Sound Energy (LSE:SOU) — Interim Results

0:00 Good evening, and welcome to the SOUND ENERGY PLC Interim Results Investor Presentation. Throughout this quarter presentation, investors will be in listen only mode. Questions are encouraged, they can be submitted at any time by the Q and A tab situated at the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question received in the meeting itself. However, the company can view the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you off to Executive Chairman, Graham Lyne. Good evening to you, sir. Thank you, Alessandro. For those of you who can see, I am flanked by our new CFO, Andy Matharu, and I've also got our VP, Geoscience, John Arjun, with me who are gonna help me do the presentation and answer some questions.

0:46 Thank you for sending them in advance. That's been very helpful. We are in a really exciting time now. We're right on the cusp of things coming good in sound, And so actually exciting time to to be in sound at the moment. You know we are very close to production. And we since we've did the deal with ManageM last year, we're in a much healthier position. For those that are new to SOUND and have come in recently or have been watching us recently because you know we're we're close to revenue generation, I'll just refresh a little bit of why we think we're a good investment opportunity for you. We're clearly a strong player in Morocco, and we're in the transition energy space where we're helping Morocco move away from the fossil fuel, the coal fired power, and transition them to what in the end will be a a a very renewable energy, dominated, country.

1:49 But transition energy involves gas, and we're we're the biggest owner of gas in or landowner alongside management, obviously, in Morocco at the moment. So we have a fantastic onshore position. We have a concession that we're about to bring on to production, And we have plenty of exploration upside and romance in Morocco. The need for gas is very compelling Morocco and strong demand and strong pricing. And it's been like that for quite some time, not just since the issues in in Europe. What we've got is a very clear development plan for our project. If those of you who've been with us for a few years will know that we, you know, we eat the elephant slice by slice, and we have it for breakfast. We have it for lunch. We have it for dinner.

2:44 So what we've done with this gas field is we've taken it in stages. We're onshore so we can appraise it. We can evaluate properly. We can put our investments in, and we can expand on that as we see the successful results. We have two projects. One out to be producing. That's the LNG project, small scale LNG, micro LNG, and we'll talk a little bit about that in a second. We have a second project, which is progressing not quite as fast as we wanted to, but I think there's some exciting news coming out on that in the near near term. What's very important for a small cap aim listed company is where our financing is. As everybody knows, that, you know, it's very difficult when when you're in the small cap world. So we've done that in the last year, like, the year eighteen months. We brought in a strong partner, Managem Energy. So we are now financed for our second phase of our development.

3:42 We recovered some past costs of our investments. And we've got a couple of exploration wells that are going to be drilled, which is, you know, not many people can say they've got a funny fully funded exploration wells. So we've got a good potential bringing these fields onto or this concession onto production with our first phase and our second phase gives us a long term view, ten, fifteen, twenty years of revenue. The excitement is going to be when we drill a bit more and and we find more gas. And as those of you have seen in the past when SOUND was successful in exploring and finding more gas, the share price reacted. But moreover, we're not resting on our laurels and just waiting for the gas to come out of Tendrara.

4:27 We've also expanded to our strengths in Morocco. John will be talking a little bit about the natural hydrogen that we will we formed a joint venture company called High Moroc, and that's with GTEC. So John will talk a little bit about in that. So very early stages, but that's very positive. The second one is really not just solar energy for the sake of doing solar. Morocco is one of the best countries in the world to do solar. But also because of a liberalization of the electricity grid and our opportunity to be one of the first movers to participate in that. So why Morocco? Why do we think transition energy is is is good in Morocco? Well, there's been a lot of gas imported into Morocco. There's a lot of not much natural hydrocarbons in Morocco. We have, as I say, the biggest position.

5:21 The government has decided to stop subsidizing and and reduce the subsidies on the imported LPG, liquefied petroleum gas. That's the gas that the locals cook with and is used sometimes in in industry. And the idea that we are partnering up and and doing this business in phase one with the liquefied natural gas is a substitution. So, I mean, it's good for the carbon footprint as well. Local gas is always better than imported. Tell that to Ed Miliband, but he wants to import it from the rest of the world instead of using our own gas. But we will be producing liquefied natural gas for the domestic market, industrial market in in Morocco. It's a growing energy need. Morocco is getting about 4% to 5% growth. I mean, we would love to have that growth in The UK. And inflation in Morocco is around about 1%.

6:15 It needs energy, and therefore, everybody is held for leather to to get energy, Moroccan energy into the Moroccan system. We also believe that moving into the transition energy and taking opportunities of our strength in Morocco, our relationships and our shareholder base in Morocco to move into the renewable energy bay basis. But financially, Morocco is attractive to companies like SOUND to develop its gas. And there is a ten year corporation tax holiday. So it's it's important for us to produce this gas and get as much out as possible in a ten year period to optimize our our tax position. So moving on to for those of you who are not sure where Tandrara is, we're up on the Algerian border.

7:07 Quite a remote location, but we are south of the main trunk line that comes in from Algeria, goes across Morocco and up into Spain. That's called the GME pipeline. Tenderra Concessions are small concession in the center of a large exploration acreage position that we have. And so we're out in the East of the country, and we will be developing the second phase with the pipeline that ties into the GME. Three seventy seven Bcf of raw gas volumes, uncontracted raw gas volumes is more than that. But we have taken with our two signed gas sales agreements to sell round about what we will call the one c, one p reserve level. So there's plenty of upside to sell about two c resource, 377 BCF.

