Sound Energy (LSE:SOU) — 2024 AGM

0:01 Good afternoon, and welcome to the SOUND ENERGY PLC Annual General Meeting. Throughout this recorded meeting, investors will be in listen only mode. I'd now like to hand you over to Graham Lyne, Executive Chairman. Good afternoon to you, sir. Thank you, Mark. Good afternoon, ladies and gentlemen. I would like to welcome you to the reconvened annual general meeting of the company. On the 06/13/2024, with the approval of shareholders, the AGM was adjourned until today.

0:27 Please be advised that the proxies submitted for the meeting of the June 13 still stand together with any changes or any additions made. So before commencing the proceedings, I would like to introduce myself and my colleagues. I'm Graham Lyon, the executive chairman of the company. To my right is Mohammed Segiri, our chief operating officer, and to my left, far left, Christian Bukovic, our senior independent director. And on my immediate left, Amanda Bateman of Amber Secretary is our company secretary. David Blueden, is unable to attend today and sends his apologies as does Simon Ashby Rowe. So before we start the formal proceedings, I'd like to pass over to our company secretary to explain the procedures that we will follow for this annual general meeting.

1:17 Thank you, Graham. Good afternoon. Before Graham takes you through the formal business, I would like to advise you that the company is exercising authority contained in the company's articles of association to call for a poll to be taken on the resolutions to be put to the meeting. I will now detail the procedure we will follow for the AGM. After the resolutions have been proposed, there will be an opportunity to for you to ask questions about each of the resolutions. If you have a question, please state your name, or if you are a proxy or a corporate representative, your name and the name of the shareholder you represent before asking your question. Once any questions about the resolutions have finished, you will be invited to vote by way of a poll on the resolutions put to the meeting.

2:02 On a poll, each shareholder present in person by corporate representative or proxy as one vote for every share held. If you have already lodged a form of proxy, you do not have to vote again now unless you wish to change the way you originally voted or unless you did not appoint the chairman as your proxy and the person you appointed as your proxy is not present. A separate poll card should be used for each separate holding. So if you are representing more than one holding, please ask for additional cards as necessary. You should indicate the number of shares to be voted in the appropriate box on the poll card. If you do not, all the shares registered in your name or in the name of the person you are representing will be included in the count.

2:48 If two more persons are jointly registered to shareholders, any one of them may vote either in person or by proxy. If more than one of the joint holders votes, then the vote of the joint holder whose name is the most senior on the order of names on the share register shall be counted. Please complete the complete the poll card and sign where indicated. If you are here as a proxy or corporate representative for a shareholder, you should complete the details of the shareholder you represent and your full name. Poll cards were provided as you entered the room. Please remain in your seat while the poll is being conducted. Once voting has finished, completed poll cards should be handed to the representative from representative from LINK who will act as red the scrutineers.

3:34 LINK is our registrars who sat at the back of the room. Those votes validly cast at this meeting will be added to the proxy votes properly received in advance of the meeting, and the outcome of the poll will be announced via RNS. So as the quorum for the meeting is present with two members impersonal by proxy and entitled to vote, we are quorum, and therefore, I'll pass back to Graham to go through the formal business. Thanks, Amanda. So let's start the formal process of the meeting. The notice convening this meeting was sent to shareholders on the May 14, and I would propose with your agreement to take the notice of the meeting as read, and I will read out the short form of these resolutions. Thank you. I will now propose the resolutions to the meeting.

4:23 Resolutions one to six are ordinary resolutions, and seven and eight are special resolutions. The first item on the agenda is resolution number one to receive the audited annual accounts for the financial year ended 12/31/2023 together with the director's report and the auditor's report on those accounts. This resolution is proposed as an ordinary resolution. Resolution two is appointment of Crow UK LLP as auditor of the company. This resolution is proposed as an ordinary resolution. Resolution three is to authorize the directors to determine the remuneration of the auditor. This resolution is also proposed as an ordinary resolution.

5:10 Resolution number four was to reappoint Simon Ashby Rudd as a director of the company. However, as announced to the market, Simon will be standing down after this AGM. Therefore, this resolution no longer stands. We thank him for his service and support over the last year. Resolution five is to reappoint David Blueden as our director of the company in accordance with articles one twenty four, one twenty five of the company's act articles of association. Sorry. This resolution is proposed as an ordinary resolution. Resolution six is to authorize the directors of the company to allot shares in the company up to an aggregate nominal amount of £5,979,368.03.

6:02 Provided that this is only used to allot shares for cash on a basis that is pro rata with shareholders' existing holdings as outlined in the notes, to the notice with a separate authority to allot shares up to an aggregate nominal amount of £11,958,736.07 in respect of shares being issued by way of a rights issue. If given, this authority will expire at the conclusion of the annual general meeting to be held in 2025 or on the 06/30/2025, whichever is the earlier. This resolution is proposed as an ordinary resolution. Resolution seven is linked to resolution six in that it also concerns the authority to allot shares of the company.

6:56 Where it differs from resolution six is that it is, in particularly, concerned with the situation where your directors proposed to allot shares for cash on a non preemptive basis. Your directors are seeing seeking authority to disapply the preemption rights in respect for an aggregate nominal amount of £3,986,245.35. If the if given, this authority will expire at conclusion of the annual general meeting to be held in 2025 or on the 06/30/2025, whichever is the earlier. Resolution seven is a special resolution. Resolution number eight gives authority to the directors to make market purchases of ordinary shares in the capital of the company up to 10% of the company's issued share capital as of the date of mailing the notice of meeting.

7:52 If given, this authority would expire at the conclusion of the annual general meeting to be held in 2025 or on the 06/30/2025, whichever is the earlier. Resolution eight is a special resolution. Now before putting the resolutions to the meeting, are there any questions? Okay. There being no questions, I point link group, the company's registrar's scrutineer to the meeting, and I will now put the resolutions to the vote. So if you could, please complete your poll card, and the company secretary will come and collect them from you.

9:01 K. So if there are no more poll cards to collect, I declare the poll closed. Ladies and gentlemen, that concludes the formal part of the business today, of our annual general meeting. The outcome of the poll will be announced via r r and s very shortly. Thank you for your attendance, and I now declare the meeting closed. What we'll do now is give us a couple of minutes. We'll just change a few people around, and then we'll have a a presentation from the company and answer questions and answers. So, Gary and John, if you'd like to join me.

