Sound Energy (LSE:SOU) — Investor presentation

0:01 Good afternoon, and welcome to the SOUND ENERGY PLC investor presentation. Throughout this recorded meeting, investors will be in listen only mode. Questions could be submitted at any time by the Q and A tab situated in the right hand corner of the screen. Simply type in your question and press send. Company may not be in a position to answer every question received during the meeting itself. However, the company can review all 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 over to Graham Lyon, executive chairman. Good afternoon, sir.

0:29 Thank you, Paul. Well, thank you very much for everybody joining us this evening. It's been a while since we've spoken to our shareholders and stakeholders, yeah, it's about time for a catch up. We took on this IMC platform to help hopefully involve shareholders in our Qs and As in a more regular basis. So we expect lots of activity this year, quite a lot of news coming, although it's been very quiet over the last few months as many of you have pointed out to me. Just to reiterate, any price sensitive information comes via the RNS system, so, there won't be any delays on on that front. I'm gonna talk to you today about four elements of, what's going on in SOUND, the projects, our finance, what we're doing with the m and a transaction, and finally, a little bit on exploration. And then lots and lots of good questions, so I'll I'll I'll run through those as quickly as I can.

1:31 Couple of slides on disclaimers, and then let's hit the meat of the project information. You know we have the gas field in the East Of Morocco, 377 BCF of gas to develop. We've got a twenty five year concession, and we're doing it in a stepwise phased approach. The first phase of that is the micro LNG project, which is well underway, and I know you're all desperate for it to be on production like we are. And so I'm gonna go through that in some detail over the next hour. Well, less than that, but I'll include micro LNG in quite a lot of that conversation. We have a gas sales contract for ten years with Africa Gas, around about $8.

2:17 And for those of you who are on on the money, you you'll know that the American gas price at Henry Hub is about a dollar 60. National balancing point, that's The UK gas price is about $7.60. So, you know, we we've got a fair price from Africa, not too far off what the European price is now. We expect to see about $30,000,000 a year of revenue from this project at a 100% basis. And from that, there's a 5% royalty that's taken off. And then we have a operating cost, which we pay to Itau fluids. So perhaps we'll see a netback of somewhere in the region of 2 to $3 a million cubic foot. We do expect first gas this year.

3:05 So as we go into the project, I think we just need to reiterate to people the various elements of this project, and not all of it is under control of SOUND ENERGY. Our operating company, SOUND ENERGY Morocco East, is responsible for the access road, and you've seen probably pictures of that coming out on our tweets or on or on the websites or linked. And and we're at the stage where this is mostly gravel and and laid and pipelines sorry. Pipes have been put in to take care for any waddies or water runaways. We will put the blacktop down, the bitumen around about May when things warm up. So, that that project's going ahead. That's a part of the activities all on on schedule, and we're we're moving forward quickly.

3:54 The second part that SOUND ENERGY Morocco East is responsible for is our wells. The t e six and t e seven wells, are available for production. And what we need to do now is is put them into the mode with the completion, appropriate for development. And and that means putting our chrome tubing in, and that's the production tubing you saw, loaded at site that's waiting there for for, installation. And we, bring in a rig. It's the Star Valley rig one zero one, and that's due in after the person who's got it at the moment finishes working with it, and we expect that to come towards the end of March. So we've got the production equipment there. We've got the, rig coming at the end of March. The Christmas trees are on their way from Singapore, and they'll be hidden inside. But we don't need to to use a rig to install the the Christmas trees.

4:50 Last year, we did the packer settings, so and we've tested all the world, so they're in good shape, and and we're ready to get that work completed very shortly. The next part is the meat of the project, and this is what Itau fluids are undertaking for us. And you'll know that this is under a vendor financing model, so that's not a traditional EPC engineer engineer, procure, and construct contract where the operator that, in this case, SEMIAST, would have been in control of everything. So it's our fluids because of its vendor financing. It's almost like a turnkey. They come along, give us a plant that's up and running and hands the keys, except they're gonna operate and maintain it as well.

5:37 At the top of the graph, you or the slide, you'll see the plot layout. This is the design of all the various bits of equipment. And if you go to our website, you can see a seven minute video of a walk through of all the different pieces of equipment. But here's the real equipment in the in the project built, ready, or about to be complete in the center site. The the guts of the project is the micro LNG cold box. That's the that's the equipment that manufactures the LNG. It takes the gas and then cools it down to a minus a 162, I think it is, degrees c, and puts it into a liquid form. That's been fabricated. That's ready, and, and that's ready for, coming to to Morocco.

6:23 The element in the middle is the, mixed refrigerant, so makeup unit. So this is the the the liquids that you use when you cool the gas down to the cryogenic temperatures you're looking for, and that's being manufactured, I think, in Singapore. This is a picture on the right here as parts of the inner tank of the LNG storage tank, the big storage tank. And this is I've seen it physically. I've seen it myself, and it's in North Of Spain at the moment. And that will be due to leave Spain in the next week or two and be in in Morocco very shortly after. On the bottom is another part that's critical to the gas processing. It's the AMEEN unit, and these are being manufactured and are ready to come to the site.