8:04 And a little picture at the bottom here of where we are. I've got a couple more site pictures. But where we are in this phase one development, we partnered with MANNA ENERGY. MANNA ENERGY is the new lake to the Managem story. Managem, a mining company of, I think, a $6,000,000,000 Moroccan owned mining company that's active throughout Africa. And they've moved into the energy space as well. They've moved into the gas business by acquiring a a part of our business last year. We're also partnered with Africa Gas, which is a big fuel distributor in Morocco, a subsidiary of the Aqua Group, which is an even bigger conglomerate. Africa Gas in their own right, couple of billion dollar company. So we've got two very strong local partners, and and we now are a 20% non operated shareholder in that in that business. The other shareholder is 25% owned by the state, which is the state participant ONIM.

9:08 So phase one development for those that you've been following us, it's taken some time. The wells are ready. We're up to we've tested them. They are completed. They are ready to go. The micro LNG plant is coming to site in pieces. It's been factory tested, and it's been brought into the country. And commissioning is is starting any minute now. We expect to have production by the end of this year. Transportation, Africa gas are ready. They bought their trucks. They've got their re gas storage facilities, and they've got their re gasification facilities. We took some financing out to help it. When this was owned 75% or in in operated by SOUND and owned at various times between 47 and a half and 75% owned by SOUND. We have our o n e sorry. Our our Africa gas gas sales contract in place. We will be at the top end of that gas price, $88, around about that for a gas sold at the site.

10:11 Bear in mind, Africa picks the gas up there, trucks it six, seven, 800 kilometers to their their sales points. They store it, and they regasify it, and then they sell it to their customers. Ten year take or pay contract and around about 10,000,000 cubic foot a day of sales gas, 10,000,000 that's a 100,000,000 cubic meters a year. There's a few pictures. We are every day, there's new equipment coming site. To Every day, there's a bit of process. But the main developments now is the LNG tank is is is pretty ready. The up in the top right hand side, you can see the flow lines being laid. You see here, this is a couple of months ago when we tested the the wells.

10:59 So the wells shut in now, but it's it's ready to go. AMIN units and the LNG equipment. So it's all coming together on-site, and it's quite an exciting measure. There was an an interesting pre pre submitted question, which I'm looking forward to answering about getting to first gas. Second phase of the development is more about the pipeline. And I think the interesting and the the good news is that MANNA ENERGY have already commissioned and have started the FEED update. And in fact, information's coming to to to our knowledge quite regularly on that. So we expect that the FEED study will be completed by the end of the year. That triggers then and the main thing outstanding is now with the the FEED studies, where are we in the in the cost estimate?

11:49 You know, are we talking 300,000,000? Are we talking $3.25? Are we talking $350,000,000 for developing this? Bear in mind, we are carried to 24 and a half percent of the of of our share of the equity. The debt financing is in place with actually Joffe Bank. And so with the FEED study triggers closing of the debt financing, triggers selection of the EPC contractor, and triggers the finalization of the ONEE gas sales agreement. Again, a ten year take or pay contract at 300,000,000 cubic meters a year. When this is fully on production, we're looking a couple of years after FID. It's about $90,000,000 a year revenue.

12:35 So in total, phase one and phase two, a $120,000,000 a year. Our share of that will be 20%. So I'm gonna pass over to John now to talk a little bit about where we are with the expiration because that's key to everybody's hope that the share price will rocket. Great. Thanks, Graham. No. Just just a bit of an introduction to some of our, you know, new shareholders and those thinking of perhaps investing in SOUND. SOUND ENERGY, you know, we're providing some exposure to some very large areas of exploration acreage looking for gas. Beneath the salt is our that's our niche play in Morocco. But around the T 5 Horst development itself, and Graham's talked a lot about that development's coming on stream in those two phases. That's the map up in the top right hand there. You know, that's you know, we have some 23,000 square kilometers of exploration acreage surrounding that development.

13:29 And through that, you know, we've got exposed to significant exploration potential for, you know, further gas discoveries on on the acreage as well. So the phase two, you know, which brings in the pipeline in there that's shown on that map really is the launch pad for, you know, opening up additional potential that this basin, you know, truly has. So it really is that infrastructure that facilitates, you know, much more rapid commercialization of further discoveries, you know, should we make those in the future. Now we've received, you know, a lot of questions about timing of the exploration drilling. You know, as a shell myself and a geologist, I'm obviously extremely keen to see, further drilling in this basin because, you know, I truly believe this basin will deliver. And we know that drilling is certainly, you know, a catalyst for share price movement.

