Sound has announced that ‘positive ‘ discussions are continuing with the appropriate authorities in Morocco with regard to the Gas Sales Agreement for Tendrara. It also confirms that the GSA covers all of the gas to be produced from the Tendrara concession.
This is good news as shareholders are aware of its importance to the company and management are keeping them informed. It is also important to Morocco itself as the gas produced will be a key domestic supply and crucially will reduce dependency on Algerian gas, not to be forgotten.
I am on my way now to the Premier meeting and will write more after that but a short comment now on what is a good but expected set of results. Not much new here as is often the case after a detailed trading statement but results presentation should put some meat on the bones. Production was a record at 80.5 kboepd helped again by Catcher which is running at 66/- b/d gross. In the medium term Tolmount has been sanctioned and will add 58 kboepd gross when onstream.
Profit of $133.4m and EBITDAX was up 50% to $882.3m and with cash flow of $772.2m up 64% even the debt pile might get reduced a touch especially with the conversion of the convertible. Guidance for production is 75/- b/d up 5% and looks a modest target to set. Reserves are uncomfortably down but it seems like a Sea Lion technicality which should reverse in time. As for debt the reduction is still modest and careless talk about buying vast swathes of the North Sea from US sellers hit the share price hard and unnecessarily…
With Zama appraisal to be concluded in Q3 along with Tolmount East, and with Indonesia carrying newlicences that leaves Sea Lion where it being described as a ‘growth project’ seems like an upgrade and the formal loan application submission is imminent. More after the meeting…