Proactive Investors
Ian Lyall
TE-8 will be around 12 kilometres from the last successful hole and is what’s called a step out well because it will test the lateral extent of gas that has been discovered in the TAGI reservoir.
Sound Energy PLC (LON:SOU) has begun drilling its latest well on the Tendrara licence in Morocco.
TE-8 will be around 12 kilometres from the last successful hole and is what’s called a step out well because it will test the lateral extent of gas that has been discovered in the TAGI reservoir.
It will also for the first time assess the potential of the deeper-lying Paleozoic formation.
WATCH: Analyst tells us why this latest well really could be a ‘significant’.
Work began Sunday and is likely to take 40-50 days to complete with drilling going down to a vertical depth of 2,975 metres.
Assuming gas is encountered in the main well bore, a further 30-day side-track will be drilled to prove a potentially deeper gas contact 900 metres to the north-west, Sound said.
Whatever comes in the next two months, the firm has already enjoyed considerable success at Tendrara.
Results from TE-7 were revealed on January 19 with the company telling investors that over a 56 day period of continuous flow the well has yielded just under 1bn cubic feet of gas.
That figure is made all the more impressive given that the gas flow was constrained in test conditions, at a maximum of 40% drawdown, in order to protect the integrity of the well completion to date.
No formation water was produced during testing – as the company had expected – and there were no indications of barriers.
As such Sound said that the result had confirmed a “significant connected volume” of gas is present at Tendrara, and it would now monitor pressure across past wells to confirm the physical connectivity of the reservoir.
These results will all be valuable as it advances field development planning.
Last month the company announced a non-binding agreement to acquire all of Oil & Gas Investment Fund’s (OGIF) assets in Eastern Morocco – that includes 20% Tendrara, 75% of the Meridja project and a 75% stake in acreage close to Tendrara.
In return the AIM-quoted company offers OGIF some 272mln new Sound Energy shares, notionally worth nearly £200mln based on Sound’s present market price. It will mean that OGIF – a fund owned by seven Moroccan financial institutions – will own around 29% of Sound Energy’s enlarged share capital.
Sound said Monday the outline deal had crystalised into a binding agreement.
At 1.45pm, the shares were changing hands for 90p each – off around 3% for the day.
Sam Wahab, of City broker Cantor Fiztgerald, said: “We believe that Sound has sufficiently grown its acreage position to become a material player in Mediterranean gas.
“The company is benefitting from attractive and robust pricing fundamentals which have served to boost project economics. With a number of event driven catalysts on the horizon, supported by a robust financial position, and a funded 2017 drilling campaign, we see Sound’s current share price as representing a compelling entry point for investors.”
—adds broker comment and share price—
Ian Lyall
