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2 Continuing to Fuel
the Energy Transition
Annual Report & Accounts
for the year ended 31 December 2022
Continuing to Fuel
the Energy Transition
Sound Energy is an AIM quoted transition
energy-focused business, currently playing
an important role in developing lower
carbon energy solutions
for Morocco.
Strategic and Financial Direction
Key Priorities
• Moving to revenue generation in 2024
• Delivering phased gas developments at Tendrara
• Maturing and delivering creative financial solutions to grow the business
• Further infrastucture-led exploration and appraisal to unlock additional
gas resources
• Diversification and portfolio development
• Continue to prudently manage costs and financial resources
Read more in the Financial Review on pages 22 to 23
Operational Highlights
Micro LNG Phase 1
• Construction of LNG storage tank and wellhead maintenance continues at site
• Work has included site preparation, excavation for the tank foundation, laying the
concrete base for the tank foundation and several other activities
• Reduced operating cost by 7%
Phase 2
• Commenced potential partner selection process and received non-binding
indications of interest from credible and well-funded parties
• Developed relationships with various vendors to conduct Engineering,
Procurement, Construction (“EPC”) and potentially Operations and Maintenance
activities for Phase 2 development
• Continued negotiations with Attijariwafa bank on arrangement of a long-term
project senior debt facility
Exploration
• Approval of the Company’s application to enter the optional First Complementary
Period under the Grand Tendrara Exploration Permits consisting of 2 years to
1 October 2024 by ONHYM – commitment to drill one well (awaiting final approval
from Moroccan Energy and Finance Ministry)
• 12-month extension to the Anoual Exploration Permits initial period to
January 2023 by ONHYM (subject to final approval from Moroccan Energy and
Finance Ministry)
• 12-month extension to the Sidi Moktar Exploration Permits initial period to
October 2023 (subject to final approval from Moroccan Energy and Finance Ministry)
Net 2C Resources1
283 Bcf
1 2C certified by RPS Energy
Consultants Limited 2018, net (75%)
recoverable resources, includes non-
hydrocarbons, common examples
of which are carbon dioxide and
nitrogen.
Our investment
proposition summary
• Largest onshore operator in Morocco and focused leadership team with
track record of delivering value
Contents
• Advanced in monetising Tendrara’s significant 377 Bcf1, 2C gross (100%)
discovered gas resource through an innovative phased development
• Scalable Phase 1 mLNG FID sanctioned 2022 with First Gas expected
within 24 months, unlocking the route to cash flow
• Phase 2 pipeline gas sales, preparation for FID, and thereafter, before
first revenue in around 24 months, generating significant value
Read more in Reserves and Resources on pages 14 to 15
• Value upside as trading at a deep discount to Net Asset Value
supported by SP Angel equity research valuation
• Assessing a basket of Energy Transition growth opportunities in, and
beyond, Morocco
• Multiple near-term catalysts for a re-rating with attractive ESG
credentials
View our Corporate website
Get the latest reports and presentations at
www.soundenergyplc.com
1 2C certified by RPS Energy Consultants Limited 2018, gross (100%)
recoverable resources, includes non-hydrocarbons, common
examples, two of which are carbon dioxide and nitrogen.
STRATEGIC REPORT
Executive Chairman
LNG and the Energy Transition
A Compelling Case for Morocco
Our Business Partnerships
Business Model
Partnering Through the Value Chain
Reserves and Resources
Our Strategy
Portfolio Review
LNG Project Review
Financial Review
s172 Statement
Sustainable and Responsible Business
Principal Risks and Uncertainties
GOVERNANCE REPORT
Chairman’s Corporate
Governance Statement
QCA Code Principles
Overview
The Team
Board Activities
Shareholder Relations
Health, Safety, Security & Environment
Committee
Audit Committee
4
6
7
8
10
12
14
16
16
20
22
25
27
34
38
39
40
42
44
38
46
48
Nominations and Remuneration Committee 50
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report to the
members of Sound Energy plc
FINANCIAL STATEMENTS
Consolidated Statement of
Comprehensive Income
Consolidated Balance Sheet
Company Balance Sheet
Group and Company Statements
of Changes in Equity
Group Statement of Cash Flows
Note to Statement of Cash Flows
Company Statement of Cash Flows
Note to Company Statement of
Cash Flows
Notes to the Financial Statements
OTHER INFORMATION
List of Licences and Interests
Shareholder Information
51
55
57
58
65
66
67
68
70
70
71
71
72
99
100
01
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Strategic Report
Group at
a Glance
Where we operate
Morocco and gas: a compelling case
Greater Tendrara
Strategic relevance
Exploration potential in the Triassic
TAGI reservoir of 7.52 Tcf gross/5.64
Tcf net (arithmetical sum of mid-case
unrisked GIIP) identified in sub-salt
concepts, leads and prospects
Anoual
Strategic relevance
Exploration potential in the Triassic
TAGI reservoir of 11.51 Tcf gross/8.63
Tcf net (arithmetical sum of mid-case
unrisked GIIP) identified in the sub-salt
concepts, leads and prospects
Ownership
Operator with an effective interest
of 75%
Ownership
Operator with an effective interest
of 75%
ONHYM holds the remaining
25% interest
ONHYM holds the remaining
25% interest
Partnerships
Long standing partnership with
ONHYM. Additional partners currently
being considered
Partnerships
Long standing partnership with
ONHYM. Additional partners currently
being considered
Sidi Mokhtar
Strategic relevance
Unrisked exploration potential 8.9
Tcf gross/6.7 Tcf net (arithmetical
sum of mid-case unrisked GIIP) TCF
gross original gas in place. Sound
believes the pre-salt plays have been
overlooked in the region
Ownership
Operator with an effective interest
of 75%
ONHYM holds the remaining
25% interest
Partnerships
Long standing partnership with
ONHYM. Additional partners
currently being sought
Read more in the
Market Drivers on
pages 06 to 07
02
Tahaddart Power
400MW
(Dhar Doum
4 x 400MW)
M E D I T E R R A N E A N
(Oued
El Makhazine
2 x 400MW)
T I C
A N
L
T
A
Oujda
AinBeni
Mathar
Rabat
(AlWahda
4 x 400MW)
120km
Casablanca
Sidi MoktarPermit
Anoual Exploration
Permit
Marrakech
O
C
C
O
R
O
M
Tendrara
Production
Concessi on
Greater Tendrara
Exploration Permit
Power Stations (coal or dual fuel)
Power Stations (gas)
Planned Gas Power Stations (gas)
Maghreb - Europe Pipeline
Proposed routing of pipeline to GME
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Strategic priorities
1
2
3
Unlocking cash flow
Pipeline to power generation
Unlocking portfolio potential
Strategic principles
Partnerships
Scalable growth
We nurture
our existing
partnerships and
seek to develop
new ones to
ensure we remain
a competitive
and shareholder
value accretive
company.
We look to scale
within our means
with a firm eye
on costs, but
understanding
of the enormous
growth potential
in our acreage.
Opportunity
assessment
We carefully
review relevant
opportunities in
the transition fuel
and renewable
energy space,
both in Morocco
and further afield,
for projects that
could align with
our strategy.
Our Vision
Fuelling the energy transition through a
focused and compelling value proposition,
we assess multiple opportunities to develop,
diversify and grow our business organically,
and inorganically, in Morocco and beyond.
The future
1
2
3
The transition: We are committed to the
energy transition and view gas and mLNG as
transition fuels.
Portfolio diversification: We see portfolio
diversification as a key strategy in reducing risk
and optimising shareholder returns.
Sustainable shareholder value: We continue to
work towards revenue generation via our Phase 1
and Phase 2 projects.
Strategic Report
What ESG means
to Sound Energy
We are aligned to the
following UNSDGs
Social
We are committed to making a positive
contribution to the communities in which
we operate. Our operations will deliver
energy, jobs and investment into local
communities and the wider economy, and
we are committed to delivering this in the
most sustainable manner.
Governance
Sound Energy’s strong corporate
governance culture ensures that all
stakeholders are treated with fairness and
respect.
Environmental
At Sound Energy, we are environmentally
focused and compliant with all
international and local operating
standards. We have a keen focus on
energy conservation, which includes a
CO2 recovery project at Tendrara Eastern
Morocco. We are also advancing the
development of renewable sources (solar
and wind) at Tendrara to fully run all
operations.
Read more on pages 27 to 33
www.soundenergyplc.com
03
Sound Energy plc Annual Report for the year ended 31 December 2022 Strategic Report
Chairman’s
Statement
“ 2022 marked the start of
development – a milestone
on our journey to revenue.”
Graham Lyon
Executive Chairman
Introduction
2022 was a ground breaking year for the Company both
(literally and, figuratively) as Sound Energy continued
the transition from being a pure exploration company
to a development and production company. In March,
groundworks began on Phase 1, our micro-LNG project
at the Tendrara production concession in Morocco. We
also made material progress on Phase 2, the further
development of the concession via a pipeline, primarily
on the financing side. Despite a challenging and rapidly-
changing global political and economic backdrop, the
Company was able to successfully deliver a number
of milestones in moving towards becoming a revenue
generating company. All exploration licences were either
extended or advanced into the first Complementary Period.
The ongoing dispute with the Moroccan authorities over tax
continued to be an unhelpful drain on the Company’s time
and resources; and, post period end, the Company entered
into a settlement agreement with Morocco tax authority
on a phased payment schedule of approximately US$2.5
million as a full and final settlement against a claim of
approximately US$23.95 million.
2023 will be an important year, which I hope will see further
progress. Irrespective of the challenges we may face,
the team remains fully dedicated to delivering its project
activities and growing the Company as we seek to create
material value for the Company’s shareholders.
In February 2022, the Notice to Proceed for our Phase
1 project was issued, and work commenced. Material
progress at site has been made and there is a more detailed
commentary in the operational review. We are pleased that
the Company is moving forward to becoming a revenue
generating company.
Progress on the Group’s Phase 2 Tendrara Concession
development planning comprising of a Central Processing
Facility (CPF), a pipeline and several development wells,
has been made throughout the year. In March, the Company
announced the pipeline interconnection agreement with
ONHYM (Office National des Hydrocarbures et des Mines)
to enable the tie-in of the future gas export pipeline to
the GME gas pipeline, a key remaining condition of the
binding, but conditional, gas sale and purchase agreement
with ONEE (Office National de l’Electricite et de l’Eau
potable). Additionally, in June, the Company announced the
appointment of Attijariwafa Bank, Morocco’s largest bank,
as the exclusive lead arranger of a senior debt financing of
up to approximately U$250 million for Phase 2. The bank
is now undertaking detailed due diligence and we expect
the parties will enter into a Conditioned Financing Offer
term sheet in the near future. Both ONEE and Attijariwafa
work hand in hand with Sound to ensure the prime target
of delivering local gas to local power stations becomes
a reality. As such, all have agreed to work to conclude
documentation by mid-2023.
In December, we were pleased to report that ONHYM had
extended a number of our Moroccan licences, all subject
to Ministry approval. First, the Grand Tendrara Exploration
Permits are continued by two years to 1 October 2024
and will involve the drilling of one exploration well
with a Triassic objective, this being entry into the First
Complementary Period. The Anoual exploration permits
has been extended by 12 months and will also involve the
drilling of one exploration well with a Triassic objective.
Finally, the Sidi Moktar exploration permit has been granted
a 12-month extension to 9 October 2023. We are delighted
that the Moroccan authorities remain so supportive of our
work programmes. and await Ministerial formal approval.
As part of our wider efforts to bring funding into our plans
for Phase 2, we announced, in August, that we had initiated
a formal process to identify a partner for the Tendrara
Production Concession and the surrounding Grand
Tendrara and Anoual exploration permits.
The objective of the area-wide approach is to seek a co-
investing partner in each licence, to both fund the expected
balance of Phase 2 development costs to first gas of,
04
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 c. US$60 million net to the Company’s working interest in
the Tendrara Production Concession and to progress an
exploration and appraisal drilling programme in the Grand
Tendrara and Anoual exploration permit areas.
Company received the written judgement late in the year
and submitted an appeal within the allotted timeframe. The
Company continues to believe the tax authority has mis-
interpreted licensing law in Morocco.
Following strong levels of interest in this process, from
a wide range of credible and well-funded parties, the
Company received quantified non-binding indications of
interest from several parties and, following review, the
Company is progressing negotiations. Whilst there is no
guarantee that a partner will be selected, it is hoped that
such a transaction can be concluded alongside the debt
funding for Phase 2 development.
Corporate
Early in 2022 the Company reviewed the opportunity to
create an enlarged group with Angus Energy to focus on
high margin, onshore gas in stable fiscal environments.
On detailed evaluation the opportunity did not meet the
criteria required for Sound Energy and the opportunity was
not further pursued.
In June, we successfully raised £4 million through an
equity issue, which was priced at 2 pence per share, with
the funds earmarked for pre-development work on the
Tendrara Phase 2 pipeline to FID, new ventures activities
and corporate G&A.
The Company performed its first stakeholder review, setting
a benchmark in early 2022 with a follow up undertaken at
year end 2022. The Company strategy is well recognised
amongst Stakeholders, and stakeholder feedback that the
team are considered to be performing well whilst facing
technical, commercial, and resourcing challenges.
Stakeholder meetings and Investor sessions were held;
it was a pleasure to meet so many knowledgeable and
passionate shareholders face to face and engage in
meaningful dialogue.
ESG sits at the heart of our business and, as Operations
commenced, we have monitored and taken immediate
action at any slight safety issue. Our environmental releases
are recorded and monitored. Corporate Governance is
maintained all levels. Finally, we engage with our local
communities and have taken steps to not only employ but
keep all stakeholders in Morocco well informed regarding
our activities.
The Company continues to manage its financial resources
prudently whilst undertaking several substantial activities.
The bridge to fund the company until first revenues is
always under review and the mix of various cash sources
explored, such as debt/equity funding for projects and
potential partnering.
Moroccan tax dispute
In July, a Moroccan tribunal rejected Sound Energy
Morocco East’s (SEME) claim to overturn the previous
decision of a Moroccan local tax committee to seek a
tax payment of approximately US$2.5 million relating to
a purported historical sale of an exploration permit. The
In a separate case, Sound Energy Morocco SARL AU
(SARL AU) received notice that the Local Taxation
Committee supported the Tax Authorities’ assumption of
a sale of assets, although the Committee did not present
a full calculation of the amounts it purports to be due on
the taxable base amounts it has now upheld. However,
Sound Energy estimated that taxes on those taxable
base amounts would amount to, approximately, US$ 21.4
million (previously reported as US$19.7 million for half-year
reporting but was unaudited. Following the year-end audit,
the estimate was revised to US$21.4 million). As previously
announced, the Company remains of the strong opinion
that the assessments levied against SARL AU, that certain
purported historical intra Group transactions between
SARL AU and SEME have taxable bases, have been wrongly
interpreted by the Moroccan Tax Administration.
Post period end, the Company entered into a settlement
agreement with Morocco tax authority on a phased
payment schedule back ended over 6 years of
approximately US$2.5 million as a full and final settlement
against a claim of approximately US$23.95 million.
Board
During 2022, the Board continued to meet regularly
and contribute to strategy and problem solving for the
company. A review of the Board’s effectiveness was
conducted, the first in several years. Learnings and
improvements were identified and will be included in the
Board‘s 2023 activities.
Summary
2022 was a year of real tangible progress for Sound Energy,
with the micro-LNG development at Tendrara contracted to
deliver maiden revenues in early 2024. I am pleased that, as
we move further into construction activities, the Company
continues to uphold all our ESG values and deliver our work
in a manner commensurate with our principles. We are
pleased to have settled our outstanding tax matters such
that we can optimise our resources on field development.
We have enjoyed a supportive working relationship with
ONHYM, the Ministry and our various contractors in
Morocco, and, most importantly, we continue to benefit
from the hard work and dedication of our own staff. We will
continue to work diligently to deliver value and progress for
all our stakeholders during 2023 and beyond as we target
to deliver material developments.
Graham Lyon
Executive Chairman
05
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Our
Marketplace
LNG and the energy transition
The market opportunity
It is a poignant time for the energy transition.
In 2022, COP27 showed the world the urgency
we face in securing fewer carbon-intensive
fuels as part of the energy mix.
MicroLNG and the
opportunity for Sound
Energy’s stakeholders
While the LNG industry has, traditionally, focused primarily
on the development of ever-increasing plant capacities, the
maturity of the technology has allowed the development
of technologies applicable for small volumes to be
competitive and, potentially, economically attractive.
The main challenge for small-scale LNG applications is,
therefore, not technical but economic. Mini/Micro LNG
facilities currently mainly consist of liquefaction plants
supplying LNG satellite stations with annual LNG volumes
up to 0.2 mtpa. As an indication, these LNG quantities
correspond to the yearly LNG demand for a power plant
up to, approximately, 100MW. The mLNG chain is virtually
identical to the conventional LNG chain, differing only in
scale. One difference is that for small gas volumes, LNG
transport is feasible using trucks (onshore) or barges
(offshore), rather than large marine carriers.
What this means for
Sound Energy and its
stakeholders
Our mLNG project aims to be generating revenue in 2024.
There is demand for our LNG both internally in Morocco
and externally. For shareholders and other stakeholders,
this is a key phase for the business and could allow us to be
less reliant on external sources of funding.
06
Gas and the opportunity for
Sound Energy’s stakeholders
• Spanish natural gas consumption in 2020 was
31 BCM(1 Tcf), more than 30 times larger than
Morocco’s
• Gas exports from Algeria to Spain and Morocco
via the GME pipeline ceased at the end of
October 2021
• In 2021, over 99% of Spanish gas demand is met
by imports, from countries including USA, Angola,
Nigeria, Norway, Russia and Australia
• Moroccan gas to power generating market
consumed 0.7BCM (25 bcf) in 2021, 0.5 BCM
(18 bcf) of which was purchased from Algeria, 0.2
(7 bcf) BCM as GME pipeline royalty – this gap
needs to be filled
• Moroccan LPG market demand is equivalent to
> 2 BCM (71 bcf) p.a. of natural gas
Algeria Gas
Following the cessation of gas exports to Morocco
from Algeria in 2020, the case for enhanced
supply security and indigenous gas production
has become even greater. The proposed Phase 2
gas development to produce for the gas-to-power
market is a key element of Morocco’s energy
strategy. Clearly, with the significant exploration
potential within Sound Energy’s portfolio, we are
very well-positioned to meet Morocco’s heightened
and growing need for gas should the company
discover further gas resources.
Spanish gas prices
€/MWh
MIBGAS Index/futures
250
200
150
100
50
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
2021
2022
2023
What does this mean for Sound Energy?
• In the Moroccan National Energy Strategy, Sound
Energy has been referred to as crucial in plugging
the supply demand imbalance for gas as it
becomes the replacement fuel for coal in Morocco.
• As Morocco continues to grow both industrially
and domestically, and as other fuel sources
become more scarce in-country, there is a further
opportunity to supply more of the energy mix.
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Strategic Report
A compelling case for Morocco
• Prior to 2021, Morocco historically imported 90%
• Connecting to the GME opens access to the
of all consumed gas from Algeria through the GME
pipeline, feeding two existing CCGTs in Tahaddart
and Ain Beni Mathar.
European market with confirmed capacity by Spain
and Portugal, two import-dependent geographies,
to absorb additional volumes.
• Electricity needs are growing at a sustained yearly
• Attractive fiscal terms (10-year tax holiday).
rate of about 5%.1
• The Moroccan Government is committed to reducing
dependency on imports, with a clear energy policy
focused on energy security and sustainability.
• The Morocco National Energy Strategy has stated its
plan to harness renewable energy and add 3,900 MW
of new gas-fired power capacity2 as an alternative
to coal.
• Natural gas, therefore, plays a strategic role as a
bridge fuel and a catalyst to sustain Morocco’s
growing energy needs.
• Increasing domestic energy needs are identified as a
growth opportunity for Tendrara gas.
1
IEA Energy Policies Beyond IEA Countries 2019 Morocco
2 Morocco’s nationally-determined contribution under the
UNFCCC 2016
Natural gas demand
Morocco
Spain
BCM p.a.
35
30
25
20
15
10
5
0
31.2
28.5
0.8
1.6
2020 2030
Tahaddart Power
400MW
(Dhar Doum
4 x 400MW)
M E D I T E R R A N E A N
(Oued
El Makhazine
2 x 400MW)
T I C
A N
L
T
A
Oujda
AinBeni
Mathar
Rabat
(AlWahda
4 x 400MW)
120km
Casablanca
Sidi MoktarPermit
Anoual Exploration
Permit
Marrakech
O
C
C
O
R
O
M
Tendrara
Production
Concessi on
Greater Tendrara
Exploration Permit
Power Stations (coal or dual fuel)
Power Stations (gas)
Planned Gas Power Stations (gas)
Maghreb - Europe Pipeline
Proposed routing of pipeline to GME
07
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Afriquia Gaz
Phase 1
Funding/offtaking/investment
The partnership commits SEMEL (Sound Energy
Morocco East Ltd) on behalf of the Concession JV,
for 10 years from first gas via the binding gas sales
agreement to produce, process, liquefy and sell, to
Afriquia Gaz, an annual contractual quantity of 100
million standard cubic metres of gas from the Phase
1 development with Afriquia Gaz committing to an
annual minimum “take or pay” quantity of 90 million
standard cubic meters of gas, priced within a range.
Afriquia Gaz underpinned its partnership with
Sound Energy plc by acquiring a 9.8% shareholding
through a £2 million placing in 2021 and entered into
a $18 million loan note agreement with the Company,
also in 2021, which meets the capital funding
requirements of Sound Energy’s JV concession
participants to bring the Phase 1 project onstream.
Current substantial market
share of LPG supply
1. Listed in Morocco
2. Market Cap. of c 1.29 USD bn1
Financing
1. Loan note for $18 million
2. £2 million equity placement resulting in a 9.8%
shareholder position
3. Provision of transportation and end-user storage
and re-gasification
4. Guaranteed 10-year take or pay offtake contract
1 Quoted from Casablanca Bourse at 16:00 on 14 April 2023
Our Business
Partnerships
Our key partners allow
Sound Energy to achieve
more than we could do
alone. Our partners support
us from investment funding
to project execution and
delivery.
08
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Italfluid Geoenergy S.r.l
Phase 1
Design/construct/commission/
operate/maintain
In 2022, Sound Energy Morocco East Limited
(SEMEL) entered into a binding contract with Italfluid
S.R.L. in which Italfluid will design, construct, install,
commission, operate, maintain and lease to SEMEL, a
gas processing and liquefaction plant over a 10-year
period.
Italfluid is an international integrated service
Company, which provides certain upstream
petroleum services, including the design,
construction, commissioning and maintenance
of process plants and hydrocarbon processing,
including gas liquefaction to produce liquified natural
gas. It has been operating in the oil and gas industry
for over 30 years. Its clients include Total, Edison,
British Gas and Eni.
Italfluid, through a vendor financing financial
structure with Sound Energy, is aligned with
delivering plant operation and maintenance services
to the Phase 1 mLNG Project, such that LNG
deliveries are guaranteed to market as required under
take or pay, and send or pay, contractual obligations.
Micro LNG Plant is to be designed, constructed,
commissioned, operated and maintained by Italfluid
with contractual obligations for plant operability and
delivery.
Lease structure:
1. Minimal capital payments during project execution
and following successful completion of Micro
LNG plant commissioning (including production
build-up)
2. Leasing solution substantially lowers capital
investment requirements of Phase 1 development
3. Daily Rental payment paid to Italfluids on
guaranteed daily volume only
4. Performance obligations on plant availability
Oil and Gas
Investment fund
Investment
In January 2017, Sound Energy
announced the acquisition of the
Eastern Morocco portfolio of Oil and
Gas Investment Fund (“OGIF”), and
introduced OGIF as a second
cornerstone investor:
• Consolidated interest in Eastern Morocco’s
prospective acreage
• Strengthened Sound Energy’s position in Morocco:
OGIF is a Moroccan fund, owned by the seven
largest Moroccan financial institutions
• As at 31 December 2022, OGIF had an interest in,
approximately, 14.36% of Sound Energy’s current
issued share capital
Office of Hydrocarbons
and Mines
Licences/funding
• The National Office of Hydrocarbons and Mines
(“ONHYM”) is another key partner for Sound
Energy. The department was established in August
2005 by the merger of the Bureau of Research and
Mining Participations (“BRPM”) and the National
Office for Research and Petroleum Explorations
(“ONAREP”).
• ONHYM is a public institution with legal personality
and financial autonomy under state supervision
and is responsible for the monitoring of licences
for exploration and for funding the development
jointly with private partners in Morocco.
• Sound Energy has a good relationship with
ONHYM and looks forward to further strengthening
their shared interests.
09
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Strategic Report
Business
Model
Delivering sustainable value through
the energy transition.
Fuelling the energy transition
As the world continues its ambitious journey towards lower carbon, sustainable energy solutions and a greener
planet, Sound Energy is committed to delivering its part in this journey. Access to energy improves lives and
stimulates growth in society. Sound Energy is committed to this aspiration and has a strategy focused on developing
a portfolio of opportunities to deliver business growth whilst serving consumer needs.
EVALUATE
S
H I C
T
D E
N
A N C E A
Relationships
and partnering
P
E
O
P
L
E
Strategic relationships
Sound Energy recognises that it can
achieve more than we can alone by
developing high-impact and sustainable
strategic industry relationships. These
relationships allow us to leverage technical,
financial and commercial expertise to
enhance our business and deliver on
our objectives, whilst de-risking our
opportunities and accessing capital to fund
our operations. We believe the creation of
mutually-beneficial partnerships allows us
and our partners to enhance, and deliver,
our business strategies.
Governmental relationships
Having strong and well-developed
relationships with host governmental
bodies is key to delivering Sound Energy’s
aspirations. The Company invests time,
expertise and resources to engage with
governmental agencies to build trust
and understanding around its strategy
and operations. We believe we have
a responsibility for operating safely,
efficiently and reliably in the countries in
which we operate, and that, through our
investments and expertise, we can add
value to communities and create a positive
legacy for society and key stakeholders.
