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Sound Energy advances as route to gas commercialisation starts opening up

Published: 10:42 04 Sep 2017 BST

Tendrara, onshore Morocco well
Sound shares up around 9.2% to 52.15p

Sound Energy PLC (LON:SOU) shares advanced more than 9% on Monday morning, 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.

WATCH: Sound Energy buoyed by funding news while 88 Energy investors wait patiently

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.

READ: Sound Energy receives funding offer for Tendrara gas pipeline

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.

Monday’s share price rally, up around 9.2% to 52.15p, helps Sound Energy hit a near 20% gain in the past month or so – reflecting investors' focus on the group’s successes, with the recent exploration disappointment in Italy fading into the background.

OGIF is due to formally become a shareholder in Sound Energy before the end of the third quarter, upon conclusion of previously announced transactions, which will see Sound Energy increase its footprint in the region surrounding Tendrara in exchange for equity.

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.

READ: Sound Energy has nearly wrapped up Badile operations

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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