10:01 So I hope people saw a few of the revolving slides behind me with our site activity. Okay. Mark? Yes, sir. Alright. We're roll if that's okay. Perfect. Floor is yours, sir. Thank you. Well, following the adjourn to AGM, it's now concluded. We asked everybody for any questions on the investment Investor Meet platform. We got lots surprisingly, no doubt because we made an announcement the day after the, of the adjournment of the AGM.

10:48 So I'm fortunate to have Mohammed Segiri here, our chief operating officer, Gary Dempster, on the far end, our chief financial officer, and John Arjun, our VP geoscience, to help me answer some of the questions. I'm gonna go through a presentation probably a little bit quicker than I would normally because there is a lot of question, or I want as much time for the question as an answer session as possible. We we've got some quite detailed questions, so hopefully, people will bear with me. I think we all know the story of why we're doing our business. Our Morocco needs gas. We have the largest onshore position in in Morocco. There's a compelling need for gas in Morocco.

11:36 We have two projects that we are one underway, under development, another one in the planning cycle, which we hope to get on to develop fairly soon. We have I think have now announced with the the June 14 announcement a strong robust financing plan to get these things up and running. We also have a significant portfolio in the exploration front that we'd we'd like to go to. I have our HSSE, supervisor manager here, and he's ready to answer any questions on ESG as they come up. But bear bear in mind that, you know, we try and do everything safely, securely with an environmentally friendly manner. Some of you may have seen this slide before, but I think the important fact to notice is that Morocco has imported its gas, an increase of 400%.

12:35 I think what what essentially that means is the Algerian gas that was turned off has been supplemented by imported gas from Spain primarily, which is regasified, liquefied natural gas. So you can imagine that's quite expensive for the Moroccans. There is a big demand for energy, growing country, growing in, industry, with a substantial growth rate, which I think a lot of European countries will be pleased to have. It it has an advanced sustainable energy policy. It's been in place for several years, and we want to be part of that. The transition economy needs gas, and we're there to help provide that. The Tendrara development, without going into too great detail, at the moment, you'll know the story, of our micro LNG phase one project, and that's been moving along. For those of you that follow us on LinkedIn or X, you'll see some pictures of activity that are happening.

13:38 And we're we're planning to have all the kit on-site by the end of the year and then commissioned an LNG sale sales thereof. And a few pictures for those who haven't seen the rolling slides. Plant construction. A lot of the activity on-site is primarily around the tank construction, but the aiming unit has arrived and other pieces of equipment are coming to site. Just recently, we had the Star Valley rig one zero one working on our two wells, t six and seven. So t six is ready for production now. It's got its production tree on. It's got its corrosion resistant tubing in. T seven is waiting for a piece of kit on the surface, and we hope to have that one ready soon as well.

14:33 Once we create our LNG, we need to transport it. And working with Africa Kia Gas, our our purchaser, we're also constructing the access road and the, whilst it's it's it's mostly gravel and hardcore at the moment, there will be a blacktop being put on it as well. So you'll see that developing over the next few months. Phase two is the big one, and, this is the pipeline development which we've committed to with the ministry. We we we are planning to sell gas through a gas sales agreement to the two power stations that will need our gas on on the GME pipeline. And the key to get that project going is to take the financial the final investment decision, and that needs, several elements.

15:20 The gas sales agreement. Now we have a a gas sales agreement that we've been tweaking a little bit. And just recently, there's a new CEO at ONEE, and so we'll be finalizing that gas gas sales agreement with with ONEE very shortly. We have the need to do a little bit of an update on our front end engineering design. The plant's changed a little bit to match the the sales volumes. But, also, over the last three years, you've seen a massive swing in costs up and down. So we need to refresh the the outcome cost for the the project. At the duo offer bank, our debt providers, they're there. They have given us a a good term sheet, a good facility, and we're pleased to to to be working with them. So the missing portion for that was the equity component that everybody needs to bring to the table.

16:18 And that's where on the June 14, we were able to announce the transaction, a binding sale and purchase agreement with managing. In the end, the value to SOUND is over 45,000,000, dollars. This dates back to just before we took the notice to proceed with the micro LNG project. What it does do is give net to SOUND a $24,500,000 funding for the phase two development. That's the equity portion. Bear in mind, there's a big chunk of the of the debt portion. So if you gross that up, that means equity is over a $100,000,000, $120,000,000, plus the 200 and, $30,000,000 of the bank.

17:05 We're talking $3.50 so million dollars. Currently, we expect that should be sufficient for the project, but, you know, let's get the feed done. We have a first gas, production payment of $1,500,000. That's a nice sweetener that management were kind enough to to offer us. More importantly, though, it also brings with us two exploration wells. And I'm sure John will answer a few questions on the the drilling. But it's the drilling of the, one well on the Grand Tenderoa license and one well on the Anahuao license. And these will both be commitments that we expected to drill for, on behalf of the ministry. So, exciting that we've got a two well, exploration program con confirmed.

17:55 Key for us in the short term, we'll be closing this deal with Managem, and that will bring to SOUND ENERGY around about $12,000,000 of past costs, which is how much money that we would have spent at the 55% equity position, SOUND ENERGY PLC, the company we're selling. And, and then, when we move forward in the expiration, another million dollars for the money we spent on expiration. So a considerable amount of back cost, so, SOUND will have, some spare cash. Who are managing, you might ask? For those that are new that know Morocco well, they're a Morocco headquartered Pan African mining company.

18:41 They're in seven countries across Africa, mostly in mines. Gold is one of their areas internationally. They're an integrated player. They employ 5,000 people. They have a good market cap to a bit billion dollars. They are owned 82% by a particular fund called El Mother, and so that's a large private Moroccan holding. So we think that these are a good strategic partner as well. We believe they can add a lot of value to unlocking, Tendrara. Part of their vision for 2030, and I'm not here to talk on behalf of management, but they are transitioning in their own right. And so they're they're moving into track transition critical manual minerals, but they're also moving into energy, and they see the value of that. A big company, lots of people, big project engineering teams, etcetera. So we think a a an excellent company to partner with.

