REG - Sound Energy PLC - Final Results
10/04/2025 07:00
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RNS Number : 3884E Sound Energy PLC 10 April 2025
The information contained within this announcement is deemed by the Company to constitute inside information pursuant to Article 7 of EU Regulation 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 as amended. Upon the publication of this announcement via a Regulatory Information Service, this inside information is now considered to be in the public domain.
10(th) April 2025
SOUND ENERGY PLC
("Sound Energy", "Sound" or the "Company" and together with subsidiaries the
''Group'')
FINAL RESULTS
Sound Energy, the transition energy company, announces its audited final
results for the year ended 31 December 2024.
HIGHLIGHTS
Development of the Moroccan Tendrara Production Concession (the
''Concession'')
· Phase 1 Micro LNG (''mLNG'') project (''Phase 1''):
o Safely installed production tubing and completed workover of both wells
necessary for first gas production
o LNG storage tank at the final stage of construction at site, with roof
installed
o Extensive activity continued offsite with our contractor and its
sub-contractors designing and constructing plant equipment and receiving the
equipment at site
o Key equipment arrived at site for commissioning
o Processed gas expected at plant in Q4 2025
· Phase 2 Gas (pipeline) development (''Phase 2'')
o Continued progress made for project financing from exclusive lead
arranger, Attijariwafa Bank, Morocco's largest bank
Exploration
· Exploration licences are all in the process of extension and
renewal
Corporate
· In December 2024, completed partial divestment of the Concession
and Grand Tendrara and Anoual exploration permits, through the sale of the
Company's subsidiary, Sound Energy Morocco East Limited (SEME), to Managem SA.
SEME held a net 55% working interest in the Concession and 47.5% interest in
the Grand Tendrara and Anoual exploration permits. The Completion of the
transaction unlocked significant future funding of the Company's retained 20%
interest in the Concession and 27.5% interest in the exploration permits
Graham Lyon, Executive Chairman said:
''Significant progress has been made in advancing the sustainability of the
Company through the transformational transaction with Managem which brings a
substantial co-venturer that will operate the mLNG project, provide Sound
Energy's equity funding to take FID on the Phase 2 pipeline project and fund
two exploration wells for Sound. Sound is now able to evaluate further growth
opportunities, either within the current asset base or externally whilst
seeking to further strengthen its portfolio and balance sheet.
We have enjoyed a supportive working relationship with ONHYM, the Ministry and
our various contractors in Morocco and, most importantly, we continue to
benefit from the hard work and dedication of our own staff. We will continue
to work diligently to deliver value, revenue and progress for all our
shareholders during 2025 and beyond, as we focus on material developments in
transition energy.''
For further information please visit www.soundenergyplc.com
(https://www.soundenergyplc.com/) , follow on X @soundenergyplc
(https://x.com/soundenergyplc?lang=en) and Linkedin
(https://www.linkedin.com/company/sound-oil/) or contact:
Sound Energy plc chairman@soundenergyplc.com
Graham Lyon (Executive Chairman)
Flagstaff Strategic and Investor Communications sound@flagstaffcomms.com
Tim Thompson, Mark Edwards, Alison Allfrey +44 (0)207 129 1474
Zeus - Nominated Adviser and Broker +44 (0)20 3829 5000
James Joyce, Alex Campbell-Harris, Gabriella Zwarts (Investment Banking)
Simon Johnson (Corporate Broking)
STATEMENT FROM THE EXECUTIVE CHAIRMAN
Introduction
2024 ended with the closure of a transformational transaction for Sound Energy
PLC in which its subsidiary, Sound Energy Morocco East Limited (SEME), was
sold to Managem SA (Managem), a large Moroccan based, pan-African mining
company. This sale, of the Operating Company for Tendrara Concession (the
Concession) and the Anoual and Greater Tendrara exploration licenses, brings
Sound significant funding covering both development and exploration
activities, as well as cash by way of the recovery of past investments from
January 2022 to December 2024, thereby materially increasing the Company's
cash position and positioning the Company well for future revenue growth and
potentially significant exploration upside.
The micro LNG project activity at Tendrara is behind the initial 2024 delivery
schedule due to the late delivery of equipment and construction overruns by
the main contractor. Despite good progress being made on construction of the
LNG storage tank, the construction supply chain and delivery of the key
components were challenged. At year-end, major packages had either arrived or
were enroute to site. With Managem now assuming operational responsibility for
the Concession, value enhancing opportunities will continue to be pursued to
ensure delivery of LNG in 2025. The scheduled 2024 Sound-operated development
activities, including preparing the wells for production, were completed
successfully with no lost time incidents and well integrity maintained.
The Phase 2 pipeline gas project matured with entry into a binding agreement
with Managem (for equity development capital funding) for Sound Energy Meridja
Limited by way of a development carry. The Company has a binding gas sales
agreement with ONEE (Office National de l'Electricité et de l'Eau potable)
and senior debt financing via Attijariwafa bank. Both are in place
(effectiveness subject to certain conditions precedent). In order to take the
next step to enable the Concession joint venture partners to take a Final
Investment Decision (''FID'') and commence execution of the project, an update
of the Front-End Engineering & Design (''FEED'') study to get relevant
2025 costings and an optimised design is required. As new operator, Managem
plans to conclude all activities to undertake FID in 2025 - they have
maintained momentum by using their own project management team as well as
former SEME staff, and Sound plc staff are providing a comprehensive handover
and continued support where required.
Exploration licenses are all in the process of extension and renewal. At year
end we are awaiting the various authorities' final approval of the agreed
licence amendments. Managem will operate the Anoual and Grand Tendrara
exploration licenses and have agreed to carry Sound's costs on two exploration
wells, one on each licence. Sidi Moktar remains operated by Sound Energy
through its subsidiary Sound Energy Morocco South Limited (SEMS) and it is the
intention of the company to progress a seismic survey over the licence in 2025
or early 2026. Logistics are such that until licenses are all fully approved
by the various ministries, on-the-ground works cannot take place.
During 2024, we announced a joint study programme with Getech, a market leader
in subsurface data, to evaluate natural Hydrogen and Helium potential in
Morocco. We expect the study results in 2025.
During the year, the Company held regular shareholder meetings both online and
in person. Shareholders requested interactive sessions where they do not
need to travel and therefore five live webinar Q&A sessions were held and
various video recordings answering questions submitted to the company took
place. In 2025 regular engagements will be undertaken, as we continue to
interact, listen and share information with our shareholder community.
Corporate
In August, we announced a small working capital bridge facility from 2i
Partners which was available whilst the Managem transaction was closing. This
facility was not fully utilised, and the amounts drawn down were repaid in
December 2024, along with accrued interest.
During the year, the Company issued 117.5 million new ordinary shares (under
its previous authorities) to settle 2023 Convertible loan note obligations. At
year end, accrued interest of £568,800 was outstanding.
ESG and keeping our people safe sits at the heart of our business and, as
operations continued, we have actively monitored and taken timely action on
safety or environmental issues, reports or alerts, as have arisen. The Company
has a robust health and safety management system in place and works hand in
hand with our contractors and under the umbrella of our corporate
environmental and safety standards. Our strong monitoring and constant
improvement of working practices has proved robust; we have had very few
incidents over the year; however, one contractor broke a leg falling from
scaffolding that was marked not for use and a driving accident offsite and out
of working hours occurred. Any environmental issues are also recorded and
monitored. We instigated a CO2 study with a contractor in 2024 for its
potential recovery and sale. A modest 936 tCO2e were emitted in 2024 through
diesel consumption which was primarily from heavy plant and equipment used in
the mLNG facility civil construction / ground works, dozers, graders,
compactors and the well workover operations on TE6 and TE7 completed by Star
Valley 101.
Finally, we engage proactively with our local communities and in 2024, we laid
a water line to a local school making running water available for the first
time. We take steps not only to employ locals where we can, but to keep
relevant stakeholders and communities in Morocco informed about our
activities. Good corporate governance is maintained at all levels, and we are
applying the revised QCA governance code during reporting year 2025.
The Company continues to manage its financial resources prudently whilst
making significant capital investments in pursuing its strategy. The pathway
to funding the company until the first revenues from Phase 1 is always under
review and a variety of working capital sources are being evaluated. The
transaction with Managem provided cash to the Company, however, as Sound now
has less operated activities very careful cost management will continue to be
applied in 2025 and moving forward. With significant debt on the Company's
balance sheet, debt management will be a key focus for Sound in 2025.