Investors
The support of Sound Energy’s investors,
lenders and shareholders provides us with
a firm financial foundation to deliver our
strategy. We regularly engage with our
shareholders and we collaborate with our
cornerstone investors who bring insight,
knowledge and business skills, which offers
an additional layer of value to help us
achieve success within the business.
N
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Read more about Stakeholder
engagement on page 24
C I A
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PRODUCE
10
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L R E S P O NSIBLIT
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022
Organic growth
• Tendrara Phase 2 gas development
• Phase 1 and Phase 2 expansions, more LNG and 2C
Inorganic growth
• Renewables
− Solar
resources gas sold
• Exploration potential
• Commercialising known discoveries (e.g. SBK-1)
− Wind (own use in Eastern Morocco, expansion
for grid)
• Gas storage
• Corporate actions where accretive
A sustainable business model with ESG at its core
EVALUATE
DEVELOP
• Evaluate our existing portfolio focusing on value
extraction via a variety of sustainable energy
transition strategies, including partnerships, farm
outs and revenue producing opportunities
• Screen and assess opportunities for revenue
generation
PRODUCE
• Advance development strategies with efficient use of
financial resources
• Move discoveries through the development phase
at pace
• Innovative relationships with strategic partners which
can deploy capital and/or technical solutions
RECYCLE AND GROW
• Natural gas production via Micro LNG or larger
• Recycle cash and leverage portfolio to fuel growth
projects at advantaged pricing to generate cash
and value for shareholders
• Leverage technical, financial and commercial skill
sets to build the portfolio
GOVERNANCE AND ETHICS
PEOPLE
• Committed to strong corporate governance to
• Keeping our people safe
strengthen our business and serve our stakeholders
• LSE listed entity observing the QCA code
• Developing our people
• Promoting positive behaviours
• Training of Moroccan nationals
SOCIAL RESPONSIBILITY
ENVIRONMENT
• Creating local employment in developing countries
• LNG and piped gas development displacing coal
• Sponsoring PhD students
and LPG to lower Morocco’s carbon footprint and
increase security of supply
• Respecting our environment and upholding high
environmental standards
“ It is not just what you do, it is how you do it;
we aim to be a respected developer in Morocco.”
Graham Lyon
Executive Chairman
11
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Partnering through
the Value Chain
Phase 1
Micro liquified natural gas (“mLNG”) development plan for
the TE-5 Horst Development
Micro LNG Value Chain
Sound Energy
Production
Production
Italfluid
• Design
Afriquia Gaz
• Commission
• Operate and maintain
Small-scale LNG production
• Design
• Commission
• Operate and maintain
Small-scale LNG
production
Transport
via truck
Local storage +
regasification
Distribution
Marketing
and sales
Transport via truck
Local storage + regasification
Distribution
Marketing and sales
Progress
• 10-year Gas Sales Agreement signed with
Afriquia Gaz
• Italfluid Geoenergy Srl selected as contractor to
engineer, procure, construct, operate and maintain
the micro-LNG Plant based on a lease contract
structure
• Contract for civil works for the micro-LNG
facilities awarded (via Italfluid) and works
commenced with the construction of the
LNG storage tank and processing units’
foundation pads
• Detailed design engineering within primary
subcontractors progressing
Next steps
• Finalise engineering of flowlines and associated
equipment, engage with suppliers and place
purchase order(s) for supply
• Complete construction of LNG storage tank
• Execute TE-6 and TE-7 well-works including
replacement of trees
• Site installation of gas processing and
liquefaction train
• Hook-up, integration and tie-ins
• Field commissioning and testing
12
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Phase 2
Full field development plan centred around the development
of a 120km pipeline and central processing facility
Full field Value Chain
Sound Energy
ONEE
Production
Production
Gas processing
Gas processing
Transport
via pipeline
Transport
Transport via pipeline
Distribution
Distribution
Distribution
Marketing
and sales
Marketing and sales
Marketing and sales
Progress
• Gas Sales Agreement signed with ONEE for
supply of minimum 0.3 bcm/year gas-for-power
generation (transit via GME pipeline)
Next steps
• Engage with potential suppliers for the design
and build of the CPF
13
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Strategic Report
Reserves and
Resources
Resources
The Company’s volumes and risk factors are presented
in accordance with the updated and revised June 2018
SPE/WPC/AAPG/SPEE/SEG/SPWLA/EAGE Petroleum
Resource Management System (“PRMS”).
Contingent Resources are those quantities of petroleum1
estimated, at a given date, that are potentially recoverable
from known subsurface accumulations, but the applied
project(s) are not yet considered mature enough
for commercial development due to one or more
contingencies.
The Tendrara Production concession contains Contingent
Resources. In late 2017, Sound Energy undertook a
resource evaluation exercise for the Tendrara discovery.
This exercise was conducted by a leading independent
technical consultancy, RPS Energy Consultants Ltd (“RPS”).
The results of the resource evaluation were presented in
a Competent Persons Report (“CPR”). The table below
summarises the Discovered Gas Originally in Place and the
Contingent Resources1 for the Tendrara TE-5 Horst within
the Concession certified by RPS, as announced by the
Company on 20 December 2017 and 23 January 2018, and
the net interest to the Company3.
Discovered Gas
Originally In Place (Bcf)
Contingent Resources (Bcf)2
Contingent Resources (Bcf)2
Segment Name
Gross (100%) basis
Gross (100%) basis
Net to Company (75%) basis
TE-5 Horst
(TAGI 1 & 2)
Low
349
Mid
651
High
873
1C
197
2C
377
3C
533
1C
148
2C
283
3C
400
Summary table showing the range of Discovered Gas Originally In place and
Contingent Resources, gross, for the TE-5 Horst accumulation (TAGI Reservoir),
within the Tendrara Production concession.
• the necessary production and transportation facilities are
available or can be made available
At the point of the Final Investment Decision (“FID”) for
each phase of the Tendrara TE-5 Horst development
project, it is expected that a portion of these Contingent
Resources will be converted into Reserves. Projects that are
classified as Reserves will meet the following criteria:
• a technically mature and feasible development plan
• financial appropriations either being in place or having a
high likelihood of being secured to implement the project
• a reasonable timeframe for development
• a reasonable assessment that the development
projects will have positive economics and meet
defined investment and operating criteria;a reasonable
expectation that there will be a market for forecast sales
quantities of the production. There should also be similar
confidence that all produced streams can be sold, stored,
re-injected, or otherwise appropriately disposed
• legal, contractual, environmental, regulatory, and
government approvals are in place, or will be
forthcoming, together with resolving any social and
economic concerns
1 Petroleum is a naturally occurring mixture consisting of, but not
limited to, hydrocarbons in the gaseous, liquid or solid phase.
Petroleum may also contain non-hydrocarbon compounds,
common examples of which are carbon dioxide, nitrogen,
hydrogen sulfide, and sulfur.
2 Contingent Resources are technical volumes, i.e. no economic
limit test applied
3 Under the principal terms of a Profit Sharing Deed, the Company,
together with its subsidiaries, will pay to Schlumberger Holdings
II Limited, an amount equivalent to between 8% and 11% of total
net profits (after costs, taxes and other applicable deductions)
arising from the Concession over a period of 12 years from first
commercial production from the Concession
14
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 3C 533Bcf
2C 377Bcf
1C 197Bcf
128 Bcf2
PHASE 2
PIPELINE
ONEE CSA
CONTRACTED
RAW GAS
VOLUMES
54 Bcf2
PHASE 1 LNG
AFRIQUIA
The output of the basin modelling has allowed Sound
Energy to update the estimated exploration potential of
the licences and Production Concession as 20 Tcf gas
equivalent, mid case, unrisked GIIP. The basin model further
defines a possible range of estimated exploration potential
across the entire permit area, with a 7 Tcf low case of
unrisked gas initially in place and, if all the key elements of
the petroleum system’s model are present, an upside case
of 34 Tcf of unrisked gas initially in place.
The range of unrisked gas initially in place volume estimates
from the basin model has been used to constrain and
consolidate the exploration inventory of features across
the licences in addition to the resources of the Tendrara
Production Concession. The volumes are spread across a
portfolio of prospects, leads and concepts with varying
degrees of technical maturity. The portfolio includes an
estimate of volumes for features identified from previous
operators’ studies, plus new volumes identified by Sound
Energy from geophysical data acquisition, processing and
interpretation exercise, including the recent evaluation of
the TE-4 Horst, SBK-1 Structure and M5 Prospect.
TE-5 HORST
RESOURCES
(TAGI I & II) GROSS
(100%) BASIS3
1 Contingent Resources certified by RPS Energy (2018)
are technical volumes, i.e. no economic limit test
applied
2 Raw gas required to satisfy “take or pay” delivery
requirement in the GSA over 10 years
3 Quoted volumes in standard conditions cubic feet
1
)
f
c
B
(
s
e
c
r
u
o
s
e
R
t
n
e
g
n
i
t
n
o
C
600
500
400
300
200
100
0
Exploration Potential for Eastern Morocco
(Greater Tendrara and Anoual licences)
Prospective Resources are those quantities of petroleum
estimated, as of a given date, to be potentially recoverable
from undiscovered accumulations, assuming the application
of future development projects. Prospective Resources have
an associated geological chance of success (“CoS”) applied.
CoS is the estimated probability that drilling activities
will confirm the existence of a significant accumulation
of petroleum and for them to be tested to flow to the
surface. Prospective Resources are further subdivided in
accordance with the level of certainty associated with
recoverable estimates, assuming their discovery and
development, and may be subclassified based on
project maturity.
Sound Energy has defined an exploration inventory, a
series of features internally classified as either prospects,
leads or concepts, based on their technical maturity. The
term “exploration potential”, as used herein, is intended
to encompass all quantities of undiscovered petroleum
(recoverable and unrecoverable) and presented as gas
initially in place (“GIIP”). GIIP is the total quantity of
gaseous petroleum that is estimated to exist originally in
naturally occurring reservoirs, as of a given date. Petroleum
may also contain non-hydrocarbon compounds, common
examples of which are carbon dioxide, nitrogen, hydrogen
sulfide, and sulfur.
Sound Energy has internally estimated exploration potential
for the Greater Tendrara and Anoual licences. These
estimates are presented as GIIP (gas initially in place)
unrisked without an associated geological CoS and on
a gross basis. The total volume of exploration potential
is constrained by a basin modelling study undertaken
by a leading independent petroleum systems analysis
consultancy (IGI Ltd), as communicated by RNS on
29 June 2018.
15
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022
Our
Strategy
Today
FOCUSED
Moroccan gas development and
monetisation strategy
COMPELLING
Case for gas in Morocco and
Europe, leading to advantaged
pricing
DEVELOPING
A major discovered gas resource
with strategic partners (e.g.
Afriquia Gaz), with follow-on
potential
FINANCED
Phase 1 gas development via
Micro LNG with Afriquia Gaz and
Italfluid, unlocking cash flow
PHASE 2
Pipeline gas-to-power
generation providing an
alternative to coal use. Financing
solutions progressing
GAS EXPLORATION
Portfolio offers potential for
transformational growth
STRONG ESG
Lower carbon footprint fuel,
strong corporate governance
The future
TRANSITION ENERGY
Delivering secure, affordable and
sustainable energy, replacing
imported LPG, coal and
Algerian gas
PORTFOLIO
DIVERSIFICATION
By asset class and geography
to spread risk and open growth
opportunities
SHAREHOLDER RETURNS
Delivered through sustainable
cash generation and
capital growth
16
Portfolio Review
A blended portfolio of gas assets
Eastern Morocco
Tendrara Production Concession
Permit Area
Located proximate to Gazoduc
Maghreb Europe (“GME”) pipeline,
approximately 120 kilometres to
the North. The 522 kilometre-long
Moroccan section is owned by the
Moroccan State and operated by
ONHYM. The pipeline connects
Morocco to Spanish/Portuguese gas
grids as well as Moroccan
gas-fired power stations.
Geology
The gas is trapped within the Triassic
TAGI1 reservoir within the structural
fault block, termed the TE-5 Horst, and
sealed by the overlying salt. Reservoir
characteristics are significantly
enhanced by application of proven
hydraulic stimulation techniques to
increase gas flow rates.
Ongoing and Planned
Developments
Potential capacity to address gas
demand in a phased manner with
Phase I being the implementation of
a micro-LNG development scheme
(currently underway) and Phase II
being the development of a larger scale
central processing facility (“CPF”) and
gas export pipeline to GME.
Phase 1
Supply of LNG displacing higher
carbon energy (such as heavy
fuel, petcoke or imported LPG)
Phase 1 Micro LNG Development
– Funding arranged to meet
Sound Energy’s share of
sanctioned pre first gas
development costs
Deployment of field gas treatment,
processing, liquefaction and storage
facilities to deliver mobile LNG to
buyer at site. The LNG buyer will
distribute and sell on to its growing
Moroccan industrial consumers within
the domestic gas market.
Supplies of LNG are to be an annual
contractual quantity equivalent to
approximately 100 million standard
cubic metres of gas (approximately
3.5 billion standard cubic feet of gas
per year) over a ten-year period.
Binding gas sales agreement and
associated funding are in place with
Afriquia Gaz, one of the largest LPG
distributor in Morocco. A ten-year
commitment from first gas to sell annual
contractual quantity of 100 million
standard cubic metres per annum
with take or pay agreement priced at
$6–$8.346 per mmBTU ex plant.
Development utilises the existing wells
TE-6 and TE-7, with the drilling of one
new well, as required, to maintain the
ten-year period of production at the
plateau.
LNG Central Processing Facility
is under construction by Italfluid
Micro LNG Plant to be designed,
constructed, commissioned, operated
and maintained by Italfluid with
guarantees for plant operability
and delivery.
Lease structure (with option to buy):
• Minimal LNG tank construction
capital payments at FID, and
following successful completion of
Micro LNG Plant commissioning
(including production build-up)
• Leasing solution substantially lowers
capital investment requirements of
Phase 1 development
• Daily rental payment paid to Italfluid
on guaranteed daily volume only
• Performance guarantees on plant
availability
Phase 2
Gas as a transition fuel flowing to
the GME pipeline
Phase 2 Tendrara TE-5
Development
20 inch, 120km Tendrara Gas Export
Pipeline (“TGEP”):
• Tie-in to existing GME pipeline
(Station M04), approved by the new
operator ONHYM, which took over
the GME operatorship at the end of
Q4 2021.
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 • Pipeline EIA permit approved and pipeline corridor fully
secured. Lease agreements signed with the landowners
and the first lease payments are scheduled for first of
half 2023
• CPF EIA permit approved
• EPC Consortium selection process launched in 2022 and
ongoing discussion with bidders
• Gas Sales Agreement (“GSA”) with ONEE (Office National
de l’Electricite et de l’Eau potable) signed November 2021
for domestic power plants for gas-to-power generation
(transit via GME line), minimum volume of 0.3 bcm/year
(approximately 10.5 billion standard cubic feet of gas per
year) at a fixed sale price over a ten-year term.
• Up to six horizontal wells planned to achieve First Gas
(Phase 2)
• Exclusive partnership with Attijariwafabank (which is one
of the top banks in Morocco and in Africa and which is
part of the King’s holding MADA) acting as Lead Debt
Arranger in order to fund a substantial part of Phase 2
project. Technical and Legal Due Diligence ongoing.
• Different options to close out equity raise are currently
discussed with financial investors and Vendors.
Exploration
Greater Tendrara – two Triassic TAGI1 discoveries
Licence Details
Area
Status
14,411 km2
Petroleum Agreement: Exploration
Effective date
1 October 2018
Term
8 years
Resource
Potential
Exploration potential in the Triassic
TAGI reservoir of 7.52 Tcf gross/5.64
Tcf net (arithmetical sum of mid-case
un-risked GIIP) identified in sub-salt
concepts, leads and prospects.
Permit Area
Surrounds the Tendrara Production Concession.
Located for access to Gazoduc Maghreb Europe (“GME”)
pipeline approximately 120 kilometres to the north. The 522
kilometres long Moroccan section is owned and operated
by the Moroccan State. The pipeline connects Morocco to
the Spanish/Portuguese gas grids as well as the Moroccan
gas-fired-power stations.
Geology
Only eight wells drilled across the entire area, all encountered
evidence of a petroleum system. The primary reservoir
is the Triassic TAGI1 charged from Palaeozoic petroleum
source rocks and sealed by the overlying Triassic salt, which
is present across much of the basin. This petroleum play is
regionally extensive and extends into Morocco from Algeria.
Two Triassic TAGI1 gas discoveries exist within the permit area:
• SBK-1 tested by the previous licence holder at a peak rate
of 4.41 mmscf/d in July 2000
• TE-10 flowed gas at non-commercial rates in May 2019
Exploration potential in the Triassic TAGI1 reservoir of 7.52
Tcf gross/5.64 Tcf net (mid-case unrisked GIIP) identified in
sub-salt concepts, leads and prospects.
Future Developments
A number of targets are available for near-term drilling
with two features, the SBK structure and the TE-4 Horst,
high-graded for drilling. Both these structures were drilled
by SBK-1 and TE-4, in 2000 and 2006, respectively, and
both encountered gas shows in the TAGI1 reservoir. SBK-1
flowed gas to surface during testing in 2000 at a peak rate
of 4.41 mmscf/d post acidification, but was not tested with
hydraulic stimulation. TE-4 was tested in 2006 but did not
flow gas to the surface. Hydraulic stimulation has proven to
be a key technology to commercially unlock the potential of
the TAGI gas reservoir in the TE-5 Horst gas accumulation
and, accordingly, the Company believes this offers potential
to unlock commerciality elsewhere in the basin.
The gross exploration potential of these high-graded structures, expressed as GIIP, are as follows:
Target name
TE-4 Horst Structure
SBK-1 Structure
Unrisked Volume Potential Gas Initially in Place (Bcf)
Gross (100%) basis
Low
153
71
Best
260
130
High
Mean
Chance of
Success
408
225
273
140
36%
50%
A discovery in either structure would have the potential to be commercialised through the proposed development
infrastructure centred on the TE-5 Horst, with sufficient capacity in the planned Tendrara Export Pipeline or as standalone
mLNG projects.
Subject to approval by the Ministry of Energy and Ministry of Finance, the Company has elected to enter the voluntary
first Complementary period, which commenced mid-October 2022 with one well commitment to be drilled before
October 2024. A well drilled on either the SBK structure or the TE-4 Horst would satisfy this commitment.
1 Trias Argilo-Gréseux Inférieur (“TAGI”) are sandstones deposited in a fluvial-alluvial environment and are significant oil and gas reservoirs
across Algeria, extending into Morocco
17
17
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Portfolio
Review continued
Anoual
Licence Details
Area
Status
8,873 km2
Petroleum Agreement: Exploration
Effective date 8 September 2017
Term
10 years
Resource
Potential
Exploration potential in the Triassic TAGI
reservoir of 11.51 Tcf gross/8.63 Tcf net
(mid-case un-risked GIIP2) identified in
sub-salt concepts, leads and prospects
Geology
Only one well drilled across the entire area. The primary
reservoir is the Triassic TAGI1 charged from Palaeozoic
petroleum source rocks and sealed by the overlying
Triassic salt, which is present across much of the basin. This
petroleum play is regionally extensive and extends into
Morocco from Algeria.
Committed geophysical surveying completed with a single
well commitment remaining.
Exploration potential in the Triassic TAGI1 reservoir of 11.51
Tcf gross/8.63 Tcf net (mid-case un-risked GIIP2) identified
in sub-salt concepts, leads and prospects.
Permit Area
Located for access to Gazoduc Maghreb Europe (“GME”)
pipeline approximately 120 kilometres to the North. The 522
kilometre-long Moroccan section is owned and operated by
the Moroccan State. The pipeline connects Morocco to the
Spanish/Portuguese gas grids as well as the Moroccan gas-
fired power stations.
Future Developments
“M5” prospect high graded for drilling a TAGI1 target,
operational planning is progressing. The Company’s
estimation of the gross exploration potential of the
M5 exploration prospect, a possible candidate for the
exploration well, expressed in GIIP, is as follows:
Target name
M5 Exploration
1 Trias Argilo-Gréseux Inférieur (“TAGI”) are sandstones deposited
in a fluvial-alluvial environment and are significant oil and gas
reservoirs across Algeria, extending into Morocco
2
Internal exploration potential estimates, arithmetical sum of
mid-case unrisked Gas Initially In Place (“GIIP”)
Unrisked Volume Potential
Gas Initially In Place (Bcf)
Gross (100%) basis
Low
332
Best
800
High
1728
Mean
943
Chance of
Success
21%
Anoual
10 years1 from September 2017
Exploration permit
Operated
75%
interest
8,873km2
1 well drilled
18
www.soundenergyplc.com
Sound Energy plc Annual Report for the year ended 31 December 2022
Strategic Report Sidi Mokhtar
Licence Details
Area
Status
4,712 km2
Petroleum Agreement: Exploration
Effective date April 2018
Term
10 years
Resource
Potential
Unrisked exploration potential of 8.9
Tcf mid-case unrisked GIIP following
interpretation of the historical 2D seismic
Permit Area
The permit in which Sound Energy has a 75% interest is
located onshore on the Atlantic seaboard of Morocco,
approximately 100 kilometres to the west of Marrakech.
In July 2017, the Company reported the results of the
re-entry, completion, perforation and flow testing of the
existing Koba-1 well, with a focus on previously producing
relatively shallow gas reservoir.
Strategically, the Company has shifted its focus on the Sidi
Mokhtar area towards, what it believes to be, the potentially
more significant opportunity of the deeper Triassic
TAGI2 and Palaeozoic gas plays in the region already
demonstrated by the gas and condensate producing
adjacent Meskala Field operated by our partner ONHYM.
In June 2018, the Company was awarded a new eight-year
Petroleum Agreement and is now actively seeking a partner
to participate in a geophysical survey programme focused
on these deeper objectives.
In December 2020, the Company announced a further
one-year extension to the initial period of the Sidi Mokhtar
licence and that the work programme for the initial period
of the Sidi Mokhtar permit remained unchanged.
Geology
Un-risked exploration potential of up to 8.9 Tcf1 gross gas
initially in place following interpretation of the historical 2D
seismic. The Company believes the pre-salt plays have been
overlooked in the region with limited drilling to specifically
target these deeper successions.
The sub-salt plays are underexplored with more than 60
historical exploration wells focused on shallower objectives
in the Jurassic post-salt carbonate successions. The few
historical sub-salt tests were drilled on poor sub-salt seismic
imaging. Recent improvements in seismic acquisition and
processing technologies are expected to provide enhanced
imaging of the sub-salt structure and geology.
Future Developments
Our next step is to mature the identified leads to drillable
prospects with improved seismic imaging. We aim to acquire
new, high-quality 2D seismic data, focused on improving
the sub-salt imaging. This work is hoped to lead to an
exploration well targeting a high-impact gas prospect.
1
Internal exploration potential estimates, arithmetical sum of mid-
case unrisked Gas Initially In Place (gross)
2 Trias Argilo-Gréseux Inférieur (“TAGI”) are sandstones deposited
in a fluvial-alluvial environment and are significant oil and gas
reservoirs across Algeria, extending into Morocco
Production Concession
25 years from September 2018
Exploration permit
Operated
75%
interest
133.5km2
4 wells drilled
Sound Energy plc Annual Report for the year ended 31 December 2022
www.soundenergyplc.com
19
Strategic Report Strategic Report
LNG Project
Review
Operational progress
Sound Energy is a pioneer in Morocco in establishing an
onshore small scale LNG solution to provide LNG to a local
market in Africa and to assist the Moroccan industry in
reducing usage of more polluting fuels and reducing CO2
emissions.
The mLNG project is a complex project that involves
three main parties:
• Afriquia Gaz, which is the LNG offtaker and is in charge
of LNG logistics from the Tendrara gas field to all its
customers located in Morocco (mainly in the western
part of Morocco, whereas the Tendrara field is in Eastern
Morocco)
• Italfluid GeoEnergy (Italfluid), which is Sound Energy’s
partner in charge of the construction and maintenance of
the gas processing and liquefaction plant through a lease
arrangement;
• Sound Energy and its Concession partners including
ONHYM, which are in charge of financing the delivery of
the raw gas gathering system, the upgrade of the current
wells ready to produce (TE6 and TE7), and the drilling of
a new well T-112 to be done post first gas production
All the main agreements were signed in 2021 and are in
place to enable the project to be implemented. On behalf
of the Concession partners, Sound Energy released the
Notice to Proceed to Italfluid on 15 February 2022.
20
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022
Progress in 2022
Italfluid mobilised its staff to start the civil work on site and
levelled up the land on which the plant will be located. In
the meantime, they started the engineering specifics, and
the work on the main equipment packages required to be
manufactured by its subcontractors.
Despite some challenges encountered since the issue
of the Notice to Proceed, including market volatility
due to the war in Ukraine, which has been disruptive
in achieving a reliable schedule and firm costs from the
supply chain subcontractors. Sound Energy and both of
its partners, successfully, managed to progress project
activities on site and to start the manufacturing of several
elements. The foundations of the LNG tank, which is the
most complicated part of the civil work on site, are now
complete, and have been checked by the subcontractor in
charge of the erection of the LNG tank, which is another
key part of the mLNG plant construction project. Project
schedule is reviewed constantly and remains challenging.
Delivery of a commissioned plant by Italfluid is contracted
for Q1 2024.
The first pieces of equipment were delivered on site and
are being assembled. The main elements of the firefighting
system have been put in place in the field. The detailed
engineering is still progressing to allow Italfluid to continue
procuring remaining different packages required for
commissioning the plant. Some delays have, nevertheless,
been noted on the date for first gas production but Italfluid,
Sound Energy and Afriquia Gaz are working together,
cooperatively, to supply LNG to the local industry in 2024 in
an efficient manner without neglecting safety issues.
