SOUND ENERGY PLC
ANNUAL REPORT & ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 2024
Company Number 05344804
Table of Contents Page
STRATEGIC REPORT ........................................................................................................................................................ 2
Chairman’s Statement ............................................................................................................................................................. 2
Our Marketplace ...................................................................................................................................................................... 5
Our Strategic Relationships ....................................................................................................................................................... 7
Business Model and Strategy ................................................................................................................................................ 10
Reserves and Resources ...................................................................................................................................................... 12
Portfolio Review..................................................................................................................................................................... 15
Micro LNG Project Review .................................................................................................................................................... 20
Financial Review .................................................................................................................................................................... 22
S172 statement ...................................................................................................................................................................... 24
Sustainable and Responsible Business ............................................................................................................................... 26
Principal Risks and Uncertainties ......................................................................................................................................... 30
CORPORATE GOVERNANCE .......................................................................................................................................... 34
Chairman’s Corporate Governance Statement ..................................................................................................................... 34
QCA Code Principles ............................................................................................................................................................ 35
Board Overview ..................................................................................................................................................................... 41
Board of Directors ................................................................................................................................................................. 42
Board Activities ..................................................................................................................................................................... 44
Health, Safety, Security & Environment Committee ............................................................................................................. 46
Audit Committee Report ........................................................................................................................................................ 47
Nominations and Remuneration Committee Report ............................................................................................................ 49
Directors’ Remuneration Report ........................................................................................................................................... 50
Directors’ Report ................................................................................................................................................................... 55
Statement of Directors’ Responsibilities .............................................................................................................................. 58
Independent Auditor’s Report ............................................................................................................................................... 59
FINANCIAL STATEMENTS ............................................................................................................................................... 64
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024 ............... 64
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2024 ...................................................................................... 65
COMPANY BALANCE SHEET AS AT 31 DECEMBER 2024 ................................................................................................. 66
GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024 ........... 67
GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024 ..................................................... 69
COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024 .............................................. 70
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 .............................................. 71
LIST OF PERMITS AND INTERESTS ............................................................................................................................... 99
SHAREHOLDER INFORMATION .................................................................................................................................... 100
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
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STRATEGIC REPORT
Chairman’s Statement
Introduction
2024 ended with the closure of a transformational transaction for Sound Energy PLC in which its subsidiary,
Sound Energy Morocco East Limited (SEME), was sold to Managem SA (Managem), a large Moroccan
based, pan-African mining company. This sale, of the Operating Company for Tendrara Concession (the
Concession) and the Anoual and Greater Tendrara exploration licenses, brings Sound significant funding
covering both development and exploration activities, as well as cash by way of the recovery of past
investments from January 2022 to December 2024, thereby materially increasing the Company’s cash
position and positioning the Company well for future revenue growth and potentially significant exploration
upside.
The micro LNG project activity at Tendrara is behind the initial 2024 delivery schedule due to the late delivery
of equipment and construction overruns by the main contractor. Despite good progress being made on
construction of the LNG storage tank, the construction supply chain and delivery of the key components
were challenged. At year-end, major packages had either arrived or were enroute to site. With Managem
now assuming operational responsibility for the Concession, value enhancing opportunities will continue to
be pursued to ensure delivery of LNG in 2025. The scheduled 2024 Sound-operated development activities,
including preparing the wells for production, were completed successfully with no lost time incidents and well
integrity maintained.
The Phase 2 pipeline gas project matured with entry into a binding agreement with Managem (for equity
development capital funding) for Sound Energy Meridja Limited by way of a development carry. The
Company has a binding gas sales agreement with ONEE (Office National de l’Electricité et de l’Eau potable)
and senior debt financing via Attijariwafa bank. Both are in place (effectiveness subject to certain conditions
precedent). In order to take the next step to enable the Concession joint venture partners to take a Final
Investment Decision (‘‘FID’’) and commence execution of the project, an update of the Front-End
Engineering & Design (‘‘FEED’’) study to get relevant 2025 costings and an optimised design is required. As
new operator, Managem plans to conclude all activities to undertake FID in 2025 - they have maintained
momentum by using their own project management team as well as former SEME staff, and Sound plc staff
are providing a comprehensive handover and continued support where required.
