TIDMSOU
RNS Number : 6784Y
Sound Energy PLC
11 September 2020
11 September 2020
SOUND ENERGY PLC
("Sound Energy", the "Company" or the "Group")
HALF YEARLY REPORT FOR THE SIX MONTHSED 30 JUNE 2020
Sound Energy, the Moroccan focused upstream oil and gas company,
announces its unaudited half-year report for the six months ended
30 June 2020.
OPERATIONAL AND CORPORATE HIGHLIGHTS
-- Liquefied Natural Gas ("LNG") Heads of Terms signed with a leading Moroccan Energy Group
-- Environmental Impact Assessment ("EIA") approvals for
120-kilometre, 20-inch pipeline and gas treatment plant/compression
station received in January 2020 and March 2020 respectively
-- Successful renegotiation of the terms of the Anoual exploration permit in July 2020
FINANCIAL SUMMARY
-- Structural reduction in administrative expenses by 57% compared with H1 2019
-- Total Cash balances as at 30 June 2020 of GBP4.2 million
-- Equity placing to raise gross proceeds of GBP1.5 million at 2
pence per ordinary share announced in December 2019 and completed
in January 2020
-- Equity placing post period end to successfully raise
additional GBP3.2 million after costs at 2.125 pence per ordinary
share in August 2020
-- Continued focus on disciplined cost and cash management
Enquiries:
Vigo Communications - PR Adviser Tel: 44 (0)20 7390
Patrick d'Ancona 0230
Chris McMahon
Sound Energy questions@soundenergyplc.com
Graham Lyon, Executive Chairman
Cenkos Securities - Nominated Adviser Tel: 44 (0)20 7397
Ben Jeynes 8900
Russell Cook
Turner Pope Investments (TPI) Ltd - Broker Tel: 44 (0)20 3657 0050
Andy Thacker
Statement from the Executive Chairman
Despite the challenging business environment brought on by the
Covid-19 global pandemic and exacerbated in the oil and gas sector
by a dispute between Russia and Saudi Arabia which led to an
increase in supply just as demand was falling due to the economic
impact of the pandemic, the first half of 2020 was an active and
productive period for the Company as it reset its strategy to
transition towards becoming a cash generating Company with
significant exploration potential. The period concluded with the
announcement of a key milestone, that the Company had entered into
a heads of terms with, and granted exclusivity to, a Moroccan
conglomerate, to provide partial financing for its Phase 1 micro
LNG project and for the purchase of the LNG produced from the TE-5
Horst under the first phase of development. In addition during, the
Company also received EIA approval for the Tendrara Gas Export
Pipeline and Central Processing Facility ("CPF") whilst continuing
to progress the finalisation of binding terms for the proposed Gas
Sales Agreement ("GSA") with Office National de l'Electricité et de
l'Eau Potable ("ONEE") for the second phase of development of the
TE-5 Horst.
Eastern Morocco Partial Disposal
The Company announced in July 2020 that it is no longer in
discussions with the previously proposed purchaser in relation to
the potential partial disposal of its Eastern Morocco portfolio,
however, having announced its phased development strategy for the
Tendrara Production Concession, the Company continues to engage
with other parties who have expressed interest in participating in
the Company's strategy by way of a potential farm-in. Whilst a
partial disposal of its Eastern Morocco portfolio is not a
strategic priority of the Company, normal business development
discussions are ongoing in this regard. There is no certainty that
any of these discussions will advance and the Company's current key
priority is to deliver a final investment decision on its proposed
Phase 1 development of the Tendrara Production Concession during
2020.
Phase 1 Micro LNG Development
In June, the Company was pleased to announce that heads of terms
had been entered into with a Moroccan conglomerate to permit
exclusive discussions to negotiate definitive agreements for both
the purchase of LNG to be produced from the TE-5 Horst as well as
partial financing for the Phase 1 development by the Moroccan
conglomerate. An LNG Gas Sales Agreement is currently being
negotiated pursuant to which the joint venture will commit, over a
10 year period, to supply an annual contractual quantity of 100
million standard cubic metres of (liquefied) gas from the Phase 1
development, based upon the key commercial terms set out in the
heads of terms.