Sound Energy have deployed an HSSE supervisor on site to
closely monitor the work to ensure it is done in compliance
with the best safe practice.
Sound Energy started the detailed engineering work related
to the gas gathering system and the upgrade operation on
wells TE6 and TE7. The work to upgrade the access road
and to bring an alternate source of power supply from the
grid, using the construction of the self-powered generation
solution using raw gas production, are ongoing.
2023 is a key year when all the equipment packages are
to be completed and tested in the workshops and later
be brought from workshops located around the world
(USA, Asia, etc.), delivered on site through the main ports
in Morocco (Casablanca, Tanger or Nador) and assembled
on site before being all tested. Sound Energy expects to
face some challenges of different nature ( for example,
administrative approval of equipment testing by local
authorities given that this project is the 1st LNG project in
Morocco, delays in the supply chain due to the disruptive
events which occurred in 2022, cost increase which can
impact our main contractor and its subcontractors and risk
of delay on the offtake side), which are usual for projects
in which an international chain of suppliers is involved,
but remain confident that the three partners Afriquia
Gaz, Sound Energy and Italfluid should make significant
progress in 2023.
Consequently, provided that no new disruptive events slow
down progress, and the final industrial users are ready
to make their process switch from their current fuel to
natural gas, LNG plant commissioning and the full solution
commissioning including the well and gas gathering system
and Afriquia Gaz logistic solution, are both expected to be
started in 2024.
Sound Energy plc Annual Report for the year ended 31 December 2022
www.soundenergyplc.com
21
Strategic Report Strategic Report
Financial
Review
Net assets (£’m)
£’million
179
180
162
145
155
200
180
160
140
120
100
80
60
40
20
0
“ 2022 marked a year of prudently
managing working capital
whilst moving into major capital
investment mode to pave the way
for planned, sustainable revenue
generation from 2024.”
Garry Dempster
Chief Financial Officer
Development and
intangible assets (£’m)
£’million
250
183
178
164
171
199
200
150
100
00
2018
2019 2020 2021
2022
2018
2019 2020 2021 2022
Cash flow bridge (£’m)
£’million
7.2
-3.9
3.7
2.9
-6.2
-0.4
0.6
3.9
At 31
December
2021
Proceeds
from
equity
issue
Afriquia
loan
drawdown
Spend
on
operating
activities
Spend
on
investing
activities
Interest
and
lease
payments
Foreign
exchange
difference
At 31
December
2022
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0
22
Income Statement
The profit for the year after tax from
continuing operations was £6.6
million (2021: £2.4 million). Reversal
of impairment of development assets
of £5.7 million (2021: £4.0 million
impairment reversal), related to the
TE-5 Horst production concession,
arose following the results of an
impairment test, which indicated that
previously recognised impairment
charge should be reversed. The
discount rate and forecast gas price
are significant estimated inputs used
by the Company to determine the
recoverable amount when undertaking
impairment testing of the Company’s
TE-5 Horst concession. The Company
has taken account of changes in the
wider financial markets during 2022
and has, accordingly, revised the
discount rate from 10% at the end
of 2021 to 12.5% as at 31 December
2022. The Company previously
used forecast gas price indexed
to the Brent price for pricing the
forecasted uncontracted gas sales
volumes for impairment testing.
Following significant changes in
market conditions during the year, the
Company concluded that an average
of forecast gas price referenced to
the Title Transfer Facility (‘‘TTF’’) in
the Netherlands and the UK National
Balancing Point (‘‘NBP’’) price is more
representative of the conditions in the
gas market than an indexation to the
Brent price.
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Accordingly, the Company used an average of TTF and
NBP forecast gas price for its impairment testing as at
31 December 2022.
Administrative costs at £3.1 million were higher than 2021
administration costs (£1.7 million). During 2022, there were
awards of nil cost options of approximately £0.5 million in
settlement of 2020 and 2021 staff bonuses, and the issue
of shares of approximately £0.3 million in settlement of
a one-time bonus to the Chief Operating Officer. Due to
the Company being in a largely continuous closed period
during 2020 and 2021, the issue of shares and awards of
the nil cost options could not be done during that period.
During 2022, the Company adopted a new Long-term
Incentive Plan (LTIP) designed to reward, incentivise and
retain the Company’s executives and senior management to
deliver sustainable growth for shareholders. Approximately
£0.2 million of the administrative costs related to the
LTIP expense incurred during 2022. The remainder of
the increase in administrative costs reflects increased
operational activities, including the taking of FID on Phase
1 Micro-LNG in February 2022 and pre-FID activities on the
Phase 2 gas project.
Foreign exchange gains primarily related to intra-Group
loans, which were partially offset by exchange losses in
US dollar and Euro-denominated borrowings. Foreign
exchange gains and losses arising from intercompany loans
that originated on acquisition of Moroccan licences are
recognised in the other comprehensive income section of
the statement of comprehensive income.
Cash Flow/Financing
During 2022, an equity issuance raised approximately
£3.7 million (2021: £2.0 million) net of issue costs.
Drawdowns from the Company’s loan note facility with
Afriquia Gaz amounted to $9.5 million (£7.2 million).
Financing costs were £1.4 million (2021: £2.3 million),
primarily due to the amortised costs of the Euro
denominated loan notes and the US dollar Afriquia loan
note facility drawdowns, net of interest capitalised to the
development and exploration licences of £0.1 million (2021:
£0.1 million). The decline in finance costs arose due to
full-year impact of the 2021 restructuring of the Company’s
Eurobond, which inter alia extended the maturity of the
loan notes to 21 December 2027 and amended the coupon
structure from a 5% cash coupon per annum to a 2% cash
coupon per annum together with a deferred 3% per annum
coupon, payable at maturity.
The Group spent £6.2 million (2021: £1.2 million) on
investing activities during 2022. The primary spend related
to approximately £4.3 million paid in advance in respect
of the Group’s Micro-LNG project. The balance of spend
consisted of expenditure on the Group’s Morocco licences
and capitalised general and administrative expenses.
Balance Sheet
As at 31 December 2022, the carrying amount of
property, plant and equipment was £163.4 million (2021:
£139.7 million), primarily related to the development and
production assets in Morocco with a carried value of
£163.1 million (2021: £139.6 million) after taking account
of impairment reversal, additions and foreign exchange
movement.
Intangible assets, with a carrying amount of £36.0 million
(2021: £31.6 million), primarily relates to the Group’s
investment in its exploration licences in Morocco. Additions
of £0.8 million intangible assets primarily consisted of
capitalised general and administrative expenses and
£3.6 million foreign exchange movement recognised.
As part of the 2018 Italy divestment agreement, the
Company is entitled to receive the proceeds, upon the
sale, of land associated with the former Badile onshore
exploration permit (‘‘Badile land’’). The Company has a
carrying amount of, approximately, £0.6 million (2021:
£0.7 million) as interest in Badile land. The Company
expects the sale of the remaining area of Badile land
to be completed during 2023 for gross proceeds of
€350,000 and the Company’s obligation for the Badile land
remediation, with a carrying amount of £0.4 million (2021:
£0.4 million) will terminate upon the sale as will be taken
over by the buyer of the Badile land.
Non-current prepayments of £4.3 million relate to the
Group’s Phase 1 mLNG project. Other receivables, amounting
to £2.8 million (2021: £0.9 million), primarily related to
receivables from our partners in Morocco licences and
recoverable VAT in Morocco.
Trade and other payables amounting to £1.9 million (2021:
£1.5 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.
During 2022, the Company issued 219,518,767 shares of
which 200,000,000 were issued for cash and 19,518,767
were non-cash share issues. The primary non-cash share
issue related to 13,419,891 shares issued as one-time bonus
to the Chief Operating Officer following the delivery of all
elements required to take FID for Phase 1 of the Concession
and for establishing the commercial framework for
monetisation of Phase 2 of the Concession.
Post period end in May 2023, the Company entered into a
phased payment schedule with Morocco tax authority for
full and final settlement of the tax cases for approximately
£1.6 million (£0.1 million current liabilty and £1.5 million non
current liability).
Going Concern
As detailed in note 1 on page 72, the Company’s cash flow
forecasts, for the next twelve-month period to May 2024,
indicate that additional funding will be required to enable
the Company to continue to meet its obligations. This
condition, indicates the existence of a material uncertainty
on the Company’s ability to continue as a going concern.
Garry Dempster
Chief Financial Officer
23
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Engaging with
our Stakeholders
Employees
Suppliers
Customers
Why it’s important to engage
Our employees are at the centre of our
business and engaging regularly with
open communication is crucial. High
performing employees are hard to find
and harder to keep, and we do all that
is necessary to ensure a happy and
open working environment.
How the Board engages
The Board provides regular updates
and communication both in person
and via e-mail to its employees and
contractors.
How we engage across
the Company
Regular e-mail communication,
updates on different projects and our
investor relations activities are given to
all employees.
Why it’s important to engage
To deliver on our Phase 1 and Phase 2
projects, we need reliable and credible
suppliers.
How the Board engages
Decisions on major partners are made
at Board level and communicated
to senior management, who then
form lasting relationships with their
partners.
How we engage across
the Company
Our local teams in Morocco
actively engage with our suppliers.
Internationally our project team and
senior management engage with our
service supplier counterparts.
Why it’s important to engage
Our primary customer for phase 1 is
Afriquia Gaz. As the offtaker of the
mLNG it is key that we have regular
dialogue with regards to the progress
of our projects. Ensuring they are
kept up to date means we protect the
relationship allowing for further potential
gas sales agreements going forward.
How the Board engages
The Board is responsible for discussing
and agreeing to all potential
major agreements, which are then
implemented either via the Executive
Chairman or senior management to
our stakeholders and customers.
How we engage across
the Company
Our share register shows key
stakeholders are also customers The
Executive Chairman maintains their
strong relationships, with them as with
all shareholders.
Regulatory
authorities
Communities
and environment
Shareholders
Why it’s important to engage
Our regulatory authorities both in
Morocco and the United Kingdom
are there to protect stakeholders and
shareholders alike. It is important for
Sound Energy to engage with them
to ensure we are up to date with the
latest regulations and can adjust our
processes and procedures according
to any revisions.
How the Board engages
The Board engages with regulators via
the Executive Chairman Graham Lyon
and via the firm’s nominated advisor:
CENKOS
How we engage across
the Company
Senior management, including the
firm’s CFO and COO, are also in
regular contact with the various
regulators.
Why it’s important to engage
As guests in our host country, Morocco,
we want to ensure longevity of our
operations and protection of the
local environment and communities.
Engaging with these key stakeholders
enables us to understand our operating
environment in greater detail.
How the Board engages
The Board is kept up to date with
all matters with regards to the
environment and local communities
and communicates via the Executive
Chairman Graham Lyon on any
decisions or courses of action.
How we engage across
the Company
Over the years, there have been events
that have raised funds for the local
community and provided medical
facilities and training for our Moroccan
stakeholders.
Why it’s important to engage
Our shareholders are the owners of
our business – we want to engage
with them as much as possible while
respecting all regulations with regards
to that communication.
How the Board engages
The Board engages via the AGM and
other shareholder events, where all
board members are present.
How we engage across
the Company
Several members of our team have
met our shareholders via shareholder
events and Q&A sessions. We value
those encounters and will plan more
in 2023.
24
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Directors’ Statement under
Section 172 (1) of the
Companies Act 2006
Strategic Report
Section 172 (1) of the Companies Act 2006 obliges the
Directors to promote the success of the Company for
the benefit of the Company’s members as a whole.
The section specifies that the Directors must act in good faith when promoting the success of the
Company and, in doing so, have regard (amongst other things) to:
a. the likely consequences of any decision in the long term;
b. the interests of the Company’s employees;
c. the need to foster the Company’s business relationship with suppliers, customers and others;
d. the impact of the Company’s operations on the community and environment;
e. the desirability of the Company maintaining a reputation for high standards of business conduct; and
f. the need to act fairly as between members of the Company.
The Board of Directors is, collectively, responsible for the decisions made towards the long-term success of the
Company and details of how the strategic, operational and risk management decisions have been implemented
throughout the business are included in the Strategic Report on pages 2 to 36.
Employees
Our employees are a primary asset of our business and
the Board recognises that our employees are the key
resource that enables the delivery of the Company’s vision
and goals. Annual pay and benefit reviews are carried
out to determine whether all levels of employees are
benefitted equally, and to retain and encourage skills vital
for the business. The Remuneration Committee oversees
and makes recommendations for Executive remuneration
and long-term share awards. The Board encourages
management to improve employee engagement and to
provide necessary training in order to use their skills in
the relevant areas in the business. The Board, periodically,
reviews the Health, Safety, Security and Environmental
measures implemented in the business premises and
improvements are recommended for better practices.
Employees are informed of the results and important
business decisions and are encouraged to feel engaged and
to improve their potential.
Suppliers, customers and regulatory
authorities
The Board acknowledges that a strong business
relationship with suppliers and customers is a vital part
of growth. Whilst day to day business operations that
consider suppliers and customers are delegated to the
Executive management, the Board sets directions and
evaluates policies with regard to new business ventures and
investing in research and development. The Board upholds
ethical business behaviour and encourages management
to seek comparable business practices from all suppliers
and customers doing business with the Company. We value
the feedback we receive from our stakeholders and we
take every opportunity to ensure that, where possible, their
wishes are duly considered.
25
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Directors’ Statement under
Section 172 (1) of the
Companies Act 2006 continued
Shareholders
The Board places equal importance on all shareholders
and recognises the significance of transparent and
effective communications with its investors. As an AIM
listed Company, there is a need to provide fair and
balanced information in a way that is understandable to all
stakeholders and, particularly, our shareholders.
The primary communication tool with our shareholders is
the Regulatory News Service (“RNS”) on regulatory matters
and matters of material substance. The Company’s website
provides details of the business, investor presentations,
and the Board and Board Committees, changes to major
shareholder information, QCA Code disclosure and updates
under AIM Rule 26. Changes are promptly published on
the website to enable the shareholders to keep abreast of
the Company’s affairs. The Company’s Annual Report and
Notice of Annual General Meetings (“AGM”) are available
to all shareholders. The Interim Report and other investor
presentations are also available for the last six years and
can be downloaded from our website.
There are opportunities throughout the year for
shareholders to meet with the Board and members of the
Executive team, through general meetings, investor events
and the Company’s Q&A sessions as well as e-mail directed
questions.
The Board acknowledges that encouraging effective
two-way communication with shareholders encourages
mutual understanding and better connection with them.
The benefits include improved transparency of information
on the business and its performance, appropriate
consideration of all shareholders views, and instilling trust
and confidence to allow informed investment decisions to
be made by the Board.
Community and the Environment
The Board upholds high standards of care towards the
community and environment and is conscious of the fact
that the nature of the Company’s business requires strong
measures to protect the environment. At its meetings, the
Board receives HSSE updates from the HSSE Committee
and considers the impact of the Company’s operations on
the environment and the neighbouring Community.
The Company provides training and employment
opportunities to members of the communities in the
areas in which it operates. As detailed in the ESG section
of the strategic report, the Company fully paid for the
construction of a telecommunication tower in the Tendrara
area, drilled a water well, supplied water storage tanks and
continues to provide round the clock security to enable
safe access to the water by the local community. The
Company is supporting two PhD students in Geology/
Geoscience in the Company’s offices to enable them to
complete their doctoral thesis.
Maintaining High Standards of
Business Conduct
The Company is incorporated in the UK and governed
by the Companies Act 2006. The Company has adopted
the Quoted Companies Alliance Corporate Governance
Code 2018 (the “QCA Code”) and the Board recognises
the importance of maintaining a good level of corporate
governance, which, together with the requirements to
comply with the AIM Rules, ensures that the interests
of the Company’s stakeholders are safeguarded. The
Board has prompted that ethical behaviour and business
practices should be implemented across the business. Anti-
corruption and anti-bribery training are compulsory for all
staff and contractors, and the anti-bribery statement and
policy are contained in the Company’s Employee Manual.
The Company’s expectation of honest, fair and professional
behaviour is reflected by this and there is zero tolerance for
bribery and unethical behaviour by anyone related to the
Company.
The importance of making all staff feel safe in their
environment is maintained and a Whistleblowing policy is
in place to enable staff to confidentially raise any concerns
freely, and to discuss any issues that arise. Strong financial
controls are in place and are well documented.
26
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Sustainable and
Responsible Business
Strategic Report
Sound Energy are committed to the principles of an
environmental, social and governance framework.
We have a range of policies, processes and procedures embedded within our integrated management systems that
demonstrate our commitment to Environmental, Social and Governance requirements, expectations and performance.
1
3
6
l
s
r
e
d
o
h
e
k
a
t
s
n
o
t
c
a
p
m
I
4
5
2
7
8
Materiality assessment
Identifying key material topics for
Sound Energy
1 Local communities, land and resource rights
2 Anti-bribery and anti-corruption and strong governance
3 Employment practices
4 Economic impacts
5 Public policy and regulation
6 Occupational health and safety
7 Climate change, transition and GHG emissions
8 Waste and emissions
Impact on Sound Energy’s business
Applicable Sustainable Development Goals
From our materiality assessment, we are working towards the following United Nations
Sustainable Development Goals.
27
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022
Sustainable and
Responsible Business continued
Materiality assessment
The assessment looks at the materiality of different topics for Sound Energy and the impact they have on the business
and stakeholders. The ESG materiality assessment was approved by the Board in 2022.
Environmental
Our Environmental Policy and Environmental Management Standards define our commitments and the methodology we
use to manage all aspects of Environmental risk and stewardship in a sustainable manner:
Timing
2023
onwards
Material
issue
UN
SDG
Vision
Goals
Example
metrics
Climate change
transition and
GHG transitions
To support Morocco in
achieving a low carbon
economy
• Support energy
• Number of homes/facilities
transition through
the Tendrara Gas
development to
offset the use
of coal
• Capture and
commercialise CO2
emissions
• Quantify energy and
emissions baseline
• Implement plans to
capture future data
supplied
• Value to local economy
• Avoided emissions
• Energy efficiencies in the
development
• Carbon intensity
• Fugitive emissions, air and
water pollution
• Waste management and
disposal
• Baseline Scope 1, 2 and 3
• Define reduction
emissions
strategies
• Define planned data capture
• Analyse and
mitigate
climate risks
of emissions, energy
usage, waste
• Model future emissions
profile, define reduction
strategies, risk analysis
Our Carbon Footprint
In 2022, we consumed 101.90 m3 of diesel in 2022, which
corresponds to 275.79 tCO2e. Our diesel consumption is
primarily from road transport to and from our Tendrara
Phase 1 operations and is very dependent on the level of
activity over there. There are also fluctuations dependent
on weather. For example in less occupationally busy
times and in extreme heat, our consumption decreases
significantly.
We expect our carbon impact to increase as we move
towards being fully operational on site, but are committed
to monitoring and acting upon any avoidable peaks. We
also remain committed to reviewing all possible strategies
for renewable energy on site.
We work with carbon accounting and measurement
company Redigo: www.redigocarbon.com
28
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Social
We have a number of policies and procedures that direct the approach to our social responsibilities:
• Health and Safety Policy
• Labour Rights & Modern Slavery Policy
• Corporate Social Responsibility Policy
• Supply Chain Policy
• Equality, Inclusion & Diversity Policy
Material
issue
UN
SDG
Vision
Economic
impacts and
equality
To be a partner of
choice, promote
equality, and contribute
to the long-term
economic benefit of
the countries and
communities in which
we operate
Local and
indigenous
communities,
land &
resource rights
Create and sustain
long-term value for
our stakeholders and
communities in which
we operate
Occupational
health and safety
To perform in the top
quartile for safety
performance among
peers in North Africa
and support healthcare
in the communities in
which we work
Goals
• Support local
content and
diversity in all
aspects of the
business
Example
metrics
• Local content by contract
value, % of contracts
• Diversity statistics, incl. from
suppliers (gender, nationality,
ethnicity, age)
Timing
2023
onwards
• Participate in the
• Capacity building support
capacity building of
local communities to
enhance skills and
contribute to local
job development
and the economy
through funding/internships/
programmes for local
businesses (e.g. value
donated, number of people
supported, jobs provided)
• Develop effective
and positive
relationships with
stakeholders
through transparent
communication and
fair practices
• Conduct land
acquisition in a
fair and sensitive
manner with full
engagement with
stakeholders
• Number of formal and
informal engagement
processes with local
communities
• Adopt and follow
internationally recognised
procedures for land
acquisition (e.g. IFC)
• Establish & communicate
community grievance
mechanism (number of
grievances received and
successfully closed)
• Capacity building (hours of
training)
• Top quartile
• HSSE management
health and safety
performance
with zero serious
incidents during
infrastructure
installation
• Contribute to the
improvement of
community health
through the support
of local projects
systems, work towards
ISO accreditation, risk
assessments
• Number of HSSE training
hours, people trained, toolbox
meetings, Stop Cards issued
• Fatalities, HiPos, lost-time
incidents, medical incidents
• Community project
contributions (funding
value, people benefiting,
number of additional health
professionals)
2023
onwards
2023
onwards
29
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Sustainable and
Responsible Business continued
ESG Societal
Employment Opportunities: Sound Energy plc has been
committed to the development of the local community
via substantial investment over the past 15 years. We have
worked with remote communities through employment,
training and engagement with local communities and
leaders.
A reduction in Company operational activities has led to
a corresponding reduction in the number of personnel we
are currently able to offer employment opportunities to.
However, we continue to hire local personnel to ensure
that the integrity of our assets is maintained, and Sound
Energy plc continues to employ 12 individuals from our
neighbouring communities at our operational locations in
Morocco.
Training Programmes: In line with the Company’s
commitment to develop local competencies in the Oil
and Gas industry, Sound Energy Morocco established an
academic collaboration agreement with the Mohammed
first University in Oujda in 2019.
Under the agreement, Sound Energy Morocco received
two doctoral students in Geology/Geoscience in the
Company’s offices to work on their doctoral theses. The
chosen candidates not only have access to data in real
time, but also receive academic supervision throughout the
period of their research, as well as technical training and
mentorship provided in house and externally. The training
programme is focused on bibliography, geological field
missions, structural studies (geochemistry, petrophysics,
gravity), and the integrated structural and sedimentological
interpretation of the Tendrara Basin.
Our two PhD students studies included field visits to
enhance their understanding of data interpretation, as well
as highlight some of the operational and geographical
challenges that may dictate changes to the design of our
field sites and facilities.
Social Impact: During previous years, Sound Energy have
worked on infrastructure projects to improve the facilities,
conditions and environment in the areas in which we
operate in Morocco. Projects in recent years have included:
• Sound Energy plc paid and installed a Maroc Telecom
telecommunications tower in the Tendrara area. This
not only greatly enhanced mobile phone coverage for
our operational purposes, but its presence continues to
significantly benefit the local communities in the area.
• Sound Energy Morocco also drilled the Hassi Lahcen
water well in the Tendrara field, installed the required
generator and electric pump, and provided three
6,000-litre PVC water tanks for local community use.
Throughout 2022, Sound Energy Morocco continued to
maintain the well and provided security from the local
community to ensure safe access for all.
• Investment in a new maternity section for the local
health centre.
• Investment in a school building and an on-site office with
accommodation for employees who work and live all year
round at our operational hub.
• We have also worked on various infrastructure projects,
including building and maintenance, to improve the
access roads surrounding our sites.
Governance: Sound Energy’s success is fundamentally
linked to good governance, and we remain committed to
achieving high standards in all that we do. Our business
and processes being aligned around a robust governance
framework.
In November, Sound Energy plc personnel, at both
the London and Rabat offices, successfully completed
Anti-Bribery and Corruption training. As a Company,
we analyse corruption risks within our business, ensuring
that we have up to date policies and procedures,
monitoring programmes in place and raising awareness
through training.
30
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Looking Forward: Looking forward to our planned
recommencement of operations in Morocco, we intend to
continue this good practice of engaging in Social Corporate
Responsibility projects during 2023. We are currently
developing plans to ensure that we prioritise the local
community in employment opportunities arising from the
project within the areas in which we operate.
Health, Safety, Security and
Environment
2022 Overview
The HSE function within Sound Energy has been
redesignated as the Health, Safety, Security and
Environment function (HSSE) to reflect the broader areas
of risk exposure that the business must manage.
HSSE is of paramount importance within the exploration
and production industry, and with the increased levels of
operational activity at our Tendrara site in 2022, we have
placed a major focus on implementing Sound Energy’s
Health, Safety, Security and Environmental Management
System to minimise risk.
Key operational achievements in 2022 were the civil
engineering works involved in the construction of the
mLNG plant package foundations and the LNG storage
tank foundations. Additionally, we conducted maintenance
operations on two gas production wells, TE6 and TE7. This
work involved the replacement of a hydraulically actuated
upper master valve on TE6 in preparation for production.
These activities saw up to 45 personnel onsite and were
achieved with no injuries.
At a corporate level, all company policies associated with
Environmental, Social and Governance were updated and
approved by the Board of Directors.
A company HSSE management system improvement plan
was implemented.
We recruited a field based HSSE Advisor role to assure our
oversight of contractor activities as part of our focus on
contractor management.
Health
Our key focus in 2022 has been to ensure Field Medical
support for our operations. Tendrara is a remote area with
very limited infrastructure, so it is essential that adequate
medical support is available on site. We have a doctor
trained in emergency medicine operating out of our on-site
clinic in Tendrara supported by an ambulance and driver.
Our Sound Safe Behaviours (“SAFER”) is based on
five key principles:
SAFER > 5 Sound Safe Behaviours
STOP
I will STOP any activity that I think is unsafe
and will not commence any job I consider
unsafe.
ACCOUNTABILITY
I will always take ACCOUNTABILITY for my
own safety and for the safety of others.
FOLLOW
I will FOLLOW all the rules and procedures
at my place of work.
ENCOURAGE
I will always ENCOURAGE those around me
to act safely and praise those acting safely.