19:44 A strong financial player, good metrics. If you deal with management, you know what you're gonna get. And, you know, we we're very pleased to to have them, as a a partner. John, I'm sure, has shown this slide several times before, but it's just a reminder that there's still a lot of untapped potential if we can get the exploration game going again. And the three, immediate wells that we've identified, two on Grand Tendrara, and one exciting exploration well on, Anowal. And I'll let John explain that because he's much better than that than me. So what are we doing? Our key activities. Clearly, we've got our day job. A man has been pulling his hair out, getting this moving with our onshore construction and the micro energy project.

20:34 Things are moving. Things are happening slower than we all wanted, but we're we're planning to get that all in place by the the end of the year and hopefully get the the the critical path item, which is the energy storage tank available shortly after so that we can start selling gas. You know, a lot of that is it's a little bit of a moving target, but we're we're working on that. Another important aspect as we build all these building blocks in SOUND, as we've moved from a pure exploration company into a development and then hopefully a revenue generating company early next year, is getting projects over the ground, getting the funding together for for those projects. And it's clear that we've had a lot of support from the business community of Morocco.

21:23 We've actually do offer bank, you know, the number one bank, I think, in Morocco, is it? Or one of the top banks of the top. One of the top banks in in Morocco provided some debt funding, leading the that consortium of banks that that we have ONEE, a state purchaser for the gas. We need to get the updated fee study in an engineering procurement construction group, and all the approvals are pretty much in place, the key missing part for that jigsaw was the equity portion. And, you know, we'll talk about this a little bit later on, but trying to raise $4,050,000,000 dollars for SOUND is is is not easy at the equity level, and I'm sure shareholders won't want to be diluted like that one way or the other.

22:12 Exploration. I think we've got a partner now who's committed to developing exploration. It's it's very encouraging that they made it clear that they are not in this just to to do one pipeline project. They've built pipelines before in in their own businesses. They wanna get involved in the exploration. What we need to do is also move to E 4 at Grand Tendera. So we'd like to get all three wells drilled. Strengthening the balance sheet, that's been important. You know, we did quite a lot of activity in 2023, and you you know about that. And, you know, I think the key for us for for future is closing this deal with management and having a bit of cash in

22:53 the bank. This is the standard slide. You'll see this pretty much everywhere, and we'll we'll take any finance questions. There's some that have been brought up.

23:08 We we haven't forgotten ESG. We do work it. I am very pleased, and I wish to be proud of this team in Morocco that when we had the well operations, and John was heavily involved in that, we we had no safety incidents at all. Thank you, Sean. We had a good two good team, good crew. We, you know, we had a couple of technical things we needed to deal with. They were dealt with properly. Bear in mind that people worked over the years as well. So it's a bit like if you're in the Western world working over Christmas. No loss in productivity. No loss in quality and safety. So pleased with that. Part of 2024 and our objectives is to engage even more with the local community and put in a social investment plan. And also the c o two that we've got in our gas, we found ways of, capturing that and commercializing that. We'll give more information on that. So that could add a little bit of value for us as well, but more importantly, it reduces our emissions.

24:06 So where are we? I think you've seen what we've done with the company. We've tried to take it from a pure exploration company. It's not been easy, I have to say. We've had a few speed bumps, as they would say, in the road. We've overcome most of them. I think we're on the last last few. We're definitely a strategic player in in Morocco for the energy market in providing gas that is part of that transition energy, that flexibility that's needed between the renewable energy and and the the still days and the dry days and the not windy days. We have a position on shore. We're competitive, and I think we can do things. We we have a a forward plan, what we want to do with the phase two development. And, of course, any other success on exploration will bring another add on, another add on, another add on.

25:00 I think we've now laid out the financial road map with management as our partner. So being a key player in in Morocco, established in Morocco, up and running, revenue generating, we can then start looking at what we can do with SOUND and expand the company in, other directions. But I have, you know, I have to say we've been with our small team, we've been very focused on developing Tendrara and and getting that, underway. So, that's where I would like to finish the, questions. And, I can sorry, the presentation. Now I can move to the questions, and please bear with me. We've got over, I think, 50 questions, some of which are a little bit redundant now because they were all telling me I was lazy, wasn't closing the the other deal, the other opportunity.

25:54 And but you can see now we were doing some other things and running plan b and run running plan c at the same time. So what I'll do is I'll read the questions out. Forgive me if I paraphrase a few because some of them are long. And so and then I I'll answer some. John, Gary, and and Mohammed will answer others. So the first question, and there were a lot about why is it taking so long on Cal Valley, so we we parked that. The proposed deal with Car Valley would have a massive giveaway anyway, reducing our 75% to just 35%. The deal with management seems at first sight much worse. This hasn't gone down well with shareholders and the share price. Please explain why the Cal Valley deal fell through and why a manager on deal will be better.

26:44 Well, I think the answer to to that is CarValue will take CarValue will take in far too long to close the deal. And because it was announced as a nonbinding term sheet, others approached us. And so so we were talking to several other companies. And at the same time, Cal Valley, because of a nonbinding term sheet, continued to negotiate and rather than closing a deal. And not it's not that we didn't wanna close a deal with them. They're, you know, a good good group to to partner with. But I think you're fine now. We've managed them with the two exploration wells that we've got to manage them to fund and a much larger carry. It means we're more aligned, and it's a greater net asset value to than the Cal Valley transaction would have done.

27:31 So and we also shouldn't forget the quality of having a partner like a manager derisking the project. You know, a local Moroccan player helping us develop local Moroccan gas. I think this is a cleaner and simpler transaction with the sale of SOUND ENERGY Morocco East. Kal Valley would have been a a large restructuring, needing a whole lot of, government approvals, changing of contracts, etcetera. So even if we've managed to finalize the, the same purchase agreement with Cal Valley, it might have taken another six months to close. Question here. It would appear that the tax issue, took which so much time and effort for SOUND to resolve, could have been an attempt by certain factions in Morocco to weaken SOUND's position.

28:21 Now, does this deal with management restore Morocco control? So I I think we shouldn't look at it as weakening our position. I think it's more as an enabler to the business. 75% equity to try and put a $350,000,000 project together whilst you're doing a micro LNG project was a tough order for SOUND to to do. And so this deal does bring significant value. It derisks the project. The likelihood of this going ahead is far greater than it would have been even six months ago or even if we closed with Kal Valley. What I would also say is we've got big upside in those two exploration licenses and and management are after chasing those down as well. So in parallel, we'll manage all.