Whilst new business opportunities were reviewed in 2024, the corporate focus
was to deliver a sustainable Tendrara position and to fund the company for its
key development and exploration priorities. With the phase 2 funding pathway
contractually agreed, the Company will focus more management attention on
growth and portfolio expansion to seek to accelerate its strategy of
sustainable revenue generation.
In light of the agreed sale of SEME to Managem, the Company is required to
compare the carrying value of its intangible and development assets with their
fair market value (less cost of disposal). The Company determined that an
impairment charge totalling £122.0 million was required for the retained
development assets.
Board
During 2024, the Board continued to meet regularly and oversee effective
implementation of the Company's strategy. Simon Ashby-Rudd stepped down as a
board member on the announcement of the transaction with Managem. We thank
Simon for his valued service, advice, and support to the Company particularly
during the major transaction. Post year end, Mohammed Seghiri resigned from
the Company and Board to join Managem SA, providing continuation of operations
in Morocco. We thank Mohammed for his 8 years of service with Sound and look
forward to continuing our close co-operation in his new role. The board now
consists of one Executive and two Independent Non-Executive Directors.
Graham Lyon
Chairman (Executive)
PORTFOLIO REVIEW
A blended portfolio of gas assets
Eastern Morocco
Tendrara Production Concession
Permit Area
The permit in which Sound Energy has a 20% interest is located close to the
Gazoduc Maghreb Europe ("GME") pipeline, approximately 120 kilometres to the
North of it. The 522 kilometre-long Moroccan section is owned by the Moroccan
State and operated by Office National des Hydrocarbures et des Mines
(''ONHYM''). The pipeline connects Morocco to Spanish/Portuguese gas grids as
well as Moroccan gas-fired power stations.
Geology
The gas is trapped within the Triassic Argilo-Gréseux Inférieur (''TAGI"(1))
reservoir within the structural fault block, termed the Tendrara TE-5 Horst,
and sealed by the overlying salt. Reservoir characteristics are significantly
enhanced by the application of proven hydraulic stimulation techniques to
increase gas flow rates.
Ongoing and Planned Developments
Planned development of our discovered TE-5 gas to address gas demand in a
phased manner is progressing, with Phase I being the implementation of a
micro-LNG development scheme (currently underway) and a future Phase 2 being
the development of a larger scale central processing facility ("CPF") and gas
export pipeline to the GME pipeline.
Phase 1- Micro LNG Development
Supply of LNG displacing higher carbon footprint energy (such as heavy fuel,
petcoke or imported LPG).
Funding is arranged to meet Sound Energy's share of sanctioned pre first gas
development costs.
Deployment of field gas treatment, processing, liquefaction and storage
facilities to deliver mobile LNG to buyer at site. The LNG buyer will
distribute and sell on to its growing Moroccan industrial consumers within the
domestic gas market. Supplies of LNG are to be an annual contractual quantity
equivalent to approximately 100 million normal cubic metres of gas
(approximately 3.5 billion standard cubic feet of gas per year) over a
ten-year period.
A binding gas sales agreement and associated funding are in place with
Afriquia Gaz, one of the largest LPG distributors in Morocco. There is a
ten-year commitment from first gas to sell annual contractual quantity of 100
million Normal cubic metres per annum with take or pay agreement priced at
$6-$8.346 per mmBTU ex plant.
Development utilises the existing wells TE-6 and TE-7, with the drilling of
one new well, as required, to maintain the ten-year period of production at
the plateau.
LNG Central Processing Facility
Micro LNG Plant to be designed, constructed, commissioned, operated and
maintained by Italfluid with guarantees for plant operability and delivery.
Lease structure (with option to buy):
• Minimal LNG tank construction capital payments at and from FID,
and following successful completion of Micro LNG Plant commissioning
(including production build-up)
• Leasing solution substantially lowers capital investment
requirements of Phase 1 development
• Daily rental payment paid to Italfluid on guaranteed daily
volume only
• Performance guarantees on plant availability
In March 2025 (post period-end), the Company announced that the mLNG project
main contractor, Italfluid, and the operator of the Tendrara Production
Concession had agreed to amend their contractual arrangement by terminating
the vendor financed lease agreement entered into in 2020 and entering into an
engineering, procurement and Construction (EPC) contract. The parties are
currently in advanced discussions to agree an operations and maintenance
contract.
Phase 2 - Tendrara TE-5 Development
Concept - Processed gas as a transition fuel flowing to the GME pipeline:
• 20 inch, 120km Tendrara Gas Export Pipeline ("TGEP")
• Tie-in to existing GME pipeline (Station M04), approved by the
GME operator ONHYM, which took over the GME operatorship at the end of Q4 2021
• Pipeline EIA permit approved, and pipeline corridor fully
secured. Lease agreements signed with the landowners and the first lease
payments have been paid
• CPF EIA permit approved
• Gas Sales Agreement ("GSA") with ONEE (Office National de
l'Electricité et de l'Eau potable) signed November 2021 for domestic power
plants for gas-to-power generation (transit via GME line), minimum volume of
0.3 bcm/year (approximately 10.5 billion standard cubic feet of gas per year)
at a fixed sale price over a ten-year term. Extended in 2023
• Up to six horizontal wells planned to achieve First Gas (Phase
2)
• Senior debt facility in place with Attijariwafa Bank (which is
one of the top banks in Morocco and Africa), and part of the Al Mada Group
(the Moroccan Monarchy's holding company) to fund a substantial part of the
Phase 2 project. Fully termed and binding senior debt facility in place
(subject to fulfilment of certain conditions precedent before FID)
Exploration
Grand Tendrara - two Triassic TAGI discoveries
Permit Details
Area 14,411 km2
Status Petroleum Agreement: Exploration
Effective date 1 October 2018
Net interest 27.5%
Term 8 years
Resource Potential Exploration potential in the Triassic TAGI(1) reservoir of 7.52 Tcf gross/2.07
Tcf net (arithmetical sum of mid-case un-risked GIIP(2)) identified in
sub-salt concepts, leads and prospects.
Permit Area
Surrounds the Tendrara Production Concession.
The permit in which Sound Energy has a 27.5% interest is located with access
to the GME pipeline, situated approximately 120 kilometres to the north of it.
The 522 kilometre long Moroccan section is owned and operated by the Moroccan
State. The pipeline connects Morocco to Spanish/Portuguese gas grids as well
as Moroccan gas-fired-power stations.
Geology
Only eight wells drilled across the entire area, all encountered evidence of a
petroleum system. The primary reservoir is the Triassic TAGI charged from
Palaeozoic petroleum source rocks and sealed by the overlying Triassic salt,
which is present across much of the basin. This petroleum play is regionally
extensive and extends into Morocco from Algeria.
Two Triassic TAGI gas discoveries exist within the permit area:
• SBK-1 tested by the previous permit holder at a peak rate of
4.41 mmscf/d in July 2000
• TE-10 flowed gas at non-commercial rates in May 2019
Exploration potential in the Triassic TAGI(1) reservoir of 7.52 Tcf gross/2.07
Tcf net (arithmetical sum of mid-case un-risked GIIP(2)) identified in
sub-salt concepts, leads and prospects.
Future Developments
A number of targets are available for near-term drilling with two features,
the SBK structure and the TE-4 Horst, high-graded for drilling. Both these
structures were drilled by SBK-1 and TE-4, in 2000 and 2006, respectively, and
both encountered gas shows in the TAGI reservoir. SBK-1 flowed gas to surface
during testing in 2000 at a peak rate of 4.41 mmscf/d post acidification but
was not tested with hydraulic stimulation. TE-4 was tested in 2006 but did not
flow gas to the surface. Hydraulic stimulation has proven to be a key
technology to commercially unlock the potential of the TAGI gas reservoir in
the Tendrara TE-5 Horst gas accumulation and, accordingly, the Company
believes this offers potential to develop commercial operations elsewhere in
the basin.
The gross exploration potential of these high-graded structures, expressed as
GIIP, is as follows:
Target name Unrisked Volume Potential Gas Initially in Place (Bcf) Chance of Success
Gros
s
(100
%)
basi
s
Low Best High Mean
TE-4 Horst Structure 153 260 408 273 36%
SBK-1 Structure 71 130 225 140 50%
A discovery in either structure would have the potential to be commercialised
through the proposed development infrastructure centred on the TE-5 Horst,
with sufficient capacity in the planned Tendrara Export Pipeline or as
standalone mLNG projects.
Subject to approval by the Ministry of Energy Transition and Sustainable
Development and the Ministry of Economy and Finance, the Company has elected
to enter the voluntary first Complementary period, which commenced October
2022 with the commitment to be drill one well. A well drilled on either the
SBK structure or the TE-4 Horst would satisfy this commitment.
