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Wednesday, November 30, 2022
Sound Energy provided a progress update on its Phase 1 micro-LNG development in Morocco where the company states good progress continues to be made with construction of the LNG storage tank ongoing and wellhead work undertaken.
Work on the LNG storage tank has included site preparation, excavation for the tank foundation, laying the concrete base for the tank foundation, laying reinforcing bar and installing the reinforced concrete columns on the base, of which there are 60 in total and each 4 meters high. Once complete, the tank will stand 24 meters high and be 22 meters in diameter.
Wellhead inspection and remedial well servicing work at TE-6, one of the first of two wells to be put on production in Phase 1, was also completed safely in September.
The company also states that the project contract entered into between Italfluid Geoenergy S.r.l. and Sound Energy‘s wholly owned subsidiary, Sound Energy Morocco East, in respect of the design, procurement, construction, operation and maintenance of Tendrara Concession of the micro-LNG facilities onshore Morocco has been amended. The Contractor was previously provided with ‘Notice to Proceed’ under the Project Contract, as confirmed by the Company on February 16, 2022.
The amendment to the Project Contract effects a reduction of the operating day rate of the plant by $3,000 to a revised $38,000 per day over its 10-year term, an approximate 7% reduction. The reduction in the operating day rate represents savings of $1.1 million per year to the project, and $11 million over the 10-year term. Additionally, the parties have agreed to exercise their best endeavors to execute an option agreement under which the company will have the right (but not the obligation) to acquire the micro-LNG facilities, or the entity owning and leasing the facilities, after five years of operation for a sum of c.$9.15 million, a reduction of $1.5 million from the previous “option to purchase” sum agreed in principle between the Parties.
In return for the Contractor agreeing a reduction in the operating day rate under the Project Contract, the Contractor will be paid by the Concession owners (Sound Energy, 75% working interest) additional staged payments of an aggregate of US$6.5 million during the construction phase, in doing so providing the Company with the right to own the permanent on-site LNG storage tank facility once the plant is commissioned and LNG production starts. These staged payments, which are intended to be borne pro rata by all of the Tendrara Production Concession JV partners, will be presented to the December Tendrara Concession Management Committee Meeting (TMCM), with the initial payment likely to be advanced to the Contractor in full by the company on behalf of the JV partners ahead of the TMCM from proceeds of the Company’s existing project debt facility which is in place with Afriquia Gaz S.A. The LNG storage tank will remain part of the Operation and Maintenance responsibility of the Contractor over the life of the Project Contract.
Graham Lyon, Sound Energy’s Executive Chairman, commented: “We are working closely with the Contractor to ensure the project remains on track to meet the joint venture’s delivery obligations to Afriquia Gaz under the LNG sale and purchase agreement. The restructuring of the payment structure under the Project Contract increases our alignment with Italfluid during the construction and commissioning phase whilst notably facilitating a valuable reduction in the operating day rate of the facility of some $1.1 million per annum over the 10-year contract. Additionally, under the “option to purchase” agreement, which we expect to agree and execute in the coming weeks, the proposed reduction of the purchase price of the facility (or operating company, as the case may be) provides a valuable opportunity for Sound Energy to access additional value upside from the micro-LNG development.”
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