29:11 We do have two very large Moroccan shareholders, and I've since discussed this transaction with them. Of course, they're very interested, and they're convinced that this is a a good deal for SOUND. So what's good for them should be good for all shareholders. We're now a minority holder in Tendrara. Do we continue to have any say at all in what's going on in the concession? Does management have the same priorities as us as we do regarding drilling? Well, yes. This will be a new challenge for us as opposed to finding the money to fund a 75% position. Our challenge is now going to be working closely with our partners. Now this is day to day business for us in the energy world. We joint venture all over the world with with companies and through structures like the association contract or the management committee meeting, ourselves, ONIM, the state participant, and the manager will all have a say at the table.

30:13 Of course, there are voting rights, but the the way the association contract is is that people have to be aligned to go forward. So, yes, we still have, an element of control. It's called operated by others managing, other companies. And I would say over the last few months, we have a very good relationship with management right to the top. And, so far, they seem to be an excellent counterparty, a very professional, well structured company. So we're we're pleased to have them, and I'm sure they're gonna be very aligned with the way we go forward. Regarding the two exploration wells, yes, they're they're completely aligned. John is part of the transition plan to ensure that they fully understand what's needed and and, getting the operations up and running to try and get the exploration moving alongside it. Clearly, none of this will take place until the the

31:05 the deal is closed. It can't happen before then, but that's our plan. Similar line similar question, apart from seeing mock tar, what assets of any value are still in our control? Ownership. Well, everything's still in our ownership. We haven't got we've not got out of Morocco. So we do continue to operate Sidi Moktar, and we're we're talking to people about progressing that. But we discussed this part in the past. You know, do shareholders want to be diluted at the PLC level? When you're a market cap of 20,000,000 and you're trying to raise 40,000,000, a, I don't think The UK market will allow that, We'll we'll fund it. But secondly, you know, at the asset level, you get more close to a net asset value than you do a a share price value, which if you look at our share price relative to our net asset value, they're not the same. Okay?

32:01 So we we really do believe, and the board approved this as opposed to other transactions that we could have signed, that this is a better deal than the alternatives. Are we now simply passengers waiting for management to start generating revenue? Gary, I think can I ask you to look at this? I mean, you know, what if any further CapEx are we gonna need? I've been talking a lot now, but it it does come down to the best value in the project. So Yeah. I mean, certainly, we we don't see ourselves as passengers. We've got a lot of regional knowledge that we'll look to share and use that knowledge we have to drive value, influence the operator, influence on it, influence other stakeholders in the joint venture and outside the joint venture going forward.

32:53 So we see ourselves being fully involved in development of the assets in developing our working interests going forward. We've obviously got rights, as Graham mentioned, under the petroleum agreements to vote on the various matters, so we'll be actively involved now and going forward. In terms of future CapEx, well, the structure of the transaction is that we are carried for phase two in terms of the forecasted equity component of that investment. So, obviously, that believes that CapEx burden on the company and on shareholders. And then we've got two exciting exploration well carries as well, so we're fully carried for those two prospects as well. John will get some more details on those later on in the in the presentation. Thereafter, if there are further CapEx demands, then we'll obviously be required as a 20% participant in the concession to fund further CapEx beyond phase one, beyond phase two, and beyond the expiration carried on the other license as well. So we will be expected to fund future incremental CapEx thereafter.

34:01 But that's actually quite a good problem to have because that means we've got some exciting investments in front of all this, so we shouldn't be scared of that. It's an opportunity for us. Yeah. Thanks. The next one, Gary, is is one for you. I'm well, I'd like to pass to you anyway, if that's okay. Could you put an approximate estimated potential value on sales, 27 and a half percent of annual and the SPK wells if they were successful? Likewise, a value on 20% of phase two. Alright. So, hopefully, you you've seen the updated market research posts, and then some of the transaction with management. So that was announced early on this week. We've got the initiation coverage from our new broker, Zoos. So you can see that in the marketplace. We also had a flash note from SP Angel, our former former broker as well. So they put some values on the on the asset on the on the business.

34:59 So you can see, for example, from the Zoos valuation, they've got an unrest valuation of about 4p per share from the concession. So that gives you a sense as to the value that we see from the development of both phase one and phase two going forward. 4p per share. Unrest is clearly well above the current share price that we're seeing in the in the market. In terms of future earnings, we see around from their forecast around $1,819,000,000 pounds of EBITDA on an annualized basis once we're through the investment phase. So there's some strong figures there that, obviously, with the enablement of the funding and progressions and projects through the carriers, we look forward to delivering in years that lie ahead of us. In terms of the exploration potential, John, again, will go into a bit more detail on that later on in the presentation, but there are quite significant numbers there. For example, on the n five prospect on Anwal, the gross premium unrest gas initially in place is around 940 BCF.

36:07 So there's significant potential that we hope to look forward to trying to realize within the not too distant future through through those two exploration carriers that we have.

36:18 Okay. Thanks. Another one for you, Gary, coming up. Can you clarify that management will carry the total costs for the SBK and annual drilling, and SOUND won't be contributing? Presumably, ONIM will be paying 25% of the cost too. Right. Yes. So the the deal that we concluded with management is designed to be a full carry on each of those two prospects. So we've we've got a very robust cost estimate in place for SBK one and for n five, and it's a full carry for SOUND ENERGY's remaining equity interest in those two prospects. So we've got a 27 and

37:02 a half percent interest through AREN ENERGY Holdings. We're fully carried through those through those planned activities. In terms of ONM, they've never contributed to exploration costs. They are fully carried through the exploration phase, so that will continue to be the case. So, clearly, manager will pick up all of the costs associated with drilling those two prospects. Another one for you, Gary, coming up, and it's about the detail of the deal in with management. As you can imagine, the headline numbers are fine, but there's a lot of value that we're trying to create for shareholders inside the deal. So will management be taking over the agreement and payments of the Schlumberger contribution, or will this be a future cost to SOUND?

