22 March 2018

 

SOUND ENERGY PLC

("Sound Energy" or the "Company")

 

Sound Energy, the Moroccan focused upstream oil and gas company, announces its audited final results for the year ended 31 December 2017.

 

highlights
 

Morocco

·     Successful TE-7 extended well test

·     Acquisition of Oil & Gas Investment Fund's interests in Eastern Morocco

·     US$27.2 million Schlumberger carried seismic programme

·     Paleozoic play opening TE-8 well

·     Continued preparation for next exploration drilling, including ongoing 2D seismic acquisition and aerial gradiometry

 

Corporate

·     Cash balance at 31 December 2017 of £21.2 million

·     Strong safety record

·     Disposal of Italian interests in progress

·     Appointment of new Chief Financial Officer

 

 

For further information please contact:

 

Vigo Communications - PR Adviser Patrick d'Ancona Chris McMahon Kate Rogucheva	Tel: 44 (0)20 7830 9700
Sound Energy James Parsons, Chief Executive Officer	j.parsons@soundenergyplc.com
Smith & Williamson - Nominated Adviser Azhic Basirov David Jones Ben Jeynes	Tel: 44 (0)20 7131 4000
RBC - Joint Broker Matthew Coakes Martin Copeland Laura White	Tel: 44 (0)20 7653 4000
Macquarie Capital (Europe) Limited - Joint Broker Alex Reynolds Nick Stamp	Tel: 44 (0)20 3037 2000

Statement from the Chairman and Chief Executive Officer

 

2017 was a busy year for Sound Energy with a successful extended well test on TE-7, the acquisition of Oil & Gas Investment Fund's ("OGIF") interests in Morocco, two material exploration wells drilled safely, a further Schlumberger investment in Eastern Morocco and significant progress on a fully carried seismic programme.

 

Morocco Portfolio and Schlumberger Field Management Agreement ("FMA")

 

During 2017, the Company built on its early success in Tendrara with the acquisition from OGIF of a further 27.5% interest in Tendrara and a 75% interest in both the Anoual exploration permit and the Matarka reconnaissance licence.

 

The Company granted a 27.5% working interest in the Anoual permit and the Matarka reconnaissance (subject to definitive agreements) to Schlumberger.  This has enabled a fully funded material seismic programme which we believe will prove to be critical in de-risking the forthcoming exploration drill programme. 

 

Tendrara

 

During the period, the Company completed a successful extended well test on TE-7 and drilled a third well, TE-8, which was largely funded by Schlumberger under its carried arrangement.  Drilling was completed in May 2017 and despite tighter TAGI sands than in TE-6 and TE-7, this well established the westward extension of the primary hydrocarbon system proven in Algeria into Morocco.

 

Building on the outstanding TE-6 and TE-7 well results in 2016 and 2017, the Company is progressing with the development of its existing discovery.  As outlined in our recent resource certification, the discovery has a gross (100%) mid-case unrisked gas originally in place ("GOIP") of 651 Bcf with an 873 Bcf upside case and a 349 Bcf downside case. The Company intends to sign a Gas Sales Agreement, secure development funding and apply for a concession, all during 2018.

 

Seismic Programme

 

The Company continues to progress its 2,900 km 2D seismic programme which is now already more than 47% complete. The objective of the seismic is to de-risk the forthcoming three well exploration programme and provide line of sight on the potential of the province. The US$ 27.2 million cost of the programme is fully funded by Schlumberger.

 

Sidi Moktar

 

During 2017, the Company completed its licence obligations with a positive re-entry and work over of the Koba-1 well. Sound has recently received, subject to Ministerial approval, a new eight year exploration permit and is looking forward to further drilling in 2019 once a seismic programme is complete.

 

Italy

 

Following the safe but unsuccessful drilling of the Badile well in Italy, an agreement was signed with Saffron Energy PLC to divest of the Company's Italian portfolio.  It is anticipated that this transaction will complete in early April 2018. The consideration shares in Saffron Energy PLC are to be distributed directly to Sound shareholders on the register on 26 March 2018.

 

Corporate

 

The Company remains in a solid financial position as it enters 2018.  Funding through the Schlumberger seismic carry, and cash balance of £21.2 million as at 31 December 2017 will support the forthcoming exploration well programme. We continue to work with strategic partners to technically and financially de-risk our portfolio.

 

During 2017, we also continued to broaden and deepen the team and we were delighted to welcome JJ Traynor to the Company (and soon to the Board) as Chief Financial Officer.

 

Summary

 

The Company continues to believe that the TAGI and Paleozoic plays across Tendrara, Anoual and Matarka have the potential to become a material hydrocarbon province on a regional scale and therefore transform both Sound Energy and the Moroccan gas industry. 

 

Unlocking such a province requires time and technical skill and none of this would be possible without the efforts of our people, our shareholders and other stakeholders. 

 

We remain hugely excited about our future and look forward to success together.

 

Richard Liddell

Chairman

 

James Parsons

Chief Executive Officer

 

operational review

 

Overview of the Operational Performance for the Year

 

2017 was a busy year for Sound Energy in Morocco.

 

Wells Programme

 

Two challenging wells were safely delivered in the year, Moirago-1 at Badile in Italy and the TE-8 step out well at Tendrara in Morocco. The Italian well was ultimately unsuccessful with insufficient hydrocarbon shows. The TE-8 step out well completed drilling in May 2017 and despite lower quality TAGI sands than in the previous wells, is the first well to establish significant gas shows with a Westphalian aged sequence.

 

Sidi Moktar

 

During 2017, the Company completed the licence obligations with a positive re-entry and work over of the Koba-1 well. Sound Energy has, subject to final approvals, recently received the exploration permit for the next phase on the licence and is looking forward to progressing the work programme in this area in late 2018 onwards.

 

Seismic

 

2017 saw Sound Energy commence its geophysical programme in Eastern Morocco. The coverage of all the 22,800km² of the licences with flown Gravity Gradiometry, Magnetics and LiDAR data was completed during Q4 and augmented with detailed satellite imagery.  The proposed 2,900km of 2D seismic was commenced in October and the phase 1 lines completed in early December. In total, 598km were acquired in 2017. In addition to this operational programme, the Company has completed reprocessing of the existing 522km² of 3D seismic data across the TE-5 Horst discovery and an integrated programme of geological studies including commissioning new petrographic, geochemical, chemostratigraphic and biostratigraphic analyses of the new and historical well data.

