TIDMSOU
RNS Number : 5997J
Sound Energy PLC
23 December 2020
23 December 2020
Sound Energy plc
("Sound Energy" or the "Company" and together with its
subsidiaries the "Group")
Phase 1 Development - Letter of Exclusivity and Extension of LNG
Heads of Terms
Sound Energy, the Moroccan focused upstream gas company , is
pleased to provide the following update in relation to the
Company's proposed micro liquefied natural gas ("mLNG") phase 1
development project for the TE-5 Horst (the "Phase 1 Development")
at the Tendrara Production Concession (the "Concession").
Letter of Exclusivity
The Company is delighted to announce that Sound Energy Morocco
East Limited ("SEMEL"), the Company's wholly owned subsidiary, has
entered into a letter of exclusivity (the "LoE") with Italfluid
Geoenergy S.r.l. ("Italfluid") pursuant to which the parties have
agreed to use their reasonable endeavours to negotiate and enter
into a binding project contract (the "Project Contract") which will
on entry commit Italfluid to design, construct, commission,
operate, maintain and let to SEMEL a mLNG Plant (the "mLNG Plant")
which can produce LNG. The mLNG Plant, which will also treat and
process raw gas from the Phase 1 Development prior to liquefaction,
is a substantial part of the surface facilities required to be
built and operated as part of the Phase 1 Development.
Under the LoE, the Group has granted a period of exclusivity to
Italfluid until 31 March 2021 during which time the parties have
agreed to use their reasonable endeavours to seek to conclude and
enter into the Project Contract on the basis of key commercial
terms set out under the LoE ("Proposed Transaction") and as
summarised below:
a. The mLNG Plant shall be designed, constructed, commissioned,
operated and maintained by Italfluid for SEMEL in consideration for
the Initial Payments and the Daily Rental Payments.
b. The term of the Project Contract shall be five (5) years (the "Initial Period").
c. An initial Payment of five million US Dollars (US$ 5
,000,000) due from SEMEL to Italfluid within 30 days of issuance of
the notice to proceed with the Phase 1 Development and two million
US Dollars (US$ 2 ,000,000) due from SEMEL to Italfluid within 30
days of notification from the SEMEL to Italfluid of the successful
commissioning (including production build-up) of the mLNG
Plant.
d. During each day of each contract year in which Italfluid has
evidenced to the satisfaction of SEMEL, that the mLNG Plant can
deliver a guaranteed daily volume, a daily rental payment of
thirty-six thousand US Dollars (US$36,000) per day shall be payable
to Italfluid from SEMEL.
The Company cautions that whilst the LoE is binding during its
term in the grant of Exclusivity and in its recording of the
commitment by SEMEL and Italfluid to use reasonable endeavours to
conclude and enter into a Project Contract based on the key
commercial terms set out in the LoE, the Proposed Transaction
remains subject to, inter alia, the negotiation of and entry into a
binding agreement, to the approval of the Concession joint venture
partners and to an FID on the Phase 1 Development being taken.
Italfluid is an integrated service company which provides
certain upstream petroleum services, including the design,
construction, commissioning and maintenance of process plants and
hydrocarbon processing, including gas liquefaction to produce
liquified natural gas.
LNG Heads of Terms with Leading Moroccan Energy Group
The Company announced on 29 June 2020 that it had entered into a
heads of terms (the "HOT") with a Moroccan conglomerate (the "Gas
Offtaker") pursuant to which the Company had agreed to commence
exclusive discussions with the Gas Offtaker in order to enter into
agreements for both the purchase of LNG to be produced from the
Phase 1 Development, as well as the partial financing thereof
("Exclusivity"). Under the HOT, Exclusivity was granted to the Gas
Offtaker until 31 December 2020.
The Company is pleased to announce that negotiation of the
definitive agreements with the Gas Offtaker pursuant to the HOT has
progressed well over recent months however given the inherent
linkage between Project Contract envisaged to be entered into with
Italflluid and the suite of definitive agreements planned to be
entered into with the Gas Offtaker, the Company has agreed to
extend the period of Exclusivity with the Gas Offtaker under the
HOT to 31 March 2021, coincident with the period of exclusivity now
granted to Italfluid. Synchronising the timing of these respective
negotiations provides a clearer and de-risked pathway to taking a
final investment decision together with the Concession joint
venture partners on or before 31 March 2021.
Further announcements will be made, as appropriate, in due
course.
Mohammed Seghiri, Sound Energy's Chief Operating Officer,
commented:
"We are very pleased to announce the signature of this Letter of
Exclusivity with Italfluid for the proposed provision and leasing
of the mLNG Plant. The Company has worked with Italfluid in Morocco
in the past and I am pleased to continue developing our partnership
with such a technically assured contractor in support of the Phase
1 Development of the TE-5 Horst.
The mLNG Plant is the most complex element and most significant
capital requirement of the proposed Phase 1 Development therefore
today's announcement of a proposed leasing structure, which when
combined with the financing proposed to be provided by the Gas
Offtaker, would secure the balance of funding required by Sound
Energy for the Phase 1 Development, is a key milestone for the
Company as we move towards FID."
For further information please contact:
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: (0)20 3657 0050
Andy Thacker
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