Sound Energy, which has been looking to sell its Eastern Moroccan assets portfolio, said it has signed a non-binding heads of terms agreement with a private UK company to purchase 51 per cent of the assets for US$112.8 million.
The UK-based company said under the terms of the agreement, the buyer has an exclusivity period expiring on 14 February 2020, subject to certain milestones being met, to complete due diligence on the Eastern Morocco Portfolio and to finalise a binding sale and purchase agreement.
Sound Energy said it will retain a carried interest that provides the opportunity for the company and its shareholders to continue to benefit from significant potential upside in the portfolio.
Simon Davies, Sound’s chairman, said: "The Proposed Transaction being progressed on an exclusive basis funds development of the Tendrara project, provides early monetisation of a substantial part of our established gas resources and retains upside for our shareholders through both future gas production and further exploration drilling."
The total consideration of $112.8 million, consists of a $54.3 million cash consideration payable in tranches and an estimated $58.5 million carry with respect to Sound Energy's future capital expenditure requirements relating to its retained interest in the Tendrara production concession in order to achieve first gas production from the concession.
On completion of achieving first gas, Sound Energy expects to retain a 23.3 per cent share in the Eastern Morocco Portfolio synthetically through a new joint venture. The company will also provide the buyer with a one-year option to acquire a further 9 per cent of remaining interest in Eastern Morocco Portfolio on the same proportional financial consideration and carry terms as for the 51 per cent interest.
The cash consideration will be payable in three tranches: 55 per cent on completion of the proposed transaction (from which the company will meet transaction expenses and related costs); 30 per cent at the final investment decision (when binding commitments are made to provide the development capital) of the concession; and 15 per cent within 60 days of the delivery of first gas production from the concession. The completion of the proposed transaction will be subject to satisfactory completion of due diligence and purchaser financing.