7:14 So things are moving on, and, we'll go through some of the elements of this in detail. Some very good questions, about, the micro energy plant, and I'll take that, in the questions. The sec the third bit that SOUND ENERGY Morocco East is responsible for is the taking the gas from the wellheads and moving it across to the manifolds and entry into the production system. And this is being undertaken from a subcontractor we're using gas liquids engineering out of Calgary, and the design's pretty much finished on that. Then we move into procuring the flow lines and beginning to the the construction installation side of that. You you can see it's a three well design. That the third well is T e 112, which will be the next well we drill as a development well after first gas.

8:09 Last part of the project is getting the gas to the market. And whilst we manufacture the gas and manufacture the LNG, we store the LNG in that big LNG storage tank, then somebody has to transport it to market and sell it. And that's Africa Gas, our partner. Africa Gas are preparing right now trucks to collect the LNG at the site. They are preparing, small storage facilities in each of their client's bases, and then they're preparing a regasification site, at each client's premises. So it's very important for us to work closely aligned with Africa Gas to ensure that our plant is ready when their trucks are ready, and our wells are ready when the plant's ready. All of those three parts have to come together.

9:01 So we're we're doing that, and I do expect first gas this year.

9:09 The gas field that we have, the concession that we have, as I mentioned, 377 BCF of gas developed in a stepwise manner. First phase of that, the microengine, but the second phase of that is a bigger project, and it's the pipeline project, which connects us to the GME pipeline. So this will take 300,000,000 cubic meters a year as opposed to a 100,000,000 cubic meters a year with the Africa gas micro LNG project. The key elements to get this project in place and get it funded and as you as you a lot of you asked is when is the FID, the final investment decision? Well, the key elements are that we get the debt in place, the financing in place, and then that's a combination of debt and equity.

9:55 We have a gas sales agreement, and we have the engineering contracts. Once all of that is put together, then we can take the FID. We've got a lot of work done, and we've explained this in the past, but we are now working very closely on the debt financing with Attitude Offer Bank. That has certain CPs in it, which require to be harmonized with the gas sales agreement, and we're doing that work now. That work is under the auspices of the authorities in Morocco, and documentation is between both ourselves, ONEE, Attitude Afa Bank, and the ministries. So all of that's coming together, and, you know, we we hope to be able to move forward with those concluded agreements very shortly.

10:45 Once we've got those agreements in place, we do need to refresh the feed because there's time has passed since the last work was done, costs have changed, and that slightly optimized development has been put in place. We expect this project to be delivering revenue wise about $90,000,000 a year and over a ten year period each year, you know, with the roundabout 30,000,000, 32,000,000 of of gas sold every every day. And the netbacks for this will be much higher because the operating cost per unit of gas produced is a lot lower. Finally, I'd just I'd just say that the main point of this pipeline project is the uncontracted gas. Almost double the volume of the gas that we have at the moment in place is uncontracted, and therefore, having the opportunity to sell more gas down this pipeline is important.

11:42 Where we are financially, here's the statistics. You've seen some of these before. We've got cash for the project in our microenergy project. We have a debt facility from Africa Gas of which around about $6,000,000 is undrawn at the moment. You know that we have some debt facilities with the Eurobond, and and that's that's out there at the moment. We have good supportive shareholders. Our two main shareholders, Oil and Gas Investment Fund of Morocco and Africa Gas, are both supportive of our strategy and our plan to deliver revenue through a staged approach of the tender oilfield development. But two thirds of our shareholders are are retail shareholders, so that's you guys. So thank you very much for your support and sticking with us so far. We have a plan. We are trying to execute on it, even though it's a little bit slower than I think most people want.

12:43 The attitude of a bank debt, we've we've presented that information, previously, so I'm not gonna go through that. But, just to say that everything seems to be the same as as we expect. The missing part for the project financing is the equity portion. And rather than try and raise equity on a market, which you know got these guys would dilute us to hell, we have taken the the route to divest a little bit at the at the asset level. And we announced this this transaction with Cal Valley where they come in and take an equity position across the licenses and including the concession. They, buy in for the project by recovering paying their back costs.

13:31 They fund, the equity portion of the, phase two development. And if that doesn't if their funding, cap doesn't, cover all of the funding, they advance us on an additional funding should we need it. So this is important for us to show that all the building blocks for phase two are in place, save the detailed agreements, and and we're working very hard on putting those together. So sorry. It's not a blow by blow, hour by hour update on that, but, you know, these detailed agreements take some time to get through. The definitive agreements are between Calvary and SOUND are underway, and, they've completed their due diligence. They are very actively, liaising with us. I even had a call with the, a voice message and a call with the chairman of, Calvary this morning. They are part of the Octavia group and have, the same shareholders as a very big Yemeni, family, conglomerate that's been trading in over over ninety odd years.