Phase 2 Tendrara TE-5 Development
The Company continued to make progress in advancing the
development of the Tendrara TE-5 discovery including the approval
of the EIA mentioned above along with progression of discussions to
obtain pipeline corridor rights. Despite the difficulties imposed
by the Covid-19 pandemic, positive discussions with ONEE have
continued in order to finalise the fully termed GSA for gas
offtake. This will form a key building block to support project
sanction of the proposed TE-5 Phase 2 development.
EIA of the Tendrara Gas Export Pipeline and CPF
In January 2020, the Company announced receipt of the EIA
approval from the Moroccan Ministry of Energy, Mines and
Environment to build and operate a 120km 20-inch gas pipeline
connecting the CPF to the Gazoduc Maghreb Europe pipeline ("GME").
This was followed by the ministerial approval of the EIA for the
CPF in March. Approval of the respective EIAs are important steps
in the development process of the TE-5 Horst. The EIA incorporates
the Micro LNG project activity.
Structural Cost Reductions
The Company continues to manage its cash resources prudently
and, accordingly, having paused its operational programme in 2019,
the Company continued a structural cost reduction programme aimed
at materially reducing the Company's ongoing operating expenditure,
including reductions in staff numbers, executive remuneration and
other business costs. By the end of the reporting period, the cost
reduction initiatives that have been implemented delivered a
reduction in general and administrative expenses by 57% compared
with the first half of 2019.
Licensing
The Company announced in July that it had successfully concluded
a renegotiation of the terms of its Anoual Exploration Permit in
order to realign the Company's committed exploration work programme
in Eastern Morocco so that it dovetails more efficiently with the
proposed phasing of our Phase 1 Development Plan at the Tendrara
Production Concession in a manner that underscores both our
confidence in the potential of the basin as a future significant
gas producing province and our ability to deploy capital
judiciously across the portfolio.
Corporate
In February, the Company announced the appointment of myself,
Graham Lyon, as Executive Chairman. The Company was pleased to
subsequently appoint Mohammed Seghiri as Chief Operating Officer in
April. Mohammed brings extensive technical and commercial
experience, as well as Moroccan knowledge and relationships which
will be utilised in particular to drive forward the Company's
phased development strategy in Eastern Morocco. In July, the
Company announced further board strengthening with the appointment
of David Blewden as an Independent non-executive director. David
brings a wealth of experience from the financial side of oil and
gas sector and specific experience around debt restructuring which
is a key priority for the Company in the coming period. As at 30
June 2020, the Company had total cash balances of GBP4.2 million
and, subsequent to the period end, the Company placed 163,529,411
new ordinary shares at a price of 2.125 pence per share to raise
GBP3.2 million after costs in August 2020.
Graham Lyon
Chairman (Executive)
Condensed Interim Consolidated Income Statement
Six months Six months
ended ended Year ended
30 June 30 June 31 Dec
2020 2019 2019
Unaudited Unaudited Audited
Notes GBP'000s GBP'000s GBP'000s
------------------------------------------------ ----- ---------- ---------- ----------
Exploration costs - (6,494) (6,570)
------------------------------------------------ ----- ---------- ---------- ----------
Gross loss - (6,494) (6,570)
------------------------------------------------ ----- ---------- ---------- ----------
Administrative expenses (1,700) (3,995) (6,064)
------------------------------------------------ ----- ---------- ---------- ----------
Group operating loss from continuing operations (1,700) (10,489) (12,634)
------------------------------------------------ ----- ---------- ---------- ----------
Finance revenue 26 57 102
Foreign exchange gain/(loss) 2,890 116 (1,101)
External interest costs (1,596) (1,151) (2,787)
------------------------------------------------ ----- ---------- ---------- ----------
Loss for period before taxation (380) (11,467) (16,420)
------------------------------------------------ ----- ---------- ---------- ----------
Tax expense - - -
------------------------------------------------ ----- ---------- ---------- ----------
Loss for period after taxation (380) (11,467) (16,420)
Other comprehensive (loss)/income
Items that may be subsequently be reclassified
to profit and loss account:
Foreign currency translation income/(loss) 8,044 349 (4,256)
------------------------------------------------ ----- ========== ========== ==========