Exploration licenses are all in the process of extension and renewal. At year end we are awaiting the various
authorities’ final approval of the agreed licence amendments. Managem will operate the Anoual and Grand
Tendrara exploration licenses and have agreed to carry Sound’s costs on two exploration wells, one on each
licence. Sidi Moktar remains operated by Sound Energy through its subsidiary Sound Energy Morocco South
Limited (SEMS) and it is the intention of the company to progress a seismic survey over the licence in 2025
or early 2026. Logistics are such that until licenses are all fully approved by the various ministries, on-the-
ground works cannot take place.
During 2024, we announced a joint study programme with Getech, a market leader in subsurface data, to
evaluate natural Hydrogen and Helium potential in Morocco. We expect the study results in 2025.
During the year, the Company held regular shareholder meetings both online and in person. Shareholders
requested interactive sessions where they do not need to travel and therefore five live webinar Q&A sessions
were held and various video recordings answering questions submitted to the company took place. In 2025
regular engagements will be undertaken, as we continue to interact, listen and share information with our
shareholder community.
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Corporate
In August, we announced a small working capital bridge facility from 2i Partners which was available whilst
the Managem transaction was closing. This facility was not fully utilised, and the amounts drawn down were
repaid in December 2024, along with accrued interest.
During the year, the Company issued 117.5 million new ordinary shares (under its previous authorities) to
settle 2023 Convertible loan note obligations. At year end, accrued interest of £568,800 was outstanding.
ESG and keeping our people safe sits at the heart of our business and, as operations continued, we have
actively monitored and taken timely action on safety or environmental issues, reports or alerts, as have arisen.
The Company has a robust health and safety management system in place and works hand in hand with our
contractors and under the umbrella of our corporate environmental and safety standards. Our strong
monitoring and constant improvement of working practices has proved robust; we have had very few incidents
over the year; however, one contractor broke a leg falling from scaffolding that was marked not for use and
a driving accident offsite and out of working hours occurred. Any environmental issues are also recorded
and monitored. We instigated a CO2 study with a contractor in 2024 for its potential recovery and sale. A
modest 936 tCO2e were emitted in 2024 through diesel consumption which was primarily from heavy plant
and equipment used in the mLNG facility civil construction / ground works, dozers, graders, compactors and
the well workover operations on TE6 and TE7 completed by Star Valley 101.
Finally, we engage proactively with our local communities, and in 2024, we laid a water line to a local school
making running water available for the first time. We take steps not only to employ locals where we can, but
to keep relevant stakeholders and communities in Morocco informed about our activities. Good corporate
governance is maintained at all levels, and we are applying the revised QCA governance code during
reporting year 2025.
The Company continues to manage its financial resources prudently whilst making significant capital
investments in pursuing its strategy. The pathway to funding the company until the first revenues from Phase
1 is always under review and a variety of working capital sources are being evaluated. The transaction with
Managem provided cash to the Company, however, as Sound now has less operated activities very careful
cost management will continue to be applied in 2025 and moving forward. With significant debt on the
Company’s balance sheet, debt management will be a key focus for Sound in 2025.
Whilst new business opportunities were reviewed in 2024, the corporate focus was to deliver a sustainable
Tendrara position and to fund the company for its key development and exploration priorities. With the phase
2 funding pathway contractually agreed, the Company will focus more management attention on growth and
portfolio expansion to seek to accelerate its strategy of sustainable revenue generation.
In light of the agreed sale of SEME to Managem, the Company is required to compare the carrying value of
its intangible and development assets with their fair market value (less cost of disposal). The Company
determined that an impairment charge totalling £122.0 million was required for the retained development
assets.
Board
During 2024, the Board continued to meet regularly and oversee effective implementation of the Company’s
strategy. Simon Ashby-Rudd stepped down as a board member on the announcement of the transaction
with Managem. We thank Simon for his valued service, advice, and support to the Company particularly
during the major transaction. Post year end, Mohammed Seghiri resigned from the Company and Board to
join Managem SA, providing continuation of operations in Morocco. We thank Mohammed for his 8 years of
service with Sound and look forward to continuing our close co-operation in his new role. The board now
consists of one Executive and two Independent Non-Executive Directors.
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Summary
Significant progress has been made in advancing the sustainability of the Company through the
transformational transaction with Managem which brings a substantial co-venturer that will operate the
mLNG project, provide Sound Energy’s equity funding to take FID on the Phase 2 pipeline project and fund
two exploration wells for Sound. Sound is now able to evaluate further growth opportunities, either within the
current asset base or externally whilst seeking to further strengthen its portfolio and balance sheet.
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, revenue and progress for all our shareholders during
2025 and beyond, as we focus on material developments in transition energy.