 

TE-5 Horst Development

 

Good progress has been made on the development project, including the resource certification issued in January 2018. Key forward steps include the contracting, engineering and financing which are progressing as well as offtake and other related commercial agreements. The Company intends to apply for the concession in 2018 with final sanction estimated for later in the year.

 

The Company's HSE record has been strong with only one LTI (Lost Time Incident) during the year.

 

EASTERN Morocco

 

Permit Area

 

·     Figuig Province, North-East Morocco

·     120km from Gazoduc Maghreb Europe (GME) pipeline (connecting Algeria and Morocco to the Spanish/Portuguese gas grids)

·     Sub-divided into eight blocks

 

Geology

 

Represents a continuity of the Algerian Triassic Province and Saharan Hercynian platform. Same tectono-sedimentary as the evolution in the Algeria Basins.

 

Partnerships

 

·     Sound Energy farmed in to the Tendrara licence in June 2015, taking a 55% working interest in the licence, partnering L'Office National des Hydrocarbures et des Mines ("ONHYM") (25% interest) and OGIF (20% interest) and assuming Operatorship

·     In December 2015, Sound Energy entered into a Field Management Agreement ("FMA") with Schlumberger. Schlumberger agreed to fund a significant portion of the capital expenditure on the first three Tendrara wells and provide technical services, equipment, personnel to Sound Energy as Operator in exchange for an upside linked to production performance

·     In February 2017, Sound Energy entered into binding agreements with OGIF for the conditional acquisition by the Company of a further 20% interest in the Company's Tendrara-Lakbir permits and a 75% position in Matarka (relinquished area of the Tendrara exploration area) and in Anoual permits (ex Meridja reconnaissance licence converted in permits). These agreements were approved by Sound Energy shareholders at a general meeting in March 2017

·     In April 2017, Sound Energy and Schlumberger expanded their partnership to the Matarka reconnaissance licence and Anoual permits

·     In September 2017, after the completion of all the conditions precedent-related to February 2017's binding agreements, OGIF became a substantial shareholder of the Company.

 

Main Results

 

·     TE-8 proved, 12km to the Northeast of TE-7, the presence of a TAGI sand sequence, commencing at a measured depth of 2,643 metres. It penetrated 114 metres of TAGI I (approximately twice the thickness of the TAGI I reservoir encountered in wells on the TE-5 Horst) with gas shows. The TAGI sands encountered by TE-8 are also interpreted to be at the same reservoir pressure as the previous wells on the TE-5 Horst (TE-5, TE-6 and TE-7)

·     TE-8 was drilled some 359 metres into the Paleozoic and identified the full series of Westphalian stratigraphy including sandstones (between 2,762 metres through to 3,120 metres), which are one of the producing horizons in neighbouring Algeria. The sandstones are interpreted to lie in a separate pressure regime to the overlying TAGI play beneath the TE-5 Horst and the Lakbir High. Gas shows were encountered over this interval and subsequent petrophysical analysis suggests that these sandstones may be permeable and likely to be producible with mechanical stimulation

·     Sound Energy completed the first phase of the 2D seismic and magneto-telluric acquisition in Eastern Morocco during 2017.

 

Future Focus

 

·     The second phase of the 2D seismic acquisition campaign is underway and should be completed during summer 2018

·     Further wells targeting the Paleozoic on the Tendrara permit are being planned in 2018. The 'A' Structure is expected to be the first target at TAGI level

 

SOUTHERN MOROCCO

Sidi Moktar

 

The Geology and Activity History

 

There are four Exploration plays within the Sidi Moktar permit:

·     PS1 Argovian (sandy dolomite) which has given rise to five discoveries (Jeer, Kechoula, Sidi Rhalem, Toukimt and N'Dark);

·     PS2 Low Liassic (sandstone) which has given rise to two discoveries (Zelten and Kechoula);

·     PS3 Triassic (TAGI equivalent) which has given rise to one discovery (Meskala); and

·     PS4 Paleozoic Devonian carbonates which remain frontier exploration, gas shows present in penetrations beneath the Meskala field with one well testing gas.

 

Essaouira Basin history

 

·     Historically, 84 wells have been drilled in the Essaouira Basin with discoveries in the lower Liassic and Triassic having the highest discovery ratio. Additionally, 7,000 km of seismic have been acquired since the late 1950s.

 

1950s and 1960s

·     Exploration in the basin began in the 1950s resulting in the discovery of two small gas fields (Kechoula in 1957 and Jeer in 1958) and one oilfield (Sidi Rhalem in 1961).

1970s

·     By 1970, 35 onshore wells and one offshore well had been drilled, of which 12 were classed as appraisal/development. From 1974 to 1980, a further 13 wells were drilled with the aid of multi-fold 2D seismic resulting in three further discoveries at Toukimt (1976), N'Dark (1976) and Meskala (1977).

1980s

·     The development of the Meskala field gave rise to the discovery of gas-condensate in Triassic clastics at 3,500m and a DST yielded a flow rate of 12 MMscf/d. Between 1980 and 1987 a further 28 wells were drilled including nine development wells at Meskala, two of which were the deepest stratigraphic tests in the basin (4.3km), proving the possibility of Ordovician sands as a second potential Paleozoic target.

Most recent history

·     In 2009, Magreb Petroleum Exploration (MPE) signed a Petroleum Agreement with ONHYM to secure a 75% interest in the Sidi Moktar North, South and West licences, the remaining 25% being held by ONHYM (the Moroccan NOC). MPE subsequently farmed out a 50% working interest operated position to Petromaroc (formerly Longreach) in exchange for a full carry to first commercial gas. During the course of 2013 and 2014, Petromaroc drilled two wells which both had gas shows but which were never completed and tested. In January 2016, Sound Energy secured and retained MPE's 25% carried interest in the licence and in March 2016 secured Petromaroc's 50%.

 

Italy

 

Badile

Moirago-1

The exploration well Moirago-1 was located 20 km south of Milan and was spudded on the 7^th March 2017, by the drilling contractor Pergemine S.p.A. The project was successfully executed with no Lost Time Incidents (LTIs) and no recordable injuries.

