Member Info for Southmead

Zeus

Sound holds the Tendrara gas asset onshore Morocco, which contains 305bcf of

gross sales gas, or 10.2mmboe net to Sound’s 20%. Phase 1 development is already underway, with first gas sales at 10mmcf/d gross (0.3mboe/d net) via a micro-LNG facility

expected in mid-2025. Phase 2 is substantially larger, targeting 42mmcf/d gross (an

additional 1.4mboe/d net). Sound has now closed a significant farm out to Moroccan-based

natural resources player Managem which, alongside an agreed debt facility, is expected to

see Phase 2 fully funded (including US$13.1m of cash back costs for Sound) and leave

Sound on 20%. Now that the farm out has closed we expect progression of FEED, going into

Phase 2 FID in mid-2025, and first gas sales from Phase 2 in mid-2027. Once Phase 2 is

onstream, our long-term forecasts imply Sound EBITDA of £17m and FCF of £12m –

significant cash flows for a company of its size, which will also help pay down debt. The farm

out also funds the SBK-1 and M5 exploration wells nearby Tendrara, expected to be drilled in

2025. In terms of upcoming catalysts, now that the farm out is closed we expect progression

of Phase 2 FEED work, completion of Phase 1 in H1 2025, first gas sales from Phase 1 and

also Phase 2 FID both in mid-2025, and the two exploration wells in Q2/Q3 2025 – a busy

overall programme. Our total risked NAV is 4.0p, and we have a positive outlook for the

shares.

shares.

Now that is an interview from a very confident, relaxed CEO, whose plan has come together and he now has clear sight of profitability and return. Well done Graham, nice job.

Important thing now is to stay grounded and secure the hard yards that have been won with the Managem deal before getting too interested in 'other projects'. Stay focused, work hard and ram it home. Roll on next week and the inevitable positive effect on the share price. IMHO

Yes, I agree, what a difference. The outlook is really positive now the uncertainty of the Managem deal has been lifted.

We can now focus on the completion of Phases 1 and 2 and what it will mean for the valuation of the business. The drilling prospects are a bonus and may be huge.

I am looking forward to the Investor Event next week, and the prospect of a steady increase in the SP until the New Year.

Merry Christmas

A very supportive and positive endorsement from Malcy today.

'Although we have known about this for a while, it is confirmation that this is a game changing deal for Sound and going forward they are solidly financed with cash in the bank, a full cycle funded work plan of exploration development and imminent production and cash in the bank.

Sound are now ‘spreading their wings’ and are taking advantage of the strong position they have created for themselves in Morocco. Thanks to Chairman Graham Lyon and his team the future is now very solid. '

'Whilst this is not a huge deal it looks like a cracker to me, on the face of it it ups Serica’s interest in Skerryvore to 70% and gives an interest in Fynn Beauly which is a heavy oil development not even certain of going ahead under current economics but that is not the primary reason for the deal.

No, the real reason for this bit of imaginative M&A is that it brings with it a huge pool of tax losses of varying type which amount to ‘£197 million of ring-fence corporation tax losses, £181 million of supplementary charge tax losses, £1 million of Energy Profits Levy losses and £12 million of activated investment allowances’.

It is actually amazing to write up a deal involving Parkmead after years of inactivity, Tom Cross gets to keep the Dutch assets, in themselves of little value to Serica who have nothing in the country and would only be an administrative nuisance.

For me, while I am expecting bigger deals than this it should not be written off as just a tax efficient stroke of genius, it is entirely logical, value accretive and unusually a win-win situation for both parties. What is more, should either of the fields go ahead then they will fall into a feather bed of tax losses thus making the development highly profitable. Having said that I am still expecting more, bigger deals from Serica but this is a smart, efficient and fiscally astute gift for shareholders.'

The cash input from this deal will mean that the business is well funded and can move swiftly on to the drilling program on SBK-1 appraisal and M5 exploration targets, which has already been outlined.

It also means that Attijariwafa Bank can confirm their conditional offer to provide $225m of project finance for the Phase 2 pipeline gas development.

And that means that the FID on the Phase 2 pipeline will not be far behind.

Things should start to move very fast now, exciting times at last.

Well done Graham and Team.

Can someone post the ZEUS report please, 6 interesting pages I should think

The 8 kilometre access road to the microLNG plant is now fully complete with work progressing on the LNG tank.  Inner shell course number 5 currently being welded into place with another 4 more shell courses to go.  Sound Energy and partners are bringing Moroccan gas to power Moroccan industry.

So, completion very near future and Malcy says 'Really good news from Sound today and this is the really important one, formal approval by the Ministry and all that this entails. I understand that with a few ‘manageable’ processes to come progress to completion is being made ‘on all fronts’.

I would agree that it seems unlikely that all the outstanding CP's will be satisfied by Thursday.

