as well. They may have made recommendations regarding information management and may have been implemented some time ago. Or not. All we know is we are now officially marketing to interested parties. History (from most M&A) tells us discussions probably started some time ago, but we'll just have to wait and see.

Either way Jones, there are no rules to state we need to announce NDAs in these circumstances. One RNS from BPC doesn't make the rules either I'm afraid.

I have to be honest wh0s my experience is from private M&A. One director/shareholder may give their view on what they'd like to achieve and then disassociate themselves from the full discussions, providing advice only on their area of expertise. Clearly the other participants use their judgement as to whether they need to include the absent member fully at any point and of course they will have a say on offers or other high level discussion.

Board members do not have to be involved in every discussion. Ideally a board is made up of a number of individuals with specific skills and then the gel (person(s)) to bring them together.

As I say, none of us know, but I wouldn't like to make assumptions either way.

No problem Neptunes ;)

You would certainly expect it wh0s, but it's not a certainty. Sometimes there is segregation on certain topics within discussions to maintain neutrality.

We've already had the NDA discussion Jones and your assumptions are incorrect. This is an asset sale and you can't compare it with a sale of the company or a formalised farm out.

Of course the rest of your thinking is opinion too. None of us know the level of segregation within the business or indeed Brian's reasons for buying.

The irony is that all the data we have prepared and had verified by 3rd parties is spot on. I think this has been something they have concentrated on from the start and on purpose given our stated aim to sell. But unfortunately the drill bit has been less successful. Personally this is more due to the fact we are trying to open up a new hydrocarbon play, and even with the help of Schlumberger, we have struggled.

Sometimes you have to accept when you don't have the resources to achieve something and the timing is spot on IMO.

'Majors' buy proven resource. They don't want to base a purchase of 'unproven' and spend a fortune proving JP was wrong.

Really Foxy? I really don't think you've looked at many O&G deals then. The Majors unequivocally do want unproven exploration and large quantities of it. Of course they also want exploration that has a good chance of success and that is the only question mark over our potential resources.

'Jobbs- not in any independent CPR they aren't- we declined to continue commissioning them. Any figures trotted out are purely company estimates and cannot be taken as factual or even showing genuine potential until such CPRs back them up. having CPRs in place now would have been very useful in marketing the Company especially after Te 8,9 and 10'

Is it better to have CPRs trellis? I'm sure it would add some percentage of certainty, but how that would relate to our sale price is unknown to us. I believe our Board advised us it would not add to our value on sale and of course they are advised by Rothschild & Co. You know, the internationally renowned M&A firm.

I'll take your advice on Chateau Lafite Rothschild, but I think I'll stick to the advice from the Sound BOD and Rothschild & Co when it comes to anything else ;)

An interesting observation Jones.

After reviewing a few RNS trails where companies have opened data rooms, some of them have not issued any further RNSs and have moved straight to an offer for sale of the company. Therefore there is certainly no requirement to do so in many cases.

However, saying all of that, we shouldn't be applying that criteria to us anyway. It is very important to be clear that we are currently marketing the sale of the portfolio (asset sale) and not the sale of the company. The rules surrounding the sale of the asset have much less regulation attached to them than if the company were to be sold. We may of course convert to the sale of the company.

You'll have to explain further Jones, but any NDAs to do with our process will not be public knowledge.

And to pre-empt the question:

'Why are we trading at this price then?'

There are many examples where the share price trades well below NAV. Normally where a company is easily valued, we see bids at a premium, say 30-50%. However some assets are not easily valued and are in a state of flux. One example that is easy to compare with Sound in this matter is Cove. Whilst negotiations were ongoing (in private), the asset part of the share price (ignoring cash) was valued at a quarter of the NAV as valued by the main operators of the Rovuma block. This data was public, but the share price vs NAV disparity remained.

Developments such as the TE5 horst do not sell for discounts such as those you mention eric. Have a look at some of the examples I noted the other day. This is close to plug and play development with a 10% return built into the calculations.

Agreed prudent.

We have seen significant change to the TE5 horst over the last few months, with the GSA offer and a material reduction in capex and opex costs due to increased recoverability of gas per well (TE7 threefold increase). I see the NPV increasing by 25% plus compared with the Progressive note. The asset is very close to plug and play in development terms.

It was also made clear in the recent RNS that our inventory of drill targets includes appraisal as well as exploration.