Sound Energy (LON:SOU) has confirmed it has now signed heads of terms for its proposed acquisition of a 25% stake in the Sidi Moktar Licences, onshore Morocco, from Maghreb Petroleum Exploration.
The deal, first announced in early September, sees Sound Energy acquire the interest in some 2,700 square kilometres of central Morocco where there a material existing gas discoveries.
Two wells have already been drilled, and the company says a well test in the near term could be a precursor to commercial gas production. Initial estimates, by Sound, put the size of the Kechoula discovery at around 293bn cubic feet of gas (an unrisked mid-case).
It added there is also significant exploration potential, in the order of 1 trillion cubic feet.
James Parsons, Sound Energy chief executive, said: “The company now plans to work with the other partners on the Sidi Moktar Licences, with a view to accelerating progress on the licence area."
According to the signed deal terms Sound Energy will be given the option to purchase the 25% stake for a nominal price of €1 at any time up to first commercial gas. In order to secure that option, it is issuing MPE new Sound Oil shares with a combined market value of £3.57mln.
MPE will also retain a 1.6% net profit interest from cash flows from the two existing wells.
Sound Energy explains that the deal structure - i.e. the use of an option – was decided upon to avoid losing MPE’s ‘carry’ on programme costs.
"The option will, when granted, enable Sound Energy to secure a 25% carried interest in an already successfully drilled gas discovery with potential near term production and significant deeper exploration potential,” Parsons said.
“An interest in Sidi Moktar would also represent the second material asset in Sound Energy's onshore Moroccan gas portfolio, which is underpinned by strong European gas fundamentals.”
The company added that it is now finalising due diligence for the transaction.