Anoual
Permit Details
Area 8,873 km(2)
Status Petroleum Agreement: Exploration
Effective date 8 September 2017
Net interest 27.5%
Term 10 years
Resource Potential Exploration potential in the Triassic TAGI(1) reservoir of 11.51 Tcf
gross/3.17 Tcf net (arithmetical sum of mid-case un-risked GIIP(2)) identified
in sub-salt concepts, leads and prospects
Permit Area
The permit in which Sound Energy has a 27.5% interest is located with access
to Gazoduc Maghreb Europe ("GME") pipeline approximately 120 kilometres to the
North. The 522 kilometre-long Moroccan section is owned and operated by the
Moroccan State. The pipeline connects Morocco to Spanish/Portuguese gas grids
as well as Moroccan gas-fired power stations.
Geology
Only one well drilled across the entire area. The primary reservoir is the
Triassic TAGI(1) charged from Palaeozoic petroleum source rocks and sealed by
the overlying Triassic salt, which is present across much of the basin. This
petroleum play is regionally extensive and extends into Morocco from Algeria.
Committed geophysical surveying completed with a single well commitment
remaining. Exploration potential in the Triassic TAGI(1) reservoir of 11.51
Tcf gross/3.17 Tcf net (arithmetical sum of mid-case un-risked GIIP(2))
identified in sub-salt concepts, leads and prospects.
Future Developments
"M5" prospect high graded for drilling a TAGI(1) target, operational planning
is progressing. The Company's estimation of the gross exploration potential of
the M5 exploration prospect, a possible candidate for the exploration well,
expressed in GIIP, is as follows:
Target name Unrisked Volume Potential Gas Initially In Place (Bcf) Chance of Success
Gros
s
(100
%)
basi
s
Low Best High Mean
M5 Exploration 332 800 1728 943 21%
Sidi Moktar
Permit Details
Area 4,712 km(2)
Status Petroleum Agreement: Exploration
Effective date April 2018
Net interest 75%
Term 10 years
Resource Potential Unrisked exploration potential of 8.9 Tcf gross/6.68 Tcf net (arithmetical sum
of mid-case un-risked GIIP(2)) following interpretation of the historical 2D
seismic identified in sub-salt leads
Permit Area
The permit in which Sound Energy has a 75% interest is located onshore on the
Atlantic seaboard of Morocco, approximately 100 kilometres to the west of
Marrakech.
In July 2017, the Company reported the results of the re-entry, completion,
perforation and flow testing of the existing Koba-1 well, with a focus on
previously producing relatively shallow gas reservoirs.
Strategically, the Company has shifted its focus on the Sidi Moktar area
towards what it believes has the potential to be the most significant
opportunity amongst the deeper Triassic TAGI(1) and Palaeozoic gas plays in
the region, already demonstrated by the gas and condensate producing adjacent
Meskala Field operated by our partner ONHYM. In June 2018, the Company was
awarded a new eight-year Petroleum Agreement and is now actively seeking a
partner to participate in a geophysical survey programme focused on these
deeper objectives.
In December 2022, the Company announced a further one-year extension to the
initial period of the Sidi Moktar permit and that the work programme for the
initial period of the Sidi Moktar permit remained unchanged.
Geology
There is initial un-risked exploration potential of up to 8.9 Tcf gross
gas/6.68 Tcf net gas (arithmetical sum of mid-case un-risked GIIP(2))
following interpretation of the historical 2D seismic. The Company believes
the pre-salt plays have been overlooked in the region with limited drilling to
specifically target these deeper successions.
The sub-salt plays are underexplored with more than 60 historical exploration
wells focused on shallower objectives in the Jurassic post-salt carbonate
successions. The few historical sub-salt tests were drilled on the basis of
poor sub-salt seismic imaging. Recent improvements in seismic acquisition and
processing technologies are expected to provide enhanced imaging of the
sub-salt structure and geology.
Future Developments
Our next step is to mature the identified leads to drillable prospects with
improved seismic imaging. We aim to acquire new, high-quality 2D seismic data,
focused on improving the sub-salt imaging. This work is hoped to lead to an
exploration well targeting a high-impact gas prospect.
(1. ) Trias Argilo-Gréseux Inférieur ("TAGI") are
sandstones deposited in a fluvial-alluvial environment and are significant oil
and gas reservoirs across Algeria, extending into Morocco
(2. ) Internal exploration potential estimates, arithmetical
sum of mid-case unrisked Gas Initially In Place ("GIIP")
Financial Review
Income Statement
The pre-tax loss for the year from continuing operations was £150.8 million
(2023: £7.2 million). The loss for the year primarily relates to an
impairment loss of approximately £122.0 million recognised during the year.
In light of the sale of SEME to Managem SA, the Company was required to
compare the carrying value of its intangible and development assets with the
fair market value (less cost of disposal) which led to the recognition of the
impairment loss. Loss on discontinued operations amounted to approximately
£24.2 million after taking account the cash consideration received of £10.2
million and deferred consideration of £20.7 million. The deferred
consideration represents the fair value of up to $24.5 million net carry
through Managem SA funding of the Group's remaining 20% interest in future
Concession Phase development, $1.5 million payable to the Group no later than
one year after first gas from Concession Phase 2 development, $3.6 million net
carry through funding the Group's remaining 27.5% Grand Tendrara permit
interest in drilling exploration well and $2.6 million net carry through
funding the Group's remaining 27.5% Anoual permit interest in drilling an
exploration well.
Administrative costs at £4.6 million were higher than 2023 administration
costs (£2.3 million) reflecting an increase in activities related to the
divestment, non-cash excess of par value of shares issued over the fair value
and increase in staff costs.
Foreign exchange losses primarily related to intra-Group loans, which were
partially offset by exchange gains in US dollar denominated borrowings.
Foreign exchange gains and losses arising from inter-company loans that
originated on acquisition of Moroccan permits are recognised in the other
comprehensive income section of the statement of comprehensive income.
Cash Flow/Financing
Cash inflow from disposal of SEME, net of cash sold with the subsidiary
amounted to approximately £9.2 million.
Proceeds from borrowings were approximately £5.8 million (2023: £4.4
million) and interest paid amounted to approximately £1.2 million (2023:
£0.4 million). The Company commenced payment of interest on the Afriquia loan
facility from Q2 2024 and the total interest paid during the year relating to
this facility amounted to £0.6 million.
In Q3 2024, the Company entered into a short-term bridge financing facility
with a high-net-worth investor for up to £1.5 million, available for three
months and any amount drawn down attracted interest of 15% per quarter. The
Company made drawdowns amounting to £1.1 million which attracted interest of
£133,000. The principal and interest amounts were repaid in December 2024.
The Company also repaid £0.25 million, being the remaining principal element
of the convertible bond, leaving approximately £0.6m of accrued interest
outstanding.
Financing costs during the year were £2.3 million (2023: £1.9 million),
primarily due to the amortised costs of the Company's Euro denominated loan
notes, the US dollar Afriquia loan facility and unwinding of discount related
to convertible bonds, net of interest capitalised to the development and
exploration permits of £0.2 million (2023: £0.3 million). The increase in
finance costs arose principally due to a further $6.0 million drawdown from
the Afriquia facility.
The Group spent £5.4 million (2023: £2.9 million) on investing activities
during 2024 primarily related to the Group's Micro-LNG project with the
balance relating to expenditure on the Group's exploration permits in Morocco
and capitalised general and administrative expenses.
Balance Sheet
As at 31 December 2024, the carrying amount of property, plant and equipment
was £10.5 million (2023: £157.9 million), primarily related to the
development and production assets in Morocco with a carried value of £10.5
million (2023: £157.8 million). The decrease from the previous year is
primarily due to the impairment loss recognition and disposal of SEME.
Intangible assets, with a carrying amount of £14.1 million (2023: £35.0
million), primarily relates to the Group's investment in its exploration
permits in Morocco. The decrease from previous year is primarily due to the
disposal of SEME.
Non-current prepayments of £1.5 million (2023: £5.1 million) relate to the
Group's Phase 1 mLNG project.
Deferred consideration receivable of £21.0 million relates to the elements of
SEME disposal consideration receivable in the future as described under the
income statement section. The carrying amount on the balance sheet includes
the effect of foreign exchange movements.
Other receivables, amounting to £3.2 million (2023: £0.9 million), are
primarily related to the amount receivable for services provided by the
Company supporting the joint operations and cash calls paid in advance of work
being undertaken on our Morocco permits and recoverable VAT.