14:38 They've met all the key stakeholders, in Morocco authorities, we're looking forward to closing this deal with Cal Valley. So it's very much on. Finally, I'll I'll just briefly touch on exploration because this is the romance in the portfolio. We have a lot of gas here. We have a very large acreage position, and the potential to unlock this requires us drilling some wells. We've identified near term drilling opportunities through, T 4 on the horse and SPK 1 on Gran Tenendrara and the M 5 big exploration well on the annual license. Now part of the deal with Cal Valley is to fund the drilling of TE 4. And as soon as that well sorry. As soon as that deal with Cal Valley is closed, we will start looking at the t e four drilling timing. And I'll talk a little bit about that. It was a good question on that coming up in the in the presentation.

15:36 So I'll move, if that's not too too boring for you, to the q and a. So there's a lot of them. And, Paul, if I can pass back to you Fantastic. Absolutely. Graham, thank you indeed for the presentation. Ladies and gentlemen, Graham said, please do continue to submit your questions just using that Q and A tab. Just click Q and A, scroll to the bottom, type your question and press Q and A, can be seen by your investor dashboard. Graham, I'm just going to bring your camera up. As you can see, we received a number of questions, both pre submitted and throughout today's meeting from investors. So thank you to those investors for submitting those. Could I please ask you just to read out the questions and give responses where appropriate to do so? And I will pick up from you at the end. Cheers, Paul. Thanks. So, look, I'm gonna read these questions. I'll paraphrase them if they're a bit long because there's one or two, long questions. But key one I think everybody wanted to know is, can you fire clarify the current position regarding the micro LNG plant and the project completion and test phase of that cut plant? So, look, I've explained that to you where the five elements are from the different subcontractors that are responsible and the different operating parts.

16:51 The key area, and I wanna spend a little bit of time talking about this, the key area is we expect from the Tel Fluids, and they've confirmed that they can deliver the plant this year. The key area is the, LNG storage tank. And will that be ready? Because it's no good us producing the gas, processing it, making LNG, and have it having nowhere to put it. So that's oh, sorry about this. The there's nowhere to put the tank. So I'll explain a little bit more about the tank in another question. But what we are doing is taking steps to see if we can accelerate that and look up some form of short term rental of energy storage tanks. Not not the 6,200 cubic meters that this big tank will have, but maybe smaller ones that will allow Africa to start their production.

17:44 The next question was, we appreciate there's time slips, but can you give us some positive news? You've got 31 TCF of gas to discover. That's true. We've got a lot of gas in the license from prospects, leads, and plays. And, clearly, the important bit for that is, you know, where do we put our focus? Well, our focus has been very much on developing the LNG project and developing the the micro LNG to get revenue. That's our strategy. Get some revenue into the company, get some cash flow, and then develop the the large acreage position. Because it's on land, we can do it step by step. That said, we've got the Cal Valley deal. So that's a TE four well. And what we want to try and do is put three well program together. So for me, it's important that we we bring the, Kal Valley guys into Anoal as well, and I'm trying to convince them to do that.

18:42 They haven't accepted that just yet, but we hope to to to get them there on that. And that really takes it into the next question is where are we with Anoal? And Anouel, I I would say that we're working closely with the with ONIM and and the ministry, and we've applied for, an extension of an Anouel into the first complementary period. And that will allow us to take that m five well into a time slot that will allow us to drill t four and and m five and and hopefully, SBK one all in the same time. The next question was and I'm gonna mix them a little bit so that we'll we'll go between the project expiration and and phase two, etcetera, and financing. When's the plant gonna be up and running? Same same same question. And I think I think this is where I can talk a little bit about the LNG tank. The LNG tank is two walls, two cylindrical flat bottom tanks. One on is an outer wall of pretty robust carbon steel, and the inner is a a very flimsy, and you saw that picture, stainless steel. So imagine picking up some tinfoil two meters by four meters and hold it in holding out in the garden and the wind blowing it around. We've gotta be very careful when we lift this and then install it that it doesn't crimp, it doesn't bend, and it slots in place.

20:07 Last week, we had 50 kilometer hour winds out at, at Tandrara, and the wind sock was completely horizontal. There's no way you can lift that sort of equipment, that sort of stuff in that in that type of wind. Saying that, we've got specialist hydraulic jacks going to the site and and the construction supervisors already on-site. And CryoSpain, who are gonna guarantee the performance of this, are sending their supervisor to site right now. So I'm hoping the outer tank, the commencement of that construction will start very shortly. And at the inner tank, which is the is the key one, the kit is coming down to Morocco in the next week or so, and then that will start coming through. So that's the that's the critical path.