Graham Lyon
Executive Chairman
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Our Marketplace
Gas and the Energy Transition
The market opportunity
As the global community advances the deployment of capital and technology to deliver an energy transition,
the outcomes of the United Nations COP28 emphasised the urgency of accelerating climate action. The
consensus highlighted the critical need to secure lower-carbon energy sources and transition away from
fossil fuels in a "just, orderly, and equitable manner." This momentum reinforces the role of natural gas as a
transitional fuel on the path towards a lower-carbon energy future.
In this context, Sound Energy's strategic position is strengthened by its ownership of Morocco's largest
onshore gas resource and its extensive, unrisked multi-TCF exploration potential in Eastern Morocco and
Sidi Moktar. These assets position the company to capture a significant share of the Moroccan gas market,a
market characterised by limited indigenous gas resources and substantial growth potential across industrial
applications, gas-to-power projects, and potential exports to Europe via the Gazoduc-Maghreb Europe
(GME) gas pipeline.
Gas and the opportunity for Sound Energy
Transitioning away from carbon-intensive energy supply requires the replacement of high carbon density
fuel stocks such as coal to fuels with relatively lower carbon emissions such as Liquified Natural Gas (LNG)
or piped gas. This is the opportunity for Sound Energy to connect industrial and power users to gas
resources previously seen as isolated from gas market supply or reliant on foreign imports. The gas market
that Sound Energy seeks to service and develop throws up considerable opportunity:
•
Following the cessation of gas exports to Morocco from Algeria in November 2021, the case for
enhanced supply security and indigenous gas production has become even greater. Our 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.
•
In the Moroccan National Energy Strategy, Sound Energy has been referred to as important 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
scarcer in-country, there is a further opportunity to supply more of the energy mix.
•
Morocco’s imports of natural gas from Spain through the GME pipeline rose by a 403% during 2023. In
2022 Morocco imported only about 1,881 GWh (0.16 BCM, 5.8 Bcf) of natural gas from Spain, in 2023 imports
increased to about 9,472 GWh (0.82 BCM, 29 Bcf)1. Imported natural gas from Spain has continued to
rise during 2024.
•
The Phase 2 pipeline gas project, under development at Tendrara, has the potential to offset at least 0.3
BCM per annum of imported natural gas
Moroccan liquefied petroleum gas (LPG) market demand is equivalent to 3.3 BCM (116 bcf) per annum of
natural gas. Commencing in May 2024, the Moroccan Government initiated the process of phasing out
subsidies on LPG, specifically butane gas2, to ease the fiscal burden on the State, which provided more than
US$ 2 Billion of LPG subsidies in 20223. While the government has begun reducing LPG subsidies, the
process is gradual and ongoing. The complete elimination of these subsidies is planned over several years to
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ensure economic stability and social equity. Given these developments, the Moroccan LPG market is expected
to undergo significant changes, with potential impacts on consumption patterns, import levels, and market
dynamics with particular opportunities for indigenous gas producers.
Our Phase 1 mLNG project is the means for the Company to generate long term and stable revenue in the
short term potentially offsetting 0.1 BCM per annum of imported LPG. There is strong and growing demand
for our LNG within Morocco. For shareholders this is a key phase for the business and will allow us to be less
reliant on external sources of funding, through long term revenue generation in a low (hydrocarbon) taxation
country.
Building on Phase 1, the Phase 2 pipeline gas project will allow the company to layer on growth, generate
increased revenues whilst servicing the burgeoning gas market.
1 https://www.cores.es/en/estadisticas (Corporación de Reservas Estratégicas de Productos Petrolíferos data 2023)
2 https://www.mapnews.ma/en/actualites/social/social-assistance-project-partial-withdrawal-butane-gas-subsidy-take-effect-monday
3 OPIS, a Dow Jones Company, 19 December 2023 Interview with Mohammed Rachid Idrissi Kaitouni, President of the Energy Federation in Morocco
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Our Strategic Relationships
Our key business relationships allow Sound Energy to achieve more than we could do alone. We hold
strong relationships with our partners, funders, offtakers and investors supporting us from investment
funding to project execution and delivery.
Managem SA
Phase 1 and Phase 2
Operating Joint Venture Partner
On the 10 December 2024, Sound Energy completed a partial divestment of the Company's Moroccan
assets by way of the disposal of the entire issued share capital of Sound Energy Morocco East Limited
(SEME) to Managem. SEME is the designated Operator of the Tendrara Concession, Grand Tendrara and
Anoual Exploration Permits.