Trade and other payables amounting to £3.7 million (2023: £2.5 million)
primarily related to accruals for advisers' fees in respect of the SEME
disposal, staff costs accrual and accruals for operations in the Group's
permits in Morocco.
During 2024, the Company issued 117,500,000 ordinary shares following the
conversion of £1,175,000 of accrued interest by convertible bonds holders.
Going Concern
As detailed in note 1 to the financial statements, the Company's cash flow
forecasts, for the next twelve-month period to April 2026, indicate that
additional funding will be required to enable the Company to continue to meet
its obligations. This condition indicates the existence of a material
uncertainty regarding the Company's ability to continue as a going concern.
Consolidated Statement of Comprehensive Income
For the year ended 31 December 2024
2024 2023
Notes £'000s £'000s
Continuing operations
Revenue - -
Other income - 4
Impairment on development assets and exploration costs (122,042) -
Gross profit (122,042) 4
Administrative expenses (4,586) (2,311)
Group operating (loss) / profit from continuing operations (126,628) (2,307)
Finance revenue 12 25
Foreign exchange gain/(loss) 2,294 (2,719)
Finance expense (2,302) (1,893)
Loss for the year before taxation (126,624) (6,894)
Tax expense 3 - (1)
Loss for the year after taxation (126,624) (6,895)
Discontinued operations
Loss for the period after tax from discontinued operations 11 (24,196) (265)
Total loss for the year (150,820) (7,160)
Other comprehensive income
Items that may subsequently be reclassified to the profit and loss account
Foreign currency translation gain/(loss) 9 (6,555)
Total comprehensive loss for the year (150,811) (13,715)
Loss for the year attributable to:
Owners of the Company (150,811) (13,715)
2024 2023
Pence Pence
Basic and diluted loss per share for the year from continuing and discontinued 4
operations attributable to the equity shareholders of the parent
(7.48) (0.38)
Basic and diluted loss per share for the year from continuing operations 4
attributable to the equity shareholders of the parent
(6.28) (0.37)
Consolidated Balance Sheet as at 31 December 2024
2024 2023
Notes £'000s £'000s
Non-current assets
Property, plant and equipment 5 10,489 157,927
Intangible assets 6 14,097 35,002
Prepayments 1,522 5,092
Deferred consideration 7 21,045 -
47,153 198,021
Current assets
Inventories 69 915
Other receivables 3,247 924
Prepayments 25 1,342
Cash and short-term deposits 7,895 3,016
11,236 6,197
Total assets 58,389 204,218
Current liabilities
Trade and other payables 3,665 2,495
Tax liabilities - 199
Lease liabilities - 121
3,665 2,815
Non-current liabilities
Tax liabilities - 1,410
Loans and borrowings 10 37,707 33,285
37,707 34,695
Total liabilities 41,372 37,510
Net assets 17,017 166,708
Capital and reserves
Share capital and share premium 8 41,073 39,898
Shares to be issued 374 374
Accumulated (deficit) /surplus (28,137) 122,443
Warrant reserve 2,071 2,071
Convertible bond reserve 28 28
Foreign currency reserve 1,608 1,894
Total equity 17,017 166,708
Consolidated Statement of Changes in Equity
Convertible Foreign currency reserves
Share capital Share premium Shares to be Accumulated Warrant reserve Bond reserve £'000s Total equity
Notes £'000s £'000s issued Surplus/ £'000s £'000s £'000s
£'000s (deficit)
£'000s
At 1 January 2024 19,631 20,267 374 122,443 2,071 28 1,894 166,708
Total loss for the year - - - (150,820) - - - (150,820)
Other comprehensive
gain - - - - - - 9 9
Total comprehensive loss
- - - (150,820) - - 9 (150,811)
Issue of share capital on conversion of bond
10 1,175 - - (554) - - - 621
Transfer to profit and loss account on bond conversion to shares
- - - 554 - - - 554
Reclassification to profit and loss account on disposal of subsidiary
- - - - - - (295) (295)
Share-based payments - - - 240 - - - 240
At 31 December 2024 20,806 20,267 374 (28,137) 2,071 28 1,608 17,017
Notes Share capital £'000s Share premium £'000s Shares to be issued Accumulated surplus Warrant reserve £'000s Convertible Foreign currency reserves £'000s Total
£'000s £'000s Bond equity £'000s
reserve
£'000s
At 1 January 2023 18,487 20,134 404 129,004 1,607 - 8,449 178,085
Total loss for the year - - - (7,160) - - - (7,160)
Other comprehensive loss - - - - - - (6,555) (6,555)
Total comprehensive loss - - - (7,160) - - (6,555) (13,715)
Issue of share capital on conversion of bond 1,000 46 - - - - - 1,046
Other share capital issues 114 87 - - - - - 201
Transfer to share capital on issue of shares 30 - (30) - - - - -
Fair value of warrants issued during the year - - - - 464 - - 464
Equity component of convertible bond - - - - - 562 - 562
Cost of issue allocated to equity component - - - - - (174) - (174)
Transfer to accumulated surplus on bond conversion to shares - - - 360 - (360) - -
Share-based payments - - - 239 - - - 239
At 31 December 2023 19,631 20,267 374 122,443 2,071 28 1,894 166,708
Consolidated Statement of Cash Flows
For the year ended 31 December 2024
2024 2023
Notes £'000s £'000s
Cash flow from operating activities
Cash flow from operations (2,352) (1,403)
Interest received 23 42
Tax paid - (134)
Net cash flow from operating activities (2,329) (1,495)
Cash flow from investing activities
Disposal of subsidiary 11 9,236 -
Capital expenditure (4,640) (1,600)
Exploration expenditure (651) (660)
Prepayment for Phase 1 the mLNG project (143) (820)
Receipt from interest in Badile land - 134
Net cash flow from investing activities 3,802 (2,946)
Cash flow from financing activities
Net proceeds from borrowings 5,822 4,442
Interest payments (1,168) (441)
Loan repayments (1,350) -
Lease payments (124) (180)
Net cash flow from financing activities 3,180 3,821
Net increase(decrease)/increase in cash and cash equivalents 4,653 (620)
Net foreign exchange difference 226 (225)
Cash and cash equivalents at the beginning of the year 3,016 3,861
Cash and cash equivalents at the end of the year 7,895 3,016
Note to Statement of Cash Flows
For the period ended 31 December 2024
2024 2023
£'000s £'000s
Cash flow from operations reconciliation
Loss before tax for the year from continuing operation (126,624) (6,894)
Loss before tax for the period from discontinued operations (24,196) (258)
Loss for the year before tax (150,820) (7,152)
Finance revenue (23) (42)
(Increase)/decrease in drilling inventories (260) 48
Decrease in receivables and prepayments 803 688
Increase/(decrease) in accruals and short-term payables 1,113 (343)
Impairment on development assets and exploration costs 122,042 -
Loss on disposal of subsidiary 23,438 -
Foreign currency translation loss reclassified from other comprehensive income
295 -
Impairment of interest in Badile land - 125
Depreciation 128 194
Share-based payments charge and remuneration paid in shares 794 239
Finance expense and exchange adjustments 138 4,840
Cash flow from operations (2,352) (1,403)
Non-cash transactions during the period included the issue of 117.5 million
ordinary shares, following partial conversion of accrued interest on the
convertible bond. The Group has provided collateral of $nil (2023: $1.75
million) to the Moroccan Ministry of Petroleum to guarantee the Group's
minimum work programme obligations for the Anoual, and Sidi Moktar permits.
The cash was held in a bank account under the control of the Company and, as
the Group expects the funds to be released as soon as the commitment is
fulfilled, on this basis, the amount remains included within cash and cash
equivalents.
Notes to the Financial Statements for the year ended 31 December 2024
1. Accounting Policies
Sound Energy plc is a public limited Company registered and domiciled in
England and Wales under the Companies Act 2006. The Company's registered
office is 20 St Dunstan's Hill, London EC3R 8HL.
The consolidated financial information contained within this announcement does
not constitute statutory accounts for the year ended 31 December 2024 within
the meaning of Section 434 of the Companies Act 2006 but is derived from those
audited accounts. The auditors reported on those accounts and their report was
unqualified and did not contain any statement under section 498(2) or section
498(3) of the Companies Act 2006. The statutory accounts for the year ended 31
December 2024 will be delivered to the Registrar of Companies in due course.