 

The objective of the well was to target the Badile prospect. The prognosed reservoir in Badile was the Lower Jurassic aged Conchodon Dolomite formation. The Conchodon dolomite reservoir was successfully reached, was proven to be permeable and displayed significant gas shows during drilling. Subsequent data, however, proved that any potential gas accumulation was sub-commercial, and as such the well was plugged and abandoned on the 26^th July 2017. The well reached a final TD of 4473m MD (4406m TVD).

 

Saffron Deal

 

Sound Energy plc entered on 5 October into non-binding conditional heads of terms with Saffron Energy PLC, based on which Sound Energy plc proposes to dispose its portfolio of Italian interests and permits through the sale of Apennine Energy SpA ("APN") and its Holding Company, Sound Energy Holding Italy Limited to Saffron Energy PLC. The SPA was signed on 22 January 2018 and the deal is expected to complete in April 2018.

 

FINANCIAL review

 

Our commitment to unlocking Moroccan gas was demonstrated by the issue of 272 million shares valued at £138.8 million for the acquisition of OGIF's interests in Tendrara, Anoual and Matarka licences, increasing our investment in Morocco.

 

Income Statement

 

The Group's operations in Italy were classified as discontinued operations following the entering of an agreement between the Company and Saffron Energy Plc for the divestment of the Company's Italian licences. The loss from discontinued operations increased to £21.8 million (2016: £8.7 million) primarily due to an impairment charge of approximately £19.0 million attributable to the Badile licence following sub-commercial well results.

 

The loss for the year before tax from continuing operations was £12.3 million (2016: £4.7 million). Administrative costs increased by £4.3 million to £8.5 million (2016: £4.2 million) reflecting the growth of the business with increased activities
in Morocco.

 

Foreign exchange gains and losses primarily related to intra-Group loans and Euro denominated borrowings.

 

As part of the acquisition of the Sidi Moktar licences, onshore Morocco, an agreement was entered with PetroMaroc and provides that, if the shares of the Company which were issued as part of the consideration for the acquisition, are sold, the realised proceeds for any share price achieved above 50 pence to be shared equally between the Company and PetroMaroc. The loss on the derivative financial instruments of £1.9 million (2016: £0.6 million gain) arose from this arrangement and reflects the change in the share price during the year.

 

Cash Flow/Financing

 

During 2017, warrants and share options exercises raised approximately £11.6 million (2016: £15.9 million). Net proceeds from equity issued in 2016 also included £24.3 million that had been raised through an underwritten offer.

 

The financing costs were £1.1 million (2016: £3.7 million) primarily due to amortised costs of the bonds, net of interest capitalised to the exploration licences of £1.6 million (2016: £1.5 million). Financing costs in 2016 included accelerated amortisation of issue costs on refinancing of the debt.

 

The Group spent £24.0 million (2016: £11.8 million) on investing activities during 2017, which largely consisted of the Badile licence's Moirago-1 well, Tendrara TE-8 exploration well and re-entry of Koba-1 well at the Sidi Moktar licence in Morocco. 2016 capital expenditure was primarily for TE-6 and TE-7 wells in the Tendrara licence.

 

Balance Sheet

 

Additions to the intangible assets included consideration paid for the acquisition of OGIF's interests in Tendrara, Anoual and Matraka licences in Morocco. The consideration included the issue of 272.0 million shares valued at £138.8 million at the time of the acquisition. Additions also included expenditure on drilling Moirago-1 well at Badile, TE-8 well at Tendrara licence and re-entry of Koba-1 well at Sidi Moktar licence.

 

Other receivables amounting to £3.5 million (2015: £8.8 million) primarily related to receivables from our partners in the Tendrara licence.

 

Assets of the Disposal Group held for sale related to the Italian operations and primarily included intangible assets, Badile land and VAT receivable.

 

Trade and other payables amounting to £6.6 million (2016: £12.6 million) primarily related to payables and accruals for the operations in the Group's licences in Morocco, where the Group, as operator, recognises 100% of the liability and receives funds from partners to pay the partners' share.

 

Liabilities of Disposal Group held for sale related to the Italian operations and primarily included trade and other payables and provision for decommissioning of licences.

 

Accounting Standards

 

The Group has reported its 2017 and 2016 full year accounts under International Financial Reporting Standards (IFRS), as adopted by the European Union.

 

Going Concern

 

The Directors have reviewed the forward cash flow projections for the Group for the foreseeable future, being at least the next 12 months from the date of this report, which show that the Group has sufficient financial resources to undertake its committed work programme, and thus the Directors have concluded that the Group is a going concern.

 

Consolidated Statement Of Comprehensive Income

for the year ended 31 December 2017

	Notes	2017 £'000s	2016 £'000s
Continuing operations
Revenue		-	-
Other income		-	715
Gross loss		-	715
Administrative expenses		(8,458)	(4,246)
Group operating loss from continuing operations		(8,458)	(3,531)
Finance revenue		23	96
Foreign exchange (loss)/gain		(914)	1,844
Other gains and (losses)
- derivative financial instruments		(1,873)	583
External interest costs	7	(1,117)	(3,697)
Loss for the year from continuing operations before taxation		(12,339)	(4,705)
Tax credit/(expense)		-	-
Loss for the year from continuing operations		(12,339)	(4,705)
Discontinued operations
Loss for the year from discontinued operations	8	(21,811)	(8,734)
Total loss for the year		(34,150)	(13,439)
Other comprehensive (loss)/income
Items that may subsequently be reclassified to the profit and loss account
Foreign currency translation (loss)/gain		(5,361)	375
Total comprehensive loss for the year		(39,511)	(13,064)
Loss for the year attributable to:
Owners of the company		(39,511)	(13,064)
Non-controlling interests		-	-

 

	Notes	2017 Pence	2016 Pence
Basic and diluted loss per share for the year from continuing and discontinued operations	3	(4.28)	(2.52)
Attributable to the equity shareholders of the parent (pence)	3	(4.28)	(2.52)
Basic and diluted loss per share for the year from continuing operations	3	(1.54)	(0.88)
Attributable to the equity shareholders of the parent (pence)	3	(1.54)	(0.88)

 

 

 

 