14:16 And what I will say is, you know, there are there's bit more work to be done on the exploration permits. You know, we need to perfect those permits, before drilling operations, can commence operationally on the ground. And Manon Energy, you know, they're now the operator of those exploration permits, and they're leading those discussions with the Moroccan authorities with SOUND, you know, with us in in support where we're able to do so. So, you know, once those discussions are complete under the terms of the, you know, SBA we have with them, we'll be drilling two exploration exploration wells. Wells. And SOUND, importantly SOUND, we're carried for our cost contribution for those two wells, and that's a net carry of $6,200,000. So it would be carried for those two wells moving forward. Now in parallel with those discussions to perfect those exploration licenses, you know, I'm pleased to say Manor Energy, there's as one would expect, you know, they're in the market for a rig, most appropriate rig that's, you know, technically capable, the best commercial terms. There is a rig available stacked on TE 10, but, obviously, they're going, you know, off into the wider market to to, you know, secure those those best technical terms that that that they can. So clearly, you know, we, Manor Energy, very keen to unlock the potential of this basin. And if we're successful, we're talking about, you know, adding a phase three, phase four, you know, really ramping, you know, up significantly those revenues that Graham, you know, is already, you know, talking about.

15:39 And SOUND ENERGY provides, you know, exposure to that potential revenue gain that we could see. Okay. Yeah. And and, I mean, let's let's face it. If if John's successful in any of these, the two the two areas in Gran Tendrara that we've already established gas, It's really about getting the gas out the ground. The wild catch is the m five, and that is a massive game changer if that one comes in. So but bear in mind, you know, John might say phase three is the exploration potential. And I know we can sell uncontracted gas, So there's a there's there's even more in the concession. Right? That's right. Okay, John. John's done a good job with GTEC setting up a company called Haimer Rock. Yeah. So talk a little bit about natural hydrogen and and helium.

16:24 It's, you know, a nascent it's very early days in in this space. But, you know, as a number of investors will be aware, there's there's a lot of, you know, activity and excitement around the possibility of natural hydrogen accumulations in the ground or indeed engineered hydrogen. That's a that's a different story. Hydrogen is you know, obviously could form a very critical part of the energy transition. It's a, you know, clean burning fuel. And, you know, there's a significant need, and that need for hydrogen is set to grow in the future. So there are a number of companies, you know, looking for for hydrogen across the across the globe at the moment. We have teamed up a company called GTEC Group listed again on AIM. And the reason why we've done that is GTEC, they have their own proprietary gravity and magnetics database.

17:13 They also have an advanced geoscience platform as well. They have machine learning algorithms, but they have a workflow, they have the personnel, and they have expertise in this area. And then what SOUND brings to the it brings to that that that that arrangement is that we've got our Pacific expertise in Morocco. We've been operating and developing exploration wells. We've drilled five wells. We've undertaken a number of well tests. We've acquired seismic data. We acquired airborne data so we can deliver those operations. And, obviously, we'll be networking, you know, our extensive network of contacts in country as well that we developed over over that decade. So those two companies bring those complementary skills together, and we formed HimerUp. You can visit the website there that we have at the moment.

18:02 Already, you know, as we've announced previously, we've completed, you know, a I wanna say quite a high level, but a regional screening study of the whole of the territory of of Morocco. And we're very pleased that it has identified a number of favorable areas where, you know, there could be source rocks for natural hydrogen or helium as well. So we'd like to focus on those areas. But before we take some next steps with some further work, what I want to do is secure some exploration permits across there. I'm already starting to engage Moroccan authorities as well, you know, to, you know, access and get get some exposure to those those permits there as well. So that would be the next steps there. So exciting, you know, joint venture. Early days, but just watch this space of these things develop. Thanks, John. I'm gonna ask John if that's okay, although he's not fully involved in this, just to talk about where we are with our potential access to the medium voltage grid in Morocco and our partnership with Gaia.

19:01 Yep. So so what we're doing there, that's just another area where we're diversifying into into the energy space in Morocco. Again, leveraging our links in our network in in Morocco, stepping into the solar space. We're taking advantage of a liberalization of the medium voltage grid in Morocco. In Morocco, medium voltage is, what, 22 kilobytes in there, and we're an early mover into this space. So as far as we're aware, there are only two other companies active in in this area. So what we're looking to do is, you know, we're and we're looking to, you know, secure capacity of of around about 250 to 300 megawatts in in total. And we're to do that, we're looking at now 20 different sites of 20 megawatts each of installed capacity, 20 megawatts each. Okay? So we don't expect to secure all of those 20 sites of 20 megawatts each, but we expect to secure enough to get somewhere between two fifty and and three hundred megawatts in in total.

20:00 So what does a 20 megawatt solar site look like? Well, it you know, each of those could be up to a 100 hectares. So you're looking at 200 oh, 125 football pitches in in size, just to give a give an idea of of what that would be. And each of those sites were identified as already proximal to a substation. So you can access to get direct and and close access to that media voltage grid, and that that would feed, you know, power into urban and industrial centers. So we've already identified those, and and we're already, you know, working to secure the the lease and the permits of that of that land. So, you know, clearly, you know, energy is gonna grow very quickly in the near term. People will be aware that, you know, in 2030, Morocco will host the FIFA World Cup. They're building the world's largest football stadium. I mentioned football pitches there. So that's a 115,000 seat capacity in there. They're upgrading seven airports.