The annual report and statutory accounts will be sent to shareholders and will
be made available to the public on the Company's website:
www.soundenergyplc.com or, upon request, copies may be obtained from the
Company Secretary at the registered office of Sound Energy plc 20 St Dunstan's
Hill, London, EC3R 8HL.
a) Basis of preparation
The financial statements of the Group and its parent Company have been
prepared in accordance with UK-adopted International Accounting Standards.
The consolidated financial statements have been prepared under the historical
cost convention, except to the extent that the following policies require fair
value adjustments. The Group and its parent Company's financial statements are
presented in sterling (£) and all values are rounded to the nearest thousand
(£'000) except when otherwise indicated.
The principal accounting policies set out below have been consistently applied
to all financial reporting periods presented in these consolidated financial
statements and by all Group entities, unless otherwise stated. All amounts
classified as current are expected to be settled/recovered in less than 12
months unless otherwise stated in the notes to these financial statements. The
Group and its parent Company's financial statements for the year ended 31
December 2024 were authorised for issue by the Board of Directors on [9 April
2025].
Going concern
As at 31 March 2025, the Group's cash balance was £3.1 million. The directors
have reviewed the Company's cash flow forecasts for the next 12-month period
to April 2026. The Company's forecasts and projections indicate that, to
fulfil its other obligations, primarily the Company's SIDI Moktar permit
commitments, the Company will require additional funding. Following the sale
of its subsidiary SEME, the Company's share of the financial obligations for a
well commitment on each of the retained 27.5% working interests on the Grand
Tendrara (up to $3.6m) and Anoual licences (up to $2.6m), is to be funded by
the acquirer of SEME, as well as up to $24.5m of the pipeline led development
of the Tendrara Production Concession (Concession Phase 2). The Concession
Phase 2 partners are progressing towards a final investment decision and
received a conditional offer for partial financing of the Phase 2 development
and continue to work to satisfy the conditions precedents and other elements
necessary for the taking of Phase 2 FID.
The need for additional financing indicates the existence of a material
uncertainty, which may cast significant doubt about the Group and Company's
ability to continue as a going concern. These financial statements do not
include adjustments that would be required if the Company was unable to
continue as a going concern. The Company continues to exercise rigorous cost
control to conserve cash resources, and the directors believe that there are
several corporate funding options available to the Company, including a
farm-down on the Sidi Moktar permit, and various debt, equity and
equity-linked funding options. The directors, therefore, have a reasonable
expectation that the Company and the Group will be able to secure the funding
required to continue in operational existence for the foreseeable future, and
have made a judgement that the Group will continue to realise its assets and
discharge its liabilities in the normal course of business. Accordingly, the
directors have adopted the going concern basis in preparing the consolidated
financial statements.
Use of estimates and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, as well as the disclosure of contingent assets and
liabilities at the balance sheet date and the reported amounts of revenues and
expenses during the reporting period. The Group based its assumptions and
estimates on parameters available when the consolidated financial statements
were prepared. Existing circumstances and assumptions about future
developments, however, may change due to market changes or circumstances
arising that are beyond the control of the Group. Such changes are reflected
in the assumptions when they occur.
Estimation and assumptions
The key sources of estimation uncertainty, that have a significant risk of
causing material adjustment to the carrying amounts of assets and liabilities
within the next financial year, are the impairment of intangible exploration
and evaluation ("E&E") assets, impairment of development and production
assets, investments, warrants, and the estimation of share-based payment
costs.
E&E, development and production assets
When considering whether E&E assets are impaired, the Group first
considers the IFRS 6 indicators set out in note 6. The making of this
assessment involves judgement concerning the Group's future plans and current
technical and legal assessments. In considering whether development and
production assets are impaired, the Group considers various impairment
indicators and whether any of these indicate existence of an impairment. If
those indicators are met, a full impairment test is performed.
Impairment test
When value in use calculations are undertaken, management estimates the
expected future cash flows from the asset and chooses a suitable discount rate
to calculate the present value of those cash flows. In undertaking these value
in use calculations, management is required to make use of estimates and
assumptions similar to those described in the treatment of E&E assets
above. Further details are given in note 6.
In June 2024, the Company signed a binding SPA with Managem for the sale of
55% interest on the Tendrara Production Concession, 47.5% interest in the
Grand Tendrara licence and 47.5% interest in the Anoual licence. Following the
signing of the SPA, the Company undertook an impairment test as at 30 June
2024 and updated it on completion of the sale in December 2024. A significant
portion of the Group's net assets is the carrying value of the development and
producing assets and disclosures relating to management's assessment of
impairment for these assets and the investment in subsidiaries are included in
note 5, on the basis that the recoverability of the investment in subsidiaries
in the Company balance sheet is linked to the value of the development and
producing assets as, ultimately, the cash flows these generate will determine
the subsidiaries' ability to pay returns to the Company.
Impairment exists when the carrying value of an asset or cash generating unit
exceeds its recoverable amount, which is the higher of its fair value less
costs of disposal and its value in use. The fair value less costs of disposal
calculation is based on available data from binding sales transactions,
conducted at arm's length, for similar assets or observable market prices less
incremental costs of disposing of the asset. If there is no binding sales
transactions or observable market prices, the fair value is estimated using a
discounted cash flow model ('DCF model''). The cash flows are derived from the
latest budgets, expenditure and price data in signed gas sales agreements (for
contracted gas sales volumes), market based price data (for uncontracted gas
sales volumes), project contract or agreed heads of terms, and the latest
management plans on project phasing. The recoverable amount is sensitive to
the discount rate and gas price assumption as well as the Brent price
assumption that impacts condensate sales pricing in the DCF model. The
impairment test led to an impairment charge of approximately £122.0m being
recognised as at 31 December 2024 for continuing operations. The key
assumptions used to determine the recoverable amount of the development and
production assets are disclosed in note 5.
Share-based payments
The estimation of share-based payment costs requires the selection of an
appropriate valuation model, consideration as to the inputs necessary for the
valuation model chosen, and the estimation of the number of awards that will
ultimately vest, inputs for which arise from judgements relating to the
continuing participation of key employees (note 9).
Fair value of warrants
Significant judgement and estimation is also required in the determination of
the fair value of warrants.
Fair value of convertible bonds
The calculation of fair value on convertible bonds requires estimation of the
discount rate to use when discounting outstanding principal and interest
amounts at each reporting date. The discount rate is a significant input into
the discounted cashflow model used by the Company to estimate the fair value
of the convertible bonds.
Taxation
The Group seeks professional tax and legal advice to make a judgement on
application of tax rules on underlying transactions within the Group or with
third parties. Tax treatment adopted by the Group may be challenged by tax
authorities.
Intercompany loans
The Company has funded its subsidiaries through non-interest bearing loans
payable on demand. Given that the Company has no intention to call in the
loans in the foreseeable future, the loans are classified as non-current
investments. Other sources of estimate concern IFRS 9 on intercompany loans at
parent Company level.
(a) Investment in subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the
financial and operating policies, is exposed to, or has rights to, variable
returns from its involvement with the entity and has the ability to affect
those returns through its power over the entity. Such power, generally but not
exclusively, accompanies a shareholding of more than one-half of the
voting rights. The Group uses the purchase method of accounting for the
acquisition of subsidiaries. The cost of an acquisition is measured as the
fair value of the assets given, equity instruments issued, and liabilities
incurred or assumed at the date of exchange. Costs of acquisition are expensed
during the period they are incurred.
(b) Foreign currency translation
The functional currency of the Company is GBP sterling. The Group also has
subsidiaries whose functional currencies are US dollar.
Transactions in foreign currencies are initially recorded in the functional
currency by applying the spot exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies
are retranslated at the functional currency rate of exchange ruling at the
balance sheet date. All differences are taken to the income statement.
On consolidation, the assets and liabilities of foreign operations are
translated into sterling at the rate of exchange ruling at the balance sheet
date. Income and expenses are translated at weighted average exchange rates
for the year unless this is not a reasonable approximation of the rates on the
transaction dates. The resulting exchange differences are recognised in other
comprehensive income and held in a separate component of equity. On disposal
of a foreign entity, the deferred cumulative amount recognised in equity
relating to that foreign operation is recognised in the income statement.
(c) Discontinued operations
A discontinued operation is a component of an entity that either has been
disposed of, or is classified as held for sale, and:
• Represents a separate major line of business or geographical
area of operations
• Is part of a single coordinated plan to dispose of a separate
major line of business or geographical area of operations.
Discontinued operations are excluded from the results of continuing operations
and are presented as a single amount as profit or loss after tax from
discontinued operations in the statement of profit or loss. Cash flows from
discontinued operations are included in the consolidated statement of cash
flows and are disclosed separately in note 11. The group includes proceeds
from disposal in cash flows from discontinued operations. Additional
disclosures are provided in note 11. All other notes to the financial
statements include amounts for continuing operations unless indicated
otherwise.
