Sound Energy PLC Eastern Morocco Operations Update (2015O)

TIDMSOU

RNS Number : 2015O

Sound Energy PLC

28 January 2019

28 January 2019

Sound Energy plc

("Sound Energy" or the "Company")

Eastern Morocco Operations Update

Sound Energy, the Moroccan focused upstream gas company, is pleased to provide a further update on operations in Eastern Morocco, following the Company's announcements of 27 December 2018 and 7 January 2019. The Company previously announced a discovery, and the initiation of planning for testing including possible stimulation, at TE-10, the second well in Sound Energy's current three well exploration programme in the Tendrara area, onshore Morocco.

As previously announced, preliminary TE-10 wireline logging results identified a potential TAGI gross reservoir sequence from 1,899m measured depth ("MD") to 2,009m MD, an initial net pay estimate of up to 10.5m and gas bearing sands beneath the mapped TAGI structural closure. Gas was also successfully recovered to surface with a modular formation dynamics tester system, confirming the presence of moveable hydrocarbons in the reservoir.

Rig Demobilisation

The rig at TE-10 has now been demobilised and is stacked at the TE-10 rig site on a reduced standby rate, awaiting drilling of the next, and final, well in Sound Energy's current exploration programme, TE-11.

TE-10 Net Pay Estimate and Analytical Programme

The Company announced on 7 January 2019 that the FMI (high definition formation micro-imager log), which provides a microresistivity image of the well bore at a much finer resolution than the initial logging suite, had potentially identified the presence of additional thin bedded net pay within the previously identified potential gross reservoir interval between 1,899m MD to 2,009m MD. The Company now confirms that the FMI identified both the presence of fractures and the previously announced potential additional thin bedded net pay.

A total of 57 side wall core samples have been successfully cut and shipped out of Morocco and are now being analysed by ALS Ltd in the UK. Preliminary analyses of a sample subset show permeabilities within the range observed in the TE-5 Horst area.

Sound Energy's initial, and previously announced, net pay estimates of up to 10.5m are now being revised likely upwards, integrating the wireline data with the on-going analyses of the side wall core. The Company expects to be able to confirm a revised net pay estimate in mid-February 2019.

TE-10 Continued de-risking of the Stratigraphic Play

The North East Lakbir stratigraphic trap, the most material of TE-10's two targets, had pre-drill mid case potential on a gross (100%) basis of 2.7 Tcf gas originally in place ("GOIP") (4.5 Tcf GOIP upside case and a 1.5 Tcf GOIP low case). Following the acquisition of the VSP (vertical seismic profile) at TE-10, the Company previously confirmed that the gas shows observed during drilling extended below the currently mapped structural closure at approximately 1,958m MD, suggesting that the gas accumulation may extend updip into the stratigraphic trap

Seismic interpretation and modelling to provide an estimate of the gas resources within the discovery at this specific well and to de-risk the stratigraphic upside continue and are expected to be completed also by mid-February.

TE-10 Rigless Well Test

Design, planning and procurement for the TE-10 testing programme is nearing completion. The Company confirms that the testing programme will include stimulation of the well and that the testing and stimulation equipment is already being mobilised to site by Schlumberger from Libya and Tunisia.

The first stage of the TE-10 testing programme, which will commence early February, will conduct a series of flow tests on multiple intervals between 1,899m MD and 2,070m MD to establish the presence of deepest moveable gas, and reduce the range of uncertainty on gas resource volumes.

The Company then intends, once the stimulation equipment has arrived, to mechanically stimulate the most prospective reservoir zones in a series of production flow tests. The stimulated test is expected to take at least 30 days from commencement.

Based on the Company's current assessment of the reservoir section, a stimulated flow rate of approximately 1.5 mmscf/d to 2mmscf/d, is likely to be commercial (as a tie-back development to the TE-5 Horst existing discovery). This commerciality threshold would be materially lower if the stratigraphic upside materialises as the TE-10 development would, in that case, be a standalone development.

TE-11 Update

The Company is delighted to confirm that it has now selected the location for TE-11, subject to partner approvals. The Company is targeting a Palaeozoic high in the northern area of the Greater Tendrara licence.

Ground works for the drilling of TE-11, the third well in the exploration programme, are expected to commence after the TE-10 well test.

Pipeline FEED Completion and BOOT Update

The Company also continues to make good progress with the development of the existing discovery (TE-5 Horst) which is being prepared for a 66 mmscf/d development project requiring production wells, a central processing facility ("CPF"), and a 120km gas export pipeline ("TGEP").

The Consortium comprising Enagas, Elecnor and Fomento (the "Consortium") continues to make good progress in preparing for the Build-Own-Operate-Transfer ("BOOT") contract for TE-5, which sees the Consortium executing Front End Engineering and Design ("FEED") for the TGEP and CPF at their cost, securing the required US$186 million capital investment and executing the project, in exchange for an annual tariff payable calculated by reference to a target internal rate of return for the Consortium and to a 'not to exceed' fee of US$45 million per annum. Sound is pleased to note that the FEED for the TGEP has now been completed by the Consortium, and that FEED for the CPF is expected to be completed by the end of April 2019.

For further information please contact:

 
 Vigo Communications - PR Adviser          Tel: [phone] 
  Patrick d'Ancona 
  Chris McMahon 
 Sound Energy                               [e-mail] 
  James Parsons, Chief Executive Officer 
  JJ Traynor, Chief Financial Officer 
 
   Cenkos Securities - Nominated Adviser     Tel: [phone] 
   Azhic Basirov 
   David Jones 
   Ben Jeynes 
 RBC Capital Markets - Joint Broker        Tel: [phone] 
  Matthew Coakes 
  Martin Copeland 
 Macquarie Capital (Europe) Limited        Tel: [phone] 
  - Joint Broker 
  Alex Reynolds 
  Nick Stamp 
 

The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

The information contained in this announcement has been reviewed by Sound Energy's Exploration Director, Brian Mitchener, a chartered petroleum geologist. The estimated volumes are made in accordance with SPE standards. Tcf means trillion standard cubic feet of gas and mmscf/d means million standard cubic feet of gas per day.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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January 28, 2019 02:00 ET (07:00 GMT)