KEYFACT Energy
Sound Energy, the Moroccan focused upstream oil and gas company, announces its audited final results for the year ended 31 December 2018.
Highlights
Morocco
- Completion of 2,850 line kilometres fully carried seismic programme
- Recent second TAGI discovery at TE-10 at Tendrara with testing underway
- De-risking of existing TE-5 discovery; including production concession awarded and GSA approaching
- Heads signed for Infrastructure BOOT with Enagas, Elecnor and Fomento
Corporate
- Cash balance as at 31 December 2018 of £20.5 million
- Completion of disposal of Italian interests to centre strategic focus on high impact Moroccan assets
Operational Review
Exploration Programme
Two challenging exploration wells were safely delivered in the year, TE-9 and TE-10 both within the Greater Tendrara permit in Morocco. TE-9 proved unsuccessful due to a lack of effective reservoir in both the targeted TAGI and Westphalian sequences. The second well TE-10 completed drilling in December 2018 and established a new gas discovery within the TAGI sequence with a potential gross reservoir interval of 110m MD. A gas sample was successfully recovered, the first successful MDT gas test from the TAGI sandstone in the Tendrara licence. These two wells have fulfilled the work programme commitment for the initial three-year phase of the new Greater Tendrara licence awarded in August 2018, combining the previous Tendrara Lakbir and Matarka licences into a single licence.
Geophysical and Geological Programme
2018 saw Sound Energy complete its geophysical programme in Eastern Morocco with an extensive programme of 2D seismic acquisition and processing. This seismic programme augmented the coverage of 22,800 square kilometres of the licences with flown Gravity Gradiometry, Magnetics and LiDAR data and detailed satellite imagery completed in 2017. The seismic programme totalled approximately 2,850 line kilometres commenced in October 2017 and all phases were completed in August 2018. In total, approximately 2,252 line kilometres were acquired in 2018. In addition to this operational programme, the Company has completed reprocessing approximately 2,431 line kilometres of historical 2D seismic data across both the Greater Tendrara and Anoual licences, including advanced quantitative interpretation techniques. The Company further progressed an integrated programme of geological studies including commissioning new petrographic, surface geochemical, chemostratigraphic and biostratigraphic analyses of the historical well data. Both geological and geophysical programmes provided the datasets to build a 3D basin model in order to quantify hydrocarbon charge, migration timing and migration pathways on a regional basis.
Development of Existing Discovery
Continued good progress has been made on the development project, including the resource certification issued in January 2018. Key forward steps including the contracting, engineering and financing, are progressing well. Following a competitive process and negotiation, a consortium comprising Enagas, Elecnor and Fomento has been awarded the front-end engineering and design ("FEED") and exclusivity to finalise the funding, construction and operation for both a 20-inch pipeline and the central processing facility under a 'build-own-operate-transfer' ("BOOT") structure. Off-take and other related commercial agreements under the Gas Sales Agreement are in advanced negotiations.
In September, Sound Energy and its partners were awarded the production concession. The production concession covers an area of 133.5 square kilometres and follows the application made in June 2018. The partnership expects to be in a position to take a final investment decision on the Tendrara development once key development milestones have been secured, including a Gas Sales Agreement, FEED development capital funding and local regulatory administrative formalities.
Commercial Relationships
A new Greater Tendrara licence was awarded in August 2018, combining the previous Tendrara-Lakbir and Matarka licences into a single licence with Schlumberger converting through its affiliate Schlumberger Silk Route Services Limited the previous 27.5% synthetic interests held by an affiliate of Schlumberger Oilfield Holdings Limited in the Tendrara Lakbir licences into a participating interest. Schlumberger also decided to convert their 27.5% synthetic into 27.5% participating interest in the Anoual licences and the Tendrara Production Concession. Sound Energy retained operatorship of this Eastern Morocco Portfolio.
