Petroleum Africa
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Wednesday, February 22, 2017
Sound Energy entered into binding agreements with Oil & Gas Investment Fund (OGIF) for the conditional acquisition by the company of a further 20% interest in its Tendrara exploration permits, rights to apply for a 75% operated interest in an exploration permit for the Meridja area (over which the company had previously exercised an existing option to acquire a 55% operated interest, conditional on regulatory approval) and an application and/or rights to apply for a 75% position in certain relinquished area(s) of the Tendrara exploration permit areas.
The consideration for the acquisition will be the issue, on completion, of 272,000,000 new ordinary shares in Sound, the issue of which remains subject to shareholder approval at a general meeting of the company.
The consideration shares will represent as Shares (assuming no further share issues prior to completion). At the mid-market closing price of 93.50 pence per Sound Energy ordinary share on February 17, being the last practicable date prior to this announcement, the consideration shares had an implied market value of around £254.3 million.
In connection with the acquisition, Sound and OGIF have also entered into a relationship agreement which, from admission of the consideration shares, will regulate the ongoing relationship between OGIF and the company to ensure that it is capable of carrying on its business independently of OGIF and to ensure that transactions and relationships between OGIF and the company are at arm’s length and on a commercial basis.
Under the Acquisition, Sound Energy will acquire a further 20% interest in the Tendrara exploration permits. Sound Energy will have an increased 75% operated interest in Tendrara on a gross basis, representing a 47.5% operated interest in Tendrara net of the Schlumberger net profit interest arising from the Schlumberger synthetic farm in December 2015. ONHYM holds the remaining 25% stake.
Prior to completion of the acquisition, and pursuant to the June 2015 Tendrara farm-in agreement between OGIF and the group, Spound was granted an initial 37.5% operated interest in December 2015, on receipt of Moroccan Ministerial approval. Following the drilling of TE-6, and in June 2016, the Group elected to apply for the first complementary period under the Tendrara exploration permits – which brought with it a commitment to a second well at Tendrara. Following the drilling of TE-7, the company’s second well at Tendrara, the Group’s entitlement to a further 17.5% interest in Tendrara was crystallized. Legal transfer of that 17.5% interest in Tendrara to the group remains subject to receipt by the company of all Moroccan regulatory approvals and consents, including approvals and consents from the Moroccan Energy and Finance ministries and ONHYM, the receipt of which is a condition of the Acquisition.
A 75% interest in a reconnaissance permit for the Meridja area and the accompanying rights to apply for the exploration permit. Meridja was previously subject to an option agreement between Sound Energy and OGIF under which Sound Energy was granted an option to acquire a 55% interest in Meridja. Sound Energy announced in June 2016 that it had exercised the Meridja Option, subject to regulatory and other approvals, which remain outstanding.
The OGIF interests to be acquired under the Acquisition also include an existing application for and/or rights to apply for a 75% position in certain relinquished area(s) of the Tendrara exploration permits.
In Morocco’s hydrocarbon code, and consistent with all exploration permits in Morocco, the parties to the Tendrara exploration permits, being ONHYM, OGIF, and Sound Energy Morocco SARL AU (a wholly owned affiliate of the company), are required to relinquish a proportion of the Tendrara exploration permit areas over time subject to a maximum relinquishment of 50 per cent. of the exploration permits’ acreage. The area to be relinquished is at the election of the parties to the Tendrara exploration permits (subject to regulatory consents) and the accrued Tendrara relinquishment requirement to date is approximately 5,100 sq km. The relinquishment requirement does not affect the company’s preliminary volume estimates for Tendrara and Meridja announced by Sound Energy on February 1. Completion of the Acquisition will result in the Company acquiring an OGIF application for and/or a right to apply for a 75% position in certain relinquished areas of Tendrara.
The acquisition and the transfer of the 17.5%. interest in Tendrara to be transferred subject to the receipt by the company of all Moroccan regulatory approvals and consents, including approvals and consents from the Moroccan Energy and Finance ministries and ONHYM.
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