Managem S.A. is a prominent Moroccan mining group with a strong presence across Africa. Established in
1930, the company specialises in the exploration, extraction, processing, and marketing of various mineral
resources. Its diversified portfolio includes precious metals such as gold and silver, base metals like copper,
zinc, and lead, as well as cobalt and its derivatives.
The company employs over 5,000 individuals of 22 nationalities, reflecting its international reach1. The
company is a subsidiary of Al Mada, a Pan-African private investment fund. Managem's strategic vision
emphasises sustainable development, technological innovation, and community engagement, aiming to
contribute positively to the economic growth of the regions in which it operates.
Under the terms of the divestment of SEME, Managem will provide equity funding to Sound Energy for the
Phase 2 development of the Concession, funding for two exploration wells in satisfying the work programmes
under the Exploration Permits, a contingent production payment and recovery of past expenditures in cash.
Afriquia Gaz
Phase 1
Funding/offtaker/investor
In 2021, the Concession Joint Venture entered into a binding take or pay Gas Sales Agreement (GSA) to sell,
to Afriquia Gaz, an annual contractual quantity of not less than 171,000 cubic metres of LNG per year
(approximately 100 million cubic metres a year of gas) for 10 years from first gas (from the Phase 1 project).
In 2021, Afriquia Gaz underpinned its relationship with Sound Energy plc by acquiring a 9.8% shareholding
in the Company through a £2 million placing and entered into a $18 million loan note agreement with the
Company, also in 2021, which was designed to meet the capital funding requirements of Sound Energy’s
Joint Venture Concession participants to bring the Phase 1 project onstream. As of 31 December 2024,
Afriquia Gaz held an interest in approximately 8.49% of Sound Energy plc’s current issued share capital.
1 https://www.managemgroup.com/en
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Oil and Gas Investment Fund
Investor
In January 2017, Sound Energy acquired the Eastern Morocco portfolio of Oil and Gas Investment Fund
(“OGIF”), and introduced OGIF as a second cornerstone investor, which enabled the Company to:
•
Consolidate its interests in Eastern Morocco’s prospective acreage.
•
Strengthen Sound Energy’s position in Morocco: OGIF is a Moroccan fund, owned by the seven
largest Moroccan financial institutions.
•
As of 31 December 2024, OGIF had an interest in approximately 12.76% of Sound Energy’s current
issued share capital.
National Office of Hydrocarbons and Mines
Permits/funding
•
The National Office of Hydrocarbons and Mines (“ONHYM”) is another key partner for Sound Energy.
•
ONHYM is a public institution with legal personality and financial autonomy under state supervision and
is responsible for the monitoring of permits for exploration and for funding the development jointly with
private partners in Morocco.
•
Sound Energy has a good relationship with ONHYM formalised through 4 Joint Ventures and Petroleum
Agreements (PA) below in each of which ONHYM holds a 25% equity interest:
1. Tendrara-Lakbir PA which governs the Tendrara Concession JV
2. Grand Tendrara PA which governs exploration work over the Grand Tendrara exploration permits
area
3. Anoual PA which governs exploration work over the Anoual exploration permits area
4. Sidi Moktar PA which governs exploration work over the Sidi Moktar exploration permits area
Office National de l'Electricité et de l'Eau Potable (ONEE)
Phase 2
Offtaker
The Tendrara Concession JV is maturing the second phase of pipeline led development of the Tendrara
Production Concession (Phase 2 development).
The joint venture partners entered into a binding GSA in respect of the Phase 2 development with Morocco's
state-owned power Company ONEE for the sale of natural gas from the Tendrara Production Concession
over a 10-year period. Under the GSA, the joint venture partners conditionally committed to producing,
processing and delivering gas from the Tendrara Production Concession, in accordance with required ONEE
gas specifications, to the GME Pipeline, for an annual contractual volume up to 350 million cubic meters of
natural gas per year for a period of 10 years, with an annual take or pay volume of 300 million cubic meters
at a fixed sales price.
As part of Phase 2 development financing, the joint venture partners are re-negotiating the GSA with ONEE
under the oversight of the Ministry of Energy Transition and Sustainable Development.