20:50 They're upgrading the transport system. That all needs immediate energy growth in there. And not all of that should come through fossil fuels, which should be looking at renewables as well. And we want to, you know, move into that space. So we've signed an agreement with Gaia Energy to to to move that forward. Yep. Thanks, John. And Gaia is a is a Moroccan focused developer of renewable energy. I'm gonna pass over to our new CFO as of the September 1. Thank you for joining us, Andy. He Andy's been with us for four months now, three three and a bit months as a as a interim CFO. And I think he's he's been doing quite a bit of work, and he he likes the company. So I'm really pleased you joined us. Thank you. Thanks so much, Graham.

21:39 As Graham said, I joined, recently, and I've got really three areas that I'm that I'm really quite focused on. The first one is obviously the company going from being a pre revenue AIM company to having operational cash flow. And that's why my one of my key focuses is on ensuring that we get to production now with with phase one. And part of that story is the, the contract that we changed with the micro NG plant going from vendor financing to an EPC type contract, which improved the economics and reduced the cost. So that helps us get to first gas. The second area of the of my focus is on, the company's balance sheet. And everybody's aware that the company has a, a level of debt, and I'm focused on looking at ways that we may be able to restructure that, maybe reduce that to get the the the the the debt to equity ratio changed within the enterprise value of of the company. And the third area is is new ventures because the company always has to look ahead, look at new areas outside Morocco, maybe in oil and gas and other projects, and they could be corporate opportunities.

22:52 They could be asset opportunities. And the sort of areas that that we're focused on is in North Africa, around The Mediterranean. And if we come across good opportunities, then we need to think about funding solutions that we can that we can take on board to take those forward. Thank you, Andy. And I I think for those of you who don't know Andy, he's, he did a little, interview, introducing himself, last week, and it's up on our corporate website. And then he also did a little podcast with VSA Capital where discussing more over a more of a extended period about businesses. And so please get a chance to learn a little bit more about Andy and a little bit more of his thoughts on how he's gonna take this company forward.

23:40 So one of the things that we we we work quite closely on and most of us are engineers by background. Fortunately, we have a to to keep us on straight and narrow. But what we like to do is measure things. So, you know, what gets measured gets done. So we've we've put out key performance indicators together with the board at the beginning of the year, and we have essentially five areas that we we have to deliver on. All of this under the guise of making sure we're doing things safely and in in the right way. So clearly, number one is getting first gas. And the conversations we've had recently and the updates we've had recently, we know things are all coming together at the site. And this is always the way in a a typical project. It's normally a slow start, then there's a big fast ramp up, and then the last 10% takes, 20% of the time. While we're doing everything we to make that a very steep curve and that we get first gas due for this year.

24:37 I'm pleased with the FEED update that's underway. We know the Canadian outfit, GLE, quite well. They're very professional, very slick, competent people, and they're doing a very good job. I mean, the these are people that we knew at SOUND ENERGY as well, had already been doing some work on TENDRA. So we're really pleased that that's coming together, and I'm hopeful that the FEED will finish by the end of the year. And then that will unlock where we are with the O and E gas sales contract, the attitude of the bank there. And then we'll select the the right EPC contractor without, obviously, operators lead on that with Manor Energy. John's talked about exploration. I think it's exciting that MANO ENERGY are out there looking for a rig. We are working SOUND as well as MANO ENERGY to perfect those licenses.

25:26 There seems to be a little bit of a bottleneck in the ministry at the moment. Things are taking longer than than normal, but we're working hard to unlock that. And as soon as those licenses are are ready, we'll be pushing MANO Energy to select the rig and and get going. And just just described the balance sheet strengthening. You know, I mean, when I first joined SOUND, the balance sheet looked looked even worse than it does today, you know, with no revenue on-site, etcetera. And we've been able to restructure that bond a couple of times and kick it down the road. So we'll we'll see where we get to on on on that with the bondholders, but they are supportive of us. They like what we're doing. They like, you know, the fact that we we're actually, you know, within spitting distance of first revenue.

26:16 And and they've been supportive over the last three, four years. I think if they'd wanted to do something nasty to us, they would have done it five years ago. And finally, John's been working very hard on establishing the JV, which is set up at High Moroc, and the website's up and email addresses and everything's going. Gaia Energy, we need a little bit longer to formula that because it's got a little bit more extra out outside of The UK registrations to be completed. But that's all moving in the right direction, and and we're gonna be looking at other opportunities. We, you know, we have a team that we're looking at other opportunities. But let's face it, we wanna strengthen our position in Morocco. We wanna be strong with revenue base, and we and we want to play to the strength of our two main shareholders and our partner of Energy.

27:07 So, Alessandro, that was a quick run through of the presentation. Maybe we can head over to questions. Yes. Of course. Well, thanks very much for the presentation. Ladies and gentlemen, please do continue to submit your questions. And you can do so just by using the Q and A tab that's situated in the top right hand corner of your screen. Just while the company take a few moments to review the questions that have been submitted today, I'd like to run the recording of the presentation along with a copy of the slides and the published Q and A can be accessed via investor dashboards. As you can see, we have received a number of questions both pre submitted and throughout today's live presentation. Graham, what I'll do is I'll hand back to you now to run through the q and a, and I'll pick up from you at the end. Alright. Thanks. Well, what we'll do is you have a bit of variety is the questions that more aimed at me, I'll take first, and then we'll pass to John and Andy to to carry on with some other questions.