REPORT
I will REPORT all unsafe acts and conditions,
spills, incidents, and accidents I see.
Safety
We spent considerable time ensuring our principal
contractor’s HSSE management system was effectively
implemented for the Tendrara project. This included
preparing management system interface documents to
define responsibility and overriding procedures to be used.
This was further assured by frequent field visits.
We had no recordable injuries or work related first aid
cases in 2022. We did, however, have two safety-related
near-miss incidents in 2022, from which there were no
injuries. Both incidents involved the unloading of steel
reinforcement bars from delivery lorries with a crane. The
learning from these incidents has resulted in changes to
our procedures and an increased focus on the competent
supervision of operational activities.
31
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Sustainable and
Responsible Business continued
Total Man-hours 2022
Sound Energy & Contractors
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
Jan
Feb Mar Apr May
Jun
Jul
Aug Sep Oct
Nov
Dec
Security
We conduct quarterly country security reviews and
maintain close liaison with the Moroccan security services
in our area of operations. We have also created local
employment opportunities by employing and training
personnel from the local community as security guards for
our site, ensuring a permanent presence to oversee our
assets.
1. Lagging Indicators
Fatality
Lost Time Injury
Restricted Work Case
Medical Treatment Case
First Aid Case
Property Damage
Environmental Incident
Near Miss
High Potential Incident
Environment
The environmental impact assessment for our Tendrara
project has been approved by the Moroccan authorities and
we conduct monthly EIA monitoring inspections to assure
our compliance with the environmental management plan.
In partnership with Redigo Carbon, we now gather data
on our carbon dioxide emissions and report on a monthly
basis.
HSSE Reporting Data
Sound Energy is aligned to similar operators in the
International Oil and Gas Producers Association (“IOGP”)
database. We gather a range of HSSE related data to
enable us to compare our performance against IOGP peers,
both internationally and regionally.
Lost Workdays
2. Leading Indicators
Audits & Inspections
HSSE Meetings
Inductions
Emergency Drills
Job Safety Analysis
Toolbox Talks
SHOC Cards
Management Tours
3. Environmental Data
Diesel Consumed (m3)
Water Consumed (m3)
Mud Cuttings (m3)
Fuel Gas (m3)
Electrical Energy (kWh)
Total Barrels Spilled
CO2 Produced (tCO2e)
32
0
0
0
0
0
2
0
2
1
0
86
10
73
2
160
200
110
3
275.79
725.6
0
0
0
0
101.9
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Governance
We have policies and processes that ensure the governance and transparency of our business:
• Statement of Ethics
• Whistleblowing Policy
• Market Abuse Regulations training
• Anti Bribery & Corruption Policy
• Board Audit Committee
• Board Compensation Committee
• Data Protection Policy
• Manual of Authorities
We also conduct frequent shareholder briefings and Q&A sessions and as an AIM listed company we
are bound by, and adhere to, AIM rules.
Material
issue
UN
SDG
Vision
Goals
Example
metrics
Anti-corruption
and strong
governance
Conduct our business
with the highest degree
of ethics and integrity
• Zero tolerance
• Annual policy revision process
and zero incidents
of bribery and
corruption within
company and
suppliers
• Implement annual,
compulsory ABC &
compliance training for all key
staff and contractors (% of
staff trained)
Timing
2023
onwards
• Adopt and follow
internationally recognised
procedures for land
acquisition (e.g. IFC)
• Strong supplier screening and
risk assessment procedures
Sound Energy plc Annual Report for the year ended 31 December 2022
www.soundenergyplc.com
33
Strategic Report Principal Risks
and Uncertainties
Principal Risks and Uncertainties
Risk management is a key component of the Company’s
Control Framework and is a cornerstone element in
enabling the delivery of the Group’s strategy and delivering
long-term value to shareholders. The Board, its Committees
and the Executive team are actively engaged in assessing
the risk appetite as well as managing both risks and
opportunities to the Group.
Definition of Risk
Risk is defined as a potential future event that may
influence the achievement of business objectives. This
includes both “upside” (opportunity) and “downside”
(threat) risks. Risks and opportunities can come from
a variety of sources and can be directly related to the
Company’s operational and commercial activities and
support functions, or they can arise externally, from third
parties such as joint venture partners, suppliers, regulators,
competitors and from the economic environment or
political climate.
Risk Management
The Group operates to ensure that risks are identified,
understood, agreed, communicated and acted upon
in a timely and consistent manner. It enables informed
resource allocation and the delivery of expected results by
providing a structured way to foresee the unexpected and
be prepared for it. The main objectives for the Group risk
management system are:
• Support the achievement of business objectives and
safeguard Company assets;
• Integrate consistent risk management methodology into
key business processes;
• Create a risk-aware culture in which staff actively identify
and respond to risks and opportunities; and
• Ensure compliance with legal, regulatory, and ethical
requirements.
Identifying Risk and Ownership
Risk management is actively promoted from both a
top-down and bottom-up approach through which all
individuals in the organisation are empowered to highlight
risks and opportunities to the business. All agreed risks
are allocated to an individual risk owner with mitigations
and actions followed up through monthly reporting to the
Senior Leadership team and biannual reporting to the Audit
Committee. Our principal risks have been categorised as
strategic, operational and financial, although many risks
impact more than one aspect of the business.
Changes to Risks in the Year
Several factors have impacted the Company risk register
through 2022, including changes in the global economic
and business landscape and progression of the TE-5 Horst
development project.
Removed or Changed:
Business interruption due to the Covid-19 Pandemic
Risk remains but has been removed from the top ten. Control measures including active monitoring remain in place.
Risk
Impact
Control measure
1 Limited diversification
• Profitability and cash flow
• Increased risk profile
• Limited platform for growth
• Reduced appetite for investment
in the Company
The Company operates
in a single country and
thus the business may
be significantly adversely
impacted by political, fiscal
and regime changes. The
Company portfolio is not
currently balanced across
the oil and gas lifecycle
2 Facilities funding
• Company investment profile
and ability to generate cash is
impaired as a consequence
Inability/delay in securing
funding for Phase 2
development of the TE-5
Horst results in delays or
inability to take FID
• Build strong relationships
with partners, advisors,
governments, local authorities,
local population and other
stakeholders
• Actively monitor potential
legislation changes
• Active new business
development programme
• Working with financial advisor
to screen opportunities
• Mature vendor financing and
structured financing (gas
buyers) options
• Progress senior debt funding
proposal with Attijariwafa Bank
• Mature licence partnering
options
Owner
Chairman
Chairman
34
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Risk
Impact
Control measure
3 Reservoir uncertainty
• Exploration play risk in relation
to basin understanding, reservoir
distribution and effectiveness.
Hydrocarbon volume available to
charge the structures in the basin,
in order to deliver the exploration
potential across our exploration
permits
• Comprehensive geophysical
surveying, data analysis, and
modelling integrated with
geological and reservoir
engineering studies to improve
reservoir understanding
throughout the basin
• Independent resources
Owner
Chairman
• Reservoir distribution and
certification
effectiveness, hydrocarbon
saturation and H2S risk in respect
of Jurassic carbonate reservoirs in
Sidi Moktar
4 Share price weakness
• Vulnerability to hostile takeover
• Difficulty raising finance to
support and grow business
• Strengthen investor appetite
through delivery of business
plan, diversification and growth
Chairman
5 Major HSSE event
• Loss of life or injury to personnel
• Highly skilled, competent,
Chairman
• Environmental impact
• Reputational damage
• Exposure to litigation
• Financial and operational losses
6 Loss of, or inability to
secure, key personnel
• Loss of shareholder confidence
• Lack of direction and leadership
within the Company
• Loss of expertise and knowledge
• Unable to secure required
expertise to deliver the work
programme
and qualified personnel and
subcontractors. Training
provided as required
• Management and Board
commitment. Experienced
corporate HSSE Manager
• Robust operational HSE
processes and procedures
• HSE Committee reviews and
regular HSE meetings and
engagements
• Insurance cover
• Competitive remuneration
package in place for key
Executives, benchmarked
relative to the market
• Succession planning
• Programme to identify and
source additional expertise as
and when required
• Resourcing partnership models
with key suppliers e.g. drilling
services
Chairman
35
www.soundenergyplc.comStrategic ReportSound Energy plc Annual Report for the year ended 31 December 2022 Principal Risks
and Uncertainties continued
Risk
Impact
Control measure
Owner
7 Insufficient funds to
• Capital constraints due to
• Active engagement with
Chairman
operate and sustain the
business
insufficient funding of work
programme, potential impact to
long-term viability of business
capital markets and financing
streams to raise capital
• Long-term cash flow
• Insufficient working capital to
management
sustain the business as a going
concern
• Finances are controlled
through annual planning
process with regular forecast
updates. Monthly MI measures
performance against plan
• Risk transfer through farm-
ins, joint ventures and/
or partnering funding
arrangements
• Active contract management
and tracking for main contracts
8 Capital project
• Delay in implementation of Phase 1
• Monitor and maintain
Chairman
cost inflation and
procurement tightening
due to global economic
shifts related to Covid-19
and the Ukraine war
and Phase 2 developments
contractual arrangements
• Diminution in value of capital
• Apply disciplined cost control
projects due to cost escalation
and additional project
management
and project management
• Explore contingent funding
options
9 Requirement to pay
substantial Moroccan
tax demand
The Company was issued
notifications by the
Moroccan tax administration
of interpreted taxable
liabilities in respect of
historic transfer of licence
interests between wholly
owned subsidiaries of
Sound Energy plc
• Reduction of working capital,
• Manage Moroccan tax
Chairman
investment capital and cash flow
• Reduced appetite for investment
in the Company and in Morocco
assessment process taking
appropriate legal and tax
advice to resolve through
court, and/or out of court, as
the Company believes this
arises from a misunderstanding
of historical licensing events
• Lobbying with Moroccan tax
authority, industry regulator
and within UK and Moroccan
governments
• Post period settlement with
Moroccan tax authority
(page 98)
10 Delayed execution
• LNG SPA exposure due to late
• Regular monthly reporting and
COO
of Phase 1
delivery
contract management
• Delayed revenues due to delayed
• Close collaboration with gas
gas sales
buyer and key suppliers
• Effective project management
in place
The Strategic Report was approved by the Board of Directors on 3 May 2023 and signed on its behalf by:
Graham Lyon
Executive Chairman
3 May 2023
36
Strategic Reportwww.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Governance
Report
Chairman’s Corporate Governance Statement
QCA Code Principles
Overview
The Team
Board Activities
Shareholder Relations
Health, Safety, Security & Environment Committee
Audit Committee
Nominations and Remuneration Committee
Directors’ Remuneration Report
Directors’ Report
Statement of Directors’ Responsibilities
Independent Auditor’s Report to the members of
Sound Energy plc
38
39
40
42
44
38
46
48
50
51
55
57
58
Sound Energy plc Annual Report for the year ended 31 December 2022
www.soundenergyplc.com
37
Chairman’s Corporate
Governance Statement
Governance Report
“ ESG is integral to all we do. Our AIM
listing and the QCA corporate governance
code provide a robust framework, and
we are fortunate that management
lead the company with authority and a
demonstrable commitment to the
highest levels of governance.”
Graham Lyon
Executive Chairman
Dear shareholders
As Executive Chairman of the Company, it is my
duty to ensure that good standards of governance
are maintained. It is my responsibility to work with my
fellow Board members to ensure that the Company
embraces corporate governance, delivers the highest
standards we can and that this is cascaded down
throughout the organisation. It is within my role to
manage the Board in the best interests of our many
stakeholders. The Board, as a whole, looks to instil
a culture across the Company and throughout the
business, delivering strong values and behaviours.
2022, like 2021, has again been a challenging year,
with the impact on economies and businesses across
the world. However, the Company has continued to
work hard to drive forward its strategy to transition the
business towards becoming a cash generative Company
with exploration upside opportunities. The Board has
an effective, robust but fit-for-purpose corporate
governance framework across the business, from
Executive level and cascading throughout the business.
We value our shareholders and look forward to our
interactions with them. We balance our engagement
using both virtual and in-person sessions. During the
year we held Q&A sessions, produced short videos on
new team members as well as operational updates.
We met with shareholders in person at our AGM and
look forward to doing this again in 2023.
Graham Lyon
Executive Chairman
38
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 QCA Code
Principles
Introduction
The Board of Directors of the Company recognises the importance of good corporate governance and applies the Quoted
Companies Alliance Corporate Governance Code (2018) (the “QCA Code”), which they believe is the most appropriate
recognised governance code for a Company with shares admitted to trading on the AIM market of the London Stock
Exchange. It is believed that the QCA Code provides the Company with the framework to help ensure that a sound level of
governance is maintained, enabling the Company to embed the governance culture that exists within the organisation as
part of building a successful and sustainable business for all its stakeholders.
The QCA Code has ten principles of corporate governance that the Company has committed to apply within the
foundations of the business. These principles are:
QCA Code Required disclosure
Reference
Establish a strategy and business model that promotes long-term value
for shareholders.
See pages 16 to 17 of
2022 Annual Report.
Seek to understand and meet shareholder needs and expectations.
Explain the ways in which the Company seeks to engage with shareholders.
Take into account wider stakeholder and social responsibilities and their
implications for long-term success.
Explain how the business model identifies the key resources and relationships
on which the business relies. Explain how the Company obtains feedback from
stakeholders.
See website disclosures:
Principle Two under
AIM Rule 26.
See website disclosures:
Principle Three under
AIM Rule 26.
Embed effective risk management, considering both opportunities and threats,
throughout the organisation.
See pages 34 to 36 of
2022 Annual Report.
Maintain the Board as a well-functioning balanced team led by the Chair.
Ensure that, between them, the Directors have the necessary up-to-date
experience, skills and capabilities.
Evaluate Board performance based on clear and relevant objectives, seeking
continuous improvement.
A description of the Board performance evaluation process.
Promote a corporate culture that is based on ethical values and behaviours.
Explain how the Board ensures that the Company has the means to determine
ethical values and behaviours.
Maintain governance structures and processes that are fit for purpose and
support good decision making by the Board.
Roles and responsibilities of the Chair, CEO and other Directors with
commitments. Describe the roles of the Committees.
10
Communicate how the Company is governed and is performing by maintaining
a dialogue with shareholders and other relevant stakeholders.
Outcomes of votes cast by shareholders to be disclosed in a clear and
transparent manner. If a significant number of votes were cast against a
resolution put to a general meeting (20%) explain the reasons behind the
votes cast.
See pages 42 to 43 of
2022 Annual Report.
See pages 42 to 43 of
2022 Annual Report.
See website disclosures:
Principle Six under
AIM Rule
See pages 44 to 45 of
2022 Annual Report.
See website disclosures:
Principle Seven under
AIM Rule 26.
See website disclosures:
Principle Eight under
AIM Rule 26.
See website disclosures:
Principle Nine under
AIM Rule 26.
See pages 46 to 47 of
2022 Annual Report.
See website disclosures:
Principle Ten under
AIM Rule 26.
39
1
2
3
4
5
6
7
8
9
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Overview
Leadership
The Company remains committed to achieving high
standards in all we do. Our business and processes are
aligned around a robust governance framework. The
Company applies and seeks to adhere to the ten principles
of the QCA Code, and the requirements of the AIM market
of the London Stock Exchange.
The Directors develop policies and procedures in line with
the QCA Code and these policies and procedures are
monitored on a regular basis.
While building a solid governance framework, we also try
to ensure that we take a proportionate approach and that
our processes remain fit for purpose as well as embedded
within the culture of our organisation. We continue to
evolve our approach and make ongoing improvements as
part of building a successful and sustainable Company.
Good governance provides a framework that allows the
right decisions to be taken by the right people at the
right time.
Shareholders and other stakeholders
Board
Set strategy and deliver value to shareholders. Review performance against plan.
Health and Safety
Committee
The Health and Safety
Committee is primarily focused
on ensuring that the HSE policies
are adopted and applied
across the Group.
It also ensures that incidents
that occur are dealt with
correctly and lessons learnt
and exercises are carried
out to prevent repeats.
Remuneration and
Nominations Committee
The Committee is responsible
for all material elements of
remuneration policy, including
Directors’ remuneration
and assessing Directors’
performance. The Committee
will consider recruitment of
Board members and members
of the Executive team, together
with consideration of succession
planning.
The Committee assesses
Executive Directors’
performance based on an
annually approved scorecard.
Audit
Committee
The main responsibility of the
Audit Committee is to monitor
the integrity of the Company’s
financial statements and other
formal announcements relating
to the Company’s financial
performance. The Committee
ensures that the Company has
effective risk management and
appropriate internal controls in
place. The responsibility for the
enforcement of the Company’s
code of conduct, and the
adequacy and security of the
anti-bribery and corruption
policy, also rests with the Audit
Committee. The Committee is
mindful of the guidance from
the QCA with respect to the
function and duties of the Audit
Committee within the business.
Executive Committee
The Executive team supports the Executive Chairman and Board’s decision making particularly around
assurance at project decision gates and new business opportunities. The Executive team is accountable for
implementation of the strategy, the performance of the business, and designing and implementing the culture
and tone of the organisation.
40
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Governance Report
Sound Energy plc Annual Report for the year ended 31 December 2022
www.soundenergyplc.com
41
Governance Report
Board of
Directors
Graham Lyon
Executive Chairman
Mohammed Seghiri
Chief Operating Officer
H
Appointed to Board
25 February 2020
Appointed to Board
23 January 2020
Background
Graham Lyon was appointed
Executive Chairman on 25 February
2020. Graham is an experienced
oil and gas, energy Executive
with 40 years’ experience across
technical, operational, commercial
and leadership roles. Graham
has chaired AIM, TSX, ASX and
AQSE growth companies. He
has a background in Petroleum
Engineering.
Significant current external
commitments
• Clarion Petroleum Limited
• Soncer Limited
• Soncer Bel BV
• Soncer Cyp Limited
• Seal Lion Power (PVT) Limited
Background
Before joining Sound Energy,
Mohammed Seghiri had over 20
years’ experience leading complex
European and African projects
across different sectors, including
Gas Storage, Oil & Gas Exploration,
Telecom, Real Estate and Power
Production. He was hired by Sound
Energy in February 2017 as Vice
President Commercial before the
Board designated him as Country
Managing Director in Morocco,
supervising all the operations in
country in June 2017. In November
2019, the Board requested him to
carry out the role of acting CEO
until Graham Lyon was appointed
as Executive Chairman in February
2020. Mohammed formally joined
the Board in January 2020 and has
been in the role of Chief Operating
Officer since April 2020, while
he continues to manage all the
subsidiaries in Morocco.
Mohammed is a graduate from the
School of Mines in Nancy, France.
Significant current external
commitments
None
Christian Bukovics
Director (Senior Independent
Non-Executive)
R H
Appointed to Board
2 December 2021
Background
Christian Bukovics joined Sound
Energy as a Senior Non-Executive
Director on 2 December 2021.
Christian is a senior oil and gas
sector Executive with 40 years of
international experience across
a variety of roles. Since 2013, he
has worked as founder, advisor
and Non-Executive Director in
small-cap oil and gas companies
and was part of the Board of
LSE premium listed JKX Oil and
Gas plc. Prior to this, he held
several senior positions with Shell,
including VP Exploration Russia
and FSU, VP Commercial in Global
Exploration and GD of Shell Temir
(Kazakhstan).
Christian holds a doctorate in
Experimental Physics.
Significant current external
commitments
• Director – CB Exploration Limited
• Director – Adveneq Holdings
Limited (registered in Ireland)
42
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Governance Report
The information provided sets out
the current Board of Sound Energy
as at the time of signing these
accounts, together with the names
and dates of tenure.
Key:
A Audit Committee
R Remuneration and Nominations
Committee
H HSSE
43
Marco Fumagalli
Director (Non-Executive)
A R
Appointed to Board
17 July 2014, appointed as Acting
Chairman on 12 November 2019 to
25 February 2020.
Background
Marco Fumagalli joined Sound
Energy as a Non-Executive Director
in July 2014. Marco is Founding
Partner at Continental Investment
Partners SA, a Swiss-based
investment firm and cornerstone
shareholder in Sound Energy. He is
a well-known Italian businessman,
who was previously a Group
Partner at 3i.
Marco is a qualified accountant
and holds a degree in Business
Administration.
Significant current external
commitments
• Non-Executive Director –
Ascent Resources plc
• Director – C4 Energy Limited
• Non-Executive Director –
Coro Energy plc
• Director – Continental Group of
Companies
• Non-Executive Director –
SourceBio International plc
David Blewden
Director (Independent
Non-Executive)
A R
Appointed to Board
1 July 2020
Background
David Blewden joined the Board
as a Non-Executive Director in
July 2020. David is a senior oil
and gas sector Executive with
40 years of international
experience working as a petroleum
engineer, an energy investment
banker and in energy industry
finance roles. He is currently CFO
of Sunny Hill Energy Limited, a UK
private E&P company (formerly
Petroceltic International), and in
recent years, has been a Non-
Executive Director of Gulf Marine
Services plc, an LSE premium listed
oil services company and New Age
(African Global Energy) Limited, a
private E&P company. From 2010
to 2016, he was CFO of Sterling
Resources Ltd, a TSX-V listed
Canadian E&P company.
Significant current external
commitments
• Director – Philipshill Consulting
Limited
• Director – Hodgemoor
Investments Limited
• CFO – Sunny Hill Energy Limited
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Board
Activities
Effectiveness
The Board retains full and effective control over the
Company and holds regular meetings at which financial,
operational and other reports are considered and, where
appropriate, voted upon. The Board is responsible for the
Group’s strategy and key financial and compliance issues.
The key matters reserved for the Board:
• Approval of the Group’s strategic aims and objectives
• Approval of the Group’s annual operating and capital
expenditure budgets and any material changes to them
• Review of Group performance and ensuring that any
necessary corrective action is taken
• Extension of the Group’s activities into new business or
geographical areas
• Any decision to cease to operate all or any material part
of the Group’s business
• Major changes to the Group’s corporate structure and
management and control structure
• Any changes to the Company’s listing
• Changes to governance and key business policies
• Ensuring the maintenance of a sound system of internal
control and risk management
• Approval of half-yearly and Annual Report and Accounts
and preliminary announcements of final year results
• Reviewing material contracts and contracts not in the
ordinary course of business
• Reviewing the effectiveness of the Board and its
Committees.
The Board delegates matters not reserved for the Board,
concerning the management of the Group’s business, to
the Executive team.
Composition and independence of the Board:
As at 31 December 2022, the Board comprised of the
Executive Chairman, three Non-Executive Directors and
one Executive Director.
The current Board has a good level of industry, financial,
public markets and governance experience, possessing
the necessary mix of experience, skills, personal qualities
and capabilities to deliver the strategy of the Company
for the benefit of the shareholders over the medium term.
The Company has an Executive Chairman who provides
a bridge of the Chairman and Chief Executive Officer
role. The Company has a good balance of Executive
and Non-Executive Directors, with a strong level of
independence within the Board.
The Executive Chairman is responsible for leading
the Board and Executive team, ensuring that the
Board discharges its responsibilities; the Chairman is
also responsible for facilitating full and constructive
contributions from each member of the Board in the
determination of the Group’s strategy and overall
commercial objectives. Without a Chief Executive Officer,
the Executive Chairman, with the support of the Chief
Operating Officer and other members of the Executive
team, leads the business, ensuring that strategic and
commercial objectives set by the Board are met. He is
accountable to the Board for the operational and financial
performance of the business. The Board continues to
believe, given the current stage of the business, that an
Executive Chairman is right for the Company. At present,
there is no Chief Executive Officer; however, with three
Non-Executive Directors, of whom two are independent,
it is believed there is a strong voice of independence.
Board Composition %
Attendance at Meetings:
A schedule of the Board and Board Committee meetings held during the year ended 31 December 2022 is noted below.
Key Executives and advisors have attended these meetings, where appropriate, to present and provide feedback on
actions throughout the year.
Year ended 31 December 2022
Board meetings
Name of the Director
Scheduled
Ad hoc1
Audit
Committee
Remuneration
and
Nominations
Committee
Total number of meetings held
Graham Lyon (Executive Chairman)
Mohammed Seghiri (COO)
David Blewden
Marco Fumagalli
Christian Bukovics
5
5
5
5
5
5
5
5
3
5
4
4
2
N/A
N/A
2
2
N/A
2
N/A
N/A
2
2
2
HSSE
6
N/A
6
N/A
N/A
6
1 Ad hoc meetings: Additional meetings called for a specific business matter or of a more general administration nature, not necessarily
requiring full Board attendance
All Directors attended the meetings they were expected to attend.
44
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report What the Board did in 2022
20%
30%
15%
Governance and Risk – 20%
• Ongoing consideration of the
Quoted Companies Alliance
Corporate Governance Code and
a review of the requirements of
the Code
• AIM training carried out by the
Company’s Nominated Advisor
to Directors to ensure that the
Board is up to date with regard
to their regulatory requirements
• Review of insider dealing
requirements and individual
persons closely associated
to PDMRs
• Updates from Board Committees
following every Committee
meeting
• Board Evaluation Exercise
• Updates from the Group Auditor
via the Audit Committee
− Review of Committee
structures and composition
Strategy – 30%
• Reviewed and endorsed
Investor Engagement – 15%
• Attend shareholders relations
potential corporate actions
meetings in person
• Morocco investment
• Close liaising with the Company’s
• Project partnering
major shareholders.
• AGM proxy figures counted
and disclosed
10%
25%
People, Visions, Values – 10%
• Staffing retention
Performance Monitoring – 25%
• Updates from the Chairman of
• Resourcing
• Behaviour reviews
the Audit, Remuneration and HSE
Committees
• Monthly reports on performance
against targets received by
the Board
• Approval full and half-year results
• As the Company has moved to
the project execution phase, the
Board is spending more time in
performance monitoring
45
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Governance Report
Health, Safety, Security
& Environment Committee
“ As construction work returned
to Sound, close guidance to
HSSE policy was supported and
prioritised.”