(d) Deferred consideration
Deferred consideration relates to future funding to be received by the group
from the purchaser (the purchaser) of the Company's subsidiary disposed of
during the year (note 11). The Company's share of its future expenditure on
the Morocco licences will be funded by the purchaser up to specified amounts
detailed in note 11. Deferred consideration is recognised at fair value.
2. Segment information
The Group categorises its operations into three business segments based on
corporate, exploration and appraisal, and development and production.
In the year ended 31 December 2024, the Group's development, exploration and
appraisal activities were primarily carried out in Morocco.
The Group's reportable segments are based on internal reports about components
of the Group, which are regularly reviewed and used by the Board of Directors,
being the Chief Operating Decision Maker ("CODM"), for strategic decision
making and resource allocation, in order to allocate resources to the segment
and to assess its performance.
Details regarding each of the operations of each reportable segments are
included in the following tables.
Segment results for the year ended 31 December 2024:
Development Exploration
and production and appraisal
Corporate £'000s £'000s Total
£'000s £'000s
Other income - - - -
Impairment of development assets and exploration costs - (122,042) - (122,042)
Administration expenses (4,586) - - (4,586)
Operating (loss)/profit segment result (4,586) (122,042) - (126,628)
Interest receivable 12 - - 12
Finance expense and exchange adjustments (8) - - (8)
Loss for the year before taxation from continuing operations
(4,582) (122,042) - (126,624)
The segments assets and liabilities at 31 December 2024 is as follows:
Development Exploration
and production and appraisal
Corporate £'000s £'000s Total
£'000s £'000s
Non-current assets 61 28,707 18,385 47,153
Current assets 9,513 1,649 74 11,236
Liabilities attributable to continuing operations (25,818) (15,433) (121) (41,372)
The geographical split of non-current assets is as follows:
UK Morocco
£'000s £'000s
Development and production assets - 10,485
Fixtures, fittings and office equipment 3 1
Deferred consideration - 21,045
Software 49 8
Prepayments - 1,522
Exploration and evaluation assets - 14,040
Total 52 47,101
Segment results for the year ended 31 December 2023 were as follows:
Development Exploration
and production and appraisal
Corporate £'000s £'000s Total
£'000s £'000s
Other income - - 4 4
Impairment of development assets and exploration costs - - - -
Administration expenses (2,311) - - (2,311)
Operating (loss)/profit segment result (2,311) - 4 (2,307)
Interest receivable 25 - - 25
Finance expense and exchange adjustments (4,612) - - (4,612)
(Loss)/profit for the year before taxation from continuing operations
(6,898) - 4 (6,894)
The segments assets and liabilities at 31 December 2023 were as follows:
Development Exploration
and production and appraisal
Corporate £'000s £'000s Total
£'000s £'000s
Non-current assets 137 162,908 34,976 198,021
Current assets 1,959 2,897 1,341 6,197
Liabilities (23,551) (11,368) (2,591) (37,510)
The geographical split of non-current assets were as follows:
UK Morocco
£'000s £'000s
Development and production assets - 157,816
Fixtures, fittings and office equipment 4 6
Right of use assets 101 -
Software 18 8
Prepayments - 5,092
Exploration and evaluation assets - 34,976
Total 123 197,898
3. Taxation
Analysis of the tax charge for the year:
2024 2023
£'000s £'000s
Current tax
UK Corporation Tax - -
Adjustment to tax expense in respect of prior years - (1)
Tax cases settlement (overseas tax) - -
Total current tax (charge)/credit - (1)
Deferred tax credit arising in the current year - -
Total tax (charge)/credit - (1)
(b) Reconciliation of tax charge
2024 2023
£'000s £'000s
Loss before tax (126,624) (6,894)
Tax (charge)/credit charged at UK corporation tax rate of 25% (2023: 23.5%) 31,656 1,620
Tax effect of:
Expenses not deductible for tax purposes (231) (78)
Impairment not deductible for tax purposes (30,511) -
Tax losses not recognised (924) (1,232)
Change in UK tax rate - (310)
Differences in overseas tax rates 10 (1)
Total tax (charge)/credit - (1)
Deferred tax assets have not been recognised in respect of tax losses
available due to the uncertainty of the utilisation of those assets. Unused
tax losses as at 31 December 2024 were estimated to be approximately £6.9
million (2023: £9.8 million). The decrease in estimated losses arose
following disposal of SEME.
The Group had tax cases where Morocco Tax Authority had claimed taxes relating
to the Group's historical permits transfers and intragroup transactions. In
May 2023, the Company entered into a settlement agreement with Morocco Tax
Authority on a phased payment schedule back ended over 6 years.
The table below sets out the current and non-current tax liability and the
movement during the year.
2024 2023
£'000s £'000s
Amounts due within one year - 199
Amounts due after more than one year - 1,410
- 1,609
The movement during the year is as below:
As at 1 January 1,609 1,631
Change in/unwinding of discount (165) 101
Tax payment - (126)
Exchange adjustment (14) 3
Disposal of subsidiary (1,430) -
As at 31 December - 1,609
4. (Loss)/profit per share
The calculation of basic profit/(loss) per ordinary share is based on the
profit/(loss) after tax and on the weighted average number of ordinary shares
in issue during the year. The calculation of diluted profit/(loss) per share
is based on profit/(loss) after tax on the weighted average number of ordinary
shares in issue, plus the weighted average number of shares that would be
issued if dilutive options and warrants were converted into shares. Basic and
diluted profit/(loss) per share is calculated as follows:
2024 2023
£'000s £'000s
Loss after tax from continuing operations (126,624) (6,895)
Loss after tax from discontinued operations (24,196) (265)
Total loss for the year after taxation (150,820) (7,160)
2024 2023
Million Million
Basic weighted average shares in issue 2,017 1,882
Dilutive potential ordinary shares - -
Diluted weighted average number of shares 2,017 1,882
2024 2023
Pence Pence
Basic and diluted loss per share from continuing operations (6.28) (0.37)
Basic and diluted loss per share from discontinued operations (1.20) (0.01)
Basic and diluted loss per share from continuing and discontinued operations
(7.48 ) (0.38)
Due to loss during the year, the effect of the potential dilutive shares on
the earnings per share would have been anti-dilutive and therefore were not
included in the calculation of the dilutive earnings per share.
5. Property, Plant and Equipment
Development Fixtures, fittings and
and production office
assets equipment Right-of-use
assets 2024
£'000s £'000s £'000s £'000s
Cost
At 1 January 2024 157,816 644 331 158,791
Additions 5,258 2 - 5,260
Exchange adjustments 2,023 - - 2,023
Disposal on expiry of lease - - (331) (331)
Disposal on sale of subsidiary (30,191) (278) - (30,469)
At 31 December 2024 134,906 368 - 135,274
Impairment and depreciation
At 1 January 2024 - 634 230 864
Charge for period 129,845 2 101 129,948
Exchange adjustments 2,393 - - 2,393
Disposal on expiry of lease - - (331) (331)
Disposal on sale of subsidiary (7,817) (272) - (8,089)
At 31 December 2024 124,421 364 - 124,785
Net book amount 10,485 4 - 10,489
Development and production assets Fixtures, fittings and office equipment Right-of-use assets 2023
£'000s £'000s £'000s £'000s
Cost
At 1 January 2023 163,074 656 331 164,061
Additions 2,737 2 - 2,739
Exchange adjustments (7,995) (14) - (8,009)
At 31 December 2023 157,816 644 331 158,791
Impairment and depreciation
At 1 January 2023 - 642 57 699
(Reversal)/charge for period - 4 173 177
Exchange adjustments - (12) - (12)
At 31 December 2023 - 634 230 864
Net book amount 157,816 10 101 157,927
In June 2024, the Company entered into a binding sale and purchase agreement
(SPA) with Managem SA for the disposal of SEME (Note 11). Property, plant and
equipment of the disposal group were measured at the lower of their carrying
amount and fair value less costs to sell and as a result, impairment loss was
recognised. Similarly, for continuing operations, the Company estimated the
recoverable amount by reference to the fair value of the Tendrara Production
Concession (Concession) attributable to the discontinued operation and
recognised an impairment loss. The transaction with Managem completed in
December 2024 (note 11) and an update of the impairment test was undertaken.
