Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I'm still of the opinion that the sale of BM's shares for tax/NI purposes, is nothing more than the company discharging its employment and payroll responsibilities in the manner and time frame required by HMRC. Even though the RNS is phrased slightly differently.
It's very typical for a 'sell to cover' order to be instructed by the company in these cases, with BM holding his residual net of tax shares, which he can only then sell when any associated award/vest conditions have been satisfied and he is no longer in possession of price sensitive information etc.
The company could have avoided some of the dilution by choosing instead to 'net settle' his share award, which would have reduced the number of 'new issue' shares that were created (by circa half assuming BM is top rate tax payer) and while a favourable approach for shareholders, this may have given rise to accounting implications if it were considered a deviation from past accounting practice adopted by Sound (as I understand it/from direct policy experience, you must adopt a standard and follow consistency of approach with these type of share sales for tax purposes), and in any event Sound would have heeded to write from treasury a cheque for the tax due on BM's award to HMRC (so would go against the company's strategy of wanting to preserve cash balances).
The key next step will be whether BM tries to sell shares before the outcome of the eastern portfolio sale (or any other price sensitive news for that matter) is announced. Surely if he did, the authorities would be interested.
The 'sell to cover' for BM's shares for yax/NI purposes may take a few days to complete, given the volume needing to be sold c3million and the current lack of liquidity in the market. So they'll be dribling these into the market over a few days I expect.
I would expect Brian to have access to 'inside information' therefore he would be prevented from disposing of his residual shares (after settlement for tax/NI), while he's in posession of such price sensitive information. This would apply even if he were to remain in posession of price sensitive information even after he leaves the company. i.e he'll still post exit be subject to Market Abuse/Share Dealing regs.
Noodles,
Based on the present understanding of the proposed sale by Sound Energy of 51% (24.2% out of a total of 47.5%) of its share in the Eastern Morocco Portfolio, Sound Energy would be left with a 23.3% share of the Eastern Morocco Portfolio. An interest that would be held synthetically through a new joint venture.
In the event the Purchaser exercises their option to acquire a further 9% of Sound Energy’s remaining interest, Sound Energy’s interest would be reduced to 14.3%.
In the event the joint venture were to subsequently ‘prove up’ more TCF in discoveries, then if commercially developed (and funded through to commercial production), then the increase in revenues through the joint venture ought to generate a corresponding uplift (or possibly downward adjustment) representing a 23.3% or 14.3% share, to the level of royalty potentially distributed in due course (to PIs as well as other shareholders on the register) – although this will clearly depend on a number of things; JV decision making on how to utilise profits after allowing for operating costs/expenses, taxes, GSA terms, gas prices/infrastructure costs etc etc etc (the list goes on).
There’s a lot of unknowns with this one currently, but hope that helps.
As the services of our exploration director are no longer needed (and the BOD generally has the hallmarks of winding things down), one could suppose that's because either 1. we'll see a farm out of Sidi announced at the same time the deal on eastern morocco is (hopefully) concluded and operatorship of Sidi will be the responsibility of AN other (who has their own Exploration Dir/team), or 2. The Sidi license is being relinquished. My personal view for what it's worth, is the former. Not long to wait now before everything gets suitably clarified.
Here's the article - https://www.bnamericas.com/es/noticias/panorama-de-hidrocarburos-en-argentina
Another article about Interoil which when translated states that "According to a corporate presentation addressed to the CNV regulator, Interoil will have a 30% stake in the Chorillos, Palermo Aike, Campo Bremen, Moy Aike and Ocean blocks, all of which are part of the Austral basin." So going forward, 30% to be held by Interoil as operator, 70% Echo.
Not sure if this has been posted at all, but interesting to see that Interoil on Friday announced that it has acquired an 8.34% interest in the Santa Cruz Sur Assets, that Echo hold a 70% interest in. Last sentence in Friday's RNS states that Interoil are to become operator "Selva Maria Oil will be appointed operator until Interoil has been granted the operator licence from the Argentinian government."
https://www.interoil.no/?year=2020&page_id=13&PressReleaseID=2229418
Looking forward to the newsflow :-)
I thought that maybe we'll not get an RNS announcing the spud, if it's already happened "during the week ending 29 December 2019", i.e why would an RNS be needed for news that's already been RNS'd. That's 'if' its already spudded on schedule. Just a thought. Either way, happy to see another RNS soon (and maybe an update on CLM x-1 testing at the same time). Really hoping 2020 is a great year for Echo.
Sorry, link didn't attach so trying again - https://yea.to/6pjsJ
A few months old, but interesting article on the size and health of the euro denominated bond market and the shift away from USD denominated debt for emerging markets - https://uk.reuters.com/article/emerging-bonds-issuance/negative-yields-see-record-euro-borrowing-from-emerging-markets-idUKL8N24O47J
February 2019 - Coro raised a minimum issue of €22.5 MM Eurobonds to fund the acquisition of the 15% interest in the Duyung PSC.