Total comprehensive income/(loss) for
the period attributable to equity holders
of the parent 7,664 (11,118) (20,676)
------------------------------------------------ ----- ========== ========== ==========
Pence Pence Pence
------------------------------------------------ ----- ---------- ========== ==========
Basic and diluted loss per share for the
period attributable to equity holders of
the parent 3 (0.03) (1.08) (1.54)
------------------------------------------------ ----- ---------- ---------- ----------
Condensed Interim Consolidated Balance Sheet
30 June 30 June 31 Dec
2020 2019 2019
Unaudited Unaudited Audited
Notes GBP'000s GBP'000s GBP'000s
-------------------------------- ----- ---------- ----------- ----------
Non-current assets
Property, plant and equipment 4 157,490 152,844 147,342
Intangible assets 5 33,434 30,996 30,784
Interest in Badile land 1,002 985 936
-------------------------------- ----- ---------- ----------- ----------
191,926 184,825 179,062
-------------------------------- ----- ---------- ----------- ----------
Current assets
Inventories 1,084 1,020 1,014
Other receivables 1,669 1,963 1,492
Prepayments 51 126 41
Cash and short-term deposits 6 4,206 11,091 4,608
-------------------------------- ----- ---------- ----------- ----------
7,010 14,200 7,155
-------------------------------- ----- ---------- ----------- ----------
Total assets 198,936 199,025 186,217
-------------------------------- ----- ---------- ----------- ----------
Current liabilities
Trade and other payables 3,028 6,243 2,444
Lease liabilities 156 181 183
Loans and borrowings 7 23,845 - -
-------------------------------- ----- ---------- ----------- ----------
27,029 6,424 2,627
-------------------------------- ----- ---------- ----------- ----------
Non-current liabilities
Lease liabilities - 151 42
Loans and borrowings 7 - 21,337 21,235
-------------------------------- ----- ---------- ----------- ----------
- 21,488 21,277
-------------------------------- ----- ---------- ----------- ----------
Total liabilities 27,029 27,912 23,904
-------------------------------- ----- ---------- ----------- ----------
Net assets 171,907 171,113 162,313
-------------------------------- ----- ---------- ----------- ----------
Capital and reserves
Share capital and share premium 26,294 24,835 24,835
Warrant reserve 4,090 4,090 4,090
Foreign currency reserve 5,951 2,512 (2,093)
Accumulated surplus 135,572 139,676 135,481
-------------------------------- ----- ---------- ----------- ----------
Total equity 171,907 171,113 162,313
-------------------------------- ----- ---------- ----------- ----------
Condensed Interim Consolidated Statement of Changes in
Equity
Foreign
Share Share Accumulated Warrant currency Total
capital premium surplus reserve reserves equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
---------------------------- --------- --------- ----------- --------- --------- ---------
At 1 January 2020 10,796 14,039 135,481 4,090 (2,093) 162,313
---------------------------- --------- --------- ----------- --------- --------- ---------
Total loss for the period - - (380) - - (380)
Other comprehensive income - - - - 8,044 8,044
---------------------------- --------- --------- ----------- --------- --------- ---------
Total comprehensive income
for the period - - (380) - 8,044 7,664
Issue of share capital 822 816 - - - 1,638
Share issue costs - (179) - - - (179)
Share based payments - - 471 - - 471
---------------------------- --------- --------- ----------- --------- --------- ---------
At 30 June 2020 (unaudited) 11,618 14,676 135,572 4,090 5,951 171,907
---------------------------- --------- --------- ----------- --------- --------- ---------
At 1 January 2019 10,551 12,049 150,242 4,090 2,163 179,095
------------------------- ------ ------ -------- ----- ------- --------
Total loss for the year - - (16,420) - - (16,420)
Other comprehensive loss - - - - (4,256) (4,256)
------------------------- ------ ------ -------- ----- ------- --------
Total comprehensive loss - - (16,420) - (4,256) (20,676)
Issue of share capital 245 2,228 - - - 2,473
Share issue costs - (238) - - - (238)
Share based payments - - 1,659 - - 1,659
------------------------- ------ ------ -------- ----- ------- --------
At 31 December 2019 10,796 14,039 135,481 4,090 (2,093) 162,313
------------------------- ------ ------ -------- ----- ------- --------
Foreign
Share Share Accumulated Warrant currency Total
capital premium surplus reserve reserves equity
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------- --------- --------- ----------- --------- --------- ---------
At 1 January 2019 10,551 12,049 150,242 4,090 2,163 179,095
----------------------------- --------- --------- ----------- --------- --------- ---------