37:48 Yeah. They they will indeed. So for those of you that may remember that transaction that did with Schlumberger back in 2021, we acquired their interest in the concession of the expiration permits. In return for doing that, we entered into net profit interest agreement with them. Through that net profit interest agreement, we were obliged to pay them between 811% of future net profits from the concession. With this transaction, we have agreed with managing that burden for paying all of that, passed across to managing. So that's it's another additional value component that maybe wasn't seen in the overall overall description of the deal that we announced two weeks ago. Good. Thank you. An easy one for me now. What happened to Cal Valley?

38:38 The simple answer is you must ask them. They've got a professional leadership team, and I'm sure they're looking at other opportunities. One a more little technical one. Somebody spotted in the management announcement that they talk about delivering a 100,000,000 cubic meters of LNG each year. It should be a 100,000,000 cubic meters of gas in liquefied form. Wasn't you asking that, was it? So, yes, it was a mistake. Management have got, we sell roughly, 10,000,000 cubic foot a day in in old money, in the form of liquefied natural gas, and that's point one of a billion cubic meters a year as as in the gaseous phase.

39:25 So, yes, it is. The gaseous phase is 600 times bigger than liquid phase. I'm gonna now we've we've we've highlighted that John's here to to talk a little bit about answer the questions on the expiration. So, John, if you if you get yourself ready. If t four I mean, I know you're prepared. Is t four successful? It will transform the prospect of progressing phase two. I don't think it will, but anyway, as t four has already proven the presence of gas, a horizontal drill would greatly increase the chance of success and would any case be necessary for a production well. Why not do this in the first stage? Okay. That's great. Thank you very much. Look. I guess the first question to ask me and some of shareholders in the room, but would would want to ask me is, you know, why am I here, okay, at this table? And I want to make it clear that I'm here at this table because I fundamentally agree with the petroleum or the gas potential, the significant gas potential of this basin.

40:24 Okay? So for those of us who work in this industry, this very exciting industry, we know that opening up a new basin, okay, such as this, it requires tenacity and persistence, doesn't it, Christian? Okay. And, yes, given the risks, given those risks, it also requires a little bit of luck, okay, as well on top of that. So you only have to look at what once were frontier basins around the planet and some very recent ones that have opened up that demonstrate that. And you can look at some examples of Namibia, Guyana, Mozambique. You have a look at those in the news. Okay? Those basins, okay, had several failed attempts before they were ultimately opened up to be incredibly successful. Okay? And that's that's why I'm here. This basin, it's very large, 24,000 square kilometers that were were licensed.

41:14 There's only a dozen wells drilled to date, okay, in this basin. So it's very much underexplored, but it has gas resources. Okay? Those gas resources, they're proven by the T 5 quartz gas discovery that we we are drilling. Sorry. We're drilling we're developing at the moment. SPK one, which is also another discovery, which we'll talk about in a moment, and all the other wells drilled in this basin have all encountered either gas or oil shows. Okay? So there's a petroleum system present in this basin. So the next question, obviously, is just how prolific, okay, could this basin be? Okay? It's a large basin. And that's the question that I want the opportunity to answer, and that is why I'm here.

42:01 And the manage them deal, okay, is a very important key deal for this company, gives us that opportunity to answer that question. Okay? So, Mark, could you put on slide 24, please, up on the up on the screen? That'd be great. So, obviously, more drilling is needed to unlock this basin. There are numerous undrilled exploration targets within this basin itself. And this cross section through the basin here, you can see the t five horse in in the middle here. Okay. You've seen this. Some of you've seen this already on our website before, like sitting there. And we've also got the m five prospect in here, very large prospect, which I'll be talking about a little bit later. So this management deal, it delivers the opportunity for further drilling in this basin, and that's why I'm very excited about this opportunity from, you know, for us as a company, but also obviously for our shareholders as well.

42:56 Now that being said, I will answer the question on t four. Oh, yeah. We got that's right. Haven't answered it. So first of all, t four phase two, that stands, you know, on its own with the existing resources of the of the t five horse. Okay? And we maintain the T 4 horse, which is just to the south of the T 5 horse. And, Mark, if you put up slide 27, please, on there, with people would have seen this slide before. We maintain this as a high graded opportunity, and we'll continue to hold this opportunity within the portfolio. Okay? So if successful, it could potentially add, you know, in the upside case, you know, around about 400 BCF, I think, you know, going to the PME. I think PME is a 140 BCF of gas in place on risk and basis on on there.

43:42 And whilst the t four well, that's proven gas presence in the structure, it didn't flow on test. So the fundamental question for this well is or for this prospect, is this the effective reservoir at the crest of the well just as we have the t five force where we can flow gas. So why not drill a horizontal well to answer this, okay, and and help improve improve the chance of doing that? Well, we estimate well, certainly, our drilling team do a horizontal well is gonna cost be twice or more than twice the cost of a vertical well. Okay? But what's the advantage of drilling a horizontal well? Well, one of the advantages is that you increase reservoir exposure. Therefore, you increase gas deliverability, okay, from that. But we already have this information because we draw t six as a vertical well, and then we draw t seven as a horizontal well. We tested those wells before they were stimulated or fracked and after they were fracked as well. So we've got a lot of data from those well tests on understanding the deliverability of this of this reservoir.

44:44 So we know that if we flow test a vertical well, if we drill a horizontal well in the same type of reservoir, it should have approximately four times the deliverability. We know that from the drilling we've done on the t five. I don't believe at this point in time, it's worth doubling, effectively doubling the cost of your exploration well to obtain information that we already have to understand this reservoir. But a logical step would be that we could design a vertical exploration well. We could design that well in a way that we we could repurpose it and kick off a horizontal well from that and turn that exploration well into producer and lower the cost of putting a producing well into that structure. Okay. Long answer, but hopefully that answers that.

45:29 Thank you. Another one on the drilling x exploration drilling. SBK has proven gas. How much longer do we hold the license, and what has been done to secure it? Will we be passing 53% of our share in this license to Car Valley? The answer is no. Not to Car Valley for sure, but go on. No. Okay. So we talk about so, Mark, if you put on slide 26, and that show SBK. Okay? And some of you would have seen this slide before. They're all available on our website. We'll post these slides up up on the website. So SPK flowed gas to surface when it was drilled by the previous operator in the year 2000. Number? So, Mark, can you it's slide number 26. Put 26 on? Okay. And that that well, SBK one, that well's been plugged and abandoned by the previous operator some time ago, so well can't be reused. It's basically we'll be drilling a a new well into this structure.