Christian Bukovics
Chairman of the Health, Safety,
Security & Environment Committee
Committee Members and Participants
During 2022, the HSSE Committee comprised of Christian
Bukovics (Chair) and Mohammed Seghiri and other
members of the Executive team, and those within the
business responsible for matters pertaining to HSSE, are
invited to join and present to the Committee as appropriate.
Health, Safety, Security & Environment (HSSE)
Committee Activities
During the year under review, the Committee met on
six occasions to discuss matters pertaining to Health,
Safety and Environmental issues. The Committee is
primarily focused on ensuring that comprehensive and
fit-for-purpose HSSE policies are adopted and applied
consistently across the Group.
A full report of the activities of the HSSE Committee can be
found on page 31.
2022 Activities
• The main challenge in 2022 was the fact that after
a long hiatus, field operations resumed in Tendrara,
which included major civil works (road upgrades and
the preparation of sites) and the start of construction
work for the mini LNG plant, in particular construction
of a large LNG tank.
• Following a careful selection process, two safety
supervisors, working back-to-back, were contracted
to ensure 24/7 on site supervision by Sound Energy.
• HSSE KPIs were developed along with an annual plan to
report back to the Committee. An HSSE Plan and HSSE
KPIs were developed to ensure the tracking of Company
goals for 2022.
• The above efforts were rewarded with an outstanding
safety performance during the full year in 2022. In total,
116,403 man-hours were worked by Sound Energy plc
staff, contractors and sub-contractors, without any
injuries. 110 Safety Hazard Observation Cards, 146 JSAs
and 200 Tool box Talks were completed at site
2023 Looking Forward
• Ensure HSSE policies and procedures remain effective
and purposeful for the activities of the business, which
will increase further as the mini LNG plant construction
swings into full gear.
• Finalise, implement, and communicate the HSSE action
plan and KPIs for 2023.
• Continuously monitor effectiveness of Company Safety
programmes to ensure they are relevant to Company
activities and understood by all Company Employees and
Contractors. Ensure tracking for the closure of Action
items raised during HSSE Committee meetings.
• HSSE management system and resources to be kept
under review.
• Ensure ongoing transparent reporting to the HSSE
Committee with updates provided to the Board.
• In addition, major emphasis was put on ensuring that the
main contractors had their own safety managers on site.
• Begin the implementation of the company ESG Strategy
in line with UN Sustainable Development Goals.
• The HSSE Focus group continued to meet during the
year to review the ongoing HSSE procedures and culture.
• Continual reviews were completed to ensure safe
working measures were implemented both within
the UK and Morocco.
• An Action Plan was developed for the improvement of the
Company’s HSSE Management Systems to address areas
identified for improvement to our Policies, Procedures and
Standards and implementation was monitored.
46
Christian Bukovics
Chairman of the Health, Safety,
Security & Environment Committee
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Governance Report
Sound Energy plc Annual Report for the year ended 31 December 2022
www.soundenergyplc.com
47
Governance Report
Audit Committee
Report
“ Close attention to the
company finances is
required at all times.”
David Blewden
Chairman of the Audit Committee
Committee Members and Participants
During 2022, the Company’s Audit Committee comprised
David Blewden (Chair) and Marco Fumagalli. The CFO and
Group Financial Controller are also invited to attend
parts of most meetings and the external auditor is invited
to attend parts of meetings regarding preparation and
approval of financial reporting.
Audit Committee Activities
The Audit committee met on three occasions in 2022
regarding financial reporting, audit and risk management.
In addition, various other matters were dealt with on an
ad hoc basis.
Responsibilities
The main responsibilities of the Audit Committee
are to monitor the integrity of the Group’s financial
statements and other formal announcements relating to
financial performance. The Committee approves the risk
management policy, strategic risks and mitigation actions
allocated to the Executive team. Follow-up and review are
undertaken throughout the year to ensure effective risk
management and appropriate internal controls are in place.
The responsibility for the enforcement of the Company’s
code of conduct, and the adequacy and security of the
anti-bribery and corruption policy, also rests with the
Audit Committee.
2022 Review
• Approved audited and interim financial statements,
including key judgements and policies to ensure they are
fair, balanced and understandable for our shareholders.
• Reviewed and recommended the reappointment of our
external Auditor Crowe UK LLP, including fee structure.
• Review of the Company’s principal risks and
uncertainties.
• Discussions on controls and policies in place and
related training to prevent bribery, corruption and
insider dealing.
• Ongoing monitoring of the going concern status of
the business.
• Reviewed and approved the update to the manual
of authorities.
• Reviewed and updated the Committee’s Terms of
Reference, to ensure they reflect the current statutory
requirements and best practice proportionate to a
company of Sound’s size and nature.
2023 Looking Forward
• Keep under review the Company’s existing control
framework.
• Ensure continued risk management procedures and
controls are appropriate.
• Ongoing monitoring of the Company’s going concern
status.
• Continue to consider the recommendations of the
Quoted Companies Alliance Corporate Governance Code,
Audit Guide.
• Approval of the interim and annual reports and financial
statements.
48
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Conflicts of Interest
Under the Companies Act 2006, a Director must avoid a
situation in which a direct or an indirect conflict of interest
may occur. The Company has in place procedures to deal
with any situation in which a conflict may be perceived.
Auditor
While Crowe UK LLP has been the Group’s statutory
auditor for 13 years; the Committee are comfortable that
their audit remains independent.
David Blewden
Chairman of the Audit Committee
Financial and Business Reporting
Based on the financial statements, the Audit Committee
reviews and evaluates whether the Company is a going
concern and communicates to the Board its findings and
recommendations. The Board is responsible for presenting
a fair, balanced and understandable assessment of the
Group’s position and prospects. The statement setting out
the reasons why the Board continues to adopt the going
concern basis for preparing the financial statements is
included in note 1 to the financial statements on page 72.
Risk and Controls
The Board, taking into account the recommendations of
the Audit Committee, is responsible for determining the
nature and extent of the significant risks that the Group is
willing to take in achieving its strategic objectives, and for
maintaining sound risk management and internal control
procedures. The Group’s internal control system is designed
to manage the risk of failure to achieve business objectives,
rather than to eliminate that risk. Such systems can only
provide reasonable, and not absolute, assurance against
material misstatement or loss.
A summary of our approach and strategic risks is covered
in detail on page 34.
Sound Energy plc Annual Report for the year ended 31 December 2022
www.soundenergyplc.com
49
Governance Report Governance Report
Nominations and Remuneration
Committee Report
“ Resourcing in a growth
period requires specific
people with experience and
the correct attitude.”
Christian Bukovics
Chairman of the Nominations and
Remuneration Committee
The Committee and the wider Board recognise the
importance of attracting, retaining and motivating talent
within the Board and wider Executive team to promote
the successful growth of the Group. As Sound Energy
continues to develop, the Company’s remuneration policy
and framework is evolving to ensure that Directors and
Executives are rewarded for achieving strategic targets
and creating value for shareholders. We are creating a
remuneration framework that is appropriately aligned, both
to our business and to the interests of our shareholders.
The Committee also wants to ensure that the policy
provides simplicity and transparency.
Principles For Executive Remuneration
The main principles of the Senior Executive remuneration
policy are set out below:
• Attract and retain high-calibre Executives in a
competitive international market, and remunerate
Executives fairly and responsibly;
• Motivate the delivery of our key business strategies and
encourage a strong performance-oriented culture;
• Reward achievement over the short and long term;
• Support both near-term and long-term success and
sustainable shareholder value;
• Align the business strategy and achievement of planned
business objectives;
• Be compatible with the Company’s risk policies and
systems;
• Ensure that a proportion of remuneration is performance
related; and
• Take into consideration the views of shareholders and
best practice guidelines.
The Remuneration Committee has spent considerable time
assessing the current remuneration policy and has devised
a policy that aligns Executives’ rewards for delivery of the
success of the business with shareholders. The framework
of the policy aims to incentivise and drive the Executive
team to strive for success, but also aligns them clearly
with the aspirations of shareholders for capital growth
and ultimately long-term value to the business for all
stakeholders.
Fixed remuneration comprises salary, pension and benefits.
Variable pay includes the potential for an annual bonus
and longer-term incentives was awarded by the use nil
cost options and long-term incentive plan awards. The
Committee assessed the ongoing use of the previously
existing Restricted Stock Option (RSU) scheme and put
in place a LTIP (Long-Term Incentive Plan) scheme, which
is considered more appropriate. A remuneration advisor
was appointed to provide advice on the most appropriate
incentives for the Executive team. The Committee
recognises that it may be necessary, on occasion, to use
its discretion to make remuneration decisions outside the
standard remuneration policy, such as agreeing a sign-on
payment, to attract and retain talent.
Christian Bukovics
Chairman of the Nominations and
Remuneration Committee
50
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Directors’
Remuneration Report
2022 Remuneration Policy
Purpose
Salary
Operation
Maximum opportunity
Performance measures
Attract and retain the right
calibre of staff required
to support the long-term
success of the business.
Determined by reference
to market data and advice
from external remuneration
advisor.
Provide the basis for a
competitive remuneration
package.
Reflects individual
experience, skills and role.
Paid monthly.
Reviewed annually.
Pension
Provide a level of pension
provision that is compliant
with regulation and allows
staff to build long-term
retirement savings.
Defined contribution based
on a percentage of salary.
Executives may elect to
take part of their pension
contribution as salary.
Benefits
Increases will be made
at the discretion of the
Committee, or for Non-
Executive Directors, the
Executive Directors,
considering:
There are performance
measures in place, and
the performance of the
individual is considered
when setting and reviewing
salaries annually.
• increase in responsibility,
particularly as the
Company grows and
expands
• development and
performance in the role
• alignment to market level
4.5% of base salary.
No element other than
salary is pensionable.
None. Pension contribution is
set at the commencement of
an individual’s contract.
Protect against risks and
provide other benefits
reflecting the international
aspects of roles.
Private medical and dental
insurance in the UK,
permanent health insurance
and life assurance cover.
Set at a level that provides
a sufficient benefit.
None.
The value of any bonus
is at the discretion of the
Remuneration Committee.
Performance is assessed
using specific metrics
set by the Remuneration
Committee, including the
delivery of the Company
scorecard and the share
price performance.
Individual Executive bonus
is based on performance
measured against Group
and personal objectives.
Performance measures
are both quantitative
and qualitative, and both
financial and non-financial.
Bonus awards are made by
the Committee and awards
are paid in shares. Any
cash payments are made
at the sole discretion of the
Remuneration Committee.
Bonus Awards
The payment of bonus
awards is in form of nil stock
options, which replaced the
restricted stock unit plan.
2021 and 2022 annual cash
bonuses were awarded
in the form of nil cost
options. Any future cash
payments made by the
Company will be made at
the sole discretion of the
Remuneration Committee.
Provide a direct link
between measurable
individual performance and
rewards. Encourage the
achievement of outstanding
results aligned to Group
strategy and achievement of
business objectives.
51
51
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Directors’
Remuneration Report continued
Purpose
Operation
Maximum opportunity
Performance measures
Long-Term Incentive Plan (LTIP)
Vesting of the LTIP
Options will be subject
to: (a) the Company’s
share price on the third
anniversary of the date of
grant (the “Performance
Testing Date”); and (b)
to the grantee remaining
an executive employee
of the Company on the
Performance Testing Date.
Actual vesting of the LTIP
Options, the number of
which is determined on the
Performance Testing Date,
will then occur in three
tranches on the third (25%),
fourth (35%) and fifth (40%)
anniversaries of grant. The
number of LTIP Options
vesting on the Performance
Testing Date will be
calculated as follows, with a
linear relationship between
vesting thresholds:
In the event the LTIP Options
vest, in whole or in part, then
they will be exercisable at a
price of 2.4 pence per new
ordinary share.
Share price on
Performance
Testing Date
≥ 5.38p
% Options
Vesting
50%
≥ 10.75p
100%
Benchmarked externally
from time to time as
appropriate.
The opening price, against
which the performance is
measured and the below
multiples were chosen, is
the price at 30 April 2022
(2.40)p
Reward execution of Group
strategy and growth in
shareholder value over a
multiple-year period.
Long-term performance
measurement discourages
excessive risk-taking and
inappropriate short-term
behaviours, and aligns
Executive interests with
those of shareholders.
The LTIP is designed to
retain Senior Executives
over the performance
period of the awards.
LTIP awards are made by
the Committee for the CEO
and for Executives by the
Committee based on CEO
recommendations.
At vesting, the LTIP awards
are satisfied in Sound
Energy shares.
Awards will, typically,
lapse on termination of
employment, although the
Committee may determine
that awards may vest after
termination of employment,
in accordance with the
plan rules and taking into
account performance
during the date of grant
and date of termination
of employment.
In the event of a change
in control of the Company,
decisions relating to the
extent to which any vesting
conditions have been
fulfilled and the level of
vesting will be taken by the
Committee, as constituted
immediately prior to the
date on which control
passes.
Chairman and Non-Executive Director Fees
Provide an appropriate
reward to attract and retain
high calibre individuals.
The fee for the Chairman
and Non-Executive
Directors reflects the
level of commitment and
responsibility of the role.
The fee is paid monthly in
cash, and is inclusive of all
Committee roles.
Set at a level that reflects
the commitment and
contribution expected
from the Chairman and
Non-Executive Directors,
and is appropriately
positioned against
comparable roles in
companies of a similar size
and complexity.
Actual fee levels are
disclosed in the Directors’
Annual Remuneration
Report for the relevant
financial year.
52
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report External Appointments
It has been expressly agreed that the Executive Chairman
must obtain agreement from the Board before accepting
additional commitments that might affect the time he is
able to devote as Chair of the Company.
Remuneration Policy for the Chairman
and Non-Executive Directors
The Non-Executive Directors are appointed under
employment contracts with a notice period for termination
of six months. The Service Contracts cover such matters as
duties, time commitment and other business interests.
Loss of Office and Change of
Control Provisions
In the event of a change of control of the Company
occurring during their employment, Mohammed Seghiri,
COO, has the option to give notice and receive a lump sum
equivalent to six months’ salary.
All of the Company’s current share plans contain provisions
relating to a change of control.
In the event of a change in control of the Company,
decisions relating to the extent to which any vesting
conditions of the LTIP have been fulfilled and the level of
vesting will be taken by the Remuneration Committee, as
constituted immediately prior to the date on which control
passes.
Recruitment Remuneration Arrangements
When recruiting a new Executive Director, whether from
within the organisation or externally, the Committee will
take into consideration all relevant factors to ensure that
remuneration arrangements are in the best interests of the
Company and its shareholders without paying more than
is necessary to recruit an Executive of the required calibre.
The Committee will seek to align the remuneration package
offered with the remuneration policy outlined above, but
retains discretion to make proposals on hiring that are
outside the standard policy.
Director Shareholding Guidelines
Executive Directors and Senior Managers will be expected
to build up, over a period not exceeding five years, and
retain a personal shareholding in the company equivalent
to 70% and 30%, respectively, of their base annual salary.
Vested shares awarded under an LTIP may be taken into
account for the purposes of determining whether the
required shareholding has been achieved.
The Committee has discretion to change the shareholding
targets.
Executive Director Employment
Contracts and Termination Payments
The Executive Chairman has an employment contract and
the COO an employment contract, which entitles them to
the fixed elements of remuneration and to consideration
for variable remuneration each year. Their contracts are
terminable by the Company on not more than six months’
written notice.
Summary of Actual Remuneration of Directors
Executive Chairman
& Executive Director
Graham Lyon
Mohammed Seghiri
Non-Executive Directors
Richard Liddell
Marco Fumagali
David Blewden
Christian Bukovics
Total for all Directors
Salary
£’000
255
204
–
44
44
44
591
Special
bonus
paid in
shares
£’000
2021
bonus paid
in nil cost
options
£’000
2020
bonus paid
in nil cost
Options
£’000
Company
pension
£’000
Benefits in
Kind
£’000
Total
2022
£’000
Total
2021
£’000
–
324
–
–
–
–
77
45
–
–
–
–
109
59
–
–
–
–
324
122
168
–
3
–
–
–
–
3
–
14
–
–
–
–
14
441
649
–
44
44
44
250
212
46
46
46
4
1,222
604
During the year, the Company adopted a new long term incentive plan (the ‘‘LTIP’’), designed to reward, incentivise and
retain the Company’s executives and senior management to deliver sustainable growth for shareholders.
53
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Directors’
Remuneration Report continued
LTIP Awards
Graham Lyon
Date of grant
03.05.22
Exercisable date
03.05.25–03.05.32
Acquisition price
per share (pence)
2.4
Options held at
1 January 2022
–
Options held at
31 December 2022(i)
12,218,879
Mohammed Seghiri
03.05.22
03.05.25–03.05.32
2.4
–
7,331,327
(i) The LTIP Awards include 1,250,000 awards each qualifying under HMRC’s tax advantaged Company Share Option Plan (CSOP).
Previously existing share options expired.
Share Options
Date of grant
Exercisable date
Acquisition price
per share (pence)
Options held at
1 January
2022
Options held at
31 December 2022
Mohammed Seghiri
18.01.17
18.01.20–18.01.22
70.00
1,500,000
–
RSU Awards
Mohammed Seghiri
Date of grant
26.04.18
21.06.19
Settlement
date
RSU Awards held at
1 January 2022
RSU Awards held at
31 December 2022
01.01.21
01.01.22
126,501
195,591
–
–
The Company issued shares to settle the previously vested RSU awards.
Directors’ Shareholdings and Interests in Shares
Directors who held office at the end of the financial year had the following interests in the ordinary shares of the Company
as at 31 December 2022:
Graham Lyon (Chairman)
Mohammed Seghiri (COO)
David Blewden
Marco Fumagalli
Christian Bukovics
Nil cost options
Graham Lyon
Mohammed Seghiri
No. of shares
2,066,962
11,083,316
5,693,877
1,676,471
500,000
Date of grant
Exercisable date
03.05.22
03.05.22–03.05.27
03.05.22
03.05.22–03.05.27
Nil cost options
held at 1 January
2022
Nil cost options
held at 31 December
2022
–
–
7,740,943
4,308,017
During the year, the Company granted nil cost options to Executives and staff in settlement of 2020 and 2021
bonus awards.
Movements in Share Price During the Year
The Company’s share price at the end of the financial year were 0.875 pence and the range of mid-market prices during
the year was between 0.875 pence and 2.9 pence.
Advice Received by the Committee
The Committee has access to advice when it considers appropriate. The Committee engaged a consultant to
review the existing Company’s Directors’ remuneration. The amount paid to the consultant for services provided
to 31 December 2022, was approximately £600 and £28,550 in the year 2021.
This Remuneration Report was approved by a duly authorised Committee of the Board of Directors on 3 May 2023 and
signed on its behalf by:
Christian Bukovics
Chairman of the Nominations and
Remuneration Committee
54
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Governance Report
Governance Report
Directors’
Report
Other Disclosures
Pages 42 to 57 inclusive (together with sections of the
Annual Report incorporated by reference) constitute a
Directors’ Report that has been drawn up and presented
in accordance with applicable UK Company law, and the
liabilities of the Directors in connection with that report
are subject to the limitations and restrictions provided by
that law.
Principal Activities and Business Review
Sound Energy plc is the holding Company for a group
of transition energy focused companies whose principal
activities are currently the exploration, appraisal and
development of gas assets. The Group’s current principal
area of activity is Morocco and has recently pivoted
its monetisation strategy from exploration towards
development of its existing discovery in Eastern Morocco.
A review of the performance and future development of
the Group’s business is contained on pages 02 to 36 and
forms part of this report.
Results and Dividends
The profit for the year after tax was £6.6 million
(2021: £2.4 million). The Directors do not recommend the
payment of a dividend.
Going Concern
Disclosure on going concern is included in note 1 to the
financial statements. See page 72.
Auditor
So far as each Director is aware, there is no relevant audit
information of which the Company’s auditor is unaware.
Each Director has taken all the steps that they ought to
have taken as a Director in order to make themselves aware
of any relevant audit information and to establish that the
Company’s auditor is aware of that information.
The auditor, Crowe UK LLP, has indicated its willingness to
continue in office, and a resolution that they be reappointed
will be proposed at the Annual General Meeting.
Political Donations
No political donations were made during the year
(2021: £nil).
Takeover Directive
The Company has only one class of ordinary share and
these shares have equal voting rights. The nature of
individual Directors’ holdings is disclosed on page 54.
Board of Directors
The names of the present Directors and their biographical
details are shown on pages 42 to 43.
The Directors who served during the year were as follows:
• Graham Lyon
• David Blewden
• Marco Fumagalli
• Mohammed Seghiri
• Christian Bukovics
None of the Directors had any interest during, or at the end
of, the year in any contract of significance in relation to the
business of the Company or its subsidiary undertakings.
Full details of the interests in the ordinary share
capital of the Company of those Directors holding
office on 31 December 2022 are set out in the Directors’
Remuneration Report.
Powers Given to Directors
The powers given to the Directors are contained in the
Articles of Association (the “Articles”) and are subject to
relevant legislation and, in certain circumstances (including
55
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Directors’
Report continued
in relation to the issuing or buying back by the Company
of its ordinary shares), subject to authority being given to
the Directors by shareholders in a general meeting. The
Articles also govern the appointment and replacement
of Directors. The Articles, which may only be amended
with shareholders’ approval in accordance with relevant
legislation, can be found on our website.
Indemnities
Insurance cover also remains in place to protect all
Directors and senior management in the event of a claim
being brought against them in their capacity as Directors
or officers of the Company and its subsidiaries.
Share Capital
At 31 December 2022, the Company had 1,848,702,674
ordinary shares in issue as shown in note 18 to the
consolidated financial statements. There are no restrictions
on the transfer of the Company’s ordinary shares other
than certain restrictions that may be imposed by law, for
example, insider trading law and the Company’s share
dealing code. Each ordinary share carries the right to one
vote at General Meetings of the Company. No person has
any special rights of control over the Company’s share
capital and all issued shares are fully paid.
Substantial Shareholding
The Company was advised of the following significant
direct and indirect interests in the issued ordinary share
capital of the Company as at 31 December 2022 and up to
the date of this report.
Oil & Gas Investment Fund SAS hold 265,508,651 shares,
representing a 14.36% interest.
Afriquia Gaz S.A held 176,606,651 shares, representing a
9.55% interest.
Financial Instruments
The information relating to the Group’s financial assets and
its financial risk management can be found in note 20 to
the consolidated financial statements.
Subsequent Events
See note on page 98.
Graham Lyon
Executive Chairman
3 May 2023
56
www.soundenergyplc.com
Sound Energy plc Annual Report for the year ended 31 December 2022
Governance Report Statement of
Directors’ Responsibilities
They are further responsible for ensuring that the Strategic
Report and the Directors’ Report and other information
included in the Annual Report and financial statements
are prepared in accordance with applicable law in the
United Kingdom.
The maintenance and integrity of Sound Energy plc’s
website is the responsibility of the Directors; the
work carried out by the auditor does not involve the
consideration of these matters and, accordingly, the auditor
accepts no responsibility for any changes that may have
occurred in the accounts since they were initially presented
on the website.
Legislation in the United Kingdom governing the
preparation and dissemination of financial statements and
other information included in the Annual Report may differ
from legislation in other jurisdictions.
Graham Lyon
Executive Chairman
3 May 2023
The Directors are responsible for preparing the Strategic
Report, the Directors’ Report and the financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors have elected to prepare the financial statements
in accordance with UK adopted international accounting
standards and applicable law. Under Company law, the
Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the
state of affairs of the Company and the Group, and of the
profit or loss of the Group, for that period. In preparing
these financial statements, the Directors are required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and
explain the Company’s transactions and to disclose, with
reasonable accuracy, at any time, the financial position
of the Company, and to enable them to ensure that the
financial statements comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the
Company and, hence, for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
57
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Independent Auditor’s
Report
to the members of Sound Energy plc
Opinion
We have audited the financial statements of Sound Energy
plc (the “Company”) and its subsidiaries (the “Group”) for
the year ended 31 December 2022, which comprise:
• the Group statement of comprehensive income for the
year ended 31 December 2022;
• the Group and Company balance sheets as at
31 December 2022;
• the Group and Company statements of changes in equity
for the year then ended;
• the Group and Company statements of cash flows for the
year then ended; and
• the notes to the financial statements, including a
summary of significant accounting policies.
The financial reporting framework that has been applied in
the preparation of the financial statements is applicable law
and UK adopted International Accounting Standards.
In our opinion:
• the financial statements give a true and fair view of the
state of the Group’s and of the Company’s affairs as at
31 December 2022 and of the Group’s profit for the year
then ended;
• the group financial statements have been properly
prepared in accordance with UK adopted International
Accounting Standards;
• the parent company financial statements have been
properly prepared in accordance with UK adopted
International Accounting Standards as applied in
accordance with the provisions of the Companies
Act 2006.;
• the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit
of the financial statements section of our report. We are
independent of the Group in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard
as applied to listed entities, and we have fulfilled our
other ethical responsibilities in accordance with these
requirements. We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for
our opinion.
Material uncertainty in relation to going
concern
We draw attention to Note 1 in the financial statements.
The Group and Company’s cash flow for the next twelve-
month period to May 2024, indicate that additional
funding will be required to enable the Company to meet its
obligations.
This condition, along with other matters set forth in Note
1, indicates that a material uncertainty exists that may cast
significant doubt on the Group’s ability to continue as
going concern. Our conclusion is not modified in respect of
this matter.
In auditing the financial statements, we have concluded
that the directors use of the going concern basis of
accounting in the preparation of the financial statements is
appropriate. Our evaluation of the director’s assessment of
the group and company’s ability to continue to adopt the
going concern basis of accounting included:
• Assessing the cash flow requirements of the Group and
Company over the duration of the assessment period
based on budgets and forecasts.
• Understanding what forecast expenditure is committed
and what could be considered discretionary.