Total loss for the period - - (11,467) - - (11,467)
Other comprehensive income - - - - 349 349
----------------------------- --------- --------- ----------- --------- --------- ---------
Total comprehensive loss for
the period - - (11,467) - 349 (11,118)
Issue of share capital 245 2,228 - - - 2,473
Share issue costs - (238) - - - (238)
Share based payments - - 901 - - 901
----------------------------- --------- --------- ----------- --------- --------- ---------
At 30 June 2019 (unaudited) 10,796 14,039 139,676 4,090 2,512 171,113
----------------------------- --------- --------- ----------- --------- --------- ---------
Condensed Interim Consolidated Cash Flow Statement
Year
Six months Six months ended
ended ended 31 Dec
30 June 30 June 2019
2020 Unaudited 2019 Unaudited Audited
GBP'000s GBP'000s GBP'000s
-------------------------------------------- --------------- --------------- ---------
Cash flow from operating activities
Cash flow from operations (630) (6,591) (10,909)
Interest received 26 57 102
--------------------------------------------- --------------- --------------- ---------
Net cash flow from operating activities (604) (6,534) (10,807)
--------------------------------------------- --------------- --------------- ---------
Cash flow from investing activities
Capital expenditure and disposals (201) (963) (1,011)
Exploration expenditure (528) (4,351) (5,401)
Disposal of Italian operations - 761 761
--------------------------------------------- --------------- --------------- ---------
Net cash flow from investing activities (729) (4,553) (5,651)
--------------------------------------------- --------------- --------------- ---------
Cash flow from financing activities
Net proceeds from equity issue 1,352 2,235 2,235
Interest payments (622) (627) (1,266)
Lease payments (30) (83) (195)
--------------------------------------------- --------------- --------------- ---------
Net cash flow from financing activities 700 1,525 774
--------------------------------------------- --------------- --------------- ---------
Net decrease in cash and cash equivalents (633) (9,562) (15,684)
Net foreign exchange difference 231 117 (244)
Cash and cash equivalents at the beginning
of the period 4,608 20,536 20,536
--------------------------------------------- --------------- --------------- ---------
Cash and cash equivalents at the end of the
period 4,206 11,091 4,608
--------------------------------------------- --------------- --------------- ---------
Notes to Cash Flow Statement
Year
Six months Six months ended
ended ended 31 Dec
30 June 30 June 2019
2020 Unaudited 2019 Unaudited Audited
GBP'000s GBP'000s GBP'000s
Cash flow from operations reconciliation
Loss for the period before tax (380) (11,467) (16,420)
Finance revenue (26) (57) (102)
Exploration expenditure written off - 6,494 6,570
Impairment of interest in Badile land - - 616
Increase/(decrease) in accruals and short
term payables 550 (4,365) (7,773)
Depreciation 198 266 425
Share based payments charge and remuneration
paid in shares 579 901 1,659
Increase in drilling inventories (70) (91) (85)
Finance costs and exchange adjustments (1,294) 1,035 3,888
(Increase)/decrease in short term receivables
and prepayments (187) 693 313
----------------------------------------------- --------------- --------------- ---------
Cash flow from operations (630) (6,591) (10,909)
----------------------------------------------- --------------- --------------- ---------
Non-cash transactions during the period included the issue of
5,805,555 ordinary shares at a price of 1.86 pence per share, to an
employee of the Company in connection with the termination of an
employment contract. 1,425,000 ordinary shares were issued at a
price of 2 pence per share to a third party in lieu of fees
incurred in connection with a placing announced in December
2019.
Notes to the Condensed Interim Consolidated Financial
Statements
1. Basis of preparation
The condensed interim consolidated financial statements do not
represent statutory accounts within the meaning of section 435 of
the Companies Act 2006. The financial information for the year
ended 31 December 2019 is based on the statutory accounts for the
year ended 31 December 2019. Those accounts, upon which the
auditors issued an unqualified opinion, have been delivered to the
Registrar of Companies and did not contain statements under section
498(2) or (3) of the Companies Act 2006.
The condensed interim financial information is unaudited and has
been prepared on the basis of the accounting policies set out in
the Group's 2019 statutory accounts and in accordance with IAS 34
Interim Financial Reporting.
The seasonality or cyclicality of operations does not impact on
the interim financial statements.