20:56 It's getting that tank ready. And and, of course, we're doing everything we can to speed up its air fluids, and we've asked them to come with acceleration plans. And we've also looked at temporary storage for the LNG tanks so that we can provided the processing facilities are there, we can maybe take some smaller volumes, not necessarily the 60 6,200 cubic meters of storage, but it will still allow Africa Gas to load load LNG. And and the ramp up period that Africa Gas had, you know, they're not gonna be at full plateau in the first day. So they need to bring their clients on one after the other. A financing one. SOUND, despite very much better managed finances, so a a compliment to Gary there, SOUND still burns through your cash. Aren't you gonna run out of money soon, and aren't you gonna be insolvent?

21:52 No. And so we're completing the year end accounts now, and we'll publish those sometime in the next I think it's in the second quarter, early second quarter. I've shown you the slide that we've got for cash in hand. The project's got its money through Africa Gas and Itau fluids Itau fluids Itau fluids are financing the the the energy plant. So, yep, I one of the ways we've been saving costs is to try and reduce our external costs on consultants' resources. So investor meet, for instance, is one way of of of saving costs, and we've reduced our IR bill. Right. This question more about the LNG tanks.

22:41 Why is it taking so long? Has Africa Kia Gas withdrawn its funding? Is Itau fluid insolvent? Has the decision made to shelve the project? Lots of the answers are no to that. I would say the what I've told you about the Africa Gas, we've still got 6,000,000 to draw down. They haven't withdrawn their funding. Itau fluids is active in several Europe North African and European countries. They have multiple businesses. They're not insolvent. Is the project being sold shelved? No. If it has been, we would have had to uniron us it by now. Another quick one, is there a bankruptcy risk?

23:25 Well, we're deep into phase one. We wanna get to phase two. So, no, I think we're not gonna go bankrupt. Can we explain the share value?

23:38 Clearly, along with you guys and our two main shareholders, we are impatient for the revenue. Maybe some shareholders couldn't stay stay the journey. The partnering that we're doing with Cal Valley is important. That brings to us, when we've closed that, a year and a half, you know, maybe even two years of back costs, So considerable amounts of back costs that SOUND have have put in. So that would be helpful into redeploying that money into other areas in the sound business. One I quite like, and thank you for this question, are you confident on SOUND ENERGY's future?

24:18 Well, I'm almost in my fifth year here. So me, definitely. But I've also got a team that's been with me for five years. And so we are not giving up when we're so close. We put this plan together. We're executing it, and we can see it's delivering. I don't know if any of you listen to GB News on Monday when the prime minister did a speech, but I'm a bit like him. We do have a plan. We're sticking with it. We're gonna deliver it. So, yes, I'm absolutely confident about the future. We've heard nothing about Cal Valley. Is the agreement still going ahead?

24:55 Yes. It is. And I've presented that in the slides. I'm in active conversations with Cal Valley every day. We're at the definitive documentation site. This is a long question, bear with me. It's all about phase one, phase two, and and have we got enough funds to carry on? Well, what people are saying is can we drop phase one and if we just carry on with doing phase two? The answer is no. Phase one is integral to the the concession development plan that's agreed with the ministry. So we we need to deliver that. It supplies gas to the industrial market through Africa Gas, and that means that many buyers of that gas and could be more. We get requests all the time for more gas, more LNG.

25:50 The pipeline project is sold for a power in the power stations, and O and E have two power stations that need this gas, and there's a plan to build more power gas to five gas gas to power stations power power stations. So we've got a lot more gas to sell. I'd like to sell gas down the pipeline, but I would also like to sell gas as LNG, and maybe there's other forms of work we can do that. Again, somebody asked me, are we going about insolvency?

26:21 No. That's not in my my horizon. Could we this this question is more about financing again. Is it possible that we can change the clock on the twin the ten year tax free corporation tax free period? Because we've got phase one producing, and phase two won't produce for another two years, two and a half years, or whatever it is from FID. So, yeah, we've eaten into that ten year period. Can we convince the tax authority to change the rules for us? Tough, I think, is the answer. We are friends with the tax authority, and they are being very supportive of putting a a good structure together when we come to finance phase two in a joint venture approach with the with ONIM. Don't forget our main main state partner, ONIM. So we're we're we're friends with them. The ten year tax holiday is good to have, you know, but I think you find it very difficult to convince the tax authorities to change that timing.

27:36 The question was also, have Cal Valley given up on phase one? No. They haven't.

27:43 Why yeah. There was a question about production tubing. I've explained that regarding TE four. Cal Valley are ready to come in and drill that. They want to drill TE four first because they see it's only five kilometers away from the production site, and it's the obvious one to tie in very quickly. So provided TE four delivers the gas levels that we're trying to do, and we're gonna try and drill that in a in a good way, we can have that on production pretty quickly. We also talk about drilling the wells vertically or horizontally. In the past, the t six and t seven were long horizontal wells and multistage stimulated. We've learned a lot from having vertical wells and then horizontal wells, and there is analogies.