• Considering potential downside scenarios and the
resultant impact on available funds.
• Testing the mathematical accuracy of the forecasts
Our responsibilities and the responsibilities of the directors
with respect to going concern are described in the relevant
sections of this report.
58
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Overview of the scope of our audit
The head office of the Group is located in the UK which has
an accounting function for group reporting as well as the
head office costs and certain exploration activities.
The Group also has operations in Morocco which has a
separate accounting function. We visited Morocco to
perform an audit of the accounting systems operating
locally.
Overview of our audit approach
Materiality
In planning and performing our audit we applied the
concept of materiality. An item is considered material if
it could reasonably be expected to change the economic
decisions of a user of the financial statements. We used
the concept of materiality to both focus our testing and to
evaluate the impact of misstatements identified.
Based on our professional judgement, we determined
overall materiality for the Group financial statements as a
whole to be £2.2m (2021: £1.7m) and the overall materiality
for the parent company is £1.6m, based on 1% of assets.
We determined that for other account balances, classes
of transactions and disclosures not related to the balance
sheet, a misstatement of less than materiality for the
financial statements as a whole could influence the
economic decisions of the users. We determined that group
materiality for these areas should be £285,000.
We use a different level of materiality (‘performance
materiality’) to determine the extent of our testing for the
audit of the financial statements. Performance materiality
of £1.2m is set based on the audit materiality as adjusted
for the judgements made as to the entity risk and our
evaluation of the specific risk of each audit area having
regard to the internal control environment.
Where considered appropriate performance materiality
may be reduced to a lower level, such as, for related party
transactions and directors’ remuneration.
We agreed with the Audit Committee to report to it all
identified errors in excess of £44,000. Errors below that
threshold would also be reported to it if, in our opinion as
auditor, disclosure was required on qualitative grounds.
59
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Independent Auditor’s
Report
to the members of Sound Energy plc continued
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the
overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These
matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
In addition to going concern which is described in the Material uncertainty in relation to going concern section, we have
determined the matters described below to be the key audit matters to be communicated in our report. This is not a
complete list of all risks identified by our audit.
Key audit matter
How the scope of our audit addressed the key audit matter
Impairment of exploration and evaluation assets
Refer to page 65, (Consolidated statement of
comprehensive income), pages 72-98 (Notes to accounts
to the Consolidated financial statements), Note 11, page 84
(financial disclosures)
We reviewed management’s assessment for indicators of
Impairment assessment and conclusion that there are no
facts or circumstances that indicate the carrying amount
of the assets exceeds the recoverable amount.
The Group’s primary focus is on exploration activities in
Eastern and Southern Morocco. Exploration expenditure
in the current year was significant and totalled £0.8m.
The carrying value of the exploration and evaluation assets
was £36m at 31 December 2022.
As these amounts are material and the group are still
developing these assets with their recoverability subject
to a number of factors, there is a risk that they could be
impaired
Impairment of development and production assets
Refer to page 65, (Consolidated statement of
comprehensive income), pages 72-98 (Notes to accounts
to the Consolidated financial statements), Note 10, page 83
(financial disclosures)
The Group has a significant amount of development and
production assets which totalled £163.4m at 31 December
2022, including a reversal of an impairment of £5.6m.
As these amounts are material and the group are still
developing these assets with their recoverability subject to a
number of factors, there is a risk that they could be impaired.
In considering this assessment we performed the
following:
• Reviewed the board minutes, budgets and other
operational plans setting out the Group’s current
plans for the continued commercial appraisal of each
exploration asset
• Reviewed the controls with respect to budgets and
controls in preparation and review of impairments
workings.
• Obtained evidence of continued legal title
• Reviewed current well and licence reserve appraisals
• Discussed and critically analysed plans and intentions
with management.
We reviewed management’s assessment which included
their internal model, including the consideration of the
reversal of the impairment of £5.6m and concluded that
there are no facts or circumstances that indicate the carrying
amount of the assets exceeds the recoverable amount.
In considering this assessment we performed the following:
• Obtained management’s impairment assessment carried
out during the year
• Challenged management’s inputs into the valuation
model to available market data and other sources of
evidence. This included the assessment of:
− the discount rate;
− implicit gas price including its appropriateness and;
− reserves
• Reviewed the board minutes, budgets and other
operational plans setting out the Group’s plans in regard
to the exclusivity award
• Discussed and critically analysed plans and intentions
with management
60
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Key audit matter
Taxation
How the scope of our audit addressed the key audit matter
Refer to page 65, (Consolidated statement of
comprehensive income), pages 72-98 (Notes to accounts
to the Consolidated financial statements), Note 8, page 81
(financial disclosures)
We reviewed management’s assessment which concluded
the liability is contingent.
In considering this assessment we performed the following:
The Group received a claim from the Moroccan tax
authority in August 2020 for approximately $21.4m
(excluding penalties and interest) which has been upheld
by the next level of authorities in September 2022. and on
a separate case a claim has been received in May 2021 for
$2.5m by Moroccan tax authorities, which is also upheld by
the next level of authorities in December 2022
We considered whether it was probable that settlement
would be required and if so, the amount should be
recognised as a liability.
• Reviewed the initial claim from the Moroccan tax
authority and the independent professional advice
received by management
• Obtained an independent view from our local tax experts
• Agreed the disclosure for consistency with the facts as
presented and understood by us.
Our audit procedures in relation to these matters were designed in the context of our audit opinion as a whole. They were
not designed to enable us to express an opinion on these matters individually and we express no such opinion.
Other information
The directors are responsible for the other information. The other information comprises the information included in
the annual report, other than the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do
not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent
material misstatements, we are required to determine whether there is a material misstatement in the financial statements
or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a
material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
61
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Independent Auditor’s
Report
to the members of Sound Energy plc continued
Opinion on other matter prescribed by
the Companies Act 2006
In our opinion based on the work undertaken in the course
of our audit
• the information given in the strategic report and the
directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
• the strategic report and the directors’ report have
been prepared in accordance with applicable legal
requirements.
Matters on which we are required to report by
exception
In light of the knowledge and understanding of the Group
and the Company and their environment obtained in
the course of the audit, we have not identified material
misstatements in the strategic report or the directors’ report.
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
• the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and explanations
we require for our audit.
Responsibilities of the directors for
the financial statements
As explained more fully in the directors’ responsibilities
statement the directors are responsible for the preparation
of the financial statements and for being satisfied that they
give a true and fair view, and for such internal control as the
directors determine is necessary to enable the preparation
of financial statements that are free from material
misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Group’s and Company’s ability
to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going
concern basis of accounting unless the directors either
intend to liquidate the Group or the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of
the financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance
with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above,
to detect material misstatements in respect of irregularities,
including fraud. The extent to which our procedures are
capable of detecting irregularities, including fraud is
detailed below however the primary responsibility for the
prevention and detection of fraud lies with management
and those charged with governance of the company.
• We obtained an understanding of the legal and regulatory
frameworks that are applicable to the Group and the
procedures in place for ensuring compliance. The most
significant identified were the Companies Act 2006 and
UK and Moroccan taxation legislation. Our work included,
reviewing board and relevant committee minutes and
inspection of correspondence and HSE reports.
• As part of our audit planning process we assessed the
different areas of the financial statements, including
disclosures, for the risk of material misstatement. This
included considering the risk of fraud where direct
enquiries were made of management and those
charged with governance concerning both whether
they had any knowledge of actual or suspected fraud
and their assessment of the susceptibility of fraud. We
considered the risk was greater in areas involve significant
management estimate or judgement. Based on this
assessment we designed audit procedures to focus on the
key areas of estimate or judgement, including impairment,
this included specific testing of journal transactions, both
at the year end and throughout the year.
• We used analytics to identify any unusual transactions or
unexpected relationships, including considering the risk
of undisclosed related party transactions.
62
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements, even
though we have properly planned and performed our audit in
accordance with auditing standards. We are not responsible
for preventing non-compliance and cannot be expected to
detect non-compliance with all laws and regulations.
These inherent limitations are particularly significant in
the case of misstatement resulting from fraud as this may
involve sophisticated schemes designed to avoid detection,
including deliberate failure to record transactions, collusion
or the provision of intentional misrepresentations.
Use of our report
This report is made solely to the company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the company’s members
those matters we are required to state to them in an
auditor’s report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this
report, or for the opinions we have formed.
A further description of our responsibilities for the
audit of the financial statements is located on the
Financial Reporting Council’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
Leo Malkin (Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
3 May 2023
63
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Governance Report Financial
Statements
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Company Balance Sheet
Group and Company Statements of Changes in Equity
Group Statement of Cash Flows
Company Statement of Cash Flows
Notes to the Financial Statements
65
66
67
68
70
71
72
64
www.soundenergyplc.com
Sound Energy plc Annual Report for the year ended 31 December 2022
Consolidated Statement of
Comprehensive Income
for the year ended 31 December 2022
Continuing operations
Revenue
Other income
Reversal of impairment on development assets and exploration costs
Gross profit
Administrative expenses
Group operating profit from continuing operations
Finance revenue
Foreign exchange gain
Finance expense
Profit for the year before taxation
Tax expense
Profit for the year after taxation
Other comprehensive income
Items that may subsequently be reclassified to the profit and loss account
Foreign currency translation gain
Total comprehensive profit for the year
Profit for the year attributable to:
Owners of the Company
Notes
2022
£’000s
2021
£’000s
3
4
7
25
8
Notes
–
43
5,678
5,721
(3,175)
2,546
13
5,462
(1,446)
6,575
(1,602)
4,973
13,373
18,346
18,346
2022
Pence
–
223
4,024
4,247
(1,695)
2,552
4
2,210
(2,306)
2,460
(42)
2,418
1,179
3,597
3,597
2021
Pence
Basic and diluted profit per share for the year attributable to the equity
shareholders of the parent (pence)
9
0.28
0.16
65
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Consolidated
Balance Sheet
as at 31 December 2022
Non-current assets
Property, plant and equipment
Intangible assets
Prepayments
Interest in Badile land
Current assets
Inventories
Other receivables
Prepayments
Cash and short-term deposits
Total assets
Current liabilities
Trade and other payables
Tax liabilities
Lease liabilities
Loans and borrowings
Non-current liabilities
Lease liabilities
Tax liabilities
Loans and borrowings
Total liabilities
Net assets
Capital and reserves
Share capital and share premium
Shares to be issued
Accumulated surplus
Warrant reserve
Foreign currency reserve
Total equity
Notes
2022
£’000s
2021
£’000s
10
11
12
26
14
15
16
8
17
25
17
8
25
163,362
36,007
4,272
637
139,666
31,598
–
663
204,278
171,927
963
2,815
139
3,861
7,778
871
852
31
2,913
4,667
212,056
176,594
1,868
126
162
1,121
3,277
121
1,505
29,068
30,694
33,971
178,085
38,621
404
129,004
1,607
8,449
178,085
1,500
–
–
–
1,500
–
–
20,039
20,039
21,539
155,055
34,573
–
123,872
1,534
(4,924)
155,055
The financial statements were approved by the Board and authorised for issue on 3 May 2023 and were signed on its
behalf by:
Mohammed Seghiri Director
Graham Lyon Director
The accounting policies on pages 72 to 77 and notes on pages 72 to 98 form part of these financial statements.
66
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Company
Balance Sheet
as at 31 December 2022
Non-current assets
Property, plant and equipment
Right of use assets
Interest in Badile land
Investments in subsidiaries
Current assets
Other receivables
Prepayments
Cash and short-term deposits
Total assets
Current liabilities
Trade and other payables
Leases liabilities
Loans and borrowings
Non-current liabilities
Leases liabilities
Loans and borrowings
Total liabilities
Net assets
Capital and reserves
Share capital and share premium
Shares to be issued
Accumulated surplus
Warrant reserve
Total equity
Notes
2022
£’000s
2021
£’000s
10
26
13
14
15
16
17
25
17
25
5
274
637
197,132
198,048
67
26
1,521
1,614
5
–
663
164,498
165,166
45
23
595
663
199,662
165,829
765
162
1,121
2,048
121
29,068
29,189
31,237
168,425
38,621
404
127,793
1,607
168,425
630
–
–
630
–
20,039
20,039
20,669
145,160
34,573
–
109,053
1,534
145,160
The Company’s accumulated surplus includes profit for the year of £18.6 million (2021: profit of £3.3 million).
The financial statements were approved by the Board and authorised for issue on 3 May 2023 and were signed on its
behalf by:
Mohammed Seghiri Director
Graham Lyon Director
67
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Group and Company Statements
of Changes in Equity
for the year ended 31 December 2022
Share
premium
£’000s
Shares to be
issued
£’000s
Accumulated
surplus
£’000s
Warrant
reserve
£’000s
Foreign
currency
reserves
£’000s
Total
equity
£’000s
18,281
–
–
–
2,246
(393)
–
–
–
Share
capital
£’000s
16,292
–
2,195
–
–
–
–
–
–
–
–
–
–
–
404
–
404
123,872
4,973
–
4,973
–
–
–
–
159
1,534
(4,924)
155,055
–
–
–
–
–
73
–
–
–
4,973
13,373
13,373
13,373
–
–
–
–
–
18,346
4,441
(393)
73
404
159
129,004
1,607
8,449
178,085
Share
premium
£’000s
Shares to be
issued
£’000s
Accumulated
surplus
£’000s
Warrant
reserve
£’000s
Total
equity
£’000s
18,281
–
2,246
(393)
–
–
–
–
–
–
–
–
404
–
404
109,053
18,581
–
–
–
–
159
1,534
145,160
–
–
–
73
–
–
18,581
4,441
(393)
73
404
159
127,793
1,607
168,425
18,487
20,134
At 31 December 2022
18,487
20,134
Group
Notes
At 1 January 2022
Total profit for the year
Other comprehensive
income
Total comprehensive
income
Share
capital
£’000s
16,292
–
–
–
Issue of share capital
18
2,195
Share issue costs
Fair value of warrants
issued during the year
Vested nil options bonus
awards
Share-based payments
23
–
–
–
–
Company
At 1 January 2022
Total profit for the year
Issue of share capital
Share issue costs
Notes
Fair value of warrants issued during
the year
Vested nil options bonus awards
Share-based payments
At 31 December 2022
23
68
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements Group
At 1 January 2021
Total profit for the year
Other comprehensive income
Total comprehensive income
Issue of share capital
Share issue costs
Fair value of warrants issued during
the year
Reclassification on expiry of warrants
Share-based payments
At 31 December 2021
Company
At 1 January 2021
Total profit for the year
Issue of share capital
Share issue costs
Fair value of warrants issued during the year
Reclassification on expiry of warrants
Share-based payments
At 31 December 2021
Notes
Share
capital
£’000s
13,262
Share
premium
£’000s
16,278
–
–
–
–
–
–
18
3,030
2,004
–
–
–
–
(1)
–
–
–
25
23
Accumulated
surplus
£’000s
117,334
2,418
–
2,418
–
–
–
Warrant
reserve
£’000s
4,090
Foreign
currency
reserves
£’000s
Total
equity
£’000s
(6,103)
144,861
–
–
–
–
–
1,534
–
1,179
1,179
–
–
–
–
–
2,418
1,179
3,597
5,034
(1)
1,534
–
30
4,090
(4,090)
30
–
16,292
18,281
123,872
1,534
(4,924)
155,055
Share
capital
£’000s
13,262
–
Share
premium
£’000s
16,278
–
3,030
2,004
–
–
–
–
(1)
–
–
–
Notes
25
23
Accumulated
surplus
£’000s
Warrant
reserve
£’000s
Total
equity
£’000s
4,090
135,254
101,624
3,309
–
–
–
–
–
–
1,534
4,090
(4,090)
30
–
3,309
5,034
(1)
1,534
–
30
16,292
18,281
109,053
1,534
145,160
69
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Group Statement of
Cash Flows
for the year ended 31 December 2022
Cash flow from operating activities
Cash flow from operations
Interest received
Tax paid
Net cash flow from operating activities
Cash flow from investing activities
Capital expenditure
Exploration expenditure
Prepayment for Phase 1 the mLNG project
Receipt from interest in Badile land
Net cash flow from investing activities
Cash flow from financing activities
Net proceeds from equity issue
Loan drawdown
Interest payments
Lease payments
Net cash flow from financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note to Statement of
Cash Flows
for the year ended 31 December 2022
Cash flow from operations reconciliation
Profit for the year before tax
Finance revenue
(increase)/decrease in drilling inventories
(Increase)/decrease in receivables and prepayments
Increase/(decrease) in accruals and short-term payables
Reversal of impairment on development assets and exploration costs
Impairment of interest in Badile land
Depreciation
Share-based payments charge and remuneration paid in shares
Finance costs and exchange adjustments
Cash flow from operations
Notes
2022
£’000s
2021
£’000s
25
25
15
(3,928)
13
(7)
(3,922)
(1,519)
(399)
(4,272)
–
(6,190)
3,680
7,233
(431)
(58)
10,424
312
636
2,913
3,861
(1,513)
4
(42)
(1,551)
(959)
(454)
–
218
(1,195)
2,000
–
(878)
(31)
1,091
(1,655)
100
4,468
2,913
2022
£’000s
2021
£’000s
6,575
(13)
(92)
(2,071)
190
(5,678)
107
101
969
(4,016)
(3,928)
2,460
(4)
41
511
(841)
(4,024)
50
168
30
96
(1,513)
Non-cash transactions during the period included the issue of 17,901,146 ordinary shares, to members of staff and former
employees of the Company in settlement of vested Restricted Stock Units (RSU) awards, a one-time bonus to one
member of staff, and vested nil cost options. 1,617,621 ordinary shares were issued to third parties in settlement of £25,000
due for services provided.
The Group has provided collateral of $2.5 million (2021: $1.75 million) to the Moroccan Ministry of Petroleum to guarantee
the Group’s minimum work programme obligations for the Anoual, Greater Tendrara and Sidi Mokhtar licences. The cash is
held in a bank account under the control of the Company and, as the Group expects the funds to be released as soon as
the commitment is fulfilled, on this basis, the amount remains included within cash and cash equivalents.
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www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Company Statement of
Cash Flows
for the year ended 31 December 2022
Cash flow from operating activities
Cash flow from operations
Interest received
Net cash flow from operating activities
Cash flow from investing activities
Receipt from interest in Badile land
Advances to subsidiaries
Cash received from subsidiaries
Net cash flow from investing activities
Cash flow from financing activities
Net proceeds from equity issue
Loan drawdown
Interest payments
Lease payments
Net cash flow from financing activities
Net increase/(decrease) in cash and cash equivalents
Net foreign exchange difference
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Note to Statement of
Cash Flows
for the year ended 31 December 2022
Cash flow from operations reconciliation
Profit before tax
Impairment of interest in Badile land
Intragroup recharges
Finance revenue
Increase in receivables and prepayments
Increase/(decrease) in accruals and short-term payables
Depreciation
Share-based payments charge and remuneration paid in shares
Decrease in impairment and expected credit loss allowance on intercompany
loans
Finance costs and exchange adjustments
Cash flow from operations
Notes
2022
£’000s
2021
£’000s
(2,931)
11
(2,920)
–
(7,947)
991
(6,956)
3,680
7,233
(431)
(58)
10,424
548
378
595
1,521
(3,099)
2
(3,097)
218
–
162
380
2,000
–
(878)
(31)
1,091
(1,626)
(27)
2,248
595
15
2022
£’000s
2021
£’000s
18,581
107
(1,179)
(11)
(25)
135
58
969
(2,501)
(19,065)
(2,931)
3,309
50
(1,042)
(2)
(59)
(509)
32
30
(3,779)
(1,129)
(3,099)
Non-cash transactions during the period included the issue of 17,901,146 ordinary shares, to members of staff and former
employees of the Company in settlement of vested Restricted Stock Units (RSU) awards, a one-time bonus to one
member of staff, and vested nil cost options. 1,617,621 ordinary shares were issued to third parties in settlement of £25,000
due for services provided.
71
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements
for the year ended 31 December 2022
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 20 St Dunstan’s Hill, London EC3R 8HL.
(a) Basis of preparation
The financial statements of the Group and its parent Company have been prepared in accordance with UK-adopted
International Accounting Standards.
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 2022 were
authorised for issue by the Board of Directors on 3 May 2023.
Going concern
As at 31 March 2023, the Group’s cash balance was £2.6 million (including approximately £2.0 million held as collateral for
a bank guarantee against licence commitments). The Directors have reviewed the Company’s cash flow forecasts for the
next 12-month period to May 2024. The Company’s forecasts and projections indicate that, to fulfil its other obligations,
the Company will require additional funding. The Company commenced its Phase 1 of the Concession upon taking FID on
the micro-LNG project, and has continued to actively monitor the project schedule, costs and financing. The Company is
progressing Phase 2, pipeline led development of the Concession, and is in the process of arranging financing and other
elements necessary to enable the taking of Phase 2 FID. The Company continues to engage with its partner, ONHYM, for
payment of approximately £2.1 million for ONHYM’s share of expenditure on the Tendrara Production Concession as at
31 December 2022.
The need for additional financing indicates the existence of a material uncertainty, which may cast significant doubt about
the Group and Company’s ability to continue as a going concern. These financial statements do not include adjustments
that would be required if the Company was unable to continue as a going concern. The Company continues to exercise
rigorous cost control to conserve cash resources, and the Directors believe that there are several corporate funding
options available to the Company, including a farm-down on some of the Company’s licences, various debt funding
options together with settlement of outstanding Tendrara Production Concession receivable balance from ONHYM.
Furthermore, based upon the Company’s proven success in raising capital in the London equity market, and based on
feedback from ongoing financing discussions, the Directors have a reasonable expectation that the Company and the
Group will be able to secure the funding required to continue in operational existence for the foreseeable future, and
have made a judgement that the Group will continue to realise its assets and discharge its liabilities in the normal course
of business. Accordingly, the Directors have adopted the going concern basis in preparing the consolidated financial
statements.
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. The Group
based its assumptions and estimates on parameters available when the consolidated financial statements were prepared.
Existing circumstances and assumptions about future developments, however, may change due to market changes or
circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when
they occur.
Estimation and assumptions
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”) assets, impairment of development and production assets, investments, warrants, taxation and the estimation of
share-based payment costs.
E&E, development and production assets
When considering whether E&E assets are impaired, the Group first considers the IFRS 6 indicators set out in note 11.
The making of this assessment involves judgement concerning the Group’s future plans and current technical and legal
assessments. In considering whether development and production assets are impaired, the Group considers various
72
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements 1 Accounting Policies continued
impairment indicators and whether any of these indicates existence of an impairment. If those indicators are met, a full
impairment test is performed.
Impairment test
When value in use calculations are undertaken, management estimates the expected future cash flows from the asset
and chooses a suitable discount rate 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 11.
At 31 December 2022, the Company’s market capitalisation was £16.2 million, which is below the Group and Company’s
net asset value of £179.8 million and £168.4 million, respectively. Management considers this to be a possible indication
of impairment of the Group and Company’s assets. A significant portion of the Group’s net assets is the carrying value
of the development and producing assets and disclosures relating to management’s assessment of impairment for these
assets and the investment in subsidiaries are included in note 10, on the basis that the recoverability of the investment in
subsidiaries in the Company balance sheet is linked to the value of the development and producing assets as, ultimately,
the cash flows these generate will determine the subsidiaries’ ability to pay returns to the Company.
Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which
is the higher of its fair value less costs of disposal and its value in use. The fair value less costs of disposal calculation
is based on available data from binding sales transactions, conducted at arm’s length, for similar assets or observable
market prices less incremental costs of disposing of the asset. The value in use calculation is based on a discounted cash
flow model (‘‘DCF model’’). The cash flows are derived from the latest budgets, expenditure and price data in signed
gas sales agreements (for contracted gas sales volumes), market based price data (for uncontracted gas sales volumes),
project contract or agreed heads of terms, and the latest management plans on project phasing. The recoverable amount
is sensitive to the discount rate and gas price assumption as well as the Brent price assumption that impacts condensate
sales pricing in the DCF model. The carrying amount of the development and production assets and parent Company
investment in subsidiaries increased by approximately £5.1 million following a reversal of impairment during the year. The
key assumptions used to determine the recoverable amount of the development and production assets are disclosed in
note 10.
Share-based payments
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 (note 19).
Fair value of warrants
Significant judgement and estimation is also required in the determination of the fair value of warrants.
Taxation
The Group seeks professional tax and legal advice to make a judgement on application of tax rules on underlying
transactions within the Group or with third parties. Tax treatment adopted by the Group may be challenged by tax
authorities. In 2020, the Morocco tax authority informed the Group that it intended to claim taxes on historical acquisition
of licences in Eastern Morocco by the Group. The Group continues to believe that the Morocco tax authority has
misunderstood or misinterpreted the underlying transactions and appealed against the assessment. The matter is in Court.
In May 2021, the Group received notification from the Morocco tax authority of its intention to assess additional VAT and
withholding taxes on historical transactions of the Company’s subsidiary entity, Sound Energy Morocco SARL AU. The
Group appealed the assessment. Subsequent to period end, a settlement on the tax cases was agreed upon as disclosed
in note 8.
Intercompany loans
The Company has funded its subsidiaries through non-interest bearing loans payable on demand. Given that the Company
has no intention to call in the loans in the foreseeable future, the loans are classified as non-current investments. Other
source of estimate concern IFRS 9 on intercompany loans at parent Company level (note 13) but is not considered likely
subject to material change in the coming 12 months.
(b) Basis of consolidation
The Group financial statements consolidate the income statements, balance sheets, statements of cash flows and
statements of changes in equity and related notes of the Company and its subsidiary undertakings.
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www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements Notes to the
Financial Statements continued
for the year ended 31 December 2022
1 Accounting Policies continued
Investments in subsidiaries
Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies, is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. Such power, generally but not exclusively, accompanies a shareholding of more than one-half of
the voting rights. The Group uses the purchase method of accounting for the acquisition of subsidiaries. The cost of an
acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed
at the date of exchange. Costs of acquisition are expensed during the period they are incurred.