Going concern
The Company's Condensed Interim Consolidated Financial
Statements have been prepared on a going concern basis, which
contemplates the realisation of assets and the settlement of
liabilities and commitments in the normal course of operations. The
Company is exploring funding options to enable it to restructure or
refinance the Company's EUR28.8 million bond due for settlement on
21 June 2021. In August 2020, the Company raised through an equity
placing, GBP3.2 million net of issue costs and at the end of August
held cash and cash equivalents of GBP6.5million including GBP1.3
million held as collateral for a bank guarantee of licence
commitments. Cashflow forecasts for the twelve-month period to
September 2021 indicates that additional funding will also be
required to enable the Company to meet its obligations.
The COVID-19 pandemic has not had a material impact on the
Company's operations. The consequential impact of a deterioration
of the pandemic may delay the progress in completing activities
necessary to restructure or refinance the Company's EUR28.8 million
bond.
These conditions indicate the existence of a material
uncertainty which may cast significant doubt about the Company's
ability to continue as a going concern. These Condensed Interim
Consolidated Financial Statements do not include adjustments that
would be required if the Company was unable to continue as a going
concern. The directors have formed a judgement based on the
Company's proven success in raising capital and a review of the
strategic options available to the Company, that the going concern
basis should be adopted in preparing the Condensed Interim
Consolidated Financial Statements.
2. Segment information
The Group categorises its operations into three business
segments based on Corporate, Exploration and Appraisal and
Development and Production. The Group's Exploration and Appraisal
activities are carried out in Morocco. The Group's reportable
segments are based on internal reports about the components of the
Group which are regularly reviewed by the Board of Directors, being
the Chief Operating Decision Maker ("CODM"), for strategic decision
making and resources allocation to the segment and to assess its
performance. The segment results for the period ended 30 June 2020
are as follows:
Segment results for the period ended 30 June 2020
Development Exploration
Corporate & Production & Appraisal Total
GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------- --------- ------------- ------------ ---------
Exploration costs - - - -
--------------------------------------- --------- ------------- ------------ ---------
Administration expenses (1,700) - - (1,700)
--------------------------------------- --------- ------------- ------------ ---------
Operating loss segment result (1,700) - - (1,700)
--------------------------------------- --------- ------------- ------------ ---------
Interest receivable 26 - - 26
Finance costs and exchange adjustments 1,294 - - 1,294
--------------------------------------- --------- ------------- ------------ ---------
Loss for the period before taxation (380) - - (380)
--------------------------------------- --------- ------------- ------------ ---------
The segments assets and liabilities at 30 June 2020 are as
follows:
Development Exploration
Corporate & Production & Appraisal Total
GBP'000s GBP'000s GBP'000s GBP'000s
-------------------- --------- ------------- ------------ ---------
Capital expenditure 1,327 157,165 33,434 191,926
Other assets 4,442 785 1,783 7,010
Total liabilities (25,148) - (1,881) (27,029)
-------------------- --------- ------------- ------------ ---------
The geographical split of non-current assets is as follows:
Europe Morocco
GBP'000s GBP'000s
---------------------------------------- --------- ---------
Development and production assets - 157,165
Interest in Badile land 1,002 -
Fixtures, fittings and office equipment 19 166
Right-of-use assets 61 79
Exploration and evaluation assets - 33,333
Software - 101
---------------------------------------- --------- ---------
Total 1,082 190,844
---------------------------------------- --------- ---------
Segment results for the period ended 30 June 2019
Development Exploration
Corporate & Production & Appraisal Total
GBP'000s GBP'000s GBP'000s GBP'000s
--------------------------------------- --------- ------------- ------------ ---------
Exploration costs - - (6,494) (6,494)
--------------------------------------- --------- ------------- ------------ ---------
Administration expenses (3,995) - - (3,995)
--------------------------------------- --------- ------------- ------------ ---------
Operating loss segment result (3,995) - - (10,489)
--------------------------------------- --------- ------------- ------------ ---------