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Ministry of Energy Transition and Sustainable Development
The Moroccan Ministry of Energy Transition and Sustainable Development (METSD) is responsible for
advancing Morocco's energy policies towards sustainability, focusing on renewable energy development,
energy efficiency, and environmental stewardship. Under the leadership of Minister Leila Benali, METSD
has initiated several programs and partnerships to achieve these objectives of which the development of the
Tendrara Produciton Concession plays an important role. Throughout 2024 the joint venture partners have
engaged directly with the Minister to progress the development and maintain support of the Moroccan
Government at the highest level.
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Business Model and Strategy
Sound Energy is a Moroccan-focused transition energy company with a business purpose centred
on delivering value and sustainable cash generation through exploring, developing and producing energy.
As the world continues its journey towards lower carbon and sustainable energy solutions Sound Energy’s
investments are focused on supporting Morocco’s transition as part of this goal.
Growth
The Company’s growth focused strategy is centred on:
Short-term organic growth
•
Tendrara Phase 1 and Phase 2 gas developments
•
Tendrara Phase 1 and Phase 2 expansions – additional 2C resource gas sold
•
Establishing commercialising of known discoveries (e.g. SBK-1, TE-4 Horst)
•
Exploration potential surrounding the developments (e.g. M5)
Medium and long-term growth in the region
•
Gas or lower carbon oil
•
Renewables (where Sound has unique access)
−
Solar
−
Wind (own use in Eastern Morocco, expansion for grid)
•
Opportunistic or targeted asset or corporate acquisitions
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A sustainable business model with ESG at its core
EVALUATE
•
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
DEVELOP
• 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
PRODUCE
•
Natural gas production via Micro LNG or larger
projects at advantaged pricing to generate cash
and value for shareholders
RECYCLE AND GROW
• Recycle cash and leverage portfolio to fuel growth
• Leverage technical, financial and commercial skill sets
to build the portfolio
GOVERNANCE AND ETHICS
•
Committed to strong corporate governance to
strengthen our business and serve our
stakeholders
•
LSE growth market listed entity observing the
QCA code
PEOPLE
• Keeping our people safe
• Developing our people
• Promoting positive behaviours
• Training of Moroccan nationals
SOCIAL RESPONSIBILITY
• Creating local employment in developing countries
• Developing local infrastructure for communities
ENVIRONMENT
• LNG and piped gas development displacing coal and
LPG to lower Morocco’s carbon footprint and increase
security of supply
•
Respecting our environment and upholding high
environmental standards
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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 Resources2. 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 Resources2 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 Company.
Discovered Gas
Initially In Place (Bcf)
Contingent Resources
(Bcf)2
Contingent Resources
(Bcf)2
Segment
Name
Gross (100%) basis
Gross (100%) basis
Net to Company (20%) basis
Low
Mid
High
1C
2C
3C
1C
2C
3C
TE-5 Horst
(TAGI 1 & 2)
349
651
873
197
377
533
39.4
75.4
106.6
Summary table showing the range of Discovered Gas Initially In Place and Contingent Resources, gross, for
the Tendrara TE-5 Horst accumulation (TAGI Reservoir), within the Tendrara Production Concession.
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
At the point of the Final Investment Decision (“FID”) for each phase of the Tendrara TE-5 Horst development
project, it is permissible that a portion of these Contingent Resources can be converted into Reserves
(although the Company has not yet elected to do so following FID on Phase 1). 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 production. There should also be similar confidence that all produced streams can be sold,
stored, re-injected, or otherwise appropriately disposed
•
the necessary production and transportation facilities are available or can be made available
•
legal, contractual, environmental, regulatory, and government approvals are in place, or will be
forthcoming, together with resolving any social and economic concerns
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Exploration Potential for Eastern Morocco (Grand Tendrara and Anoual permit)
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 Grand Tendrara and Anoual permits.
These estimates are presented as GIIP 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.
The output of the basin modelling has allowed Sound Energy to update the estimated exploration potential
of the permit 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 GIIP.
The range of unrisked GIIP volume estimates from the basin model has been used to constrain and
consolidate the exploration inventory of features across the permit 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. These are all potential near term subsalt drilling opportunities within the Trias
Argilo-Gréseux Inférieur ("TAGI") gas reservoir, the proven reservoir of the Tendrara TE-5 Horst gas
accumulation within the Tendrara Production Concession.
Both SBK-1 and TE-4, drilled in 2000 and 2006 respectively, encountered gas shows in the TAGI 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 mechanical stimulation. TE-4 was tested in 2006 but did not flow gas to the surface.
Mechanical 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.
