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Sound Energy PLC: THE INVESTMENT CASE

Sound Energy expands footprint as it prepares to open up commercialisation

Sound has completed its acquisition and it is now advancing its portfolio of assets in western Morocco.
Tendrara, onshore Morocco well
INVESTMENT OVERVIEW: SOU The Big Picture
Sound's stake in Tendrara rises to 75%

Sound Energy PLC (LON:SOU) on Tuesday confirmed that it had sealed its deal to expand its footprint in western  Morocco.

It means that Sound's stake in Tendrara rises to 75% and it also gains 75% interests in follow-on exploration areas surrounding the gas discovery. To complete the deal Sound is issuing some 272mln new shares to OGIF, representing 27% of the Sound’s equity.

The completion has been expected for some time, and Sound Energy has already prepared exploration programmes for the newly acquired areas, where work begins with seismic surverying.

Sound is also advancing efforts to take forward infrastructure projects that will allow the Tendrara discovery to be commercialised.

Route to gas commercialisation is opening up

Last week, Sound Energy shares rose with sentiment boosted by potential significant funding news.

The Morocco-focussed gas junior, in a stock market statement, told investors that it had received a funding offer for its eastern Morocco gas project.

The indicative non-binding proposal comes from Advisory & Finance Group Investment Bank (AFG), a Moroccan financial institution that funds Oil & Gas Investment Fund (OGIF), Sound’s partner, and soon-to-be major shareholder.

It may provide US$60-100mln to build a pipeline connecting to the Gazoduc Maghreb Europe pipeline - that would connect Tendrara to regional infrastructure, effectively opening up the export route to the rest of Morocco and southern Europe.

Building a pipeline will be a critical element in the commercialisation of the Tendrara project, as will be the development of a gas processing facility. Sound Energy highlighted that AFG could potentially help the company in this as well.

The company explained that the AFG proposal was made on behalf of a range of institutions, including shareholders of OGIF, and that some of these investors may also be prepared to support the funding of gas processing facilities.

New exploration catalysts draw near

New regional exploration activities are however, already underway with the seismic team recently confirmed as being in the area.

Sound Energy, last month, said that investors can start looking forward to new catalysts as it was gearing up for new programmes where it is operating alongside partner Schlumberger.

The exploration programme will be split into three parcelled areas. It is likely to start with an area in the Tendrara / Anoual border where the partners want to better define structural leads.

Subsequently, once all seismic work is completed, the company intends to upgrade exploration prospects into its inventory, which will be assessed further via a new competent persons report.

This will be part of a programme to advance the Tendrara resources ahead of a final investment decision for the anticipated Tendrara development project.

In an area known as Anoual, the AIM-quoted company will retain 47.5% of the asset while Schlumberger will have a 27.5% interest. During an initial three-year period, the company will be required to carry out an FTG-aerogradiometry programme, plus acquire 600 kilometres of 2D seismic and 150 square kilometres of 3D seismic surveys.

Meanwhile, in another area which is known as Makarka, the company will have an initial one-year reconnaissance licence and it will have to deliver an FTG survey. After that, the group will have the right to apply for a longer exploration licence.

At Tendrara, Schlumberger is carrying out a number of geophysical surveys – including FTG, Scalar Gravity, Magnetics and LiDAR surveys. It will span some 24,000 square kilometres, and it will inform a basin scale model to evaluate Paleozoic and Triassic petroleum systems and the basin’s potential.

It is expected to be a three-month programme, with a full interpretation of the data anticipated in November.

That investors are again feeling positive and looking to Morocco is an obvious boon for Sound Energy, following its early summer share price wobble. Meanwhile, there’s seemingly plenty to look forward to, with the route to commercialisation opening up and new exploration catalysts on the way.

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