Interest receivable 57 - - 57
Finance costs and exchange adjustments (1,035) - - (1,035)
--------------------------------------- --------- ------------- ------------ ---------
Loss for the period before taxation (4,973) - (6,494) (11,467)
--------------------------------------- --------- ------------- ------------ ---------
The segments assets and liabilities at 30 June 2019 were as
follows:
Development Exploration
Corporate & Production & Appraisal Total
GBP'000s GBP'000s GBP'000s GBP'000s
-------------------- --------- ------------- ------------ ---------
Capital expenditure 1,590 152,247 30,988 184,825
Other assets 12,490 - 1,710 14,200
Total liabilities (22,820) - (5,092) (27,912)
-------------------- --------- ------------- ------------ ---------
The geographical split of non-current assets was as follows:
Europe Morocco
GBP'000s GBP'000s
---------------------------------------- --------- ---------
Development and production assets - 152,247
Interest in Badile land 985 -
Fixtures, fittings and office equipment 75 198
Right-of-use assets 120 204
Exploration and evaluation assets - 30,824
Software 8 164
---------------------------------------- --------- ---------
Total 1,188 183,637
---------------------------------------- --------- ---------
Segment results for the year ended 31 December 2019
Exploration
Development &
Corporate & Production Appraisal Total
GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------------------- --------- ------------- ----------- ---------
Exploration costs - - (6,570) (6,570)
----------------------------------------- --------- ------------- ----------- ---------
Administration expenses (6,064) - - (6,064)
----------------------------------------- --------- ------------- ----------- ---------
Operating loss segment result (6,064) - (6,570) (12,634)
----------------------------------------- --------- ------------- ----------- ---------
Interest receivable 102 - - 102
Finance costs and exchange adjustments (3,888) - - (3,888)
----------------------------------------- --------- ------------- ----------- ---------
Loss for the period before taxation from
continuing operations (9,850) - (6,570) (16,420)
----------------------------------------- --------- ------------- ----------- ---------
The segments assets and liabilities at 31 December 2019 were as
follows:
Exploration
Development &
Corporate & Production Appraisal Total
GBP'000s GBP'000s GBP'000s GBP'000s
------------------- --------- ------------- ----------- ---------
Non-current assets 1,530 146,876 30,656 179,062
Current assets 4,795 - 2,360 7,155
Total liabilities (22,636) (9) (1,259) (23,904)
------------------- --------- ------------- ----------- ---------
The geographical split of non-current assets is as follows:
Europe Morocco
GBP'000s GBP'000
---------------------------------------- --------- --------
Development and production assets - 146,876
Interest in Badile land 936 -
Fixtures, fittings and office equipment 46 195
Right-of-use assets 90 135
Exploration and evaluation assets - 30,656
Software 2 126
---------------------------------------- --------- --------
Total 1,074 177,988
---------------------------------------- --------- --------
3.Profit/(loss) per share
The calculation of basic profit/(loss) per Ordinary Share is
based on the profit/(loss) after tax and on the weighted average
number of Ordinary Shares in issue during the period. The
calculation of diluted profit/(loss) per share is based on the
profit/(loss) after tax on the weighted average number of ordinary
shares in issue plus weighted average number of shares that would
be issued if dilutive options, restricted stock units and warrants
were converted into shares. Basic and diluted profit/(loss) per
share is calculated as follows:
30 June 30 June 31 December
2020 2019 2019
GBP'000 GBP'000 GBP'000
------------------------------------------- -------- -------- -----------
Loss after tax from continuing operations (380) (11,467) (16,420)
------------------------------------------- -------- -------- -----------
million million million
--------------------------------- ------- ------- -------
Weighted average shares in issue 1,155 1,057 1,068
--------------------------------- ------- ------- -------
Pence Pence Pence
---------------------------------------------------------- ------ ------ ------
Basic and diluted profit/(loss) per share from continuing
operations (0.03) (1.08) (1.54)
---------------------------------------------------------- ------ ------ ------
Due to the loss for the period, the effect of the potential
dilutive shares on the earnings per share from continuing
operations would be anti-dilutive and therefore are not included in
the calculation of diluted earnings per share from continuing
operations.