Commercial discoveries in the Grand Tendrara and Anoual Exploration Permits would have the potential to
be commercialised through the proposed development infrastructure centred on the Tendrara TE-5 Horst,
with sufficient capacity in the planned Tendrara Export Pipeline or as standalone projects.
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The table below summarises the exploration potential in these three planned drilling targets, expressed as
GIIP with an associated geological chance of success.
Target name
Unrisked Volume Potential Gas
Initially-In-Place (Bcf)
Gross (100%) basis
Chance of
success
Low
Best
High
Mean
TE-4 Horst Exploration
153
260
408
273
36%
SBK-1 Exploration
71
130
225
140
50%
M5 Exploration
332
800
1728
943
21%
Summary table showing the range of Unrisked GIIP, gross, for the Prospects TE-4 Horst, SBK-1 Structure and M5
with the corresponding geological Chance of Success.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 15 of 100
Portfolio Review
A blended portfolio of gas assets
Eastern Morocco
Tendrara Production Concession
Permit Area
The permit in which Sound Energy has a 20% interest is located close to the Gazoduc Maghreb Europe
(“GME”) pipeline, approximately 120 kilometres to the North of it. The 522 kilometre-long Moroccan section
is owned by the Moroccan State and operated by Office National des Hydrocarbures et des Mines (‘‘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 Argilo-Gréseux Inférieur (‘‘TAGI’’1) reservoir within the structural fault
block, termed the Tendrara TE-5 Horst, and sealed by the overlying salt. Reservoir characteristics are
significantly enhanced by the application of proven hydraulic stimulation techniques to increase gas flow
rates.
Ongoing and Planned Developments
Planned development of our discovered TE-5 gas to address gas demand in a phased manner is
progressing, with Phase I being the implementation of a micro-LNG development scheme (currently
underway) and a future Phase 2 being the development of a larger scale central processing facility (“CPF”)
and gas export pipeline to the GME pipeline.
Phase 1- Micro LNG Development
Supply of LNG displacing higher carbon footprint energy (such as heavy fuel, petcoke or imported
LPG)
Funding is 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 normal cubic metres of gas (approximately 3.5 billion standard cubic feet of gas
per year) over a ten-year period.
A binding gas sales agreement and associated funding are in place with Afriquia Gaz, one of the largest LPG
distributors in Morocco. There is a ten-year commitment from first gas to sell annual contractual quantity of 100
million Normal 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
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 and from 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
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 16 of 100
In March 2025 (post period-end), the Company announced that the mLNG project main contractor, Italfluid,
and the operator of the Tendrara Production Concession had agreed to amend their contractual arrangement
by terminating the vendor financed lease agreement entered into in 2020 and entering into an engineering,
procurement and Construction (EPC) contract. The parties are currently in advanced discussions to agree
an operations and maintenance contract.
Phase 2- Tendrara TE-5 Development
Concept – Processed gas flowing to the GME pipeline:
•
20 inch, 120km Tendrara Gas Export Pipeline (“TGEP”)
•
Tie-in to existing GME pipeline (Station M04), approved by the GME operator ONHYM, which took over
the GME operatorship at the end of Q4 2021
•
Pipeline EIA permit approved, and pipeline corridor fully secured. Lease agreements signed with the
landowners and the first lease payments have been paid
•
CPF EIA permit approved
•
Gas Sales Agreement (“GSA”) with ONEE (Office National de l’Electricité 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. Extended in 2023
•
Up to six horizontal wells planned to achieve First Gas (Phase 2)
•
Senior debt facility in place with Attijariwafa Bank (which is one of the top banks in Morocco and Africa),
and part of the Al Mada Group (the Moroccan Monarchy’s holding company) to fund a substantial part
of the Phase 2 project. Fully termed and binding senior debt facility in place (subject to fulfilment of
certain conditions precedent before FID)
Exploration
Grand Tendrara – two Triassic TAGI discoveries
Permit Details
Area
14,411 km2
Status
Petroleum Agreement: Exploration
Effective date
1 October 2018
Net interest
27.5%
Term
8 years
Resource Potential
Exploration potential in the Triassic TAGI1 reservoir of 7.52 Tcf gross/2.07 Tcf net
(arithmetical sum of mid-case un-risked GIIP2) identified in sub-salt concepts,
leads and prospects.
Permit Area
Surrounds the Tendrara Production Concession.