27:58 And, please, if you've got any other clarification questions, we hope that we covered quite a lot anyway in the presentation. But any clarifications, just pop it on the on the live questions, and we'll we'll try and cover that. Here we go. I have been a shareholder for over a decade. Please can give me an estimate, even a very rough estimate, when we might expect the share price to arrive rise above 25p. Well, look. At 25p per share, that means a market cap of £500,000,000. I think if we get there, everybody's gonna be very, very happy. Our core net asset value, as reported by our analyst Dan Dan Slater at SOUCE and it and by the way, you can see an interview that he held just recently up on our website as well. But that shows 2.2p per share. So still four times where we are today. Alright? And the risk net asset value, so the core 2.2, the risk net net NAV is 3.9.

28:56 So, you know, six or seven times where we are today. This all builds in Dan's models, his his understanding of where we are with our cash flows, where we are with our capital expenditures, where we are with our debt repayments. And Andy's explained that to you before. You know, we there's no immediate panic about paying debt down. Okay? All of that is based on where we are with the concession. It doesn't take into consideration anything that John's gonna develop for us with the exploration drilling. And that's a free ride for us at SOUND. So, you know, we're we're quite clear clearly keen. SPK one, we know a structure has gas in it. The issue is, you know, can we find the right location and and get the well to to produce?

29:46 M5, I've I've said, is pure exploration. What I would say to the the person who said, you know, when will we see 25¢? Actually, since the company existed, it's it's been over 25p per share three times at three specific times in in over its history. Not not just three days, but periods of time when it was over 25¢. So roll on the fourth. That's all I can say. Okay. Similar sort of question, when will I see a return on my twelve year old investment? Well, thanks for that. Definitely sounds in a a much better position than we were a year ago. You know, a year ago, we hadn't closed the deal with management. It was announced, but we hadn't closed.

30:33 We've now got funded development. We've got cash in the bank. We've got several catalysts for news flow, whether it's perfecting the licenses, announcing that there's a rig contracted, spudding an exploration well, getting first gas, taking FID, locking in a new contract with ONE with a, you know, with a good gas price. I mean so all of that is good news flow over the near term. So I'm hoping depending on what you've averaged out at, and maybe you've stuck you've and bought your your shares twelve years ago and never bought a single penny. But, I mean, just look back three months. People have bought in at point six. We were over a penny, you know, for for a few days, but we're over a penny. So there's very thin liquidity in the market at the moment. So I think with all of this news flow coming, I'm hoping that that, you know, we all know a little a little news flow goes a long way in the in the share price.

31:33 Here's a question, and I think there's a couple in a similar theme. It's like, can we have reassurance that Manor Energy isn't deliberately delaying commissioning and revenues from the LNG project with the aim of eradicating sound from the project? Well, I I was with the CEO of MANNA ENERGY about two weeks ago. Discussing with him, it's full focus. His team is full focused on delivering this. They put new people in. They put specialist commissioning engineers in for the project. And please don't lose fact that our former COO, Mohammed Segiri, is still running the show down there. So MANNA ENERGY want first gas. They want FID on phase two, and they all know they are definitely not stalling first gas. They paid money to get into this project. And if they wanted SOUND out, they could have bought us out completely. They didn't, and we're in the project for for that.

32:32 Here's a question now. What's the expected revenues from SOUND for the solar project? Where's the funding coming from? Does SOUND have a $50.50 share in this with its African partner? That's Gaia Energy. Is the Moroccan government having a share? Well, the simple answer to that is no. The Moroccan government isn't part of this. This is the liberalization of the medium voltage grid. And so we are fifty fifty with Gaia Energy. There is actually a company formed in Morocco right now, and there will be a fifty fifty joint venture company owned by SOUND and GAIA ENERGY outside of Morocco. That is being set up. SOUND ENERGY, for those who follow us at company sales will know we've set up our Solar Ventures company. So we've got our UK parent set up.

33:17 We're just waiting for the intermediary company to be be set up on that. To give you an idea of revenues, a 20 megawatt site gross is around 2.5 to 3,000,000 a year of revenue. So if we can get 250, we're looking at $225,000,000 of gross revenue, and our share of that will be 50%. So then, you know, obviously, we have to take our debt financing and everything else off on that. The difference between oil and gas and solar, particularly in Morocco, the Moroccan banks and institutions love love renewable energy in Morocco and will finance it. And secondly, it's not risky. You know, if you're drilling an exploration well, you're drilling a a a development well, always a bit of subsurface risk.

34:04 We know the sun shines in Morocco. That's not the issue. We know once we have grid capacity because, as John mentioned, the substations are there. Soon as we've got the capacity, there is very, very little risk in technical risk in these projects. So that can possibly attract 80 or even up to 90% debt funding. So the idea of us having to put a lot of equity into this is is, you know, it's it's small. So, yeah, we think it's a a good opportunity for us. And it's also relatively short time frame from decision to develop getting the power capacity and getting the approvals, and then construction and commissioning and and production can be within six months. So that's quite good. Here's another question more along the the valuation or the undervaluation of SOUND. There's an increasing nationalistic movement throughout many nations, and it's expected to Morocco's keen to keep control of its resources.