46:26 Okay? It's the same reservoir we're targeting, the TAG Reservoir up on the T T 5 Horse. Now, interestingly, SPK one, it flowed at gas at a peak rate of about 4,400,000 scuffs a day. It declined to about two and a half million scuffs a day, and they saw pressure depletion. And that was consistent with it being in a drilled in a small compartment. And what we've seen on the on the seismic, the the new seismic that we acquired were also reprocessed as well, which we have up on the screen here, is the well was drilled in a small compartment neck very close to a fault and suboptimal location on an overall larger structure. So what we would like to drill is drill the large compartment. You can see on here to the to the left, and hopefully, we can get that that that to flow and find some thicker reservoir on the crest of the structure. Okay? It's worth noting, okay, the t six, same type of vertical. Well, that flowed at, you know, less than 5,000,000 scouts a day.

47:22 No fracking and seventeen minutes left. Okay? That was successfully. The previous operator didn't frac. Okay? SPK SPK one. So the prospect itself, it's entirely held under the Grand Tendrara exploration permits, and that agreement ends in 2026. Is that that's right, isn't it? Grand Tendrara. So we we hold that up until up until then, okay, in the second phase. Under the deal, as Gary said, manager will carry us for the cost of drilling this well. And in return for that, they're around the 47.5¢ interest, and that leaves us with 27.5¢ interest in there. Okay. Good. In the management deal, no mention has been made of drilling t four or no funding meant mentioned. And one one of the questions that's come, online today is, why is TE 4 not been funded?

48:19 But, yeah, this was one of our three priority wells. So what's your view on that? It it is, but that opens up the well that I'm most excited about in this basin. So we go mark to slide 25, please, and that is the well on Structure M 5 on Anowal. And this is the well that I really want to drill in this basin. Okay? And why is that? Because it's potentially the largest undrilled structure at tagging level within the basin, potentially larger than the t pi force. It's located in an area where the new seismic data that we have indicates that the Triassic Reservoir is actually very thick. Okay? And it could be up to 400 meters in thickness.

49:05 And at the t five horse, it's about a 100 meters in thickness. Okay? So we can see on the seismic at the top and the base of the reservoir, we interpret that, and we can see it's in excess of 400 meters. So it could have very thick reservoir in there. Very thick reservoir could mean that the reservoir is quite different in this area of the basin as well. So we could encounter a better quality reservoir in here as well. So something different. That's why I think that this is, you know, an extremely exciting exploration well to drill in the basin. It could unlock some really significant volumes. Okay? And the upside, you know, up to, you know, 1.7 TCF, Gary's mentioned. Was it 940 BCF, something in that that region in the in the in the mid case in in there. But drilling this well, if it was to be successful, if it was to find something different on this reservoir, potentially larger, it could be a real game changer for for this basin. And that's why I'm generally excited to drill this well and, you know, manage M70s as well. Okay? Again, and general cost of this well, which which is great. Okay? And it fulfills the commitment on the losses. So I think that was also part of it is that we got two wells with manage them, and that fulfills both commitments that we've got. One commitment on Grand 10 Drywall on on the permit and one on the Anowal permit.

50:18 It's not that we don't want to drill t four. I think we'll optimize it, and, we'll we'll try and get that well drilled as well. Now if I can move over to the more on some of the operational questions. We have a a question here. Can Itau Fluid and and, Mohammed, I think, if if you can help me answer these. Can Itau Fluid be relied on to deliver before the year's end? Other than LNG storage tank from manufacturing Spain, we've not seen any evidence of any piece of equipment arriving on-site. When can we expect to see it's our fluid constructing on-site? Thank you, Dan. On this, we need, let's say, to to explain that or to say again that the main problem now is manufacturing all the piece of of equipment.

51:13 So in tariff we are dealing, let's say, with several manufacturers located all around the world to the the manufacturing is ongoing. We have one of our main challenges are working laser with the Italy fleet in order to get all the local approvals before importing those pieces of equipment to work. So we are working on that. We had this week technical session altogether. When I say altogether, gas, ital fluid, and us to to to discuss LNG loading systems and the interfaces between gas equipment and the ital fluid equipment. We had the same kind of session, let's say, a few weeks ago between the upstream system, the gas gathering systems, and the and the micro LNG plant.

52:10 We need to make sure that all the system, they are going to work altogether in efficient manner, in a safe manner before bringing them to site. Because as soon as they are in site, we are in the Desartic area. We it will be in a very difficult position if things are not working well. So the intention, and I can ensure that that all the of the three partners is to deliver as quick as possible, let's say, this plan then to start producing LNG. We are all investing money in this this in this project. So I just want to have that some equipment, they are already coming to site. And I invite you, let's say, to follow us on x to see all recent picture and the picture that we will share with you in the next coming weeks and months.

53:02 Okay. Thanks. Yeah. So you can follow us on x or you can follow us on LinkedIn, and we try and put operational pictures up there from time to time when something has has happened. The next question regarding the the critical path, I suppose. The micro energy plant, is there a new updated completion date for the inner tank or alternative temporary option so that we might bring forward the first LNG sales? No. On the inner tanks, there is no update at present. We are focusing our effort on the outer tank, and the outer hole needs to be complete to a certain height. And it's really presently linked, let's say, to the weather.

53:49 We had, let's say, a lot of difficulty during the past month, let's say, with a a lot of bad weather, And we hope that we with the summer, let's say, we will have a better a better progress. About the in the time before, let's say, starting the work for in the time where we need, let's say, to to to put the the the base, and we are working now on that. So foam glass is is currently being put to put is being put in place. And as soon as it's done, let's say, we'll we'll be in position to start, let's say, the So installation is going on the concrete floor, and then the, you know, the inner tank goes on on top of that. Mohammed, can we clarify? Is it SOUND or management running the micro LNG and tender our production?

54:40 And who's responsible for getting phase two off the ground? The the the entity responsible, let's say, to to manage it to to manage the the work is the operator. And, obviously, the operator is some energy more focused. As soon as management is gonna need to take over this company, they are needed to be in charge. And they are they will be responsible to staff, let's say, the team alongside of of the SOUND ENERGY current staff. Good. So, essentially, the operator doesn't change. It's SOUND ENERGY PLC, but the control is the management infrastructure behind it. And our, you know, our employees in SOUND ENERGY PLC will transfer across to manager.