In calculating the fair value less cost to sell, the Company included in its
valuation the consideration received and receivable from sale of SEME, which
comprised; expenditure incurred on the licence from 1 January 2022 to the date
of disposal (back costs), Concession Phase 2 funding of up to $24.5 million,
funding for one exploration well each on the Anoual and Grand Tendrara
licences of up to $2.6 million and $3.6 million, respectively and $1.5 million
on achieving first gas on Concession Phase 2. The funding for Concession Phase
2 and the exploration wells is expected to be received over the period to July
2028 based on the Company's understanding of the timing of the operations. The
impairment test calculations in prior year were based on a discounted cashflow
model that took account of forecast and projections of various elements
including, future gas prices, field production profile, development
expenditure among others. In the current year, the Company has used fair value
less cost to sell as explained above, as the basis for the impairment test
since a recent market transaction was considered a reasonable basis use. The
impairment loss has primarily arisen due the change in the impairment test
method during the period.
The total impairment loss for discontinued operation recognised amounted to
approximately £7.8 million and in respect of the continuing operations,
approximately £124.4m (inclusive of exchange rate movements). The Company
used a discount rate of 10.55% at 31 December 2024, a decrease from 11.25% at
31 December 2023 due to changes in financial market conditions and certain
corporate parameters during the period. A change in the discount rate by 1%
has a £0.1m impact of the impairment charge for continuing operation and a
10% reduction in amount receivable for future funding of Concession Phase 2
and the exploration wells would increase the impairment charge for continuing
operations by £0.6 million.
6. Intangibles
Software Exploration & Evaluation Assets
£'000s £'000s
2024
£000s
Cost
At 1 January 2024 382 45,582 45,964
Additions 53 696 749
Exchange adjustments (1) 335 334
Disposal (252) (32,573) (32,825)
At 31 December 2024 182 14,040 14,222
Impairment and depreciation
At 1 January 2024 356 10,606 10,962
Charge for the year 25 16,501 16,526
Exchange adjustments (4) 211 207
Disposal (252) (27,318) (27,570)
At 31 December 2024 125 - 125
Net book amount 57 14,040 14,097
Software £'000s Exploration & Evaluation Assets 2023
£'000s £'000s
Cost
At 1 January 2023 375 46,594 46,969
Additions 22 729 751
Exchange adjustments (15) (1,741) (1,756)
At 31 December 2023 382 45,582 45,964
Impairment and depreciation
At the start of the year 356 10,606 10,962
Charge for the year 17 - 17
Exchange adjustments (17) - (17)
At 31 December 2023 356 10,606 10,962
Net book amount 26 34,976 35,002
Exploration and evaluation assets
Details regarding the geography of the Group's E&E assets is contained in
note 2. The directors assess for impairment when facts and circumstances
suggest that the carrying amount of an E&E asset may exceed its
recoverable amount. In making this assessment, the directors have regard to
the facts and circumstances noted in IFRS 6 paragraph 20. In performing their
assessment of each of these factors, at 31 December 2024, the directors have:
• reviewed the time period that the Group has the right to
explore the area and noted no instances of expiration, or permits that are
expected to expire in the near future and not be renewed;
• determined that further E&E expenditure is either budgeted
or planned for all permits;
• not decided to discontinue exploration activity due to there
being a lack of quantifiable mineral resource; and
• not identified any instances where sufficient data exists to
indicate that there are permits where the E&E spend is unlikely to be
recovered from successful development or sale.
On the basis of the above assessment, the directors are not aware of any facts
or circumstances that would suggest the carrying amount of the E&E asset
may exceed its recoverable amount. Included in the charge for the year is
approximately £16.5 million impairment following the measurement of
intangible assets at the lower of their carrying amount and fair value less
costs to sell on signing of the SPA with Managem SA (note 11).
7. Deferred consideration
2024 2023
£'000s £'000s
At 1 January - -
Fair value of consideration receivable 20,696 -
Exchange adjustments 349 -
At 31 December 21,045 -
Deferred consideration relates to future funding to be received by the group
from the purchaser (the purchaser) of the Company's subsidiary disposed of
during the year (note 11). The Company's share of its future expenditure on
the Tendrara Production Concession Phase 2 development (Phase 2 development)
will be funded by the purchaser up to $24.5 million, the purchaser will also
fund the drilling of one exploration well on each of the Anoual and Grand
Tendrara licences for up to $2.6 million and $3.6 million, respectively, and
pay to the group $1.5 million upon achieving first gas on the Phase 2
development. The Company has calculated the deferred consideration after
taking account of the expected timing of receipt of the various elements of
the deferred consideration based on current estimates of the timing of the
operations and applied a discount rate of 10.55% (note 5).
8. Capital and Reserves
2024 2023
Number of shares Number of shares
£'000s £'000s
Ordinary shares - 1p 2,080,622,679 20,806 1,963,122,679 19,631
2024 2023
Number of shares Number of shares
At 1 January 1,963,122,679 1,848,702,674
Issued during the year for cash - -
Non-cash share issue 117,500,000 114,420,005
At 31 December 2,080,622,679 1,963,122,679
The share issues described below were all non-cash transactions.
Share issues
In April 2024, the Company issued 30,000,000 shares following a partial
accrued interest conversion amounting to £300,000 by the holders of the
Company's convertible bonds.
In July 2024, the Company issued 50,000,000 shares following a partial accrued
interest conversion amounting to £500,000 by the holders of the Company's
convertible bonds.
In October 2024, the Company issued 37,500,000 shares following a partial
accrued interest conversion amounting to £375,000 by the holders of the
Company's convertible bonds.
Reserves
In 2018, the Company sought, and was granted, a court order approving a
capital reduction following the cancellation of the share premium account.
This resulted in the transfer of £277.7 million to distributable reserves.
9. Share based payments
2024 2023
£'000s £'000s
Expense arising from equity settled LTIP 240 239
240 239
LTIP Awards
The Company has a long term incentive plan (the ''LTIP''), designed to reward,
incentivise and retain the Company's Executives and senior management to
deliver sustainable growth for shareholders.
The maximum number of awards that may be issued under the LTIP from time to
time will be limited to 3% of the Company's issued share capital on the date
of grant of awards, and, together with all other options issued by the Company
under any employee share scheme from time to time, will not exceed an
aggregate of 15% of the Company's issued ordinary share capital in a rolling
ten year period. Awards granted under the LTIP will, generally, be subject to
a three-year vesting period from the date of grant, the number of awards,
ultimately, vesting dependent on the grantee's continued service and on
additional performance conditions set by the Remuneration Committee.
The Company issued 48,875,515 options to subscribe for new ordinary shares
under the LTIP, out of which 31,769,085 options were allocated to qualifying
Executives and senior management and the balance of 17,106,430 was retained
for future allocations. The LTIP awards are exercisable at 2.4 pence per share
and expire ten years after the grant.
The fair value of LTIP awards granted was estimated at the date of grant using
a Black-Scholes model, taking account of the terms and conditions upon which
the awards were granted. The expected life of the LTIP award is based on the
maximum award period and is not necessarily indicative of exercise patterns
that may occur. Expected volatility was determined by reference to the
historical volatility of the Company's share price over a five-year period.
The expected volatility reflects the assumption that historical volatility is
indicative of future trends, which may not necessarily be the actual outcome.
No LTIP awards were granted during 2024 or 2023. The remaining contractual
life of the LTIP awards outstanding at 31 December 2024 is 7.3 years. If all
the 31,769,085 LTIP awards were exercisable immediately, new ordinary shares
equal to approximately 1.5% (2023: 1.6%) of the shares currently in issue,
would be created
Nil cost options
The Company has outstanding nil-cost options that were granted to employees in
previous years in settlement of bonus awards. The nil-cost options vested
immediately and expire 5 years from the grant date.
Number Number
2024 2023
Nil cost options outstanding at the start of the year Granted during the year 13,796,793 16,812,583
Exercised during the year - - (3,015,790)
-
Expired during the year - -
Nil cost options outstanding at the end of the year 13,796,793 13,796,793
The weighted average share price at the date of vesting of the RSU awards was
n/a (2022: 2.5 pence).
Warrants
As at 31 December 2024, the Company had the following outstanding warrants to
subscribe to the Company's ordinary shares.