35:00 SOUND ENERGY invested a 150,000,000 in Morocco, but it's now valued at only about 13,000,000. It would it would make sense for Manor Energy over sales 20%, and it's 27 and a half percent in the Eastern Morocco. So what's assurance that nothing like this happens? Well, we're a public company, and, yes, we recognize we're way undervalued. Some costs are some costs. They're not the value of the of the project going forward. So the enterprise value, that's the combination of market cap and debt, is around about $70,000,000. So that's the difference between the enterprise value and the accountant's way of looking at it in book value. Andy can correct me on this if I'm if I'm going wrong. I think if management wants to make an offer for SOUND PLC, they would, you know our board would have to consider it, but, you know, it's gotta be a pretty good offer. And and secondly, we'd we would have to come to shareholders to to ask for approvals.

35:59 So now I see we're on the cusp on the cusp of good news in Morocco, but really material good news. Production, exploration spuds, you know, the and two new development projects with Gaia Energy and and and and High Moroc. So any lowball offer coming in to buy sound, it's not only I think I would find it difficult to accept, especially as where we are today. But I think our two main shareholders, that's the oil and gas investment fund and Africa Gas, who've been with us for a long time, don't forget, I think they will find it difficult for us to sell to any lowball offer. Similar some type of question, the share price is so low, Manor Energy could purchase SOUND for out of its pocket exchange. Well, that's true if if they wanted to.

36:47 If if we were approached for a takeover, you know, what would we do? What's the minimum sale price? Look. We're in this business to create value for our shareholders, and we are doing that through running our job. We're doing that by trying to grow our business for using a little capital as possible, but the the biggest bang for our buck. Manna Energy is a Casablanca listed company, and we're an AIM listed company. So any approach to us would have all sorts of corporate governance issues and the merger and takeover panel, etcetera. My guess is, and my conversations with Manaranji, they are very focused on getting the gas production at Tendrara. And they're very focused on getting that pipeline built and getting the gas into the power stations.

37:34 Messing around with a company like SOUND at the moment is is a distraction from their focus from all their corporate transactions that they're doing. So, you know, I I recognize that the AI market hasn't built in a takeover premium to our to our company. But as a British company in Morocco on the cusp of all these good things, you I know, recognize we're completely undervalued, and and I'm sure the market hasn't factored any takeover premium in our share price. Is there any evidence that Manor Energy is progressing to phase two? Yeah. What I discussed in the presentation, that GLE, a Canadian engineering house, design engineering house is updating the FEED study. We're aware that Manor Energy is constantly being updated and up with new information on that. The target is to have that that study finished by the end of the year.

38:29 All of the experiences we've had working with Julie is that they always meet their their deadlines. They're they're a very good engineering house fit for purpose for this project. And they've been familiar with the project for over two years, so this is not new to them. So, yeah, we're very pleased on that. And and that will trigger, as I said, the ONEE contract, the attitude of bank debt, and the selection of the EPC contractor. And then management are very keen to take FIDs. So, you know, with all those things in place, that'll be good. Is there any obligation from MANNA ENERGY to keep SOUND as a minority holder informed of what the progress or lack of there is? Well, yes, there is. Under under our agreements, we have a a formal meeting sessions with the what we call the management committee meeting where our technical director and Andy are on the on the board of that that management committee.

39:21 And so we have a structure for that. We have regular project reports. We have formal reports and then informal reports. But it's true to say we don't get the daily update that we used to get when we were the operator. Now what they call OBO, operated by others, is quite common in the oil and gas world, and it's about relationships. It's about getting inform informal information and sharing information in a timely manner. And I think you've gotta you've gotta remember, Mohammed Segiri is sitting there where he was sitting in cell inside cell six months ago, nine months ago. So our technical director has regular calls with with Mohammed. He was on the call with him yesterday, and we get emails, you know, every other day. So we do we are informed. We're not on an hourly basis, you know, step by step as we would have done as operator, but we are informed and we have structures that we can keep in in place.

40:17 Here's a little bit more technical question about the LNG progress, commissioning on revenues. How long before Africa Gas agree agreed minimum take or pay is achieved? And all its various customers, you know, will they all come online at once or are they phased in? Well, as I said to you earlier on, the the LNG construction continues. Commissioning is going through. And once commissioned full production for phase one, the two wells deliver full gas now. We could have those gas they can deliver 15,000,000 cubic foot a day, and our gross production expected is up is below that. So so the world's already we have capacity to flow at full blast. Right? The issue is is taking the gas through the LNG liquefaction plant and then cooling down the big tank, which has storage capacity for about two weeks. So you cool the tank down. So you can't, on the very first day, put all the capacity in and then take it all out in the in the in the trucks. So there will be a period where we load up the LNG tank, and then Africa will take and their plan and I've spoken to the representative of Africa. They're ready.

41:30 They're they're they're head of projects. Everything's ready. They've got the trucks. They've got everything in place. They will probably bring on one or two buyers of the gas every week. So probably one a week. So it will take a period of time to get up to the full offtake. But from our point of view, the the way the gas sales contract is, soon as we put gas in through that plant, they pay for it. Okay? So it might get stored in the LNG tank, but the system is that we get revenue from that. Then they offtake, and there's a certain minimum and maximum capacity they can take it off. Essentially, it's one truck to one and a half trucks an hour to come in and and and pick up the the LNG.