Eastern Morocco
2018 Highlights
- TE-10 vertical well drilled and proved evidence of another gas discovery in the TAGI play on the Greater Tendrara licence
- Achievement of the Reserves Certification on the first field (TE-5 Horst structure)
- Completion of renegotiation of the exploration licences combining Tendrara Lakbir and Matarka into a single licence, Greater Tendrara with a new 8 year term
- Fulfilling the initial three-year period work programme commitment on Greater Tendrara with the drilling of TE-9 and TE-10
- Completion of the biggest 2D seismic acquisition and processing ever done onshore Morocco to provide a better image of the drilled structures and to support an improved assessment of potential prospects
- Award of a 25 year exploitation (production) concession for the TE-5 gas discovery at Tendrara and entered into a Heads of Terms with the Enagas-led consortium embracing the associated development infrastructure
BOOT and FEED
The Company continued to make good progress commercialising its Eastern Morocco licence position. In June, the Company was pleased to enter into a binding Heads of Terms with a Spanish Consortium led by the Spanish midstream gas company, Enagas, for the provision of build own operate transfer ("BOOT") services for the key infrastructure (processing and treatment facilities and gas export pipeline) associated with its proposed development of the TE-5 discovery.
The agreement sets out the terms upon which the consortium will undertake and finance front end engineering design ("FEED") and the conditional terms upon which the development and financing of the facilities will be undertaken by the consortium. FEED is now under way and is expected to complete in early 2019 prior to entering into a definitive BOOT Agreement ahead of the Company taking a Final Investment Decision (FID) on the project.
Approval of Production Concession
The Company submitted its field development plan for the proposed TE-5 development to the Moroccan State in June and was pleased to have been awarded a 25-year exploitation (production) concession in September - a significant milestone in progressing Sound Energy's Eastern Morocco commercialisation strategy. Award of the concession was followed by other pre-FID activities including progression of the environmental impact assessment, pipeline route survey and continuation of FEED activities.
Gas Sales Agreement
The Company continues to make good progress in negotiating long-term gas offtake arrangements in support of the proposed development. This is a critical component in the proposed development and in the overall value creation in Eastern Mo
Southern Morocco
The Sidi Moktar permit is located in the Essaouira Basin in central-southern Morocco and is sub-divided into three sub-blocks (North, South and West) with a combined area of 4,711 km2. Sound Energy originally farmed into the Sidi Moktar licences in 2015 and took over operatorship in 2016. Following the successful completion of the work programme on the old licences, the permit was re-awarded to Sound Energy in April 2018 with an extended footprint. Sound Energy holds a 75% interest in the licence, with ONHYM holding the remaining 25%. The licence has an overall eight-year period (expiring in April 2026) divided into three phases: an initial period of two years and six months, followed by a first extension period of three years and second extension period of a further two years and six months.
The Sidi Moktar permit area hosts some 40 vintage wells drilled between the 1950s and the present. The licence is adjacent to the ONHYM operated Meskala gas and condensate field. The main reservoir in the field are Triassic aged sands, directly analogous to the deeper exploration plays in the Sidi Moktar licences. The Meskala field and its associated gas processing facility is linked via a pipeline to a state-owned phosphate plant, which produces fertiliser both for the domestic and export markets. This pipeline passes across the Sidi Moktar licence.
Two main play types are present in the Sidi Moktar licence. These are broadly divided into the Sidi Shallow and Sidi Deep play types. The main focus of activity in the basin and licence area historically has been the shallow plays. Indeed a number of discoveries were made from the 1950s to the present in Jurassic aged carbonates and clastics. With the discovery of the Meskala field in the 1980s, focus switched to the deeper play types. The discovery of the Meskala field proved the existence of a deep petroleum system in the basin. Specifically, Meskala provides evidence that Triassic clastic reservoirs are effective, proves the existence of the overlying salt super seal and provides evidence of charge from deep Palaeozoic source rocks. Based on work undertaken by Sound Energy, the main focus of future exploration activity in the licence is expected to be within the deeper play fairways.