Exercise Number at Granted Number at
2024 price Expiry date 1 January /(exercised) Expired 31 December
Pence
2023 Warrants 2.25 13 June 2026 40,476,190 - - 40,476,190
2022 Warrants 2.75 13 June 2025 7,056,875 - - 7,056,875
2021 Warrants 2.75 21 December 2027 99,999,936 - - 99,999,936
147,533,001 - - 147,533,001
Exercise Number at Granted Number at
2023 price Expiry date 1 January /(exercised) Expired 31 December
Pence
2023 Warrants 2.25 13 June 2026 - 40,476,190 - 40,476,190
2022 Warrants 2.75 13 June 2025 7,056,875 - - 7,056,875
2021 Warrants 2.75 21 December 2027 99,999,936 - - 99,999,936
107,056,811 40,476,190 - 147,533,001
10. Loans and borrowings
Secured Bonds Loan note- Afriquia Convertible Short-term 2024
£'000s £'000s Bonds loan Total
£'000s £'000s £'000s
Current liabilities
At 1 January - - - - -
Gross amount of loan drawn down - - - 1,100 1,100
Accrued interest - - - 133 133
Principal loan and interest repayment - - - (1,233) (1,233)
At 31 December - - - - -
Non-current liabilities
At 1 January 21,980 10,276 1,029 - 33,285
Gross amount of loan drawdown during the year - 4,722 - - 4,722
Amortised finance charges 1,422 816 - - 2,238
Unwinding of discount - - 166 - 166
Interest payments (430) (605) - - (1,035)
Debt conversion to equity - - (621) - (621)
Principal loan repayment - - (250) - (250)
Exchange adjustments (1,022) 224 - - (798)
At 31 December 21,950 15,433 324 - 37,707
Secured Bonds Loan note- Afriquia Convertible 2023
£'000s £'000s Bonds Total
£'000s £'000s
Current liabilities
At 1 January 1,121 - - 1,121
Reclassification to non-current liability (1,121) - - (1,121)
At 31 December - - - -
Non-current liabilities
At 1 January 20,855 8,213 - 29,068
Gross amount of loan drawdown during the year - 2,017 2,500 4,517
Amortised finance charges 890 532 - 1,422
Unwinding of discount - - 137 137
Interest payments (441) - - (441)
Gross equity component at date of issue - - (562) (562)
Debt conversion to equity - - (1,046) (1,046)
Exchange adjustments (445) (486) - (931)
Reclassification from current liabilities 1,121 - - 1,121
At 31 December 21,980 10,276 1,029 33,285
The Company has €25.32 million secured bonds (the "Secured Bonds"). The
Secured Bonds mature on 21 December 2027. The Secured Bonds bear 2% cash
interest paid per annum until maturity and a 3% interest per annum to be paid
at redemption. The Company issued to the Bondholders 99,999,936 warrants to
subscribe for new ordinary shares in the Company at an exercise price of 2.75
pence per share. The warrants expire on 21 December 2027. The Bonds are
secured on the issued share capital of Sound Energy Morocco South Limited.
After taking account of the terms of the Bonds, the effective interest is
approximately 6.5%.
The Company has a $18.0 million 6% secured loan note facility with Afriquia
Gaz maturing in December 2033 (the ''Loan''). The drawn down principal bears
6% interest per annum payable quarterly, but was deferred and capitalised
semi-annually, until the second anniversary of the issue of Notice to Proceed.
Repayment of interest that is not deferred commenced in Q2 2024. The principal
and deferred interest will be repayable annually in equal instalments
commencing December 2028. The Loan is secured on the issued share capital of
Sound Energy Meridja Limited. The weighted effective interest on the drawdowns
made is approximately 6.2%.
In June 2023, the Company issued £2.5 million convertible bonds (the
''Bonds'') from a senior unsecured convertible bond facility of up to £4.0
million. The £2.5 million Bonds have a fixed conversion price of 2.25 pence
per ordinary share. The term of the Bonds is 5 years from drawdown date, with
interest of 15% per annum payable bi-annually in cash or capitalised to the
principal, at the Company's election. The Company issued 33,333,333 warrants
to subscribe for new ordinary shares in the Company at an exercise price of
2.25 pence per ordinary share with a term of 3 years. During the year, the
Company issued 117.5 million new shares following the conversion of
£1,175,000 of accrued interest on the Bonds, leaving £0.6 million accrued
interest outstanding. The Company repaid £250,000, being the principal amount
that was outstanding. The fair value of the debt converted to equity was £0.6
million which when compared to the par value of the shares issued of £1.2
million, resulted in a difference of £0.6 million that was first recorded in
equity and subsequently transferred to the profit and loss account. The
carrying amount of the Bonds is stated at fair value and is measured using the
discounted cashflow method. A discount rate of 17.7% was used to discount the
outstanding capitalised interest over the outstanding term of the Bonds.
In Q3 2024, the Company entered into a short-term bridge loan with a
high-net-worth investor for up to £1.5 million, available for three months
and any amount drawn down attracted interest of 15% per quarter. The Company
made downs amounting to £1.1 million which attracted interest of £133,000.
The principal and interest amounts were repaid in December 2024.
Reconciliation of liabilities arising from financing activities
Non-cash changes
Convertible Bonds non-
cash 31
1 January Cash flows Finance charges Exchange adjustments movements December
2024 2024
2024 £'000s £'000s £'000s £'000s £'000s £'000s
Long-term borrowings 33,285 3,304 2,537 (798) (621) 37,707
Leases 121 (124) 3 - - -
Total liabilities from financing activities
33,406 3,180 2,540 (798) (621) 37,707
Non-cash changes
Convertible Bonds non-
cash 31
1 January Cash flows Finance charges Exchange adjustments movements December
2023 2023
2023 £'000s £'000s £'000s £'000s £'000s £'000s
Long-term borrowings 30,189 4,001 1,559 (931) (1,533) 33,285
Leases 283 (180) 18 - - 121
Total liabilities from financing activities
30,472 3,821 1,577 (931) (1,533) 33,406
Reconciliation of finance expense
2024 2023
£'000s £'000s
Amortised finance charges 2,371 1,422
Unwinding of discount 169 256
Bond issue costs expensed - 601
Less capitalised interest (238) (285)
Total finance expense for the year 2,302 1,994
11. Discontinued operations
On 14 June 2024, the Company announced that it had entered into a binding sale
and purchase agreement with Managem SA for the disposal of SEME that owns:
• 55% interest in the Tendrara Production Concession, including
the liability for payments arising from the Schlumberger net profit interest
(NPI) agreement (pursuant to the acquisition of Schlumberger Silk Route
Services Limited in 2021);
• 47.5% interest in the Grand Tendrara licence; and
• 47.5% interest in the Anoual licence.
The consideration included:
• Back costs (expenditure on licences) from 1 January 2022 to
completion date, net of working capital and other adjustments, $13.1 million;
• Tendrara Production Concession Phase 2 carry of up to $24.5
million;
• Anoual licence carry on one well, $2.6 million;
• Grand Tendrara licence carry on one well, $3.6 million;
• On achieving Phase 2 first gas, $1.5 million.
The transaction was completed in December 2024 and the Company received $13.1
million cash with the other elements of the consideration remaining as
deferred consideration.
The results of the discontinued operations are presented below.
2024*
£'000s 2023
£'000s
Other income - 38
Impairment of tangible and intangible assets - -
Gross loss - 38
Administrative expenses (563) (85)
Operating loss from discontinued operations (563) (47)
Finance revenue 11 17
Foreign exchange loss (76) (127)
Finance costs recovery/expense) 165 (101)
Foreign currency translation loss reclassified from other comprehensive income (295) -
Loss on disposal of subsidiary (23,438) -
Loss for the period before taxation from discontinued operations (24,196) (258)
Tax expense - (7)
Loss for the period after taxation from discontinued operations (24,196) (265)
· Represents the results for the period to divestment date on 10
December 2024.
The net cash flows of the discontinued operations were as follows:
2024
£'000s
2023
£'000s
Net cash flow from operating activities (816) 189
Net cash flow from investing activities 9,236 -
Net cash flow from financing activities - -
Net cash inflow/(outflow) 8,420 189
The calculation of loss on disposal of subsidiary is shown below:
2024
£'000s
2023
£'000s
Consideration
Cash consideration received on completion 10,240 -
Fair value of deferred consideration 20,696 -
Total consideration on disposal 30,936 -
Carrying amount of net assets disposed (28,807) -
Impairment and other expenses on disposal (25,567) -
Loss on disposal of subsidiary (23,438) -
12. Post Balance Sheet Events
In February 2025, the Company announced the resignation of its Chief Operating
Officer as a director of the Company who left full-time employment of the
Group in March 2025.
In March 2025, the Company announced the mLNG project main contractor,
Italfluid, and the operator of the Tendrara Production Concession had agreed
to amend their contractual arrangement by terminating the vendor financed
lease agreement entered into in 2020 and entering into an engineering,
procurement and Construction (EPC) contract.
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