The list given was:-

'Approvals by ONHYM and the Moroccan Minister of Energy of the Company continuing as the Operator of record of the Tendrara Exploitation Concession, and the Anoual and Grand Tendrara Exploration Permits where required'

This seems to me to be a formality as we are pushing at an open door with the Moroccan government and I am surprised that this condition was not one of the first to be satisfied.

· 'Receipt of the written authorisation of the Foreign Exchange Office (Office des Changes) relating to Managem's payment obligations'

Again, this CP appears to be a formality easily achieved, and again I would expect it to be one of the early CP's to be satisfied.

· 'Confirmation in writing by the Seller to the Buyer that no Material Adverse Change has occurred'

Simple to my mind, a quick letter from Managems Board or auditors should suffice.

· 'Approval by Schlumberger in accordance with the terms of Schlumberger's profit-sharing deed in respect of the Concession or Managem negotiating and entering into an agreement with Schlumberger for the cancellation of the profit-sharing deed'

Now this one is the obvious difficulty. Schlumberger has the trump card and could use it to dictate a hard bargain maybe.

· 'Extension of the Start Date/Deemed Start Date as defined in the LNG GSA'

Simple surely !!!

· 'Delivery of Completion accounts and Assurance Release Conditions'

Again, simple surely

Maybe it will be approved by Thursday after all :).

No comment from the company here but probably as the announcement is pretty clear cut, ie that the Company notes Moroccan press speculation in relation to Managem having received authorisation by the Moroccan Competition Council to the transaction.

And this is because it is not speculation, the approval has happened and Sound are keen to be open and transparent about the process which is close to completion. I think that signatures and approvals are lined up and again praise to the Moroccan Government and authorities for the all clear.

This is a good deal for Sound and provides much needed faith in Morocco, management should be congratulated for making this partial disposal attractive to Managem and will remain highly committed in-country and Sound will continue to build and to reward shareholders.

Very interesting to see the progress on site.

Roof of the inner shell to the 22m high, 6,200 cubic metre LNG storage tank completed and the 3rd of 11 outer shell courses under construction. At Sound Energy we are bringing Moroccan produced LNG to drive the continued growth of Moroccan industry.

This is all GOOD news, if a little delayed, but good news nonetheless. The deal is still very much ON and going ahead slowly but surely. GOOD news. Approval by our partner in this venture, ONHYM will not be an issue, I am sure, and Schlumberger approval must be a formality if the obligation is just transferred to Managem from Sound. The rest of the remaining CP's are easily achieved it seems to me. Good news for the work done so far.

He said, completion of the Managem deal, 'in the very near future'.

I think before the presentation next week!!!!

The Half Year Report says' Going concern

As at 31 August 2024, the Group’s unaudited cash balance was approximately £3.0 million. The Directors have reviewed the Company's cash flow forecasts for the next 12-month period to September 2025. The Company’s key priority is to complete the announced sale of its subsidiary, Sound Energy Morocco East Limited, which will bring a significant inflow of capital to the Company, and which will ensure that the Company remains fully funded for the next 12 month period.'

Half Year Auditors Report

'Going concern

As at 31 August 2024, the Group’s unaudited cash balance was approximately £3.0 million.'

Kylie, I have reported you for continuos de-ramping nonsense and mis-information.

£3m cash in the bank will see the company through the next few months. Long enough to see the Managem deal through and the extra cash that is generated there.

Some people suffer from a habit of focusing on the negative in almost everything that they do. They have a personal problem that most normal adults avoid. The problem is that they bring these hang ups to this board and try to make out that their views and opinions are balanced and proportionate. Negativity is an overall attitude that one may have about something, whether it is actually a problem or not.

Getting closer and closer to production.

Now some news about the Managem deal and I will be happy.

'This is a very handy arrangement indeed and it sums up the lateral thinking exerted by Exec Chairman Graham Lyon. Not content with a ‘little raise’ that some may have done. he has procured an insurance policy that means that Sound can carry on with business as usual allowing Sound to carry on and not lose momentum while the deal is closing.

The flexibility that this provides means also that all activities across the portfolio can continue without having to be constrained by any delay in the Managem deal, very smart. There is plenty to go for in Sound and when the deal completes there will be much to be happy with. '

A completely positive twist on the 'loan facility' from Malcy, whose views have been circulated by Flagstaff. So is that the official company line on the loan facility without the need for an interview? If so, it is a very reassuring point of view and there is nothing sinister in prospect. Certainly better than an equity raise to tide things over.

Of course, we knew that finance was tight and that the Managem deal would address any concerns over Sound’s finances.

It is not surprising that the FD would like to put in an extra layer of protection if the wait gets any longer,

What surprises me is that the Attijariwafa Bank does not step up and provide an extra facility, after all, the Managem deal is all about the Al Mada Fund and the Moroccan royal family. A measly $1.5m while we wait is nothing.