55:27 We'll move to some finance questions. Again, Gary, you can. The company coffers are virtually empty. Please explain where the cash is coming from. Yeah. So it's a good question. So the the the short answer is that we've announced through the manager deal a significant inflow of cash in the very near term. We're hoping to conclude the agreement within a three month period. We're only two weeks into that. Once we've done that, there's a inflow of back costs, $13,000,000 we expect into the company at that juncture. So that's that that's the that's the near term objective we have in place. We're making good progress in satisfying those CPs, so that will bring cash into the company.

56:22 With that cash, when it comes through the door, that provides us with ample funds to get us through to first revenues from phase one. Good. Thank you. This question is not exactly right, but I think you get the gist of it. LNG production will be well over a year behind the anticipated date, and that that's not quite true. But, are there any penalty agreements with the South Fluid for this delay? It would seem reasonable to delay their very substantial daily repayments once things are up and running for a com comparable period. And this might allow you to use the money for other funds such as drilling to e four. Yes. There are penalty clauses within the towel fluid contract for them not having the plant available on the contractual start date, so we can apply those penalties.

57:13 What what we've been doing over the last few months is we've got been trying to align the various agreements that we have in place, and that's essentially the tariff fluids contract and the APRIKEA GSA to ensure that we we merge all the contractual delivery obligations together to minimize any contractual exposure that the company may have, and obviously, to to minimize the leakage of revenue as well associated with the with the contract we have in place with with the tile fluid as well. So we're we're looking to optimize the two agreements, and if we choose to do so, we can obviously apply penalties to the tile fluid for any late delivery.

58:01 Thanks. So this is I'll lump a couple of questions together, but essentially, it's talking about the debts we have that we've we've incurred through Africa loans and also the current euro bond that we have. So you say you've de risked down with managing, but we've heard nothing about the bond repayment, which is due probably before sufficient revenue is generated. And phase one or before phase two even. How's the bond repayments gonna be managed? So the bond repayment obligation is at the end of twenty twenty seven. By then, we will have revenue from phase one because that will have been started well before we get to that juncture.

58:48 We also, with a fair wind, will have sanctioned, progressed, and developed phase two. So, potentially, we've got revenues as well for the phase two development. And remember that the phase two revenues are substantially greater than the the phase one development that's on for the current time. So there's a plan in place to bring in phase one revenues, mapping top of that phase two revenues, brings in significant cash flow to the company, which enables us to meet our debt obligations in terms of the the euro bond. The other thing that I would say is that with the managing deal that we've agreed and getting near to taking FID on the phase one project, that creates conditions for us to look at the potential to refinance the bond that we have in place as well because, obviously, we've got a more investable proposition in the marketplace as well. So that's something that we'll over the coming months as well. So it's an opportunity, as I'm sure most of you are aware, to redeem the bonds at a 30% discount to face value before the end of this year.

59:58 So we've got opportunities now that we're more advanced in the investment proposition of the company as a whole to potentially refinance that corporate bond as well. But if we don't have success in doing that, then we do have plans in play place to meet the debt obligations as they fall due. Thank you. I think we Gary, you've just advanced the next one, which is when you can when you do see us paying off some of this debt. There's a question here about could dividend be possible? Clearly, you know, the board will always consider dividends when there's sufficient free cash, but, you know, we've got a lot of work to go. So, I think, generally, small cap, AIM companies are paying dividends. They reinvest the money and hope it shows a far better return in the share price.

1:00:52 Okay. I've got a couple of questions about the same issue. The current share price is abysmal. Long term shareholders deserve better. Yep. What steps are being taken to improve the share price? Why has no board member made any recent share prices? Can't you at least infer a dividend payment? No. You know, what is the incentive to buy any SOUND shares? Well, look. We agree that the I think if you read the the market research from our broker, Zeus, and also SP Angel recently, you know, we're trading well below the net asset value per per share. So, you know, we we see that there's value that we can create. I think the more certainty closing the manage end deal will help. The more certainty we have about revenue, getting to a position where we are with First Gas at First Gas sales of micro energy will help. But I think don't underestimate what Gary said earlier about the quality of our partner.

1:01:52 I think recognizing that we have a very strong, well known international, partner has given the whole project at Tendra a lot more credibility. So, you know, we'll see we see what that can bring. I think with two exploration worlds, that's that's exciting. So, you know, these are these are all good things. It's the same old question about directors buying shares, etcetera. Trust me. We we know a hell of a lot of stuff, and and the last thing I wanna do is get done for insider trading. So we're always virtually in a closed period. So it's very difficult for board members to trade. Gary, John, Christian, we all own shares and not being able to trade at all. So, you know, we're we're in the same position.

1:02:42 But I think the incentive to buy shares in SOUND is that the company's now got a strong local partner lined up, very important local partner. I can't underestimate underemphasize just how credible that local partner is. That, I think, will unlock a few other opportunities for us in in Morocco. We have two exploration wells. John's, told you how excited he is about the m five well. We know it's a risky well, but it it is a it could be, you know, a nice success. We have, and you've heard from Gary, substantial back costs that are gonna come in that are quite material to sound, which will take us well into our revenue generating phase, and we we would hope to be having good revenue a a revenue stream in 2025.

1:03:35 I think don't underestimate also that we have a very strong supportive government and part of managem's board structure is such that they have on in on the board as well. So, you know, this is this is all friends working together to develop for the good of Morocco This, this gas Morocco needs the gas. We have, the largest onshore position. We have partnered with very strong Moroccan, partner. We are partnered with the state, with ONEM, and we are gonna get funded with a strong Moroccan bank. So I think bringing management to the table is that final missing piece from the jigsaw. We have been, let's try let's say, doing our investor relations now for the last three, four weeks since the well, two two, three weeks since the management announcement.

1:04:29 I am disappointed with a peak and a fall. There are more trades going on and a comment from one one online, you know, shouldn't we consolidate the shares to stop the day traders? Another comment, why are institutional investors not buying SOUND shares? We have two strong Moroccan shareholders. We don't have institutions. For many, many years, this has been a retail stock. So we will have a look at what we do with the company once we close this manager and deal, how we can then move forward growing sound through the production activities, the development activities, and the exciting exploration activities we're gonna be doing in Morocco, but also maybe looking a little bit further afield at other opportunities for the company to widen its horizon.

