Sound Energy PLC (LON:SOU) told investors it has been awarded a production concession for the Tendrara gas discovery, bringing the field development project closer to a final investment decision.
The AIM-quoted explorer said it expects to make a decision once additional key development milestones have been secured – namely, the securing of a gas sales agreement, funding and regulatory formalities.
"I am delighted with the award of the first development concession in Eastern Morocco, which is a critical step in commercialising our gas discovery,” said James Parsons, Sound Energy chief executive.
READ: Sound Energy inks new agreement for Tendrara and Matarka exploration
“The company continues to make excellent progress on all fronts, including FEED, the gas sales agreement and ground works at TE-9."
Sound’s new production concession is based on a proposed development programme that would involve the drilling of five new horizontal wells, plus the re-completion of the existing TE-6 and TE-7 wells.
It will need a gas treatment and compression facility, as well as a 120-kilometre pipeline.
First gas would be anticipated in around two years and production volumes are projected at around 60mln cubic feet per day over a 10-year period in the ‘mid-case’ scenario. Some 10-13 additional production wells would be required over coming years to maintain rates over the term.
“A risked valuation of the 0.4Tcf Tendrara gas development underpins our 14p/share Sound Tangible NAV,” RBC analyst Al Stanton said in a note.
“We assume first gas in 2021 and, based upon plateau sales of 60MMcfd for Powergen, we anticipate a European netback gas price (rather than the ~$10/Mcf achieved selling small volumes of gas to local consumers).”