The permit in which Sound Energy has a 27.5% interest is located with access to the GME pipeline, situated
approximately 120 kilometres to the north of it. The 522 kilometres long Moroccan section is owned and
operated by the Moroccan State. The pipeline connects Morocco to Spanish/Portuguese gas grids as well
as Moroccan gas-fired-power stations.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 17 of 100
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 TAGI gas discoveries exist within the permit area:
•
SBK-1 tested by the previous permit 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/2.07 Tcf net (arithmetical sum of mid-
case un-risked GIIP2) 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 TAGI 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 Tendrara TE-5 Horst gas
accumulation and, accordingly, the Company believes this offers potential to develop commercial operations
elsewhere in the basin.
The gross exploration potential of these high-graded structures, expressed as GIIP, is as follows:
Unrisked Volume Potential Gas Initially in Place (Bcf)
Gross (100%) basis
Chance of
Success
Target name
Low
Best
High
Mean
TE-4 Horst Structure
153
260
408
273
36%
SBK-1 Structure
71
130
225
140
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 Transition and Sustainable Development and the Ministry of
Economy and 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
2.
Internal exploration potential estimates, arithmetical sum of mid-case unrisked Gas Initially In Place (“GIIP”)
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 18 of 100
Anoual
Permit Details
Area
8,873 km2
Status
Petroleum Agreement: Exploration
Effective date
8 September 2017
Net interest
27.5%
Term
10 years
Resource Potential
Exploration potential in the Triassic TAGI1 reservoir of 11.51 Tcf
gross/3.17 Tcf net (arithmetical sum of mid-case un-risked GIIP2)
identified in sub-salt concepts, leads and prospects
Permit Area
The permit in which Sound Energy has a 27.5% interest is located with 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 Spanish/Portuguese gas grids
as well as Moroccan gas-fired power stations.
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 TAGI reservoir of 11.51 Tcf gross/3.17 Tcf net (arithmetical sum of mid-case un-risked GIIP2)
identified in sub-salt concepts, leads and prospects.
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:
Unrisked Volume Potential Gas Initially In Place (Bcf)
Gross (100%) basis
Chance of
Success
Target name
Low
Best
High
Mean
M5 Exploration
332
800
1728
943
21%
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”)
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 19 of 100
Sidi Moktar
Permit Details
Area
4,712 km2
Status
Petroleum Agreement: Exploration
Effective date
April 2018
Net interest
75%
Term
10 years
Resource Potential
Unrisked exploration potential of 8.9 Tcf gross/6.68 Tcf net (arithmetical sum of mid-case un-
risked GIIP2) following interpretation of the historical 2D seismic identified in sub-salt leads
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 reservoirs.
Strategically, the Company has shifted its focus on the Sidi Moktar area towards what it believes has the
potential to be the most significant opportunity amongst the deeper Triassic TAGI1 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
Moktar permit and that the work programme for the initial period of the Sidi Moktar permit remained
unchanged.
Geology
There is initial un-risked exploration potential of up to 8.9 Tcf gross/6.68 Tcf net gas (arithmetical sum of
mid-case un-risked GIIP2) 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
the basis of 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.
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”)
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 20 of 100
Micro LNG Project Review
Progress in 2024
Sound Energy is a pioneer in Morocco in establishing an onshore small scale LNG solution providing gas to
the local market, assisting Moroccan industry in its energy transition, reducing the use of more polluting fuels
and CO2 emissions.
The micro LNG project involves three main parties:
•
Afriquia Gaz is responsible for taking the LNG produced by the facility to customers located in Morocco.
This will be achieved by the use of a dedicated fleet of LNG transport trucks. The majority of customers
are located on the Atlantic seaboard of Morocco some 1000 km to the west of the Tendrara field.
•
Italfluid GeoEnergy (Italfluid) is responsible for the design, construction, commissioning, operation and
maintenance of the gas processing and liquefaction plant. Post period end, Italfluid contract changed
from a vendor finance lease agreement to a standard engineering, procurement and contraction contract.
•
Sound Energy and its Concession partners, including Managem and ONHYM, are responsible for the
delivery of the following aspects of the project. Firstly, the raw gas gathering system from the wells TE-
6 and TE-7 to the mLNG facility, including the re-completion and upgrade of the wells. Secondly, the
construction of the access road to the facility for the LNG transport trucks. Thirdly, the drilling of a third
production well (TE-112) to be scheduled post first gas production.