1:05:21 We have kept you all for quite a long time. I don't have Mark, I don't have any other questions on the online session, I think, that I haven't answered. So can I hand over to you to wrap up? Unless, of course, sorry. There's any questions. The people in the room, if you've got any questions, please, you know, shout them out because it's a bit quiet. Otherwise, you know, I'm happy to have a cup of tea with you afterwards. Mark, can I pass over to you, please? Oh, sorry. Yeah. What's happening with this? Yep. So is a license that we hold under SOUND ENERGY PLC Limited. Yeah. It is at an earlier exploration stage in the E and P cycle than, you know, assets in Eastern Morocco.

1:06:12 So it requires a seismic survey, okay, to mature up. Well, we have a, you know, some very promising leads and prospects, but to get those drilled, we need some additional seismic to do that. We're continuing to look for a partner to farm it down, okay, to fund that that survey. We are talking to multiple parties still, I can assure you, of of that. So our plan is is to get on and get that seismic done once we have a partner on board who can fund that survey. But given to me, the license is time limited. So how much time do we got? So we have an obligation to complete that survey by October this year, but we are talking to the government, Ahmed, Mohammed, and we have done, you know, constantly about how to, you know, align ourselves with all in the regulator, etcetera, to get that survey done. Any other questions in the room? Sorry.

1:07:02 That's fine. With the survey, do we have the funds to do it? Sorry. The The survey in Sydney Oh, the Sydney Muktar survey. So as I say, we're looking for a farming partner, okay, to fund that survey. That's how we would we that's our intention to fund that survey. Is that Gary? Unless you want to Yeah. Yeah. That's the Yeah. Quite to be No. We we don't need the funds to fund the seismic. It's quite substantial undertaking. That's why we've been looking for some time. That's why we're still looking and running discussions with a number of parties to look to farm out for a carry. Yeah. I mean, so we don't forget we're we're a 100% to pay for this one. Alright? We don't have any partner in there at the moment. So Is management management man Manager. Manager. Manager. Are they not interested in in Citi?

1:07:51 I I think I I sort of half answered that question earlier on to say they're very interested in growing their business in Morocco and through exploration. The current deal structure is all about Tendrara. But, you know, I'm sure we'll have a good conversation with them and try and encourage them as well as but John's been talking to other international companies who wanna get into Morocco. Mean, exploration is always difficult in the in these you know, in even in the good days to to get money for. And in a sort of unproven area, it's more more and more difficult. But, yeah, we'll we'll talk to them. Don't worry. I've got another one. Sorry. In terms of the expiration wells, which one do you want to start first? M 5 or the SCP?

1:08:41 And when would that be? Well, let's just talk about the rigs. Talk about that. Yeah. Because I've been talking about the rig situation at the moment. So at the moment, see we've been using the Star Valley one zero one rig, which is a rig currently available in in country. We've used that for the workovers to replace the tubing on t six and t seven. That's a lighter weight, lightweight super single rig. Okay? So it can only draw to a certain depth. Our drillers and star value in talking to them, we're confident that that rig can drill to test m five and t e four. So we could use that rig to do that. That's a rig available in country, and it's a it's an active rig. So there's one way to accelerate the the potential drilling of those those targets by using that rig. Good news is is, obviously, to do the workover, we need to get a 10 k BOP underneath that rig. It's a smaller rig. We've got a blower rental BOP that's able to do that. It's a key piece of equipment to drill these these pre salt wells.

1:09:38 SPK one, okay, that's a deeper well. Okay? Much deeper well that needs needs to be drilled. One zero one, the Starry rig, unfortunately, can't reach those those depths, So we need to reactivate the doitag rig, which is currently stacked at t 10, or we could look at options to bring in another rig for that one. So it might be a slightly longer time frame to get that one drilled. Okay. But don't don't get me wrong. I think we would like to drill all three wells, and now we've got funding for two. We need to get this deal over the line with management and convince them that, you know, t four as well would be a good idea. And as soon as the deal's signed, are they gonna you're gonna start doing it? You're gonna start? Yeah. I think so. That would you know, they they they they're if they're getting up to speed and, you know, we have to transition Yeah. I mean, I wouldn't say as soon as the deal's signed. I mean, we have to say the deal. Oh, yeah. That needs planning. Don't forget. Yeah. And then it becomes unconditional, hopefully, within the next three months. I think it would be then that we start drilling because they'll need some time to get their feet under the table and get their own engineers involved in identifying the key aspects of that opportunity. But they are ready because we've done a lot of the advanced planning for the two wells.

1:10:55 So we're hoping it won't be too long before we I mean, they've been very clear from us, and I'm down in Morocco next week with them. And Gary's managing a sort of a transition process. Well, they've been very clear, and they do quite a lot of m and a activity. So the best m and a activity is when, you know, there's a seamless transition. The last thing you want is a hot potato chopped over the wall and everything stops, and it takes them six months to get up to speed. So we're putting a transition plan together with them to make sure. So all the information that we're ready I mean, the bit that was missing with us is the money. Right? And they bring the money. So we've got a plan. We we need to explain it to them, get them comfortable, and then try and encourage them as Gary's correct. Nothing can get done until all the licenses are in place in the right way and and the deal closes. To to add to that, let's say, the main thing is if we're drilling is to to have a lot of wells to be drilled in a campaign in a row.

1:11:53 The deal that we signed with with the manager is key because we are now, like, going, let's say, to to drill, let's say, development wells. When you have development wells, you have teams on-site. They are more they they have more and more experience and the the the lower, let's say, the non profit productive time. That means well, that would be cheaper and especially especially, let's say, when you drill exploration well, you don't know, let's say, what you are going to get. It's exploration. So better to have a team we have or has already all, let's say, the processes related to drilling in place and know, let's say, the the environment before, let's say, to drill those kind of well.

1:12:39 Thanks. Okay. Gentlemen, ladies, thank you very much. Mark, I think if I can pass over to you, that will conclude our business today. Perfect. Thank you very much for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback and what the management team can better understand your views and expectations. On behalf of the management team of SOUND ENERGY PLC, we'd like to thank you for attending today's annual general meeting and presentation, and good afternoon to you all. Thank you. Thanks very much.