28:30 If you've got a well that's vertical and you've tested it at a certain flow rate and then you want to draw a horizontal well in the same location, you can make a pretty good estimate of what the flow rates will be. So you would save a lot of exploration dollars by drilling a vertical well and testing a vertical well. But saying that, we're gonna look at different options. We're also looking at using the Star Valley rig and to see whether that because it's a much lighter rig, a much cheaper rig to use than reengaging with our JOYTAC rig that we have in boxes at Tendera at the moment, which is a much heavier rig and a slower rig to move around, but it's a it's a more capable rig for drilling long horizontal wells. So we're gonna see what we can do with optimizing our exploration drilling.

29:19 We had a a good question about ESG, and I have a long answer on ESG to to to to give people. But, yes, ESG is always important in our work, environment, social, and governance. The environmental side, I can say that we have we've adopted standards. We're monitoring our emissions. And for this year, like well, this year just gone, it's around about 300 tons of c o two equivalent. Primarily, that's the diesel to run the equipment that we're using at site for, you know, travel, power for the for the construction activities. Clearly, that will go up as we do more construction activities next year. But we're also looking at optimizing the c o two that we actually have in our gas, and then we're gonna see about recovering that.

30:13 So that's part of our environmental work that we're ongoing with. The social side is about people and how we're treating people. Our Mohamed Sagiri, our COO, was out at the location last week. He was meeting the governors. He was meeting the local people, local tribes, and we employ as many people locally as we can, and in all sorts of support roles. And where possible, we would prefer to take, local people. About 98% of our workforce is Moroccan, but not all from the East Of Morocco. And this is all about our social license to operate. So, you know, it's important for us to do that. And governance, well, you you may know that the Quoting Companies Alliance have modified their rules and requesting people to start utilizing that. We are going to be doing that in the fiscal year for 2024, and then we're incorporating some of those updates in our work as it goes on now.

31:16 Does it does the company consider appropriate and legal to have withheld any corporate updates over the last four months? No. We don't withhold any updates. Anything that's needed is is immediately released through the r and s process it, like or low that we do that. We have a nomad that we work hand in hand with. And so I can assure you, any price sensitive information is released immediately. It's true that we could do updates, you know, more like this more and more, but we need to do it when there's something to talk about. As things come through, we'll get that information to the shareholders. But please bear in mind, if deadlines are not met, remember the old adage, no news is good news.

32:08 If it's bad news, we'd have to announce it. Okay? What's going on in City Moktar? Well, yes, we've similar to Anowal, we're we're recommending and have been discussing with ONEM to extend that. We've got some seismic commitments to do with Sidi Moktar, and we we are actually talking to people about coming into that that license right now, but nothing to announce formally at the moment. A question on money. Are you gonna run out of money again?

32:41 The answer is not yet. We do we have cut costs, and I think that's important. So separate out what the project costs are from what's needed to run a a name listed company. And, of course, the majority of our people are active for the company and are active on the project. An activity, you know, whether it's our our geoscientists working on the wells, whether it's Mahami Sigiri on all the operations and all the construction activity, whether it's our finance accountants working on the books, whether it's our meetings with joint venture partners with ONIM. So, you know, project costs also include some of the manpower costs. So we've cut our g and a costs dramatically, and we're still doing that as we go along. So our run rate is round about £250,000 a month now. So, yeah, we've eked out a living on that one.

33:32 A question that quest questioned, are the Moroccans committed to supporting SOUND?

33:40 Can you give me specific examples? Yes. I can. We have ONIM as a 25% paying partner. They're fully up to speed. They've paid all their bills. And in fact, you know, you know, they paid the last one within hours of us requesting it. We have a ministry that's fully supportive. Oh, yes. You say, why are they supportive? Show me. Well, I'll give you an example. The cold box is the very first cold box that ever will come to Morocco for hydrocarbons to create LNG. Under Moroccan law, you have to bring it to Morocco. They test it. They hydro test it, and they pass it in Morocco. That doesn't work. Simply, the the the guys will not guarantee shipping something halfway around the world and then saying, oh, yeah. Well, you tested it with water in in Morocco.

34:33 That's not good enough. We're not gonna do that. We're not gonna guarantee it. First of all, you shouldn't put water in that type of equipment unless you design it to be tested with water. So this will be pneumatically tested. It will be tested in America. It will be witnessed by the Moroccans, and the ministry has the authority and the approval to allow that to happen. So, yes, there's a lot of detail that we don't go into, but the ministry is very supportive of that. And we are trailblazing a little bit here. What else is Morocco doing? Ati D'Awafa Bank, one of the biggest state banks, has never funded a hydrocarbon project before. Find funded man mining projects. It's funded projects in in different businesses, but never done a hydrocarbon project like this before. So we're leading the way. They're helping us.

35:19 If they didn't wanna do this and weren't fully supported, they see the value in this project strategically for the country. Why is the broker SP Angel not updating its valuation model?

