A flash blog on Sound this morning but a genuine keynote deal to mention let alone a very good EWT reported by the company.
The EWT has clearly been a significant success and in line, or better than the company had expected. Just under 1 BCF was produced in 56 days of continuous flow and they have now started the final pressure build up phase. This is consistent with pre-test estimates and confirms good deliverability of the TAGI reservoir, it justifies the horizontal well and shows ‘significant potential’. Flow rates were were limited to 40% draw-down to preserve completion integrity and good average rates were achieved over decreasing choke sizes. With no formation water and no indication of barriers detected Sound will now check pressures at TE-5 and TE-6 for connectivity. The last piece of this jigsaw for now is the TE-8 well for which a fair bit of valuation lies, civil works are under way some 12km away from TE-7 and the company are expecting to spud next month.
In another announcement this morning the company has proposed that they acquire OGIF’s interests in Eastern Morocco for shares at what seems like an attractive discount. OGIF is a Moroccan fund owned by six large local institutions including the largest Bank and Pension Fund amongst others. The influence and access to capital in country should not be dismissed lightly and I suspect that the interest that OGIF may have in getting involved in the infrastructure solutions may help identify these with such help from the new shareholder.
The deal gives Sound and its shareholders a very strong position, by buying in before the outpost well is drilled gets an early start and the 30% discount to core NAV might achieve even more. This is hugely accretive to Sound and delivers scale on an impressive basis (75% gross, 47.5% net of Tendrara and 75% gross of Meridja), should this asset prove to be as big as some expectations, then it prepares the way for a classic asset sale if a suitor with deep pockets were to come along. These are exciting times for faithful retail holders, supportive Continental, and now OGIF who bring a local interest to the play engineered by Sound’s strong and enterprising management.