Sound Energy PLC announced on Tuesday an agreement with Calvalley Petroleum Ltd to fund exploration operations under the Tendrara exploration permit in Morocco.
Under the agreement, Calvalley Petroleum will provide Sound Energy with $48 million in funding for phase two of the equity-funded development costs for a partial divestment of a 40% working interest, according to a statement from Sound Energy reported by Marketscreen.
The agreement also means that Calvalley will provide 100% funding for the TE-4 Horst Well. The funding is capped at $7 million.
Commenting on the news, Executive Chairman of the Board of Sound Energy Graham Lyon said, “We are very pleased to have entered into exclusivity and a term sheet with Calvalley, who have operations in the Middle East and are supported by a very large conglomerate.”
He further added that “the companies will now work towards signing definitive transaction documentation which upon completion will enable the parties together to jointly progress to the final investment decision.”
Under its initial agreement with Moroccan authorities, Sound Energy holds 75% interest in the gas drilling permit, while Morocco’s National Bureau for Hydrocarbons and Minerals (ONHYM) holds 25% interest.
In March 2023, Sound Energy unveiled that it had extended the negotiation period for financing the gas production associated with the Tendrara license in Northeast Morocco.
Initially, the company had announced on June 23, 2022 that it had reached an agreement with Attijariwafa Bank, Morocco’s largest banking group, to fund Phase two of the Tendrara production.
The agreement involved the arrangement of a “long-term project senior debt facility with a term not exceeding 12 years.” However, in a recent update, Sound Energy disclosed that it had extended the negotiation period until April 28, 2023.
The agreement is intended to cover a total amount of MAD 2.25 billion ($215 million), which will be utilized to finance specific aspects of Phase Two of the Tendrara gas production. The overall development cost for Phase Two has been estimated at $330 million.