Jacklevi, completely agree. The Company should have used their capital much better and not go on some wildcatting expedition too far away from the main discovery. As for Ogif, it may be that in order to restore confidence that production by 2021 is achievable, a clearout of the BOD is needed - new blood and fresh ambition. I wonder if behind the scnenes, Ogif are showing the same level of confidence with current management as they did earlier in the year.
Jones, you do what everyne else does (inc Governments) you borrow again to repay your existing debt reaching maturity. It may be that we need to incur a higher coupon rate next time round, but once the revenues start to flow in, you repay it and progressively get onto what the Company deems an acceptable rate of interest to pay, then when you no longer need debt financing, you pay the whole thing back. The Company may need to get more innovative in how to raise the funds, and it may need a combination of solutions, but Sound have raised significant amunts of capital before when they didn't know if they even had any gas discovery that was even commercially viable. The next time Sound needs to raise capital before May 2021, they'll be in a far stronger position to do so with a clear route to market for the gas established. They'll have an asset with bookable reserves on the balance sheet. And when it comes to SM, if that's too much of a stretch to finance, then maybe they'll need to cut that one loose to protect the Horst.
Thanks Jones. The point I'm trying to make here is that once we get closer to getting the gas out the ground, the easier it should in theory be to refinance the debt - could be solved through one/or a combination of; reserves based lending, open offer, rights issue etc, or rolling the debt on. The market value has been hammered because of the uncertainty and fear that this deal doesn't complete which is clouding the situation. Maybe it's no longer the right course for the BOD to take. Maybe the purchaser pulling out would be a blessing in disguise.
And if the "privately-owned, UK registered company specialising in energy asset development and investment (the "Purchaser" shows any signs of dragging their feet, missing DD milestones, or not being able to raise the acquisition cash, then the BOD should tell them to stop wasting our time (they've had long enough) - and to crack on with getting TE-5 to production.
I would say to the BOD - show some metal - give the purchaser sufficient time, but if a change of strategy is needed, then don't be afraid of it, complete the planning for it and execute. It was JP who called for the early monetisation of the Eastern Portfolio (but he's on his way out and his interests are now elsewhere with Regency Mines) so maybe the company's forward looking strategy should be revisisited and we should just get the Horst into production ourselves retaining 47.5% share of the asset. If we knew then what we know now (i.e how the market would react to our monetisation efforts), I wonder if the BOD would have still gone down this path. It's not too late to say to the proposed purchaser, you know what, we've changed our minds.
Interesting to draw some comparisons with other operators in Morocco.
I see that SDX Energy (market cap £44m) have recently commenced a 12 well drilling campaign targetting a mix of lower-risk / low cost appaisal wells, and higher risk exploration wells. But targetting overall 12bcf of gross resources. Not up to speed on the cost of each well, but fair to assume they're willing to throw a few million at their campaign - for 12 wells and 12bcf - really?
Yet, here we are at Sound Energy sitting on a T5 Horst discovery which the latest CPR has certified mid-case resources of 651 Bcf unrisked gas originally in place (GOIP) with an upside case of 873 Bcf and a downside case of 349 Bcf. We have a BOOT in place, we have a GSA nearing completion/signing with a 10 year initial term, yet we're only "worth" a lowly £23m market cap. Nothing priced in for exploration upside, volumes in adjacent well locations close to T-5, and no credit for SM - and the fact that the Company has already spent shed loads putting holes in the acerage to getter a fuller understanding of the basin model?
We're worth a lot more than the market is giving us credit for. Recognising that SDX Energy have existing production of c3,715 boepd. But based on the MOU for the GSA - the first 0.5 bcm per annum (approximately 48.4 MMscf/d) converts to c4,000 boepd (net to our 47.5% interest) - and thats just for TE-5. The 30th October RNS setting out further detail on the MOU for the GSA states "result in first year gross revenues attributable to the Tendrara concession (100%) of US$84 million" - so US$40m net to a 47.5% interest. So the first year of production would be enough to pay of the outstanding debt and leave plenty leftover.
If this sale of the Eastern porfolio doesn't go through, then so long as Plan B involves the BOOT and getting gas to market within 2 years, then the closer we get to this happening, the more the outstanding debt pales into insignificance.
No probs Trellis, I'm actually already part of the SAG. My email sent to you on 10th Nov at 20:33 (before I topped up) will help you work out who I am. And crucially to help substantite for Pontcanna's and Dog_With-Fleas sakes that I'm not Crude ;-) Night all.
Hi Longwait, in Malcy's latest vid he was pretty bullish about that one when he commented that shareholders aren't understanding the proposed deal, and if a royalty at the level of 1 or 2p a share was released when in production, then you would hope the share price starts to rerate when investors see the size of the div potentially on offer (although clearly we need some proper data on this to make better educated decisions). If Sound were on a stable financial footing and if there's a JV agreement in place which properly protects shareholders interests, then I expect people would be tempted to take a position in Sound at a share price of between 2-10p (possibly higher) for a share of that div - especially with the additional upside we're told is there.