Consolidated Balance Sheet

as at 31 December 2017

	Notes	2017 £'000s	2016 £'000s
Non-current assets
Property, plant and equipment	4	372	1,729
Intangible assets	5	163,939	28,060
Land and buildings		-	1,535
		164,311	31,324
Current assets
Inventories		628	331
Other receivables		3,526	8,777
Derivative financial instruments		80	2,545
Prepayments		117	320
Cash and short term deposits		21,198	46,809
		25,549	58,782
Assets of disposal group held for sale	8	12,292	-
Total assets		202,152	90,106
Current liabilities
Trade and other payables		6,601	12,604
Loans repayable in under one year	7	-	986
		6,601	13,590
Liabilities of disposal group held for sale	8	4,492	-
Non-current liabilities
Deferred tax liabilities		-	433
Loans due in over one year	7	18,566	16,455
Provisions		-	2,049
		18,566	18,937
Total liabilities		29,659	32,527
Net assets		172,493	57,579
Capital and reserves
Share capital and share premium		287,829	135,667
Shares to be issued		-	223
Warrant reserve		4,090	4,459
Foreign currency reserve		(3,918)	1,443
Accumulated deficit		(115,508)	(84,213)
Total equity		172,493	57,579

 

 

Group Statement Of Changes In Equity

for the year ended 31 December 2017

Group

	Notes	Share capital £'000s	Share premium £'000s	Shares to be issued £'000s	Accumulated deficit £'000s	Warrant reserve £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2017		6,651	129,016	223	(84,213)	4,459	1,443	57,579
Total loss for the year		-	-	-	(34,150)	-	-	(34,150)
Other comprehensive loss		-	-	-	-	-	(5,361)	(5,361)
Total comprehensive loss		-	-	-	(34,150)	-	(5,361)	(39,511)
Issue of share capital	6	3,490	148,449	-	-	-	-	151,939
Reclassification on share issue	6	18	205	(223)	-	-	-	-
Reclassification on debt settlement		-	-	-	369	(369)	-	-
Share based payments		-	-	-	2,486	-	-	2,486
At 31 December 2017		10,159	277,670	-	(115,508)	4,090	(3,918)	172,493

Foreign currency reserve attributable to the Italian operations amounted to £1,658,000 (gain) as at 31 December 2017.

 

	Notes	Share capital £'000s	Share premium £'000s	Shares to be issued £'000s	Accumulated deficit £'000s	Warrant reserve £'000s	Foreign currency reserves £'000s	Total equity £'000s
At 1 January 2016		5,039	81,276	-	(71,593)	369	1,068	16,159
Total loss for the year		-	-	-	(13,439)	-	-	(13,439)
Other comprehensive income		-	-	-	-	-	375	375
Total comprehensive loss		-	-	-	(13,439)	-	375	(13,064)
Issue of share capital	6	1,612	50,425	-	-	-	-	52,037
Share issue costs		-	(2,685)	-	-	-	-	(2,685)
Shares to be issued	6	-	-	223	-	-	-	223
Fair value of warrants issued with bonds		-	-	-	-	4,090	-	4,090
Share based payments		-	-	-	819	-	-	819
At 31 December 2016		6,651	129,016	223	(84,213)	4,459	1,443	57,579

 

Consolidated Cash Flow Statement

for the year ended 31 December 2017

	Notes	2017 £'000s	2016 £'000s
Cash flow from operating activities
Cash flow from operations		(11,849)	(2,826)
Interest received		102	96
Net cash flow from operating activities		(11,747)	(2,730)
Cash flow from investing activities
Capital expenditure and disposals		(478)	(945)
Exploration and development expenditure		(23,482)	(10,882)
Net cash flow from investing activities		(23,960)	(11,827)
CSTI funding contract		-	(14)
Proceeds from derivative financial instruments		592	-
Net proceeds from debt		-	10,248
Net proceeds from equity issue		11,550	40,247
Repayment of debt		-	(5,435)
Interest payments	7	(1,293)	(1,108)
Net cash flow from financing activities		10,849	43,938
Net (decrease)/increase in cash and cash equivalents		(24,858)	29,381
Net foreign exchange difference		60	2,188
Cash and cash equivalents at the beginning of the year		46,809	15,240
Cash and cash equivalents at the end of the year		22,011	46,809

 

Notes To Cash Flow

for the year ended 31 December 2017

	Notes	2017 £'000s	2016 £'000s
Cash flow from operations reconciliation
Loss before tax from continuing operations		(12,339)	(4,705)
Loss before tax from discontinued operations		(21,866)	(10,478)
Total loss for the year before tax		(34,205)	(15,183)
Finance revenue		(102)	(1,364)
Impairment of goodwill		55	1,704
Exploration expenditure written off and impairment of producing assets		19,833	7,789
(Decrease)/increase in accruals and short term payables		(5,783)	9,035
Depreciation		406	272
Share based payments charge		2,486	819
Increase in drilling inventories		(430)	(331)
Loss/(gain) on derivative financial instruments		1,873	(583)
Finance costs and exchange adjustments		2,158	1,508
Decrease/(increase) in receivables and prepayments		1,860	(6,492)
Cash flow from operations		(11,849)	(2,826)

 

Non-cash transactions during the year included the issue of shares worth £138.8 million as the consideration for the acquisition of OGIF's interests in Morocco licences. The Company also issued shares worth £0.7 million as part settlement of the drilling services at the Badile licence, onshore Italy. 9.6 million warrants of 10.4p per warrant were exercised in settlement of £1.0 million debt.

During the year, the Group provided a bank guarantee of $2.95 million (2016: $2.5 million) to the Moroccan Ministry of Petroleum to guarantee the Group's minimum work programme obligations. The cash is held in a bank account under the control of the Company and as the Group expects to satisfy these commitments within 2018, on this basis the amount remains included as a liquid cash equivalent. A guarantee of €0.7 million was provided for expenditure relating to Badile licence and is included in cash and cash equivalents as it is expected to be released as soon as the commitment is fulfilled.

 

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2017

1 Accounting policies

Sound Energy plc is a public limited Company registered and domiciled in England and Wales under the Companies Act 2006. The Company's registered office is 1^st Floor, 4 Pembroke Road, Sevenoaks, Kent, TN13 1XR.