4: Property, plant and equipment
30 June 30 June 31 Dec
2020 2019 2019
GBP'000s GBP'000s GBP'000s
--------------------- ---------- ---------- ----------
Cost
At start of period 148,071 151,394 151,394
Additions 216 1,390 1,493
Disposal - (1) (2)
Exchange adjustments 10,118 620 (4,814)
At end of period 158,405 153,403 148,071
--------------------- ---------- ---------- ----------
Depreciation
At start of period 729 389 389
Disposals - - (1)
Charge for period 163 221 340
Exchange adjustments 23 (51) 1
--------------------- ---------- ---------- ----------
At end of period 915 559 729
--------------------- ---------- ---------- ----------
Net book amount 157,490 152,844 147,342
--------------------- ---------- ---------- ----------
5. Intangibles
30 June 30 June 31 Dec
2020 2019 2019
Unaudited Unaudited Audited
GBP'000s GBP'000s GBP'000s
---------------------------- ----------- ----------- ----------
Cost
At start of period 41,631 36,412 36,412
Additions 603 5,268 5,974
Exchange adjustments 2,094 383 (755)
---------------------------- ----------- ----------- ----------
At end of period 44,328 42,063 41,631
---------------------------- ----------- ----------- ----------
Impairment and Depreciation
At start of period 10,847 4,404 4,404
Charge for period 35 6,539 6,655
Exchange adjustments 12 124 (212)
---------------------------- ----------- ----------- ----------
At end of period 10,894 11,067 10,847
---------------------------- ----------- ----------- ----------
Net book amount 33,434 30,996 30,784
---------------------------- ----------- ----------- ----------
6. Cash and cash equivalents
30 June 30 June 31 Dec
2020 2019 2019
Unaudited Unaudited Audited
GBP'000s GBP'000s GBP'000s
----------------------------- ----------- ----------- ----------
Cash and short-term deposits 4,206 11,091 4,608
----------------------------- ----------- ----------- ----------
The Group has provided collateral of $3.35 million (2019: $3.35
million) to the Moroccan Ministry of Petroleum to guarantee the
Group's minimum work programme obligations. The cash is held in a
bank account under the control of the Company and as the Group
expects the funds to be released as soon as the commitment is
fulfilled on this basis the amount remains included within cash and
cash equivalents. Subsequent to the period end, in August 2020,
$1.6 million of the collateral was released and became
unrestricted.
7. Loans and borrowings
30 June 30 June 31 Dec
2020 2019 2019
Unaudited Unaudited Audited
GBP'000s GBP'000s GBP'000s
---------------------- ----------- ----------- ----------
Current liability
5-year secured bonds 23,845 - -
Non-current liability
5-year secured bonds - 21,337 21,235
---------------------- ----------- ----------- ----------
The Company has 5-year non-amortising secured bonds with an
aggregate value of EUR28.8 million. The bonds are secured over the
share capital of Sound Energy Morocco South Limited, have a 5%
coupon and were issued at a 32% discount to par value. Alongside
the bonds, the Company issued 70,312,500 warrants to subscribe for
new ordinary shares in the Company at an exercise price of 30 pence
per ordinary share and an exercise period of approximately five
years, concurrent with the term of the bonds. The effective
interest rate is approximately 16.3%. The 5-year secured bonds are
due in June 2021.
8. Shares in issue and share based payments
As at 30 June 2020, the Company had 1,161,851,296 ordinary
shares in issue. In January 2020, the Company issued 75 million
shares at 2 pence per share following a placing announced in
December 2019. The net proceeds of the placing were approximately
GBP1.3 million. 1,425,000 shares were issued to a third party to
settle fees relating to the placing.
During the period to 30 June 2020, approximately 0.9 million
Restricted Stock Units (RSU) awards vested and approximately 1.0
million RSU expired. In addition, 8.4 million share options expired
during the period.
9. Post Balance Sheet events
In July 2020, the Company confirmed that negotiations with
Morocco's Office National de l'Electricité et de l'Eau Potable
("ONEE") in relation to the final gas sales agreement were
continuing despite travel restrictions relating to COVID-19.
In July 2020, the Company announced that it had renegotiated the
terms of its Anoual Exploration Permits (the "Permit') with
Morocco's National Office of Hydrocarbons and Mines, which aligns
the work programme commitments on the Permit and the Company's
continued pursuit to unlock the exploration potential of the
Eastern Morocco basin, with the expected phasing of the Company's
recently announced Tendrara Production Concession Phase 1
development plan.
In July 2020, the Company issued 863,682 new ordinary shares in
respect of RSUs that had vested.
Subsequent to the period end, in August 2020 the Company placed
163,529,411 new ordinary shares at a price of 2.125 pence per share
to raise GBP3.2 million after costs.
In August 2020 the Group received a notification from the tax
authority in Morocco of its intention to assess Sound Energy
Morocco East Limited for additional tax liabilities totalling
approximately $14 million. The Group believes that the assessment
arises from a misunderstanding of the underlying transactions and
consequently intends on appealing the assessment. Accordingly, no
liability has been recognised in the financial statements and the
amount is considered to be a contingent liability.
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