Member Info for The_Linns

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.

As taken from the 21st March 2019 RNS reporting final results for 2019 -

"An innovative 'build-own-operate-transfer' ("BOOT") structure was agreed with the consortium which further underpins the financial attractiveness of the development by leveraging vendor financing. FEED for the pipeline was completed in November, with FEED for the CPF scheduled to be completed in early 2019. Since June, and in parallel with the technical work, the Company has made progress to further develop the structuring and commercial framework relating to the proposed BOOT transaction."

And later updated on the 19th September 2019 RNS for interim results -

“Tendrara TE-5 Development
During the period the Company continued to make progress in advancing the development of the Tendrara TE-5 discovery, including the continuation of Front End Engineering & Design by the Enagas-led consortium together with the progression of the Moroccan environmental permitting process and has continued to progress discussions in relation to a gas sales agreement ("GSA") for offtake from the Tendrara Production Concession. The GSA is a critical element required to support project sanction. The Company has to date received a non-binding GSA offer from Morocco's Office National de l'Electricité et de l'Eau Potable ("ONEE") and negotiations on the terms of a GSA continue.“

Has anything been announced which sheds doubt on whether the BOOT agreement with the consortium including the envisaged vendor financing is still in place? If it's not, then surely it would have been RNS'd given the materiality.

So can we safely assume that even in a no deal sotuation, there's still the bones of the consortium agreement in place to build the infrasturcture and the question would be, what funds are needed for Sound to participate and meet the bond coupon etc (possibly by utilising a reserves based lending facility).

If the BOOT is still very relevant, then the IR team at Sound could maybe remind the market of the importance of the work achieved to date with the cosortium partners on the BOOT, to help instil some confidence that even in a no deal situation with the unnamed party, there's a route to market, but yes one where capital raising is needed - maybe through an Open Offer/Placing or whatever - but one that can be properly planned for during a time that the "Company's cash position has been strengthened". Let's not waste the time, if this current deal is looking like it's not going to suceed, then the BOD better be doing overtime to get the Plan B in position.

When it comes to the bond, that's not repayable until May 2021. As I understand it (can't recall where I picked up a post mentioning this), but JP downplayed the significance of that and said the bond could be easily rolled over with potential for reserves based lending. So if that is true, and as long as we continue to be a going concern until then with cash in the bank to pay for, amongst other things, the cash needed to pay the coupon, then they can't just windup the company. They have no justifiable reason to. The company has been successful with open offers in the past where it took all of 6 weeks from announcement to getting the cash in, so they would surely want to try that first, before throwing in the towel.

Hi, it's not BS and I'm no con artist, and I'm not paid by Sound (they have no vacancies on the payroll remember!). I came into Sound at 9.5p, with various top-ups on the way down. I've been in Echo since the IRG days (was really glad to see that one saved as I thought it was all over), but again have bought more on the way down. I'm being very open here folks, I've registered and posted for the first time today, there's nothing more to it.

Thanks Pontcanna / all - I have no issue with putting a bit of further information out about me. I'm a PI who's been "investing" in AIM for 10+ years. Oh to have realised though how much the odds are stacked against you when you enter the AIM. I'm certainly not a plant or anyone with connections to any of the companies I'm invested in. Yes, trying to turn a profit on AIM - not that it's worked out too well over the years, but what I have seen is when confidence returns, things can quickly change with a particular stock on the turn of a coin. I might not post that much, but what I can promise everyone is that I have no hidden agenda and if I have something to post, or an opinon that I feel may be of interest and helps to stimulate or add to the broader debate, then I hope you don't mind me joining in.

Yes, got stock in SOU (c600k) and Echo (c1.9m) - probably more than I should have if truth be told - low averages though. Just registered today, so yes a new poster, but as I said, been reading the LSE site for years (the last time this much was during the GKP days (and TK's infamous trading plan!)

Thanks Tombi1 / Scarf. I'm a daily reader on the LSE Share Chat forum (mainly SOU/Echo) but have opted to read other peoples posts up until now and haven't felt that I've had much to contribute. But with the current situation here at Sound, I've decided to peak out from behind the covers, use my voice and provide some additional perspective.

Thanks all for your feedback on this post. On a related topic, relinquishing JJ from CFO on 6th Feb, and JP stepping down as CEO (as announced would happen earlier in 2019), as well as the cost cutting iniatives undertaken during 2019, certainly all appear to be the hallmarks of a company downsizing the payroll and cutting costs to preserve capital - given the interest expressed in the Eastern Moroccon porfolio. I find it hard to believe though that if the BOD really want to trash the company at this stage, why wouldn't they have raised more. The company have been successful in two capital raising efforts in the past 12 months, c£2m in June, c£1.5m in Dec, so on the face of it, Sound don't appear to be having any problems raising capital (and the amount raised isn't too disimilar to last time round) it's just getting more expensive through dilution to do so. So, maybe their reasoning for the capital raise to boost the balance sheet while the negotiation of the sale completes, is genuine and puts us in a stronger position if things take a while longer. Positive intent and all that.

I'm also intrigued about the future of SM farm-down process being announced when the outcome of the Eastern Morocco monitisation process/potential sale is concluded (as touched on during the last Fireside Chat). If there's a viable Plan B, then that's all that matters. Only time will tell of course as to whether this is the case - but maybe Investor Relations could throw us a bone (early Christmas present) and show the market that they've strengthened their position further and restore some market confidence, by publishing some information on what their Plan B is. Nothing too specific, just enough to give credibility that they have one. A non-binding HOT works both ways after all.

In the event this "deal" doesn't complete, what are peoples' opinions on whether Sound will be the subject of a takeover by one of the "majors" with deep pockets (or even Sonatrach)? With all the articles in recent years referencing various majors; Repsol, Gazprom, Shell and Novatek (to name but a few) all being interested in some shape or form with developing infrastructure/taking exploration acerage in Morocco, is it beyond the realms of possibility that we wouldn't see the emergence of one of the "majors" in this story (maybe they're one of the "non-disclosure agreements with 23 companies / 15 management presentations")? Given the much hyped potential/exploration upside contained in Tendara, and the value of the Horst discovery when brought to market, taking Sound over would give a "major" a strong foothold in country. And would a takeover of Sound not give the purchaser some valuable VAT recoveries on expenditure to date, making the acquisition even cheaper?