35:33 The simple answer for that is we've asked them to wait until we've closed the deal with CarValley, you know, so they can formalize that. So so that that's that's simply it. If you read the SP Angel valuation and you go back through, there's a breakdown of cash flows and models and etcetera. So that that really gives you a good understanding of where it comes from. They risk weight phase two, and they risk weight the uncontracted gas. So that's why we we get the valuation that SP Angel have. Does the current market cap limit our funding? The current market cap is low. I agree. And, it is not appropriate to do an equity raise at this this level. And that's why we've we looked for the asset divestment route through Cal Valley. So we want to avoid as much dilution as possible, and we do that by diluting at the asset level and bringing the cash in from Cal Valley such that we don't have to dilute at the corporate level through any any equity raising.

36:37 Is there a risk of bank funding interest rate being penal now following the two twenty one twenty two thousand twenty one interest rate rise? Well, the Moroccan base rate's around about 3%, and the term sheet we've got from Attitude Upper Bank is attractive relative to international bank funding standards. And, of course, Moroccan base rates are actually higher than in 2021, maybe even a 100% higher, but they are still lower than The UK base rate. So and significantly cheaper than mezzanine or bridge financing options. So, yeah, we're pleased to be working in Morocco with Moroccan banks. One more a bit personal. Have the exec team hit any performance targets that would merit a bonus?

37:28 Simply no. Our KPIs are set by our remuneration committee. There's a whole suite of them. We did meet some. We exceeded some, but we clearly failed on some others. So it was our recommendation to the remuneration committee not to have a year end bonus paid to the executive, and and they've they fully support that view and and weren't asking us to or weren't prepared to offer us a bonus. So the money sticks in the company and doesn't come to the executives. You've been deliberately vague on drilling. Can we get an honest statement about when the future drilling is gonna come?

38:14 And you haven't got any money to drill. So where's it gonna come from? Well, first of all, I think we've been very clear of what we want to do on the exploration drilling with our three wells, T 4, SPK 1, and M 5. And the the slide at the beginning shows you the potential for those. But that is exploration and drilling, and part of that will be funded by Cal Valley. But we've also got the TE 112 well, which will be drilled, within the year after first gas, and that's within the project funding. So we will have project funding for the TE 112 well. What are we doing with phase two drilling? Well, again, that will be within the project budget. So, clearly, we will have development project budget, and so we will drill one one two. We will drill our development for phase two.

39:07 TE four gets drilled by Kalvale. We would hope that we can convince Kalvale, they haven't accepted that yet, to get involved in the annual drilling one way or another. How long is the shipping from Southern Spain and Louisiana to Morocco? These refer to two parts of the LNG tank. So from Southern Spain, it's not actually in Southern Spain, it's in Northern Spain actually. So it's gonna come around into Morocco down the Atlantic side. That will take a couple of days shipping, but, you know, getting off loading, offloading, importing, etcetera, maybe a week or two. But that's that's due on its way now. The Louisiana was where the LNG coal box was based, and that has actually moved to California now because it's being shipped. And therefore, it must be protected to stop any sea air, any saltwater, or salty air getting into into the equipment.

40:08 And whether it's gonna come across land to the East Coast and then shipped or whether it's gonna go through the Panama Canal, we're still waiting for the journey management plan for that. There was a question about profits, net profits, and I explained the revenues around about 30,000,000 from phase one and 90,000,000 from phase two per per project. So a 120,000,000 when they're both up and running. That's the revenue. The net profit, possibly about a third of that when we look at the operating costs taken out. It's a much higher operating cost, obviously, for the rental kit for the micro LNG. Would we return that money to shareholders? Well, we've got phase two that we need to fund. We've got exploration wells that we need to fund.

41:00 When we have a sustainable cash flow, then then I think we can think see as a a dividend policy. Right. So are we this is a more back to the shareholders and the executive. Are we aligned with the executives? I suppose the question is is the time only question why aren't you buying more shares at this at the share price. Clearly, you know that I'm in a closed period pretty much all the time, so it's difficult. Every time an opportunity to come to buy shares, we've done that. And and more important to that is Africa Gas has done that. They they wanna stay at 10% of our our shareholding.

41:51 And we do have a share share invent incentive plan. I mean, that's well underwater, you all know. That hasn't made anybody quit. We're all committed to delivering this project. It's it's almost like, you know, we're gonna get this done. Don't worry. And I wouldn't say we'll work for free, but this is important to get this delivered. Can we get a quick update on the on the Eurobond? Yep. We did refinance that, so thank you for the person who said well done on doing that. And it it was important that we got it done. And what I think it shows is that we have a supportive set of bondholders. Not all of them, admittedly, but quite a lot of them are supportive, and it's difficult to find them all. It's a publicly traded bond.

42:38 But unlike other companies, they didn't come to try and take the company over. They didn't try and come and do a massive dilution. They believe the plan. They believe the strategy of a phased development of the Tenderara concession. They believe that we're going to deliver it. And, you know, they they stood well away from any of the massive dilutions that companies are going through at the moment when the bondholders get disgruntled. Do the Moroccans want to produce gas? Yes. Definitely. Africa Gas is a Moroccan company. They've committed to buy ten years' worth of LNG. Yes. O N E E is a state power producer. It wants to buy ten years of energy. So, yeah, they're com committed.

