Sound Energy has reached a preliminary agreement on the sale of a major stake in its eastern Moroccan assets for $112.8 million.
Sound has signed a non-binding heads of terms with an unnamed privately owned UK-registered company, it said, with an exclusivity period ending in mid-February 2020. At the heart of the package is the Tendrara concession, where a field development projects production at 1.7 million cubic metres per day.
The deal, as sketched out, would see Sound selling a 24.2% stake in the assets, leaving it with 23.3%, which would be held via a joint venture with the purchaser.
The proposed sale “funds development of the Tendrara project, provides early monetisation of a substantial part of our established gas resources and retains upside for our shareholders through both future gas production and further exploration drilling”, said Sound’s chairman Simon Davies.
The payment would come in cash of $54.3mn and an estimated $58.5mn carry for future expenditure on the Tendrara project. The cash would be paid in three parts, with 55% on completion of the sale, or $29.87mn. Another 30% would come at final investment decision (FID), or $16.3mn, with the last 15% or $8.1mn, due within 60 days of first gas.
There is also a one-year option for the sale of another 9%, on the same terms. This would reduce Sound’s stake to a synthetic 14.3%.
Sound announced the plan to sell down its stake in eastern Morocco in May, following a disappointing drilling result. It said it had signed non-disclosure agreements with 23 companies, with 15 management presentations, leading to a number of non-binding offers.
Helping make the case for the sale, Sound has recently struck a preliminary deal on gas sales from Tendrara with Office National de l’Electricité et de l’Eau Potable (ONEE), the state-backed energy company. A gas sales agreement (GSA) is expected to be signed by the end of the year, which would help move the project towards FID.
While the focus is mainly on the Tendrara development plan, Sound also said there was the potential for additional exploration work in the basin.