42:15 So but the key key for us is as soon as we're on maximum production capacity and the LNG is being manufactured, it goes in that tank, we get paid even if Africa gas don't take it. Here's here's the interesting question. Is Graham committed to see Tendrara project through to commissioning? I've I've been here six years. Course I am. I wanna be there the day we we, you know, we load the first tanker and and we sell it, maybe even the day we first commission. But realistically, you know, that's gonna be an operational thing. So I'm sure we'll we'll get invited out to do a a ribbon cutting or whatever it is. So very keen to stay. Plus, I think we've got a very solid base. I wanna see exploration wells drilled. I wanna I wanna get the solar panel solar projects going. I would love to to get some licenses. Admittedly, I might not be around when they draw their first world, but but, of course so I plan to be here for another week or two, but it's in your hands. If you you want me to stay, I you know, it's in the hands of the shareholders.

43:18 Now that was a big long thing for me. I'm gonna pass to Andy for a couple of questions, and there's a couple coming on the quest on the live questions, which John will be answering. And so we'll go to you on the financing type questions first, and then we'll finish up with John. Andy, we made a loss on foreign exchange of nearly 4,000,000 in six months. Why is that? That's quite easy to answer. Graham, our our debt is denominated in the US dollar. That's our loan notes with Africa. And our euro bonds are dominated denominated in the in the euro. And so any fluctuations in the exchange rates come as a as an FX loss. There's been quite a fluctuation in the US sterling US dollar sterling exchange rate, and that's what's made up most of that FX loss. The important thing is that this is a p and l effect. It's it's not having any It's not real money, is it? No. It's not having a cash flow impact. So that's the most important aspect of it. I know you talked a little bit about this in your discussion, but one of the questions was we need $25,000,000 facility to fund the contract change from vendor financing to traditional PC. Can you explain, please?

44:37 Yes. So the the the the micro energy contracts that we originally have with Itau Gas was a vendor financing type contract, and we converted that with the operator to a more traditional engineering procurement and construction EPC type contracts that needed to be funded. And the way the joint venture funded that was to put in a $25,000,000 debt facility with a local Moroccan bank. Our share of that facility is $5,000,000. Why did we move to that? Those sort of traditional type of EPC contracts, I think, focus the, the contractor better. They certainly get a better, OpEx, level out of it. So that overall enhances the project rate of return.

45:27 It enhances the project economics and ultimately leads to a better value rate of the project. Yeah. And and this was the challenge we had SOUND ENERGY had where how would we have raised the $25,000,000 to to do that on top of the other capital that we needed to put in. We had the $18,000,000 from Africa. So this shows you the strength of having somebody like Mana Energy behind you because we're using the the strength of Mana Gem, and the bank is very comfortable lending to Mana Gem. Andy, the next question's a little bit more about revenues and when are you gonna run out of money. Sound investors have endured delay after delay. Money continues to drain away from the company. Still no revenues. When will the company coffers be empty? Does SOUND really have the financial capacity to survive?

46:17 Yeah. Well, look, it's been a long time coming, you know, to get to this point where we're on the cusp of of first revenues. And as you saw in the interims, we reported a cash balance of 2,800,000 as of the June 30. We also have, and this is important, we have a a carry of debt financing and the managed energy carry for for phase two post FID. And we've got some some cash coming in once we start getting into operations from from phase one. So we haven't got that long to last to go now until we get to, to first gas. And we, you know, we can make that cash, last us until we get to that point by, you know, just covering our financials like our listing costs, compliance costs, etcetera. So, you know, we do make a little go a long way, and the important thing is that we're we're not that far away from having our own revenues now. Yep. That's right.

47:14 Will SOUND's 20% of phase one revenue, which may take months to fee reach full flow, I don't think so, but anyway, be sufficient for it to survive? So similar sort of question. I mean, similar question. We're we're we're going from being a a pre revenue company into a company with operational cash flow. And coupled with all the other aspects that we've got, and importantly, as I've just mentioned in the previous question, the carried element that we've got from Manor Energy post f I FID on phase two and the debt financing that's already put in there, I think that we're in a very good position, you know, to cover ourselves until we get into, you know, meaningful cash flow. Thanks, Andy. A little bit more question about the bond, the Eurobond. Has any progress been made regarding payment and or renegotiation of the 24,000,000?

48:04 It's twenty three point five, but, yeah, Eurobond. Yep. Well, we're the bonds are not the Eurobonds are not due until December twenty twenty seven seven. We have a very good relationship with the representatives of the bondholders, and we're in constant discussions with them. And they're very keen, obviously, to see us get to first gas and first revenues. So they see the light at the end of the tunnel. We've restructured these bonds a couple of times. I think there's every possibility of restructuring them again, potentially to push the maturity date out so that it jives with the phase two revenues in 2028. And, you know, all these sort of conversations and discussions are being had at the moment with the with the bondholders.