43:28 Do you consider today's share price a fair reflection set of shareholder value? Well, of course, that's a you know, what do we think the share's worth? It's what the the seller there's more sellers than buyers at the moment. Right? And that's the that's the issue. And this very small liquidity at the moment as well. So I think that tells you that the people and and thank you for the longs long suffering shareholders have stuck with it. You can see the light at the end of the tunnel. We can see the light at the end of the tunnel. We wanna try and deliver deliver value for you. We do believe that shareholders buy the shares not for a dividend play in the future, but via capital appreciation. So that's what we're after. The two main shareholders, and I talk to them, you know, pretty regularly, are definitely committed to this strategy and are supportive of me executing that.

44:24 Question about AttiJwatha Bank. I haven't spoken a lot about that, but, yes, there it was the 230 odd million dollars. It's a Dirham loan, so it's not $2.30. It's whatever it is in Dirhams. It's 65% of the project cost. Would they be flexible on that? I'm sure they would be. But just in case they're not, you're seeing that the 35% is gonna be funded through the farming partnering with Cal Valley. But what we did is we took steps to make sure that if Cal Valley's cap and they've they've estimated what they think the cost would be, so they've capped it. But they've given us a facility to offer us more cash should we need to make that up. So a combination of if AttiJwafa Bank wanna give us 70%, then the Kal Valley, we don't have to draw down anything on their their their funding.

45:13 If AttiJwafa Bank stick with the 65, maybe we have to touch, dip into the Atidua into the Kalvali funding. So I think that's that's pretty good. Have any provisions been made to put out the design and construction for phase two? I think the key thing for me is now getting the debt financing in place, the Cal Valley deal done with those two and the GSA signed. With those two all those in place, the feed is the last bit. And what you've gotta be very careful of because, you know, we had a question, about costings. And if you've gone back to, the engineering costs in 2021 and you've gone to 2022 when the war in Ukraine had kicked off, you would see that, you know, steel prices would have been up dramatically. Energy prices are up dramatically.

46:04 You look at 2022 to 2023, steel prices are down 30%. Energy prices are down 300%. So when you pick your time in the market with the engineering contractors is what you get. This has been a problem for retail fluids because they hit the market when energy prices were going up, steel prices were going up, etcetera. We're gonna be careful that we hit the market to to refresh our feed when everything's in place and and that we feel that we can can can can get a good tendered process to get competitive prices. So we have a couple more questions, and, you know, there were some there were some ones. I think I've covered most things there.

46:50 So, Paul, can I pass back to you, and then I can have a read through some of the ones that are on the on the slide? Absolutely. Look, Graham, thanks indeed for covering off all those pre submitted questions. And as I say, if you click on that q and a tab, you'll see a number of questions that we've had through. Due to the number of attendees on today's presentation as well, Graham probably not gonna have a chance to get through every question that's been processed and through the system today. However, we'll review all those questions and where appropriate to do so, we'll we'll publish responses. But, Graham, when you do get a chance just to look through those posters, you just decide at the top and just pick out those questions or subject areas you haven't covered off, and I'll pick up from you at the end. Okay. Well, let me let me see if I can do them. And apologies if don't have notes written down. So how many dollars are owed to the Moroccan tax authority as a a result? So what we did, we agreed $2,500,000 payment to them over six years. The first payment was made at the tail end of last year, which was $250,000.

47:48 And, I think we've got it in the, in the annual report. If you re go back to the annual report, I think we've got it in there. But it's phased over six year six years and the last two years of the majority, I think, over over $1,000,000.5 in the last couple of years. But forgive me if I don't have the detail. Are we gonna drill appraisal wells on the Tendrara height? Well, we're actually gonna drill development wells. The T T 112 is is going through. So that will be on the T 5 Horse. The T 4 Horse is an exploration well, and we will drill on the high there. Will this mean more of our scanning methods? I'm not sure what that means. We've got good seismic.

48:34 The 2018 seismic was very good. And would we use different technologies? We're always open to to that on the exploration front. I think more, though, it's to we've identified some pretty robust prospects now. It's to get those drilled. I'm not gonna answer the question about liquidity to meet g and a expenses. I answered that roughly what our burn rate is, and you can do the sums yourself. Slumberger MPI. Yep. You're quite right. There is an MPI that's a Leon on SOUND ENERGY Morocco East, and and that is a SOUND ENERGY Morocco East, not SOUND ENERGY Moro Meridian or ONIM cost.

49:23 But that's factored in the the cash flows that we've talked to you about. Will the company meet all conditions precedent get local bank financing? The answer is we are working hard to do that. So, yes, mostly, it's centered around the gas sales agreement, and a lot of things have been ironed out. One or two need to be closed, and we've got the ministries involved in helping on that. Following COP twenty through evidence of stop oil, anti fossil note, Morocco has a a very advanced, actually, energy transition plan. Core to it is gas. So in Morocco, everybody accepts, and I think you'll find that's gonna be the case in Europe now. The EU has decided that gas is part of its plan.