Separate financial statements
The Company has no intention to recall the intercompany loans in the foreseeable future and, therefore, classifies them as
investments in the Company balance sheet. On adoption of IFRS 9, the Company calculated the expected credit losses
on intercompany loans based on lifetime expected credit loss. The expected credit loss is re-evaluated when credit risk
significantly changes.
Investments in subsidiaries are recorded at cost, subject to impairment testing in the Group’s financial statements.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group, until the date that control
ceases.
(c) Foreign currency translation
The functional currency of the Company is GBP sterling. The Group also has subsidiaries whose functional currencies are
US dollar.
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.
On consolidation, 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.
(d) Oil and gas assets
The Group’s capitalised oil and gas costs relate to properties that are in the development, exploration and
evaluation stage.
As allowed under IFRS 6, the Group has continued to apply its existing accounting policy to exploration and evaluation
activity, subject to the specific requirements of the standard. The Group will continue to monitor the application of these
policies in the light of expected future guidance on accounting for oil and gas activities.
The Group applies the successful efforts method of accounting for E&E costs.
Exploration and evaluation assets
Under the successful efforts method of accounting, all licence acquisition, exploration and appraisal costs are initially
capitalised in well, field or specific exploration cost centres as appropriate, pending determination.
Expenditure incurred during the various exploration and appraisal phases is then written off unless commercial reserves
have been established or the determination process has not been completed.
Costs are initially capitalised as E&E assets. Payments to acquire the legal right to explore, costs of technical services and
studies, seismic acquisition, exploratory drilling and testing are capitalised as E&E assets.
Treatment of exploration and evaluation expenditure at the end of appraisal activities
Intangible E&E assets relating to each exploration licence/prospect are carried forward until the existence (or otherwise)
of commercial reserves has been determined subject to certain limitations including a review for indications of impairment.
If, however, commercial reserves have been discovered and development has been approved, the carrying value, after
any impairment loss, of the relevant E&E assets is then reclassified as development and production assets. If, however,
commercial reserves have not been found, the capitalised costs are charged to expense after the conclusion of appraisal
activities.
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www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements 1 Accounting Policies continued
Development and production assets
Development and production assets are accumulated, generally, on a field-by-field basis, and represent the cost of
developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures
incurred in finding commercial reserves transferred from intangible E&E assets, as outlined in the accounting policy above.
The cost of development and production assets also includes the cost of acquisitions and purchases of such assets,
directly attributable overheads, finance costs capitalised, and the cost of recognising provisions for future restoration
and decommissioning.
Impairment of development and production assets
An impairment test is performed whenever events and circumstances arising, during the development or production
phase, indicate that the carrying value of a development or production asset may exceed its recoverable amount.
The carrying value is compared with the expected recoverable amount of the asset, generally by reference to the present
value of the future net cash flows expected to be derived from the production of commercial reserves. The cash-
generating unit applied for impairment test purposes is generally the field, except that a number of field interests may be
grouped as a cash-generating unit where the cash flows of each field are interdependent.
Acquisitions, asset purchases and disposals
Acquisitions of oil and gas properties are accounted for under the purchase method when the transaction meets the
definition of a business combination or joint venture. Transactions involving the purchase of an individual field interest,
or a group of field interests, that do not qualify as a business combination are treated as asset purchases, irrespective of
whether the specific transactions involve the transfer of the field interests directly, or the transfer of an incorporated entity.
Accordingly, no goodwill arises, and the consideration is allocated to the assets and liabilities purchased on an appropriate
basis. Where asset purchases include the payment of additional variable payments, such as, net profit interests based on
future gas sales, a liability is recognised when the production and sale of gas commences.
(e) Expenses recognition
Expenses are recognised on an accruals basis unless otherwise stated.
(f) Property, plant and equipment
Fixtures, fittings and equipment are recorded at cost as tangible assets.
The straight-line method of depreciation is used to depreciate the cost of these assets over their estimated useful lives,
which is estimated to be three-to-five years.
(g) Borrowing costs
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that, necessarily, take a substantial period of time to get ready for their intended use or sale, are added to the cost
of those assets, until such time as the assets are substantially ready for their intended use or sale.
All other borrowing costs are recognised in profit or loss in the period in which they are incurred.
(h) Income tax
Current tax
The current tax expense is based on the taxable results for the year, using tax rates enacted or substantively enacted
at the balance sheet date, including any adjustments in respect of prior years. Amounts are charged or credited to the
income statement or equity, as appropriate.
Deferred tax
Deferred tax is provided, using the balance sheet liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred tax assets
are recognised to the extent that it is probable that future taxable results will be available, against which the temporary
differences can be utilised. The amount of deferred tax provided is based on the expected manner of realisation or
settlement of the carrying amount of assets and liabilities. Temporary differences arising from investments in subsidiaries
give rise to deferred tax in the Company balance sheet, only to the extent that it is probable that the temporary difference
will reverse in the foreseeable future, or the Company does not control the timing of the reversal of that difference.
75
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements Notes to the
Financial Statements continued
for the year ended 31 December 2022
1 Accounting Policies continued
Deferred tax is provided on unremitted earnings of subsidiaries to the extent that the temporary difference created is
expected to reverse in the foreseeable future. Deferred tax is recognised in the income statement, except when it relates
to items recognised directly in the statement of changes in equity, in which case it is credited or charged directly to
retained earnings through the statement of changes in equity.
(i) Cash and cash equivalents
Cash and cash equivalents include cash in hand and deposits held at call with banks. Cash and cash equivalents also
include restricted cash that has been placed as a guarantee for commitments on the licences.
(j) Financial instruments
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the
contractual provisions of the instrument. Trade receivables and other receivables are classified as “loans and receivables”. Loans
and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is
recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be
immaterial. Cash and cash equivalents comprise cash on hand and demand deposits, restricted cash and other short-term highly
liquid investments that are readily convertible to a known amount of cash, and are subject to an insignificant risk of changes in
value. Derivative financial instruments are measured at fair value. Financial liabilities and equity instruments issued by the Group
are classified according to the substance of the contractual arrangements entered into, and the definitions of a financial liability
and an equity instrument. Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction
costs, and are subsequently measured at amortised cost using the effective interest rate method. Warrants issued are measured
at their fair value on the date of issuance. An equity instrument is any contract that evidences a residual interest in the assets
of the Group after deducting all of its liabilities. The accounting policies adopted for specific financial liabilities and equity
instruments are set out below. Trade payables are initially measured at fair value and are subsequently measured at amortised
cost, using the effective interest rate method. Equity instruments issued by the Company are recorded at the proceeds received,
net of direct issue costs. Shares issued are held at their fair value on issue and are not subsequently remeasured.
(k) Share-based payments
The Group issues equity-settled share-based payments to certain employees. The fair value of each long term incentive
plan option or restricted stock unit (“RSU”) at the date of the grant is estimated using the Black–Scholes option-pricing
model based upon the exercise price, the share price at the date of issue, volatility and the life of the option or RSU. The
estimated fair value of the option or RSU is recognised as an expense over the options’ or RSU’s vesting period with a
corresponding increase to equity. No expense is recognised for awards that do not ultimately vest, except for awards
where vesting is conditional upon a market condition, which are treated as vested, irrespective of whether or not the
market condition is satisfied, provided that all other performance and/or service conditions are satisfied.
(l) Inventories
Inventories represent drilling equipment and materials remaining after drilling operations are completed. Inventory is
valued at lower of cost and net realisable value. The value of the inventory used during drilling operations is determined on
a weighted average basis.
(m) Leases
The Group assesses at contract inception whether a contract is, or contains, a lease, if the contract conveys the right
to control the use of an identified asset for a period of time in exchange for a consideration. The Group applies a single
recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The
Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the
underlying assets.
I. Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e. the date the underlying asset is
available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and
adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease
incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease
term, the recognised right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life
and the lease term. Right-of-use assets are subject to impairment.
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www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements 1 Accounting Policies continued
II. Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable,
variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value
guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised
by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option
to terminate. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the
period during which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease
commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date,
the amount of lease liabilities is increased to reflect the accretion of interest and is reduced for the lease payments made.
In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term or a
change in the assessment to purchase the underlying asset.
III. Short-term leases and leases of low value assets
The Group applies the short-term lease recognition exemption to its short-term leases of offices, vehicles and rented staff
housing (i.e. those leases that have a lease term of 12 months or less from the commencement date and do not contain
a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that
are considered of low value (i.e. below $5,000). Lease payments on short-term leases and leases of low-value assets are
recognised as an expense on a straight-line basis over the lease term.
(n) Standards, interpretations and amendments to published standards
Amendments to published standards
A number of amendments to standards and interpretations have been issued, but they had no material impact on the Group.
(o) Earnings per share
Earnings per share are calculated using the weighted average number of ordinary shares outstanding during the
period per IAS 33. Diluted earnings per share are calculated based on the weighted average number of ordinary shares
outstanding during the period, plus the weighted average number of shares that would be issued on the conversion of
all potentially dilutive shares to ordinary shares. It is assumed that any proceeds obtained on the exercise of any options
and warrants would be used to purchase ordinary shares at the average price during the period. Where the impact of
converted shares would be anti-dilutive, these are excluded from the calculation of diluted earnings.
(p) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate of the amount of the obligation can be made.
(q) Revenue recognition
Revenue associated with the production sales of natural gas is recorded when title passes to the customer on delivery to
the customer pipeline.
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www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements Notes to the
Financial Statements continued
for the year ended 31 December 2022
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 2022, the Group’s development, exploration and appraisal activities were primarily carried
out in 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 segments are included in the following tables.
Segment results for the year ended 31 December 2022:
Corporate
£’000s
Development
and production
£’000s
Exploration
and appraisal
£’000s
Other income
Reversal of impairment of development assets and exploration
costs
Administration expenses
Operating profit/(loss) segment result
Interest receivable
Finance costs and exchange adjustments
–
–
(3,175)
(3,175)
13
4,016
–
5,678
–
5,678
–
–
Profit/(loss) for the period before taxation from continuing
operations
854
5,678
43
–
–
43
–
–
43
The segments assets and liabilities at 31 December 2022 is as follows:
Development
and production
£’000s
Exploration
and appraisal
£’000s
167,346
2,141
(8,301)
35,988
1,413
Total
£’000s
43
5,678
(3,175)
2,546
13
4,016
6,575
Total
£’000s
204,278
7,778
(2,646)
(33,971)
Europe
£’000s
–
637
5
274
–
–
–
Morocco
£’000s
163,074
–
9
–
19
4,272
35,988
916
203,362
Non-current assets
Current assets
Liabilities attributable to continuing operations
The geographical split of non-current assets is as follows:
Corporate
£’000s
944
4,224
(23,024)
Development and production assets
Interest in Badile land
Fixtures, fittings and office equipment
Right of use assets
Software
Prepayments
Exploration and evaluation assets
Total
78
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
2 Segment Information continued
Segment results for the year ended 31 December 2021 were as follows:
Corporate
£’000s
Development
and production
£’000s
Exploration
and appraisal
£’000s
Other income
Reversal of impairment of development assets and exploration
costs
Administration expenses
Operating profit/(loss) segment result
Interest receivable
Finance costs and exchange adjustments
–
–
(1,695)
(1,695)
4
(96)
–
4,024
–
4,024
–
–
Profit/(loss) for the period before taxation from continuing
operations
(1,787)
4,024
223
–
–
223
–
–
223
The segments assets and liabilities at 31 December 2021 were as follows:
Non-current assets
Current assets
Liabilities attributable to continuing operations
The geographical split of non-current assets were as follows:
Development and production assets
Interest in Badile land
Fixtures, fittings and office equipment
Exploration and evaluation assets
Total
3 Other Income
Research and development expenditure credit
Corporate
£’000s
701
3,097
(20,669)
Development
and production
£’000s
Exploration
and appraisal
£’000s
139,628
244
(94)
31,598
1,326
(776)
Europe
£’000s
–
663
5
–
668
2022
£’000s
43
Total
£’000s
223
4,024
(1,695)
2,552
4
(96)
2,460
Total
£’000s
171,927
4,667
(21,539)
Morocco
£’000s
139,628
–
33
31,598
171,259
2021
£’000s
223
During the year, the Company’s subsidiaries received credit under the HMRC‘s Research and Development Expenditure
Credit (RDEC) scheme for qualifying activities undertaken in prior years.
4 Operating Profit/(Loss)
Operating profit/(loss) is stated after charging:
Depreciation
Employee costs
Reversal of impairment of development assets and exploration costs
2022
£’000s
2021
£’000s
101
1,860
168
780
(5,678)
(4,024)
79
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
5 Auditor’s Remuneration
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries pursuant to legislation
Other assurance services
Tax services
6 Employee Costs
Staff costs, including the Executive Chairman and Executive Directors
Share-based payments
Wages and salaries
Social security costs
Employee benefits
Employee costs capitalised to development and intangible assets
Total
The average monthly number of employees (including the Executive Chairman and
Executive Directors) was:
Technical and operations
Management and administration
Total
2022
£’000s
2021
£’000s
60
5
–
7
72
51
5
7
7
70
2022
£’000s
2021
£’000s
969
1,437
214
93
(853)
1,860
30
993
100
77
(420)
780
2022
Number
2021
Number
4
10
14
4
8
12
A proportion of the Group’s employee costs is capitalised to the cost of development, exploration and appraisal under
the Group’s accounting policy for these assets. During the year, approximately £0.8 million (2021: £0.4 million) of the
employee costs was capitalised.
7 Finance Revenue
Interest on cash at bank and short-term deposits
2022
£’000s
13
13
2021
£’000s
4
4
80
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
8 Taxation
(a) Analysis of the tax charge for the year:
Current tax
UK corporation tax
Adjustment to tax expense in respect of prior years
Tax cases settlement (overseas tax)
Total current tax (charge)/credit
Deferred tax credit arising in the current year
Total tax (charge)/credit
(b) Reconciliation of tax charge
Profit before tax
Tax (charge)/credit charged at UK corporation tax rate of 19% (2021: 19%)
Tax effect of:
Expenses not deductible for tax purposes
Settlement of tax cases
Temporary differences not recognised
Differences in overseas tax rates
Total tax (charge)/credit
2022
£’000s
2021
£’000s
–
(7)
(1,595)
(1,602)
–
(1,602)
2022
£’000s
6,575
(1,249)
(49)
(1,595)
1,276
15
(1,602)
–
(42)
–
(42)
–
(42)
2021
£’000s
2,460
(467)
(38)
–
451
12
(42)
Deferred tax assets have not been recognised in respect of tax losses available due to the uncertainty of the utilisation of
those assets. Unrecognised tax losses as at 31 December 2022 were estimated to be approximately £8.8 million (2021: £6.1
million).
In September 2022, Sound Energy Morocco SARL AU (‘‘SARL AU’’) a wholly owned subsidiary of Sound Energy Morocco
East Limited (‘‘SEME’’) received findings of the Local Tax Committee (‘‘LTC’’) that upheld the tax authority’s intended
assessment of approximately $21.4 million (excluding penalties and interest that may be levied) relating to the fiscal
years 2016 and 2017. The Group, having taken legal and tax advice, continues to believe that the assessment arises from a
misunderstanding of the historical licence relinquishment and intercompany funding arrangements and has appealed to
the Court where the case has been progressing.
On a separate tax case, in December 2022, SEME was notified of the judgement by the Court indicating that SEME’s
demand for the annulment of the LTC finding was rejected. The LTC had upheld the tax authority’s claim of tax liabilities of
approximately $2.5 million (excluding penalties and interests that may be levied), relating to the fiscal years 2016 to 2018,
alleging that there was a disposal of assets by SEME to its partner, Schlumberger, on entry to a brand-new petroleum
agreement for exploration at Grand Tendrara. In January 2023, SEME appealed against the judgement and the case has
been progressing in Court.
Post period end, in May 2023, the Company entered into a phased payment schedule with Morocco tax authority for
full and final settlement of the tax cases for undiscounted amount of approximately $2.45 million (£2.0 million). The
discounted amount is approximately $1.97 million (£1.63 million) with a current liability of approximately $152k (£126k) and
non current liability of approximately $1.82 million (£1.5 million). The tax settlement is subject to the Court agreeing that
the cases can be withdrawn.
81
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
9 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 year. The calculation of diluted profit/(loss) per share is based on profit/
(loss) after tax on the weighted average number of ordinary shares in issue, plus the weighted average number of shares
that would be issued if dilutive options, RSUs and warrants were converted into shares. Basic and diluted profit/(loss) per
share is calculated as follows:
Profit for the year after taxation
Basic weighted average shares in issue
Dilutive potential ordinary shares
Diluted weighted average number of shares
Basic profit per share
Diluted profit per share
2022
£’000s
4,973
2022
Million
1,752
7
1,759
2022
Pence
0.28
0.28
2021
£’000s
2,418
2021
Million
1,494
1
1,495
2021
Pence
0.16
0.16
Dilutive potential ordinary shares included in the calculation of diluted weighted average number of shares relates to nil
options granted during the year. LTIP options awards and warrants totalling 138.8 million (2021: 105 million) were all anti-
dilutive and were not included in the calculation of diluted weighted average number of shares.
82
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
10 Property, Plant and Equipment
Cost
At 1 January 2022
Additions
Disposal
Exchange adjustments
At 31 December 2022
Impairment and depreciation
At 1 January 2022
(Reversal)/charge for period
Disposal
Exchange adjustments
At 31 December 2022
Net book amount
Cost
At 1 January 2021
Additions
Disposal
Exchange adjustments
At 31 December 2021
Impairment and depreciation
At 1 January 2021
(Reversal)/charge for period
Disposal
Exchange adjustments
At 31 December 2021
Net book amount
Development
and
production
assets
£’000s
Fixtures,
fittings
and office
equipment
£’000s
Right-of-use
assets
£’000s
144,735
1,597
–
16,742
163,074
5,107
(5,678)
–
571
–
163,074
626
4
(3)
29
656
588
30
(2)
26
642
14
–
331
–
–
331
–
57
–
–
57
274
Development
and
production
assets
£’000s
Fixtures,
fittings
and office
equipment
£’000s
Right-of-use
assets
£’000s
142,447
997
–
1,291
144,735
9,204
(4,024)
–
(73)
5,107
139,628
778
–
(155)
3
626
665
77
(155)
1
588
38
150
–
(150)
–
–
119
31
(150)
–
–
–
2022
£’000s
145,361
1,932
(3)
16,771
164,061
5,695
(5,591)
(2)
597
699
163,362
2021
£’000s
143,375
997
(305)
1,294
145,361
9,988
(3,916)
(305)
(72)
5,695
139,666
Change in estimate
The discount rate and forecast gas price are significant estimates used by the Company to determine the recoverable
amount when undertaking impairment testing of the Company’s TE-5 Horst concession. The Company has taken account
of changes in the market conditions during 2022 and has, accordingly, revised the discount rate to 12.5% as at
31 December 2022 (2021: 10%). The Company previously used forecast gas price indexed to the Brent price for pricing the
forecast uncontracted gas sales volumes. Following significant changes in market conditions during the year, the Company
concluded that an average forecast gas price referenced to the Title Transfer Facility (‘‘TTF’’) in the Netherlands and the UK
National Balancing Point (‘‘NBP’’) is more representative of the conditions in the gas market instead of indexation to the
Brent price. Accordingly, the Company used an average of TTF and NBP forecast gas price for its impairment testing as at 31
December 2022.
83
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
10 Property, Plant and Equipment continued
The Company’s market capitalisation was £16.2 million as at 31 December 2022, which is below the Group’s net assets of
£179.7 million and the Company’s net assets of £168.4 million. An impairment indicator therefore exists. The Company is
pursuing a micro-LNG development (phase 1) followed by full field development (phase 2) of its TE-5 Horst concession
at the Group’s Tendrara licence and an impairment test was undertaken on the carrying amount of the TE-5 Horst
concession. The Company used a DCF model (‘‘Model’’) to calculate the recoverable amount for the Company’s share of
the TE-5 Horst concession. The Model has an NPV of $207.9 million (£171.8 million) which when compared to the carrying
amount of the development expenditure of £163.1 million indicated that no impairment was required and as a result a
reversal of previously recognised impairment of approximately £5.7 million was made.
The Model covers the period 2023 to 2049. The input to the Model included a discount rate of 12.5% and phase 1 gas price
of $8.0 per mmBTU rising to the phase 1 gas price ceiling of $8.346 per mmBTU, indexed using a combination of the TTF
and United States Henry Hub benchmark indexes. Phase 2 gas price used is a fixed price for the first 10 years for annual
volume of 0.3 bcm and the price for uncontracted volumes referenced to an average forecast price of TTF and NBP
with price range of $37.05 per mmBTU in 2023 and $17.41 per mmBTU in 2033, increasing at 2% per annum thereafter,
consistent with published sources. The base gas prices used are consistent with LNG GSA for the Phase 1 development
and Phase 2 gas price is based on GSA signed with ONEE for the first ten years. The production volumes data was based
on the 2018 CPR for TE-5 Horst.
The well cost assumptions used were based on management’s past experience; mLNG plant leasing costs were based on
contract with the micro-LNG plant contractor; and pipeline related costs were based on Head of Terms entered into with
a consortium of partners that had offered to provide a build, own, operate and transfer (‘‘BOOT’’) solution for the Phase
2 of the development. The Company’s latest forecast covered the period to 2027, but the model extends to 2049, as that
is the period required to produce the gas resources at TE-5 Horst concession and the economic cut-off. A change in the
discount rate by 1% has a $22.4 million (£18.5 million) impact on the NPV and change in average TTF and NBP forecast gas
price by $1/bbl has a $9.4 million (£7.8 million) impact on the NPV.
Exploration
& Evaluation
Assets
£’000s
Software
£’000s
2022
£’000s
42,556
836
3,577
46,969
42,204
813
3,577
46,594
10,606
10,958
–
–
10,606
35,988
14
(10)
10,962
36,007
352
23
–
375
352
14
(10)
356
19
11 Intangibles
Cost
At 1 January 2022
Additions
Exchange adjustments
At 31 December 2022
Impairment and depreciation
At the start of the year
Charge for the year
Exchange adjustments
At 31 December 2022
Net book amount
84
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
11 Intangibles continued
Cost
At 1 January 2021
Additions
Exchange adjustments
At 31 December 2021
Impairment and depreciation
At the start of the year
Charge for the year
Exchange adjustments
At 31 December 2021
Net book amount
Exploration
& Evaluation
Assets
£’000s
Software
£’000s
349
41,203
–
3
698
303
352
42,204
2021
£’000s
41,552
698
306
42,556
289
60
3
352
–
10,606
10,895
–
–
10,606
31,598
60
3
10,958
31,598
Exploration and evaluation assets
Details regarding the geography of the Group’s 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 2022, 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 and not be renewed;
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. During the year, the Group had capitalised interest
costs of approximately £0.1 million (2021: £0.1 million).
12 Prepayments
Non-current prepayment of £4.3 million relates to activities of the Company’s Phase 1 mLNG Project in the Concession.
85
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
13 Investment in Subsidiaries
Intercompany
loans
£’000s
2022
Cost of
shares in
subsidiaries
£’000s
Cost
At 1 January
Additions
Repayment of intercompany loans
Exchange adjustment
At 31 December
Credit loss allowance and impairment
At 1 January
Increase in credit loss
Impairment reversal
At 31 December
Net book amount at 31 December
186,687
8,754
(991)
22,369
216,819
22,189
2,605
(5,107)
19,687
197,132
–
–
–
–
–
–
–
–
–
–
Total
£’000s
Intercompany
loans
£’000s
186,687
183,819
8,754
(991)
22,369
216,819
22,189
2,605
(5,107)
19,687
197,132
1,138
(162)
1,892
186,687
25,968
318
(4,097)
22,189
164,498
2021
Cost of
shares in
subsidiaries
£’000s
–
–
–
–
–
–
–
–
–
–
Total
£’000s
183,819
1,138
(162)
1,892
186,687
25,968
318
(4,097)
22,189
164,498
The subsidiary companies of the Company at 31 December 2022, which are all 100% owned by the Company, are:
Name
Incorporated
Principal activity
Registered addresses
Sound Oil International Limited
British Virgin Isles Holding Company
Sound Oil (Asia) Limited
British Virgin Isles Holding Company
PO Box 173, Kingston, Chambers Road,
Tortola, VG 1110, British Virgin Islands
PO Box 173, Kingston, Chambers Road,
Tortola, VG 1110, British Virgin Islands
Arran Energy Holdings Limited
British Virgin Isles Exploration Company PO Box 662, Wickhams Cay, Road Town,
Mitra Energia Citarum Limited*
Mauritius
Tortola, VG 1110, British Virgin Islands
Exploration Company Fifth Floor, Ebene, Esplanade,
24 Cybercity, Ebene, Mauritius
Sound Energy Morocco SARLAU** Morocco
Exploration Company Espace Les Patios, Avenue Anakhil,
Sound Energy New Ventures
Limited
Sound Energy Sustainables
Limited
Sound Energy Morocco East
Limited
Sound Energy Morocco South
Limited
UK
UK
UK
UK
Dormant
20 St Dunstan’s Hill, London EC3R 8HL UK
Batiment 2, 1 er Etage, Hay Ryad, Rabat
Renewable Energy
20 St Dunstan’s Hill, London EC3R 8HL UK
Exploration Company 20 St Dunstan’s Hill, London EC3R 8HL UK
Exploration Company 20 St Dunstan’s Hill, London EC3R 8HL UK
Sound Energy Meridja Limited
UK
Exploration Company 20 St Dunstan’s Hill, London EC3R 8HL UK
* The investment in Mitra Energia Citarum Limited is held, indirectly, via Sound Oil International Limited.