48:54 Yeah. I have to say since Andy's come on onboard, he's he's picked up that relationship really well. So so they've got a lot of confidence in in Andy joining as our CFO. Can we pass over to John now for some answers? Mhmm. Could the board please clarify expected commencement date productive time line for drilling campaign, including any dependencies, milestones that may influence its execution? Okay. So I think I answered partly that that question in during the presentation itself. But, you know, to be clear, there's some a bit of work to be done on the protection of those exploration licenses. That is those discussions are underway. Manager M Energy is, you know, leading those those discussions on the back of that, and we're we're, you know, obviously assisting where we're able to in that. So once those, you know, are complete, we'll then, you know, move towards drilling.

49:46 Having said that, I have said in parallel, those discussions, manage them around the market, they're looking for a rig. And in terms of, you know, what a program may may look like, yes, there's a two exploration wells, which we're all keen to see, but there's additional drilling within the development itself. So for example, for the micro LNG project, you know, it's a ten year contract, take or pay contract that we have. We need to feed that plant with fifteen, one five, 15,000,000 scuffs a day from, you know, those two those those two wells we've got tied in. They'll be able to supply that 15,000,000 scuffs a day for a period, but after which, you know, the the the production decline in those, and they'll need to drill another well to fulfill, you know, that commitment. So there's one development well there. So that's a a third third well in the program. And then with phase two, there's another five wells that need to be drilled for first gas on on there as well. So suddenly, there's an eight well program. So when you're going out, you know, for a rig, we have a rig contractor, there's there's quite an drilling program there to put that in in place, and that's, you know, putting that in schedule.

50:48 And they're doing it all, you know, sequentially and scheduling it there, a lot of cost gains as as well as, you know, from there as well from the synergies of the world. And that's that's what we're that's what we're putting together. So, look, manager, we're on it. We're moving forward. And as soon as we've, you know, we've got some, you know, hard schedule, we will we will put it out there. We'll be messaging that. But we look to the operator to provide that, and I'm sure they will in due course. Thank you. We have the same question from a couple of people. So I think John's explained that. And there are a couple of new questions in I mean, it's the same sort of one. Is there an update of of of drilling the Anowal well? And it's the same answer, isn't it? Yeah. So I think that's it there. It was originally scheduled for the first semester. So, you know, we we've guided how long it would take to drill a well from a stand in, you know, starts, nine nine to, you know, twelve months in terms of long lead items, securing the rig, etcetera.

51:42 But as I say, once those licenses are perfected, you know, manage M is working in parallel to bringing long lead items. You know, obviously, the rig is one of those as well. Do we reactivate the current rig that's on there? Would it be better to commercially better to bring in another one from, you know, from outside? You know, those options are all all out on the table, and the operator is is working through through those, and we're assisting those, you know, where where we're asked to do so. So here's a well well covered. Yeah. Thanks, John. Here's a very good question, and I'm not sure if it was asked to the Gtech people this this afternoon in their presentation. But it is very sensitive, the answer. Has Haimurok already identified a potential exploration zone? Yeah. So as I said before in in the presentation, Haimurok is you know, we've already screened the the whole country. We're using that, using the information that that GTEC hold, you know, leveraging their technical expertise as well. And from from that work, we have identified an area, which we believe has the potential for hydrogen source rocks. We think it's got the potential perhaps to, you know, accumulate hydrogen and helium in in the subsurface in that area, but it needs sort of further work. So we've been looking to secure an exploration permit over that area, you know, to allow us to make that that investment, but we secure, you know, the rights with that.

53:01 And we're working with the government authorities on that. But, also, we're reaching in, you know, to some of the Moroccan academic community, you know, as well with you know, we want to leverage some of their, you know, their their laboratories, local personnel on the ground as well to provide surveys, sampling, etcetera. So it's that that piece as well. You know, as Graham said, it's sensitive for commercial reasons. We, you we can't reveal where that that area is. But as soon as we secure that permit, which we, you know, we hope we'll be doing that in the near term, we will be announcing that then in due course again. Thanks, John. Alessandro, I think with the 20 odd questions, we're we're sort of, you know, getting towards the end of the hour anyway. Can I pass back to you? Yes. Of course. Well well, thank you very much for answering those questions from investors. Of course, the company can review all the questions submitted today, and we will publish the response out on the Investor Meet company platform.

53:53 But just before redirecting investors to provide you their feedback, which is particularly important to the company, Graham, could I just ask you for a few closing comments? Well, I think guys, and Gauls and anybody else, there's something else. We we're on the cusp now. SOUND's been an interesting journey over the last six years for me, and and I want to see revenue. I want to see exploration wells drilled. I wanna see the FID taken for phase two. So there's a lot of and and what we're doing with High Moroc and what we've what we're looking at with the the joint venture with Guyana with solar. So a lot on our plate and and a lot of news flow coming in the very near near term. So I can't remember. We we we actually said we're on the cusp. I I think we really are on the cusp. And then factoring over the top of that that, you know, our share price is at an all time low.

54:46 I'm hoping there's only one way to go. So thank you for sticking with us. For the for the new people who are interested, keep an eye out on us. Keep an eye watch what we do. And I'm hoping that in the next few months, you're gonna get some really good news flow. That's great. Well, thank you once again for updating investors today. Could I please ask investors not to close this session? As you now be automatically redirected to provide your feedback in order the management team can better understand your views and expectations. Of the management team of SOUND ENERGY PLC, we'd like to thank you for attending today's presentation, and good evening to you all.