50:09 Funding has changed with the even in the EU regarding gas. So we haven't seen any of that. Of course, there's some c o two emissions. And as you without going on my spiel and hobby horse on emissions, etcetera, but methane emissions are far worse than some of the c o two emissions and hang around longer. But we that's a whole different topic. But the simple answer to that is no. Morocco is very supportive of gas being central to its energy transition plan. Somebody here saying, thanks for the good activity. When are you reasonably expecting expiration? Can we see q three, q four? We already have designed and are ready to drill t four assuming the Doitag rig because that's the one we have on on contract.

51:01 And the I think it's fair to say that I quite like the Star Valley rig. It's an active rig. It's a lighter weight rig. So we have to be careful. We have to look at the hook load of the rigs. If Cal Valley come through and we close with Cal Valley soon, the permitting and the prep for the well, maybe we could even get it done by the we we could spud by the end of this year. But don't hold me to that, but we have you know, I've got a very keen geoscientist who's desperate to get that well drilled. Have you any engagement of interest from UK institutional investors in SOUND? Well, we do in that pie chart I showed you earlier on. There are some institutional shareholders, not as many as we want, and I am talking to institutions.

51:54 The issue is and it goes back to that COP twenty three issue is, are they precluded from investing in hydrocarbons? And you see various banks and institutions coming out saying, no. I'm not gonna do that. Then a couple of years later I mean, you know, BlackRock was a prime example of coming back six months later or nine months later and saying, oh, look at this. We don't make the returns we promised everybody. Maybe we'll invest in gas because that's sort of a transition fuel. So we can try and do that. Is there further dilutions of shares likely in the near future? I you know, clearly, we do what we have to do to keep the company sane and alive, but you can see our preference is not to dilute. And over the last two years, we, we only done one raise. So we didn't do a raise last year.

52:43 We did do the convertible, which we're suffering from, I admit, which had the conversions. But other than that, no, I'm not planning to that. I mean, I do know that should we choose to do a raise, it's gotta be done at the right price, and Africa Gas would want to up their stake to back to 10%. In which quarter this year do you envision the LNG plant to be generating Quest? Good question. It will be the same quarter as we get the thing on production, and we have the storage ready. Sorry. I can't be more specific. We are having deep discussions with Itau fluids, looking at acceleration plans from their current schedule. But their current schedule shows that they will have the plant available this year. Graham, thank you very much. You've answered every single question that's come through, and and and thank you to all the investors who have submitted those. And of course, any further questions that come through, Graham and the team will have the opportunity to review those. And as I say, we'll publish responses where appropriate to do so on the Investor Meet company platform.

53:42 Before redirecting investors to provide you with their feedback, which is particularly important to you and the company, Greg, could I ask just for a few closing comments, please? Yeah. Hi. Didn't even have time to get a glass of water. I think the main thing to say is, and I I saw that in quite a lot of the questions, is people don't believe this is happening. This is really happening. Alright? This is definitely gonna take place. Have we got a committed sound team? The whole team, you know, it's almost well, I don't know. I'm sure there's a right terminology for it, but we are gonna get this done. We are one team. And all we wanna do is get this thing on production, and then I think the thing will start to snowball. Yes. It's frustrating, with Cal Valley taking a little bit longer, but they are thorough, and and it's been helpful with their their comments.

54:31 So twenty twenty four for me, we've got to construct. We've got to commission. We've got to produce gas at Tundra. We've got to close all those documents. I know it doesn't look like much. It's not operations. It's not stuff in the field, but there's a lot of work going on with paper going between company. And these are twenty five year contracts, ten year contracts. We've got to get these in place. So close the partnering divestment, need to do that. Close the financing with Attitude Alpha Bank. Close the gas sales agreement with ONEA, and then restart oh, sorry. Get the feeds feed going refreshed so that we can take FID and then reactivate that expiration. I'm confident that our small team can deliver that.

55:19 It's tough with the resources that we've got, fiscal, commercial, financial, human. You know? There's wars going on. Shipping routes are are difficult, but we're doing our best to do it, and we're looking at ways to improve on the current plan. So we have a plan. We have a strategy. We have a plan. We're following it. We're executing on it, and we're gonna deliver it. So thank you very much for your patience sticking with us. And I do hope that we see some value in the in the in the future in this this stock. But when I say the future, I mean this year. So thank you very much for your time. Fantastic. Thank you indeed for updating investors today. Please ask investors not to close the session to be automatically redirected to provide your feedback in order Graham and the team can better understand your views and expectations.

56:06 This will only take a few moments to complete, and I know it's greatly valued by the company. On behalf of the management team of SOUND ENERGY PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good evening to you all.