Morocco-focussed upstream gas company Sound Energy updated investors on the ongoing marketing process for its eastern Morocco portfolio on Wednesday.
The AIM-traded firm had announced on 22 May that, following a decision by its board to explore monetisation options for its interests in the Tendrara Production Concession, the Greater Tendrara Petroleum Agreement and the Anoual Permits – together the portfolio – with a view to assessing a sale of the portfolio prior to a final investment decision, it had started the marketing of the Eastern Morocco Portfolio.
It said it has since entered into non-disclosure agreements with 23 companies and, following those, had hosted some 15 management presentations which had resulted in the firm receiving a number of non-binding offers for its eastern Morocco portfolio, delivering a range of valuations and risk and reward profiles.
“Fundamentally, the company continues to believe the Tendrara basin requires further exploration drilling to unlock fully the basin potential and to deliver enhanced value to shareholders,” the board explained in its statement.
As a result, Sound Energy said it had now entered into a non-binding heads of terms agreement with a privately-owned, UK-registered company specialising in energy asset development and investment, which it said would, on completion of the transaction, resulting in the sale of a “substantial proportion” of its interest in the eastern Morocco portfolio.
At the same time, it would allow it to retain a carried interest that would provide an opportunity for Sound and its shareholders to continue to benefit from “significant” potential upside in the portfolio.
Under the heads of terms, Sound Energy said it had granted to the purchaser an exclusivity period expiring on 14 February, subject to certain milestones being met, to complete due diligence on the portfolio and to finalise a binding sale and purchase agreement for the proposed sale of 51% of its share for total consideration of $112.8m, consisting of a $54.3m cash consideration payable in tranches and an estimated $58.5m carry with respect to Sound’s future capital expenditure requirements.
On completion of the proposed transaction it was expected that Sound Energy would retain a 23.3% share of the eastern Morocco portfolio synthetically through a new joint venture.
The company said it would also provide the purchaser with a one-year option to acquire a further 9% of Sound Energy’s remaining interest in the portfolio on the same proportional financial consideration and carry terms as the proposed transaction.
“Should the option be exercised, the company’s retained synthetic interest in the eastern Morocco portfolio would be reduced to 14.3%,” the board said.
The cash consideration would be payable in three tranches – the first being 55% on completion of the proposed transaction, with 30% at final investment decision, and and 15% within 60 days of the delivery of first gas production.
Sound Energy said completion of the proposed transaction would be subject to satisfactory completion of due diligence and purchaser financing.
The proposed transaction remained subject to Sound Energy shareholder approval at a general meeting of the company, which would be convened in due course, the board said.
“The proposed transaction being progressed on an exclusive basis 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 Energy chairman Simon Davies.
As at 1608 GMT, shares in Sound Energy were down 24.82% at 5.15p.