The consolidated financial information contained within this announcement does not constitute statutory accounts for the year ended 31 December 2017 within the meaning of Section 434 of the Companies Act 2006, but is derived from those audited accounts. The auditors reported on those accounts and their report was unqualified and did not contain any statement under section 498(2) or section 498(3) of the Companies Act 2006. The statutory accounts for the year ended 31 December 2017 will be delivered to the Registrar of Companies in due course. The annual report and statutory accounts will be sent to shareholders and will be made available to the public on the Company's website: www.soundenergyplc.com or, upon request, copies may be obtained from the Company Secretary at the registered office of Sound Energy plc 1st Floor, 4 Pembroke Road, Sevenoaks, TN13 1XR.

 

(a) Basis of preparation

The financial statements of the Group and its parent have been prepared in accordance with:

1.    International Financial Reporting Standards (IFRS) as adopted by the European Union (IFRSs, as adopted by the European Union), IFRIC Interpretations; and

2.    those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The consolidated financial statements have been prepared under the historical cost convention, except to the extent that the following policies require fair value adjustments.

The Group and its parent company's financial statements are presented in sterling (£) and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

The principal accounting policies set out below have been consistently applied to all financial reporting periods presented in these consolidated financial statements and by all Group entities, unless otherwise stated. All amounts classified as current are expected to be settled/recovered in less than 12 months unless otherwise stated in the notes to these financial statements.

The Group and its parent company's financial statements for the year ended 31 December 2017 were authorised for issue by the Board of Directors on 21 March 2018.

As at 31 December 2017 the Group had £21.2 million of available cash. Based on the current management plan, management believes that the Group will remain a going concern for at least the next 12 months from the date of the authorisation of the financial statements on the basis that the Group has sufficient funding options for the forecast expenditure (12 months through 22 March 2019) using both the available cash resources and funding from partners in the main strategic licences.

Use of estimates and key sources of estimation uncertainty

 

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Actual outcomes could differ from those estimates.

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the impairment of intangible exploration and evaluation (E&E), investments and goodwill and the estimation of share based payment costs.

When considering whether E&E assets are impaired the Group first considers the IFRS 6 indicators set out in note 5. The making of this assessment involves judgement concerning the Group's future plans and current technical and legal assessments.

If those indicators are met a full impairment test is performed. During the year, and following unsuccessful exploration results, this was performed for the Badile block as disclosed further in note 5. In combination with the write down of the intangible asset the associated surface installations, recognised as property, plant and equipment, were also tested for impairment. Due to the impairment of the Badile licence these assets no longer have a value in use to the Group and hence were written down to their fair value. Consequently a provision of £0.2 million was made to write them down to £0.1 million, the best estimate of their fair value. This estimate was based on an offer obtained from a third party.

Goodwill is tested annually and at other times when impairment indications exist. When value in use calculations are undertaken, management estimates the expected future cash flows from the asset and chooses a suitable discount rate in order to calculate the present value of those cash flows. In undertaking these value in use calculations, management is required to make use of estimates and assumptions similar to those described in the treatment of E&E assets above. Further details are given in note 5.

The estimation of share based payment costs requires the selection of an appropriate valuation model, consideration as to the inputs necessary for the valuation model chosen and the estimation of the number of awards that will ultimately vest, inputs for which arise from judgements relating to the continuing participation of key employees.

The Group considers the latest available information on the performance of producing licences compared to expected targets and where there are indications that the production is below expectations, the Group's reservoir engineers conduct an evaluation to identify the technical reasons and where necessary seek opinion from external engineers. 

Significant judgement and estimation is also required in the determination of the fair value of warrants and bonds. In 2016, the proceeds from the issue of the bonds were used to settle existing liabilities and therefore an element of judgement was required in determining the portion of issues costs to be allocated to the old and new debt.

 

Transactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

The assets and liabilities of foreign operations are translated into sterling at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at weighted average exchange rates for the year, unless this is not a reasonable approximation of the rates on the transaction dates. The resulting exchange differences are recognised in other comprehensive income and held in a separate component of equity. On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that foreign operation is recognised in the income statement.

(b) Discontinued operations

The Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. Costs to sell are the incremental costs directly attributable to the disposal of an asset (disposal group), excluding finance costs and income tax expense.

The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Actions required to complete the sale should indicate that it is unlikely that significant changes to the sale will be made or that the decision to sell will be withdrawn. Management must be committed to the plan to sell the asset and the sale expected to be completed within one year from the date of the classification.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale. Assets and liabilities classified as held for sale are presented separately in the balance sheet.

A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and:

·     Represents a separate major line of business or geographical area of operations

·     Is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations. Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the statement of comprehensive income. All other notes to the financial statements include amounts for continuing operations, unless otherwise mentioned.

The Board considered the disposal of Italy operations met the criteria to be classified as held for sale as at 31 December 2017 for the following reasons:

i.   On 5 October 2017, the Company announced that it had entered into non-binding conditional heads of terms with Saffron Energy plc ("Saffron") and Po Valley Energy Limited under which the Company was to dispose of its portfolio of Italian interests and permits through the sale of its subsidiaries, Sound Energy Holdings Italy and Apennine Energy SpA.

ii.  Subsequent to the year end, the Company announced that it had entered into a binding agreement with Saffron and expected to complete the disposal by April 2018.

 

2 Segment Information

The Group categorises its operations into three business segments based on corporate, exploration and appraisal, and development and production.

In the year ended 31 December 2017 the Group's exploration and appraisal activities were carried out in Italy and Morocco.

The Group's reportable segments are based on internal reports about components of the Group which are regularly reviewed and used by the Board of Directors, being the Chief Operating Decision Maker ("CODM"), for strategic decision making and resource allocation, in order to allocate resources to the segment and to assess its performance.

Details regarding each of the operations of each reportable segment is included in the following tables.

