In a significant development in the energy sector, British company Sound Energy has announced its withdrawal from gas exploration projects in Morocco, amidst ongoing delays in the start of production. This decision raises questions about the viability of the ongoing exploration efforts. According to a press release obtained by the specialized energy platform, attaqa.net, Sound Energy agreed to sell its remaining 20% stake in the Tendrara gas field concession to Managem Group in a deal valued at $57 million.
This transaction marks Sound Energy's exit from one of the crucial onshore gas development projects in Morocco and redirects the company towards energy transition investments and oil and gas exploration opportunities outside the country. Following the announcement of the sale, Sound Energy's shares plummeted by as much as 46.81% at 11:30 AM GMT (02:30 PM Saudi time).
Divestment from Gas Assets in Morocco
As part of its divestment strategy, Sound Energy entered into a binding sale and purchase agreement with Managem to dispose of its remaining 20% stake in the Tendrara concession through the acquisition of all capital of Sound Energy Meridja Limited. The company will receive total proceeds of $57 million (subject to working capital adjustments), which includes a nominal value of one US dollar for the shares of Sound Energy Meridja Limited, along with the repayment of shareholder loans provided to Sound Energy Meridja Limited. Upon completion of the transaction, Managem and its subsidiaries will hold a 75% operational stake in the Tendrara concession, while the Office National des Hydrocarbures et des Mines (ONHYM) retains the remaining 25% stake.
In line with its revised strategic direction, Arran Energy Holdings Limited, a subsidiary of the British company, will relinquish its non-operational 27.5% stake in the Anoual exploration license and will also forfeit any rights related to the large Tendrara exploration license upon its expiration on September 30, 2024.
Sound Energy's Strategic Shift in Morocco
On June 12, 2024, Sound Energy announced its divestment of a 55% operational stake in the Tendrara concession to Managem, with the project planned to be developed in two main phases. The first phase involves the development of a small LNG plant with a total capacity of 54 billion cubic feet of gas under a 'take-or-pay' agreement for ten years with Afriquia Gaz, producing a total of 10 million standard cubic feet per day. The second phase comprises the development of a 120-kilometer pipeline for additional production of 128 billion cubic feet of gas, governed by a gas sales agreement with the National Office of Electricity and Drinking Water.
Despite tangible progress made by Mana Energy Ltd, fully owned by Managem, in the first phase of the project, as the operator with a 55% stake, there has been a shift in the timeline for the commencement of gas production. Initially, gas production was expected to start in October 2025, but it is now anticipated to commence in the third quarter of 2026. During this period, the project has also faced broader inflationary pressures in the sector, affecting both capital and operational expenditures, and the final investment decision regarding the second phase of the project remains under review by the joint venture partners.
In light of these developments, Sound Energy's board concluded that the proposed sale, along with the withdrawal from the exploration licenses in Anoual and the large Tendrara, represents an attractive opportunity to realize added value from the company's portfolio in exploration and production in Morocco while significantly reducing future financing requirements. This move allows Sound Energy to focus on the next phase of its growth, including energy transition opportunities both in Morocco and internationally.
Sound Energy's CEO, Majid Shafik, commented, "This deal marks a milestone in Sound Energy's journey. After many years of participation in the Tendrara project, the sale of our remaining interest to Managem accelerates the realization of significant value for our shareholders." He added that the divestment simultaneously reduces the company's reliance on future financing requirements for the broader second phase and enables a redirection of capital and management focus towards the next phase of growth and strategic priorities. Shafik continued, "This transaction provides the financial flexibility necessary to pursue a renewed growth strategy focused on transition opportunities in the energy sector, including renewable energy projects in Morocco and selected opportunities in exploration and production internationally."
