• Natural Gas News

    Sound Sees Setback in Moroccan Sale


The company also announced plans to produce LNG starting in 2021 to generate cash flow sooner.

by: Joseph Murphy

Posted in:

Natural Gas & LNG News, Africa, Liquified Natural Gas (LNG), Premium, Corporate, Mergers & Acquisitions, Exploration & Production, News By Country, Morocco

Sound Sees Setback in Moroccan Sale

London-listed Sound Energy reported on February 17 that an exclusivity period agreed with a UK-registered company for talks on the sale of a 24.2% stake in its eastern Moroccan gas assets had ended without a deal.

Sound signed a heads of terms agreement with the would-be buyer in early November initiating the exclusivity period. Under the deal, the pair had until February 14 to complete due diligence and finalise a sale worth $113mn.

In a stock filing on February 17, Sound said the potential investor had "not yet demonstrated to the company's satisfaction the proof of funds required in order to advance the proposed transaction."

"Accordingly, discussions continue with the purchaser but these discussions are no longer exclusive and there can be no certainty that the proposed transaction will proceed or will successfully conclude," Sound explained.

The proposed sale covers the Tendrara production concession, the Greater Tendrara petroleum agreement and the Anoual permits. Sound has a 47.5% stake in the assets, while US oilfield services giant Schlumberger has 27.5% and Morocco's state-owned ONHYM has 25%.

Sound filed a development plan for Tendrara production concession in September 2018, involving the construction of a 120-km pipeline to bring its gas to market. But the company also wants to produce LNG from the concession's TE-5 Horst field starting in 2021, to "prioritise early first cash flows," it said.

"This micro LNG production plan for the TE-5 Horst is viewed by the company as an attractive route to generating early cash flows from the concession," Sound said. "The larger full pipeline-led development plan can then be added to this initial plan at a later date, given the inherently longer timescales involved in its implementation."

The project will require approval from Sound's partners. The company is also in talks with industrial customers and distributors in Morocco regarding the long-term offtake of the LNG supplies. It aims to take a final investment decision in the second quarter of 2020.