Segment results for the year ended 31 December 2017:

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Administration expenses	(8,458)	-	-	(8,458)
Operating loss segment result	(8,458)	-	-	(8,458)
Interest receivable	23	-	-	23
Loss on derivative financial instruments	(1,873)	-	-	(1,873)
Finance costs and exchange adjustments	(2,031)	-	-	(2,031)
Loss for the period before taxation from continuing operations	(12,339)	-	-	(12,339)

The segments assets and liabilities at 31 December 2017 were as follows:

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Non-current assets	372	-	163,939	164,311
Current assets	21,701	-	3,848	25,549
Liabilities attributable to continuing operations	(20,165)	-	(5,002)	(25,167)

The geographical split of non-current assets is as follows:

	UK  £'000s	Morocco £'000s
Fixtures, fittings and office equipment	177	195
Exploration and evaluation assets	-	163,737
Software	66	136
Total	243	164,068

Segment results for the year ended 31 December 2016 were as follows:

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Other income	-	715	-	715
Administration expenses	(4,246)	-	-	(4,246)
Operating loss segment result	(4,246)	715	-	(3,531)
Interest receivable	96	-	-	96
Gain on derivative financial instruments	583	-	-	583
Finance costs and exchange adjustments	(1,853)	-	-	(1,853)
Loss for the period before taxation from continuing operations	(5,420)	715	-	(4,705)

 

Other income represents receipt during 2016 of $1.1 million Indonesian contingent consideration, triggered by the achievement of various operational targets of the Bangkanai licence which was previously owned by the Group. A contingent asset was not recognised when the licence was disposed of due to the uncertainty around the achievement of the conditions leading to the payment.

The segments assets and liabilities at 31 December 2016 are as follows:

	Corporate £'000s	Development & Production £'000s	Exploration & Appraisal £'000s	Total £'000s
Non-current assets	342	-	19,110	19,452
Current assets	48,730	-	6,234	54,964
Liabilities attributable to continuing operations	(3,161)	-	(25,374)	(28,535)

The geographical split of non-current assets is as follows:

	UK  £'000s	Morocco £'000s
Development and production assets	-	-
Land and buildings	-	-
Fixtures, fittings and office equipment	194	148
Goodwill	-	-
Exploration and evaluation assets	-	18,876
Software	89	145
Total	283	19,169

 

The segments assets and liabilities at 31 December 2016 excludes the assets and liabilities of the disposal group held for sale (note 8).

 

3 Profit/(Loss) per Share

The calculation of basic profit/(loss) per Ordinary Share is based on the profit/(loss) after tax and on the weighted average number of Ordinary Shares in issue during the period. Basic profit/(loss) per share is calculated as follows:

	2017 £'000s	2016 £'000s
Loss after tax from continuing operations	(12,339)	(4,705)
Loss after tax from discontinued operations	(21,811)	(8,734)
Total loss for the year	(34,150)	(13,439)

 

	2017 million	2016 million
Weighted average shares in issue	799	534

 

	2017 pence	2016 pence
Basic and diluted loss per share from continuing operations	(1.54)	(0.88)
Basic and diluted loss per share from discontinued operations	(2.74)	(1.64)
	(4.28)	(2.52)

 

 

 

 

 

4 Property, Plant and Equipment

	2017 £'000s	2016 £'000s
Development and production assets
Cost
At start of the year	15,968	14,297
Exchange adjustments	51	785
Additions	-	886
Reclassification to assets of disposal group held for sale (note 8)	(16,019)	-
At end of the year	-	15,968
Depreciation
At start of the year	14,752	8,906
Exchange adjustments	-	187
Impairment of assets	27	5,455
Charge for the year	97	204
Reclassified to assets of disposal group held for sale (note 8)	(14,876)	-
At end of the year	-	14,752
Net book amount	-	1,216
Fixtures, fittings and office equipment
Cost
At start of the year	815	377
Exchange adjustments	7	33
Additions	386	405
Reclassified to assets of disposal group held for sale (note 8)	(562)	-
At end of the year	646	815
Depreciation
At start of the year	302	210
Exchange adjustments	5	24
Charge for the year	309	68
Reclassified to assets of disposal group held for sale (note 8)	(342)	-
At end of the year	274	302
Net book amount	372	513
Total net book amount	372	1,729

 

During 2016, the Group reviewed the carrying value of the Casa Tonetto licence in view of the reservoir performance being below expectations upon commencement of production at the beginning of 2016 and recognised an impairment charge of £5.5 million to write-off the carrying value to the recoverable amount of £0.5 million, being the fair value less costs to sell of the plant and equipment. The valuation was considered a Level 3 valuation.

	2017 £'000s	2016 £'000s
Italy- impairment	-	5,455
Total	-	5,455

 

5 Intangibles

	Goodwill  £'000s	Software  £'000s	Exploration & Evaluation Assets  £'000s	2017  £'000s
Cost
At 1 January 2017	2,202	282	39,902	42,386
Additions	-	92	165,670	165,762
Exchange adjustments	64	(7)	(6,043)	(5,986)
Reclassified to assets of disposal group held for sale (note 8)	(2,266)	(86)	(35,792)	(38,144)
At 31 December 2017	-	281	163,737	164,018
Impairment
At start of the year	1,769	42	12,515	14,326
Charge for the year	55	117	19,018	19,190
Exchange adjustments	64	3	(152)	(85)
Reclassified to assets of disposal group held for sale (note 8)	(1,888)	(83)	(31,381)	(33,352)
At end of the year	-	79	-	79
Net book amount at 31 December 2017	-	202	163,737	163,939

 

	Goodwill  £'000s	Software  £'000s	Exploration & Evaluation Assets £'000s	2016 £'000s
Cost
At 1 January 2016	1,992	106	18,100	20,198
Additions	-	176	21,176	21,352
Exchange adjustments	210	-	626	836
At 31 December 2016	2,202	282	39,902	42,386
Impairment
At start of the year	-	6	10,628	10,634
Charge for the year	1,704	36	1,819	3,559
Exchange adjustments	65	-	68	133
At end of the year	1,769	42	12,515	14,326
Net book amount at 31 December 2016	433	240	27,387	28,060

 

Goodwill

Goodwill arises on acquisitions accounted for at fair value and consists largely of the synergies expected from combining acquired operations with those of the Group. In accordance with IFRS, goodwill is assessed annually for impairment. The carrying value of the goodwill is linked to the development and exploration and evaluation assets. During 2016, impairment charges were recognised for the Casa Tonetto and Strombone licences, which led to £1.7 million that was linked to these licences being impaired.

Exploration and evaluation assets

Additions during the year primarily related to acquisition of OGIF's interests in Tendrara, Anoual and Martaka licences, onshore Morocco, for £138.8 million and expenditure on drilling of wells in Italy and Morocco.