** The investment in Sound Energy Morocco SARLAU is held, indirectly, via Sound Energy Morocco East Limited.
On the basis that the recoverability of the investment in subsidiaries in the Company balance sheet is linked to the value
of the development and production assets, as, ultimately, the cash flows these generate will determine the subsidiaries
ability to pay returns to the Company, an impairment reversal of £5.1 million (2021: £4.1 million) has been recognised for the
investment in subsidiaries following the recognition of a reversal of impairment in the development and production assets
(note 10).
On the adoption of IFRS 9, the Company calculated the expected credit losses on intercompany loans based on lifetime
expected credit loss. The expected credit loss is re-evaluated when credit risk significantly changes. Annually, the Company
uses available external data on oil and gas industry default rates, where available, or speculative bond default rates. The
Company used a cumulative default rate of 9.1% (2021: 9.0%), obtained from publicly available data published by leading credit
rating agencies. A loss of £2.6 million (2021: £0.3 million loss) was recognised in the income statement.
The Company has funded its subsidiaries through non-interest bearing loans payable on demand. Given that the Company
has no intention to call in the loans in the foreseeable future, the loans are classified as non-current investments.
86
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
13 Investment in Subsidiaries continued
Composition of the Group
Information about the composition of the Group at the end of the reporting period is as follows:
Principal activity
Gas exploration
Holding companies
Dormant
Renewable energy
Holding companies
Gas exploration
Holding companies
Gas exploration
14 Other Receivables
Group
UK VAT
Morocco VAT
Other receivables
Currency Analysis
US dollar
GBP sterling
Moroccan dirham
Company
UK VAT
Other receivables
Currency Analysis
GBP sterling
Place of incorporation
Place of operation
2022
Number
2021
Number
UK
UK
UK
UK
British Virgin Isles
British Virgin Isles
Mauritius
Morocco
Morocco
UK
UK
Morocco
British Virgin Isles
Morocco
Mauritius
Morocco
3
1
1
1
2
1
1
1
2022
£’000s
32
450
2,333
2,815
2022
£’000s
2,141
103
571
2,815
3
1
1
1
2
1
1
1
2021
£’000s
10
455
387
852
2021
£’000s
244
45
563
852
2022
£’000s
2021
£’000s
32
35
67
2022
£’000s
67
67
10
35
45
2021
£’000s
45
45
87
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
15 Cash and Cash Equivalents
Group
Cash at bank and in hand
Cash equivalents:
Short-term deposits
Carrying amount 31 December
Being:
In US dollar
In euros
In sterling
In Moroccan dirham
Total
Company
Cash at bank and in hand
Cash equivalents:
Short-term deposits
Carrying amount 31 December
Being:
In US dollar
In euros
In sterling
Total
2022
£’000s
361
3,500
3,861
2,309
48
1,472
32
3,861
2022
£’000s
88
1,433
1,521
15
48
1,458
1,521
2021
£’000s
1,358
1,555
2,913
2,553
20
298
42
2,913
2021
£’000s
336
259
595
291
20
284
595
The Group has provided collateral of $2.5 million (£2.1 million) (2021: $1.75 million (£1.3 million)) to the Morocco 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 the funds to be released as soon as the commitment is fulfilled, on this
basis, the amount remains included within cash and cash equivalents.
16 Trade and Other Payables
Group
Trade payable
Payroll taxes and social security
Accruals
2022
£’000s
713
95
1,060
1,868
2021
£’000s
671
44
785
1,500
88
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
16 Trade and Other Payables continued
Currency Analysis
US dollar
Euro
Sterling
Moroccan dirham
Company
Trade payable
Payroll taxes and social security
Accruals
Currency Analysis
Sterling
Euro
17 Lease Liabilities
Amounts due within one year
Amounts due after more than one year
The movement during the year is as below:
As at 1 January
Office lease entry
Interest accretion
Payments
As at 31 December
2022
£’000s
1,044
375
397
52
1,868
2021
£’000s
794
370
248
88
1,500
2022
£’000s
2021
£’000s
98
89
578
765
2022
£’000s
390
375
765
77
38
515
630
2021
£’000s
260
370
630
2022
£’000s
2021
£’000s
162
121
283
–
331
10
(58)
283
–
–
–
30
–
1
(31)
–
The Company signed a two-year lease for its London offices.
The right-of-use assets are reported within property, plant and equipment (note 10). During the year ended 31 December
2022, the amount recognised as short-term lease expenses, for the office lease in Morocco, was approximately £45,000.
89
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
18 Capital and Reserves
Group and Company
Ordinary shares – 1p
At 1 January
Issued during the year for cash
Non-cash share issue
At 31 December
2022
Number
of shares
1,848,702,674
£’000s
18,487
2021
Number
of shares
1,629,183,907
2022
Number
of shares
£’000s
16,292
2021
Number
of shares
1,629,183,907
1,326,244,389
200,000,000
19,518,767
159,731,651
143,207,867
1,848,702,674
1,629,183,907
Non-cash transactions during the period included the issue of 17,901,146 ordinary shares to members of staff and former
employees of the Company in settlement of vested Restricted Stock Units (RSU) awards, a one-time bonus to one
member of staff, and vested nil cost options. 1,617,621 ordinary shares were issued to third parties in settlement of £25,000
due for services provided.
Share issues
In May 2022, the Company issued 13,419,891 shares as one-time bonus to the Company’s Chief Operating Officer following
the delivery of all elements required to take FID for Phase 1 of the Concession and for establishing the commercial
framework for monetisation of Phase 2 of the Concession.
In May 2022, the Company issued 1,057,211 shares following vesting of historically awarded RSUs to members of staff and
former employees of the Company.
In May 2022, the Company issued 1,617,621 shares to third parties in settlement of £25,000 for services provided to the
Company.
In June 2022, the Company issued 200,000,000 shares at a price of 2 pence per share following an equity raise.
In June 2022, the Company issued 3,424,044 shares following the exercise of nil cost options by members of staff.
Reserves
In 2018, the Company sought, and was granted, a court order approving a capital reduction following the cancellation of
the share premium account. This resulted in the transfer of £277.7 million to distributable reserves.
90
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19 Related Party Disclosures
Key management
As at 31 December 2022, there were two key management personnel other than Directors of the Company (2021: two).
Details of the Directors’ remuneration are set out in the Report of Directors’ Remuneration. The table below shows the
total remuneration of key management personnel, including the Directors.
Salaries and employee benefits
Share-based payments
2022
£’000s
935
915
1,850
2021
£’000s
923
24
947
Key management (including Executive Directors) interest in share options
LTIP options awards by key management (including Executive Directors), at 31 December 2022, have the following expiry
dates and exercise prices:
2022
Expiry
date
2032
Exercise
price
Pence
2022
Number
2.4p
31,769,085
2021
Number
–
Nil cost bonus options awards by key management (including Executive Directors) at 31 December 2022 have the
following expiry dates and exercise prices:
2022
Expiry date
2022
Number
2027
15,064,750
2021
Number
–
Share options held by the Executive members of the Board of Directors at 31 December 2022 have the following expiry
dates and exercise prices:
2017
Expiry
date
2022
Exercise
price
Pence
67p
2022
Number
2021
Number
–
1,500,000
Key management’s (excluding Directors) interest in employee share options
2017
2017
Expiry
date
2022
2022
Exercise
price
Pence
67p
52.25p
2022
Number
–
–
2021
Number
300,000
500,000
Key management’s (including Executive Directors) interest in RSU awards
2018
2019
Settlement
date
2022
Number
2021
2022
–
–
2021
Number
310,548
520,992
91
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
20 Financial Instruments Risk Management
Objectives and policies
A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a financial liability
or equity instrument of another entity. The Group’s financial instruments comprise trade payables, loans and borrowings,
receivables, interest in Badile land, cash and short-term deposits. The main purpose of the financial instruments is to
finance the Group’s operations. The fair value of the financial instruments is their carrying value, with the carrying value
amounts included in the Group balance sheet with further analysis in note 14 (Other Receivables), note 15 (Cash and Cash
Equivalents), note 16 (Trade and Other Payables) and note 25 (Loans and Borrowings).
The table below sets out the Group’s accounting classification of its financial assets and liabilities.
Financial assets
Cash and short-term deposits
Other receivables and interest in Badile land
Financial liabilities
Trade and other payables
Loans and borrowings held at amortised costs
2022
£’000s
3,861
3,452
7,313
1,868
30,189
32,057
2021
£’000s
2,913
1,515
4,428
1,500
20,039
21,539
The Company classifies the fair value of the financial instruments according to the following hierarchy, based on the
amount of observable inputs used to value the instrument. The three levels of the fair value hierarchy are as follows:
• Level 1 – inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
• Level 2 – inputs to the valuation methodology are derived from quoted prices for identical assets or liabilities in
active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for, substantially,
the full term of the financial instrument. Level 2 valuations are based on inputs, including quoted forward prices
for commodities, time value and volatility factors, which can be, substantially, observed or corroborated in the
marketplace.
• Level 3 – inputs to the valuation methodology are not based on observable market data.
The main risks arising from the Group’s financial instruments are interest rate risk and foreign currency risk (note 21). The
Board of Directors reviews and agrees policies for managing each of these risks, which are summarised below:
Market risk
Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates, primarily, to the Group’s deposit accounts and
short-term debt instruments.
The Group’s policy is to manage this exposure by investing in short-term, low-risk bank deposits.
Capital management
The Group’s objective, when managing capital, is to safeguard the Group’s ability to continue as a going concern in order
to provide return for shareholders, benefit for other stakeholders, and to maintain optimal capital structure and to reduce
the cost of capital.
Management considers as part of its capital, the financial sources of funding from shareholders and third parties.
In order to ensure an appropriate return for shareholder capital invested in the Group, management thoroughly evaluates
all material projects and potential acquisitions and have them approved by the Board of Directors where applicable.
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20 Financial Instruments Risk Management continued
The Group monitors capital on a short and medium-term view. The table below illustrates the Group’s capital structure.
Borrowings
Cash and cash equivalents
Net debt
Total capital excluding reserves:
Equity share capital
Equity share premium
Shareholders’ equity
21 Foreign Currency and Other Risks
2022
£’000s
2021
£’000s
(30,189)
(20,039)
3,861
(26,328)
2,913
(17,126)
18,487
20,134
178,085
16,292
18,281
155,055
Foreign currency risk arises from the Group’s financial instruments (note 20). As a result of the majority of the Group’s
operations being denominated in US dollar (USD), the Group’s balance sheet can be impacted by movements in the USD
exchange rate against sterling (GBP). Such movements will result in book gains or losses, which are unrealised and will be
offset if the exchange rate moves in the opposite direction.
The GBP cost of the assets being acquired with the USD rises or falls, pro rata, to the currency movement, so the
purchasing power of the USD remains the same.
As the Group also holds some Moroccan dirham (MAD) and Euro (EUR) denominated assets at the end of the year, the
following table demonstrates the sensitivity to a reasonably possible change in the USD, EUR or MAD exchange rates, with
all other variables held constant, of the Group’s profit or loss before tax. Wherever possible, the Company holds the same
currency as our liabilities, thereby providing a natural hedge.
2022
2021
Increase/
(decrease) in
rate
Effect on
profit or loss
before tax
£’000s
Effect on
comprehensive
income
£’000s
Effect on
profit or loss
before tax
£’000s
Effect on
comprehensive
income
£’000s
Increase in USD/GBP exchange rate
Increase in EUR/GBP exchange rate
Increase in MAD/GBP exchange rate
Decrease in USD/GBP exchange rate
Decrease in EUR/GBP exchange rate
Decrease in MAD/GBP exchange rate
5%
5%
5%
(5%)
(5%)
(5%)
240
1,027
(28)
(240)
(1,027)
28
(7,435)
–
–
7,435
–
–
(100)
986
(26)
100
(986)
26
(6,657)
–
–
6,657
–
–
The sensitivity table demonstrates the effect of a change in exchange rate assumptions, while other assumptions remain
unchanged. In reality, such an occurrence is very unlikely due to the correlation between the factors. Furthermore, these
sensitivities are non-linear, and larger or smaller impacts cannot easily be derived from the results. The sensitivity analysis
does not take into consideration that the Group’s assets and liabilities are actively managed, and may vary at the time that
any actual exchange rate movement occurs.
Credit risk
The maximum credit exposure at the reporting date of each category of financial assets is the carrying value as detailed
in the relevant notes. The Group’s management considers that the financial assets that are not impaired for each of the
reporting dates are of good credit quality.
Liquidity risk
The Group and Company manage cash resources to ensure that sufficient funding is in place to settle obligations as they
fall due. Disclosure on going concern consideration is provided in note 1. For further details on the maturity of financial
liabilities, see note 25.
93
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Notes to the
Financial Statements continued
for the year ended 31 December 2022
22 Financial Instruments
Cash and short-term deposits
2022
Sterling
Euro
US dollar
Moroccan dirham
2021
Sterling
Euro
US dollar
Moroccan dirham
Floating
rate
£’000s
438
–
2,067
–
2,505
273
–
1,297
–
1,570
Fixed
rate
£’000s
1,009
–
–
–
1,009
–
–
–
–
–
Interest-
free
£’000s
Total
£’000s
Weighted
average rate
%
25
48
242
32
347
25
20
1,256
42
1,343
1,472
48
2,309
32
3,861
298
20
2,553
42
2,913
2.47
–
0.45
–
0.09
–
1.11
–
Euro cash balances have been converted at the exchange rate of €1.1298: £1.00 (2021: €1.1912: £1.00). Moroccan dirham
cash balances have been converted at the exchange rate of MAD12.589: £1.00 (2021: MAD12.526: £1.00). US dollar cash
balances have been converted at the exchange rate of US$1.2097: £1.00 (2021: US$1.3512: £1.00).
The floating rate cash and short-term deposits comprise cash held in interest bearing deposit accounts. The Group
carrying value of the financial instruments approximates the fair values.
23 Share-Based Payments
Group and Company
Expense arising from equity-settled LTIP and RSU awards
Bonuses paid in shares and nil cost options
2022
£’000s
159
810
969
2021
£’000s
300
––
300
LTIP Awards
During the year, the Company adopted a new long term incentive plan (the ‘’LTIP’’), designed to reward, incentivise and
retain the Company’s Executives and senior management to deliver sustainable growth for shareholders.
The maximum number of awards that may be issued under the LTIP from time to time will be limited to 3% of the
Company’s issued share capital on the date of grant of awards, and, together, with all other options issued by the
Company under any employee share scheme from time to time, will not exceed an aggregate of 15% of the Company’s
issued ordinary share capital in a rolling ten year period. Awards granted under the LTIP will, generally, be subject to a
three-year vesting period from the date of grant, the number of awards, ultimately, vesting dependent on the grantee’s
continued service and on additional performance conditions set by the Remuneration Committee.
The Company issued 48,875,515 options to subscribe for new ordinary shares under the LTIP, out of which 31,769,085
options were allocated to qualifying Executives and senior management and the balance of 17,106,430 was retained for
future allocations. The LTIP awards are exercisable at 2.4 pence per share and expire ten years after the grant.
The fair value of LTIP awards granted was estimated at the date of grant using a Black-Scholes model, taking account of
the terms and conditions upon which the awards were granted.
The expected life of the LTIP award is based on the maximum award period and is not necessarily indicative of exercise
patterns that may occur. Expected volatility was determined by reference to the historical volatility of the Company’s
share price over a five-year period. The expected volatility reflects the assumption that the historical volatility is indicative
of future trends, which may not necessarily be the actual outcome. The valuation assumed an expected life of ten years
and used the following additional assumptions for the LTIP awards granted during the year:
(i) Share price on grant date: 2.53 pence
(ii) Average risk free interest rate: 1.79%
94
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23 Share-Based Payments continued
(iii) Expected volatility: 99.11%
(iv) Assumed forfeitures: 0%
(v) Expected dividends: nil
No other features of the LTIP awards were incorporated into the measurement of fair value. The fair value of the LTIP
award granted was 2.26 pence. The remaining contractual life of the LTIP awards outstanding at 31 December 2022 is 9.3
years. If all the 31,769,085 LTIP awards were exercisable immediately, new ordinary shares equal to approximately 1.7% of
the shares currently in issue, would be created.
One time bonus and nil-cost options
In May 2022, the Company issued 13,419,891 shares as one-time bonus to a staff member and also granted 20,236,628
nil-cost options to employees in settlement of bonus awards. The nil-cost options vested immediately and expire five years
from the date of grant. The nil-cost options were recognised at fair value on grant date by reference to the closing share
price of the Company’s shares on the trading day prior to the grant of the options.
Share options
All previously outstanding share options expired during the year.
Share options outstanding at the start of the year
5,450,000
66.47
8,950,000
Weighted
average
exercise price
Pence
2022
Number
2021
Number
–
–
–
(5,450,000)
66.47
(3,500,000)
–
–
–
–
–
5,450,000
Share options granted
Share options expired
Share options exercised
Share options outstanding at the end of the year
RSU awards
All RSU awards vested or expired during the year.
RSU awards outstanding at the start of the year
Granted during the year
Expired during the year
Vested during the year
RSU awards outstanding at the end of the year
Weighted
average
exercise
price
Pence
44.93
–
22.29
–
66.47
2022
Number
2021
Number
1,165,400
1,487,765
–
(108,189)
–
–
(1,057,211)
(322,365)
–
1,165,400
The weighted average share price at the date of vesting of the RSU awards was 2.5 pence (2021: 1.9 pence).
Warrants
As at 31 December 2022, the Company had the following outstanding warrants to subscribe to the Company’s ordinary
shares.
2022
2022 Warrants
2021 Warrants
2021
2016 Warrants
2021 Warrants
Exercise price
Pence
Expiry date
Number
at 1 January
Granted/
(exercised)
Expired
2.75
13 June 2025
–
7,056,875
2.75 21 December 2027
99,999,936
–
99,999,936
7,056,875
–
–
–
Exercise price
Pence
Expiry date
Number
at 1 January
Granted/
(exercised)
30.00
21 June 2021
52,411,273
2.75 21 December 2027
99,999,936
152,411,209
–
–
–
Number at
31 December
7,056,875
99,999,936
107,056,811
Number at
31 December
–
Expired
(52,411,273)
–
99,999,936
(52,411,273)
99,999,936
95
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements
Notes to the
Financial Statements continued
for the year ended 31 December 2022
24 Commitment and Guarantees
At 31 December 2022, the Group’s capital expenditure commitment on its licences was, approximately, £8.1 million, for the
development, exploration and appraisal activities in the Group’s licences in Morocco. The Group had placed $2.5 million
collateral to guarantee to the Moroccan Oil Ministry for the minimum work commitments on its licences. In addition, the
Company has granted a parent Company guarantee totalling, approximately, £4.1 million for the work commitments.
25 Loans and Borrowings
Group and Company
Current liabilities
At 1 January
Amount converted into ordinary shares of the Company
Fair value of warrants issued
Amortised finance charges
Interest payments
Exchange adjustments
Reclassification from/(to) non-current liability
At 31 December
Non-current liabilities
At 1 January
Drawdown during the year
Amortised finance charges
Interest payments
Exchange adjustments
Reclassification (to)/from current liabilities
At 31 December
Secured
bonds
£’000s
Loan note-
Afriquia
£’000s
Total
2022
£’000s
–
–
–
–
–
–
1,121
1,121
20,039
–
1,245
(431)
1,123
(1,121)
–
–
–
–
–
–
–
–
–
7,233
324
–
656
–
–
–
–
–
–
–
1,121
1,121
20,039
7,233
1,569
(431)
1,779
(1,121)
20,855
8,213
29,068
2021
£’000s
24,709
(3,000)
(1,534)
1,564
(389)
(919)
(20,431)
–
–
–
810
(489)
(713)
20,431
20,039
The Company has €25.32 million secured bonds (the “Bonds”). The Bonds mature on 21 December 2027. The outstanding
principal amount of the Bonds will be partially repaid, at a rate of 5% every six months, commencing on 21 December
2023. Until maturity, the Bonds bear 2% cash interest paid per annum and a 3% deferred interest per annum to be paid at
redemption. The Company has the right, at any time until 21 December 2024, to redeem the Bonds in full for 70% of the
principal value then outstanding together with any unpaid interest at the date of redemption. The Company issued to the
Bondholders 99,999,936 warrants to subscribe for new ordinary shares in the Company at an exercise price of 2.75 pence
per share. The warrants expire on 21 December 2027. The Bonds are secured on the issued share capital of Sound Energy
Morocco South Limited. After taking account of the terms of the Bonds, the effective interest is approximately 6.2%.
During the year, the Company made drawdowns totaling $9.5 million from the Company’s $18.0 million 6% secured loan
note facility with Afriquia Gaz maturing in December 2033 (the ‘‘Loan’’). The drawn down principal bears 6% interest
per annum payable quarterly, but deferred and capitalised semi-annually, until the second anniversary of entry of the
Loan agreement. Thereafter, principal and deferred interest will be repayable, annually, in equal installments commencing
December 2028. The Loan is secured on the issued share capital of Sound Energy Meridja Limited. The weighted effective
interest of the drawdowns made during the year is, approximately, 6.2%.
96
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25 Loans and Borrowings continued
Reconciliation of liabilities arising from financing activities
2022
Long-term borrowings
Leases
1 January
2022
£’000s
20,039
–
Total liabilities from financing activities
20,039
2021
Long-term borrowings
Leases
1 January
2021
£’000s
24,709
30
Total liabilities from financing activities
24,739
Reconciliation of finance expense
Amortised finance charges
Unwinding of discount on lease
Less capitalised interest
Total external interest for the year
26 Interest in Badile land
Non-cash changes
Amortised
finance
charges
£’000s
1,569
10
1,579
Exchange
adjustments
£’000s
Office lease
entry
£’000s
31 December
2022
£’000s
1,779
–
1,779
–
331
331
30,189
283
30,472
Non-cash changes
Amortised
finance
charges
£’000s
Exchange
adjustments
£’000s
Issue of equity
and fair value
of warrants
£’000s
31 December
2021
£’000s
2,374
1
2,375
(1,632)
(4,534)
20,039
–
–
–
(1,632)
(4,534)
20,039
Cash flows
£’000s
6,802
(58)
6,744
Cash flows
£’000s
(878)
(31)
(909)
2022
£’000s
1,569
10
(133)
1,446
2021
£’000s
2,375
–
(69)
2,306
In 2018, the Company completed the sale of its Italian operations. As part of the divestment agreement, the Company
retained economic interest in Badile land (‘‘Badile Area 1’’ and ‘‘Badile Area 2’’). The Company was also obligated to fund
the Badile land restoration for a fixed amount. A buyer for the land was identified and, in March 2021, Badile Area 1 was
sold for €250,000 and, after taking account of the amount that had fallen due from the Company for remediation, the
Company received net proceeds of, approximately, €183,000. The sale of Badile Area 2 is expected to complete in 2023.
The sale of Badile Area 2 contemplates that the buyer takes over the remaining obligation relating to the land restoration.
The Company has taken account of the terms offered by the buyer and amounts that have fallen due from the Company
for remediation, and recognised an impairment charge of £107k as at 31 December 2022.
97
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Notes to the
Financial Statements continued
for the year ended 31 December 2022
27 Post Balance Sheet Events
In March 2023, the Company provided an update on progress being made in securing financing for the Company’s
Phase 2 development of the Concession. Significant progress had been made by the Company’s mandated lead finance
arranger, who had completed legal and technical due diligence in respect of the proposed financing. Whilst other aspects
of pre-financing were continuing, the parties were progressing to detailed financial structuring and had entered a further
amendment to the mandate and extended the deadline by which the parties would seek to negotiate binding terms
for the proposed financing to 28 April 2023. In April 2023, the Company announced that the lead finance arranger’s
credit committee consideration had been delayed and was not expected to be held prior to 28 April 2023. With the lead
arranger’s credit committee consideration of the financing re-scheduled, the parties continue to work in good faith in
advancing the financing.
Post period end, in May 2023, the Company entered into a phased payment schedule with Morocco tax authority for
full and final settlement of the tax cases for undiscounted amount of approximately $2.45 million (£2.0 million). The
discounted amount is approximately $1.97 million (£1.63 million) with a current liability of approximately $152k (£126k)
and non current liability of approximately $1.82 million (£1.5 million) (note 8). The tax settlement is subject to the Court
agreeing that the cases can be withdrawn.
98
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022Financial Statements List of Licences and
Interests
Other Information
Licence
Greater Tendrara
Status
Name
Permit Greater Tendrara
Type
Exploration
Tendrara
Anoual
Sidi Mokhtar
Permit
Permit
Permit
Tendrara
Exploration
Anoual
Exploration
Sidi Mokhtar
Exploration
Key Project or Prospect
WI
(%)
75
75
75
75
Area
(km2)
14,411
Operator
Sound Energy Morocco East
133.5
Sound Energy Morocco East
8,873
Sound Energy Morocco East
4,712 Sound Energy Morocco South
99
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Other information
Shareholder
Information
Dealing Information
Stock code: SOU.LN
Financial Calendar
Meetings
Annual General Meeting – June 2023
Announcements
2023 Interim – September 2023
2023 Preliminary – March 2024
Addresses
Registered Office
Sound Energy plc
20 St Dunstan’s Hill
London
EC3R 8HL
United Kingdom
Business Address
Sound Energy plc
20 St Dunstan’s Hill
London
EC3R 8HL
United Kingdom
Company Secretary
AMBA Secretaries Limited
400 Thames Valley Park Road
Reading
RG6 1PT
Website
www.soundenergyplc.com
Auditor
Crowe U.K. LLP
55 Ludgate Hill
London
EC4M 7JW
100
Stockbroker
SP Angel Corporate Finance LLP
35 Maddox St
Mayfair
London
W1S 2PP
Nominated Advisers
Cenkos Securities plc
6, 7, 8 Tokenhouse Yard
London
EC2R 7AS
Registrars
Link Asset Services
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL
www.soundenergyplc.comSound Energy plc Annual Report for the year ended 31 December 2022 Sound Energy plc
20 St Dunstan’s Hill
London
EC3R 8HL
United Kingdom
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