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    Morocco-focused Sound Cuts Costs, Makes H1 Loss


The company is also in talks with a Moroccan firm about liquefying wellhead gas for transport to the local market but it warns of an uncertain future.

by: William Powell

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Natural Gas & LNG News, Africa, Premium, Corporate, Exploration & Production, Financials, News By Country, Morocco

Morocco-focused Sound Cuts Costs, Makes H1 Loss

Sound Energy, the AIM-listed explorer focusing on Moroccan gas, reported September 11 a first-half pre-tax loss of £380,000 ($488,000), compared with £11.5mn the year before. It is still in the pre-production phase. But it has cut its general and administrative costs by 57% relative to the same period in 2019 in a measure to address the Covid-19 pandemic. 

Although it said the pandemic has not had a material impact on operations, it said the "consequential impact of a deterioration of the pandemic may delay the progress in completing activities necessary to restructure or refinance the company’s €28.8 ($34)mn bond. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern." The bond is due June 21, 2021.

The assessment of its financial position excludes an August tax demand totalling $14mn, which Sound says is the result of a "misunderstanding of the underlying transactions." It is going to appeal the assessment.

As of end-August, it held cash and cash equivalents of £6.5mn including £1.3mn as collateral for a bank guarantee of licence commitments. "Cashflow forecasts for the twelve-month period to September 2021 indicate that additional funding will also be required to enable the company to meet its obligations," it said.

It is negotiating a 10-yr LNG gas sales agreement covering 100mn m³/yr to be produced from the TE-5 Horst well (Tendrara Phase 1 development) with a Moroccan firm which will also part-finance the development; and it is also progressing discussions to obtain pipeline corridor rights. Despite the difficulties imposed by the Covid-19 pandemic, it said talks with the government have continued in order to finalise the fully termed gas sales agreement. This will form a key building block to support project sanction of the proposed TE-5 Phase 2 development.

In January, Sound said it had government approval to build and operate a 120-km 20-inch gas pipeline to the Gazoduc Maghreb Europe pipeline which carries Algerian gas to Spain and Portugal.