During the year, the Group had capitalised interest costs of approximately £1.6 million (2016: £1.5 million).

Details regarding the geography of the Groups E&E assets is contained in note 2.

The Directors assess for impairment when facts and circumstances suggest that the carrying amount of an E&E asset may exceed its recoverable amount. In making this assessment the Directors have regard to the facts and circumstances noted in IFRS 6 paragraph 20. In performing their assessment of each of these factors at 31 December 2017 the Directors have:

a.  reviewed the time period that the Group has the right to explore the area and noted no instances of expiration, or licences that are expected to expire in the near future;

b.  determined that further E&E expenditure is either budgeted or planned for all licences;

c.  not decided to discontinue exploration activity due to there being a lack of quantifiable mineral resource; and

d.  not identified any instances where sufficient data exists to indicate that there are licences where the E&E spend is unlikely to be recovered from successful development or sale.

On the basis of the above assessment, the Directors are not aware of any facts or circumstances that would suggest the carrying amount of the E&E asset may exceed its recoverable amount, with exception of Badile. See below and note 1a.

During 2017, following sub-commercial well results, the E&E asset related to the Badile licence, Italy, was fully impaired; resulting in charge of £19.0 million. During 2016, the impairment charge of £1.8 million related to the Strombone licence, Italy, as the current and forecast operational spend had significantly decreased due to an application for a time extension on the licence being rejected.

 

6 Capital and Reserves

Group and Company

	2017 Number of shares	£'000s	2016  Number of shares	£'000s
Ordinary shares - 1p	1,015,869,699	10,159	665,069,037	6,651

 

	2017 Number of shares	2016 Number of shares
At 1 January	665,069,037	503,898,868
Issued during the year for cash	66,550,042	118,147,455
Non-cash share issue	284,250,620	43,022,714
At 31 December	1,015,869,699	665,069,037

 

Non-cash transactions during the year included the issue of 272.0 million shares worth £138.8 million as the consideration for the acquisition of OGIF's interests in Morocco licences. The Company also issued 0.8 million shares worth £0.7 million as part settlement of the drilling services at the Badile licence, onshore Italy, and 9.6 million warrants of 10.4p per warrant were exercised in settlement of £1.0 million debt. 1.8 million shares were issued for which cash had been received in the prior year as a result of share options exercise.

Share option schemes

Options to subscribe to the Company's shares were granted to executives and certain employees in 2017 and 2016.

Share issues

During the year ended 31 December 2017, the Company issued 58,700,042 shares following warrant exercises at exercise prices in the range of 10.4p to 30p per share.

On 7 February 2017, the Company announced the issue of 830,565 shares at a price of 82p per share in respect of drilling services at the Badile licence in Italy.

On 13 February 2017, the Company announced that it would issue 9,615,384 shares as a result of warrants exercise. The exercise price of the warrants totalling £1.0 million (10p per warrants) was satisfied by settlement of a £1.0 million loan to the warrant holder (see note 7).

On 1 August 2017, the Company announced the issue of 2,050,00 shares following the exercise of share options by a non-board member of the Company at a price of 8p per share.

On 12 September 2017, the Company announced that it would issue 272,000,000 shares as consideration for the acquisition of OGIF's interests in Tendrara, Anoual and Martaka licences, onshore Morocco.

On 21 September 2017, the Company announced the issue of 3,350,000 shares following the exercise of share options by a Director of the Company at a price of 8p per share.

During 2017, the Company issued 4,254,671 shares  as a result of share options exercises by non-board members of the Company. 1,804,660 of the shares were issued to satify option excercises that occured in December 2016 and as result, the shares to be issued reserve was fully utilised. The shares were issued at prices in the range of 8p to 25p per share.

 7 Loans and Borrowings

Group and Company

	2017 £'000s	2016 £'000s
Current liabilities
Other loans	-	986
Non-current liabilities
5 year secured bonds
At 1 January/on recognition	16,455	14,777
Amortised finance charges	2,706	1,367
Interest payments	(1,263)	(592)
Exchange adjustments	668	903
	18,566	16,455

 

On 21 June 2016 the Company announced that Greenberry S.A (''Greenberry'') had subscribed for 5-year non-amortising secured bonds with an aggregate issue value of €28.8 million (the "Bonds"). Alongside the Bonds, the Company issued 70,312,500 warrants to subscribe for new ordinary shares in the Company at an exercise price of 30 pence per ordinary share and an exercise period of approximately five years, concurrent with the term of the Bonds, to Greenberry (the "Warrants"). The Bonds were secured over the share capital of Sound Energy Holdings Italy Limited (''SEHIL'') but subsequent to year-end, the security on the share capital of SEHIL was released and replaced by security on the share capital of Sound Energy Morocco South Limited. The Bonds have a 5% coupon and were issued at a 32% discount to par value. A total cash fee of €1.1 million was paid by the Company.

The Warrants were recorded within equity at fair value on the date of issuance and the proceeds of the notes net of issue costs were recorded as non-current liability. Part of the Bonds' proceeds were used to settle an existing Reserve Based Lending facility with Greenberry of €7.0 million at a discount of 50%. The Company also settled £7.0 million debt that had been issued to Continental Investment Partners in 2014 as part of the re-financing. The coupon rate of 5% for the Bonds ensures that the Company's ongoing cash out-flow on interest payments remains low, conserving the Company's cash resources. The effective interest rate is approximately 16.3%. The 5-year secured Bonds are due in June 2021.

The £7.0 million settled was the debt issued to Continental Investment Partners with an annual coupon of 8% on 28 July 2014, which was issued alongside £1.0 million of debt to Simon Davies, with an annual coupon of 10%. The total issue of £8.0 million, with a three year term, was combined with equity and warrants which also had a three year term. Each warrant was convertible into equity at a price of 10.4p per share during that three-year term. The fair value of the warrants at issue is included within warrant reserve.

During 2017, the Company settled £1.0 million debt due to Simon Davies through the exercise of 9.6 million warrants at 10.4p per share.

