REG - Sound Energy PLC - Micro LNG Development Progress & Project Contract

Sound EnergyAnnouncement

29/11/2022 07:00

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RNS Number : 8470H  Sound Energy PLC  29 November 2022

29 November 2022

Sound Energy plc

("Sound Energy" and its group company subsidiaries collectively the
"Company")

 

Micro LNG Development Progress and Amendment of Italfluid Project Contract

 

Sound Energy, the energy transition company, is pleased to provide a progress
update on its Phase 1 micro LNG development and announce an amendment to the
project contract (the "Project Contract") entered into between Italfluid
Geoenergy S.r.l. (the "Contractor") and Sound Energy's wholly owned
subsidiary, Sound Energy Morocco East Limited ("SEMEL" and together with the
Contractor, the "Parties"), in respect of the design, procurement,
construction, operation and maintenance of Tendrara Concession micro LNG
facilities onshore Morocco. The Contractor was previously provided with
'Notice to Proceed' under the Project Contract, as confirmed by the Company on
16 February 2022.

 

Phase 1, Micro LNG Development: Progress Update

 

Good progress continues to be made on the Company's Phase 1 micro LNG
development, with construction of the LNG storage tank ongoing and wellhead
work undertaken. Work on the LNG storage tank has included site preparation,
excavation for the tank foundation, laying the concrete base for the tank
foundation, laying reinforcing bar and installing the reinforced concrete
columns on the base, of which there are 60 in total and each 4m high. Once
complete, the tank will stand 24m high and be 22m in diameter.

 

Wellhead inspection and remedial well servicing work at TE-6, one of the first
of two wells to be put on production in Phase 1, was also completed safely in
September.

 

Project Contract Amendment

 

The amendment to the Project Contract effects a reduction of the operating day
rate of the plant by US$3,000 to a revised US$38,000 per day over its 10-year
term, an approximate 7% reduction. The reduction in the operating day rate
represents savings of US$1.1 million per year to the project, and US$11
million over the 10-year term. Additionally, the Parties have agreed to
exercise their best endeavours to execute an option agreement under which the
Company will have the right (but not the obligation) to acquire the micro LNG
facilities, or the entity owning and leasing the facilities, after five years
of operation for a sum of c.US$9.15 million, a reduction of US$1.5 million
from the previous "option to purchase" sum agreed in principle between the
Parties.

 

In return for the Contractor agreeing a reduction in the operating day rate
under the Project Contract, the Contractor will be paid by the Concession
owners (Sound Energy, 75% working interest) additional staged payments of an
aggregate of US$6.5 million during the construction phase, in doing so
providing the Company with the right to own the permanent on-site LNG storage
tank facility once the plant is commissioned and LNG production starts. These
staged payments, which are intended to be borne pro rata by all of the
Tendrara Production Concession JV partners, will be presented to the December
Tendrara Concession Management Committee Meeting (the "TMCM"), with the
initial payment likely to be advanced to the Contractor in full by the Company
on behalf of the JV partners ahead of the TMCM from proceeds of the Company's
existing project debt facility which is in place with Afriquia Gaz S.A. The
LNG storage tank will remain part of the Operation and Maintenance
responsibility of the Contractor over the life of the Project Contract.

 

 

Graham Lyon, Sound Energy's Executive Chairman, commented:

 

"We are working closely with the Contractor to ensure the project remains on
track to meet the joint venture's delivery obligations to Afriquia Gaz under
the LNG sale and purchase agreement. The restructuring of the payment
structure under the Project Contract increases our alignment with Italfluid
during the construction and commissioning phase whilst notably facilitating a
valuable reduction in the operating day rate of the facility of some US$1.1
million per annum over the 10-year contract. Additionally, under the "option
to purchase" agreement, which we expect to agree and execute in the coming
weeks, the proposed reduction of the purchase price of the facility (or
operating company, as the case may be) provides a valuable opportunity for
Sound Energy to access additional value upside from the micro LNG
development."

 

For further information please contact:

 Vigo Consulting - PR Adviser               Tel: +44 (0)20 7390 0230

 Patrick d'Ancona

 Finlay Thomson

 Sound Energy                               chairman@soundenergyplc.com (mailto:chairman@soundenergyplc.com)

 Graham Lyon, Executive Chairman

 Cenkos Securities - Nominated Adviser      Tel: +44 (0)20 7397 8900

 Ben Jeynes

 Russell Cook

 SP Angel Corporate Finance LLP             Tel: +44 (0)20 3470 0470

 Richard Hail

 Gneiss Energy Limited - Financial Adviser

 Jon Fitzpatrick / Paul Weidman             Tel: +44 (0)20 3983 9263

 

 

 

The information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation (EU) No.
596/2014. Upon the publication of this announcement, this inside information
is now considered to be in the public domain.

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