	2017 £'000s	2016 £'000s
Liability component at 1 January	986	7,118
Interest and amortised issue costs	44	1,413
Interest paid	(30)	(545)
Debt paid	(1,000)	(7,000)
	-	986

Reconciliation of liabilities arising from financing activities

			Non-cash changes
	1 January 2017 £'000	Cash flows £'000	Loan repayment in shares £'000	Amortised finance charges £'000	Exchange adjustments £'000	31 December 2017 £'000
Long-term borrowings	16,455	(1,263)	-	2,706	668	18,566
Short-term borrowings	986	(30)	(1,000)	44	-	-
Total liabilities from financing activities	17,441	(1,293)	(1,000)	2,750	668	18,566

 

Reconciliation of external interest costs

	2017 £'000	2016 £'000
Amortised finance charges- long-term borrowings	2,706	1,367
Amortised finance charges- short-term borrowings	44	1,413
Accelerated bond costs amortisation on debt settlement	-	2,353
	2,750	5,133
Less capitalised interest	(1,618)	(1,455)
Exchange adjustments	(15)	19
Total external interest for the year	1,117	3,697

 

 

8 Discontinued Operations

On 5 October 2017, the Company announced that it had entered into non-binding conditional heads of terms with Saffron Energy plc ("Saffron") and Po Valley Energy Limited under which it is proposed that Company disposes of its portfolio of Italian interests and permits through the sale of Sound Energy Holdings Italy (''SEHIL'') and Apennine Energy SpA (''APN'') (the "disposal"). The consideration for the disposal would be fully satisfied through the issue of 185,907,500 new ordinary shares in Saffron which would be distributed directly to SOU shareholders valued at approximately £8.1 million using the share price of Saffron of 4.38 pence per share being the closing mid-market price per Saffron ordinary share before the announcement was made. Subsequent to the year end, the Company announced that it had entered into a binding agreement with Saffron for the disposal and is expected to complete the disposal by April 2018. At 31 December 2017, the Italian operations were classified as a disposal group held for sale and as discontinued operations. With the classification as discontinued operations, the Italian operations have been excluded from the segment note (note 2).

The results of the Italian operations for the year are presented below:

	2017 £'000s	2016 £'000s
Revenue	708	833
Operating costs	(697)	(1,110)
Impairment of producing assets	-	(5,455)
Impairment of goodwill	(55)	(1,704)
Impairment of intangible assets	(19,018)	(1,819)
Exploration costs	(761)	(515)
Gross loss	(19,823)	(9,770)
Administrative expenses	(1,995)	(1,995)
Operating loss from discontinued operations	(21,818)	(11,765)
Finance revenue	79	2,054
Foreign exchange gain	4	94
Finance costs	(131)	(861)
Loss for the year before taxation from discontinued operations	(21,866)	(10,478)
Deferred tax credit	55	1,744
Loss for the year after taxation from discontinued operations	(21,811)	(8,734)

 

The major classes of assets and liabilities of the Italian operations classified as held for sale as at 31 December 2017 are as follows:

 

	2017 £'000s
Assets
Property, plant and equipment	1,363
Intangible assets	4,792
Land and buildings	1,598
Inventories	133
Other receivables	3,527
Prepayments	66
Cash and short term deposits	813
Assets of disposal group held for sale	12,292
Liabilities
Trade and other payables	1,644
Deferred tax liabilities	378
Provisions	2,470
Liabilities of disposal group held for sale	4,492
Net assets	7,800

The net cash flows of the Italian operations were as follows:

	2017 £'000s	2016 £'000s
Net cash flow from operating activities	(2,513)	(1,810)
Net cash flow from investing activities	(13,962)	(2,468)
Net cash flow from financing activities	-	(2,894)
Net cash outflow	(16,475)	(7,172)

 

 

9 Post Balance Sheet Events

On 22 January 2018, the Company announced that it had entered into a binding conditional sale and purchase agreement (the "Binding Agreement") with Saffron Energy Plc ("Saffron") under which it is proposed that Saffron acquires Sound Energy's portfolio of Italian interests and permits through the acquisition by Saffron of the entire issued share capital of the Company's wholly owned subsidiary, Sound Energy Holdings Italy Limited ("SEHIL"). SEHIL holds all of Sound Energy's Italian oil and gas interests through its own wholly owned subsidiary, Apennine Energy SpA ("APN"). It is proposed that Saffron will be renamed Coro Energy plc. The consideration for the disposal of SEHIL will be fully satisfied through the issue of 185,907,500 new ordinary shares of £0.001 each in the capital of Saffron (the "Consideration Shares"), subject to any rounding of fractional entitlements. The Consideration Shares would be paid directly to the Company's shareholders on completion which is expected to be in April 2018. The Company was granted a court order on 13 March 2018 approving a capital reduction following cancellation of the share premium account and transferring £277.7 million to distributable reserves.

On 23 January 2018, the Company announced that it had received the final results of the resources certification in relation to the TE-5 horst core volumes at the Company's Tendrara asset, onshore Morocco (the "Final Certification"). The Final Certification, was entirely consistent with and confirmed the preliminary results of the certification announced by the Company on 20 December 2017. The Company also announced that Stephen Whyte, the Company's Non-Executive Chairman, had stepped down from the Board and his position would be assumed by Richard Riddell, a Non-Executive Director of the Company.

On 31 January 2018, the Company announced the appointment of Macquarie Capital (Europe) Limited as joint broker to the Company. Macquarie Capital (Europe) Limited will act alongside RBC Capital Markets, joint broker, and Smith & Williamson Corporate Finance Limited, continue as the Company's nominated adviser.

On 12 February 2018, the Company announced it had been granted, subject to Moroccan Energy and Finance Ministry approval, a petroleum agreement covering Sidi Moktar (the "Petroleum Agreement"). The Petroleum Agreement, has been granted to the Company by L'Office National des Hydrocarbures et des Mines ("ONHYM"), the Moroccan state regulator for petroleum operations, and will come into force on approval of the Moroccan Energy and Finance Ministries. The petroleum agreement is for an 8 year period.

On 7 March 2018, the Company provided an update on the Italy divestment and noted that the divestment was expected to complete on or around 9 April 2018.

 

10. Market Abuse Regulation (MAR) disclosure

Certain information contained in this announcement would have been deemed to be inside information for the purposes of article 7 of Regulation (EU) No 596/2014 until the release of this announcement.