On behalf of the Concession partners, Sound Energy released the Notice to Proceed (NtP) to Italfluid on 15
February 2022. The original target is to start LNG production in 2024. Since the NtP there have been
significant supply chain disruptions and cost escalation due to the events, principally the war in Ukraine and
Middle East, global inflation as a result of the COVID pandemic and the resultant effect on global supply
chains. These combined factors have placed significant scheduling and cost pressures on the contractor
Italfluid and the project delivery.
Sound Energy worked in 2024 with its project partners to mitigate the effects of external global events to
ensure that the project can progress safely. Most of the components of the mLNG facility are now
manufactured and are either already located in Morocco (Power Generation Equipment and Storage Tank)
or are ready to be shipped from the different workshops located around the world (USA, Asia and Europe).
For instance, one of the key liquefaction equipment (ColdBox) is on its way to Site. Italfluid confirmed to the
new Operator Managem that several other elements should arrive at site in the 1st quarter of 2025. The new
operator plans to start LNG production by the end of 2025, provided that no major event occurs and impacts
the plant readiness schedule.
The LNG storage tank is now at the final stage of construction at site and is expected to be tested before
the end of Q1 2025.
The construction of the access road was completed in 2024. The production wells of TE-6 and TE-7 required
specialised metallurgy for the production completions prior to long term gas production and were upgraded
with Cr13 steel tubing and are now ready to produce. The last operation of well clean-up is planned in the
1st half of 2025. The gas gathering system was fully designed in 2024 and the procurement has been started.
All pieces of equipment (Heater, valves, composite pipeline, instrumentation, etc.) should be delivered on
site as well in the 1st half of 2025.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 21 of 100
Operational progress
2025 is a key year for the project when LNG starts being produced and delivered to the offtaker Afriquia
Gaz.
Since the completion of the sale of SEME to Managem SA in December 2024, SEME has changed its name
to Mana Energy Limited and continues to be the operator of the Tendrara Production Concession.
In order to ensure a smooth handover and ensure that operations continue uninterrupted, Sound Energy
and Managem SA entered into a Transition Services Agreement (TSA), under which (the former) Sound
Energy COO, Mohammed Seghiri, was temporarily seconded to the Operator prior to joining them on a full-
time basis. Under the TSA, Sound Energy is to provide support services to the Operator in different areas
(e.g. geology, HSE, IT systems) till June 2025.
The following significant activities are scheduled for 2025:
1. Clean up operation of wells TE-6 and TE-7
2. Connecting the wells to the mLNG plant
3. Delivery, installation and connection of mLNG plant processing packages
4. Commissioning of the mLNG plant
5. Commencement of LNG sales
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 22 of 100
Financial Review
Income Statement
The pre-tax loss for the year from continuing operations was £150.8 million (2023: £7.2 million). The loss for
the year primarily relates to an impairment loss of approximately £122.0 million recognised during the year.
In light of the sale of SEME to Managem SA, the Company was required to compare the carrying value of
its intangible and development assets with the fair market value (less cost of disposal) which led to the
recognition of the impairment loss. Loss on discontinued operations amounted to approximately £24.2 million
after taking account the cash consideration received of £10.2 million and deferred consideration of £20.7
million. The deferred consideration represents the fair value of up to $24.5 million net carry through
Managem SA funding of the Group’s remaining 20% interest in future Concession Phase development, $1.5
million payable to the Group no later than one year after first gas from Concession Phase 2 development,
$3.6 million net carry through funding the Group’s remaining 27.5% Grand Tendrara permit interest in drilling
exploration well and $2.6 million net carry through funding the Group’s remaining 27.5% Anoual permit
interest in drilling an exploration well.
Administrative costs at £4.6 million were higher than 2023 administration costs (£2.3 million) reflecting an
increase in activities related to the divestment, non-cash excess of par value of shares issued over the fair
value and increase in staff costs.
Foreign exchange losses primarily related to intra-Group loans, which were partially offset by exchange
gains in US dollar denominated borrowings. Foreign exchange gains and losses arising from inter-company
loans that originated on acquisition of Moroccan permits are recognised in the other comprehensive income
section of the statement of comprehensive income.
Cash Flow/Financing
Cash inflow from disposal of SEME, net of cash sold with the subsidiary amounted to approximately £9.2
million.
Proceeds from borrowings were approximately £5.8 million (2023: £4.4 million) and interest paid amounted
to approximately £1.2 million (2023: £0.4 million). The Company commenced payment of interest on the
Afriquia loan facility from Q2 2024 and the total interest paid during the year relating to this facility amounted
to £0.6 million.
In Q3 2024, the Company entered into a short-term bridge financing facility with a high-net-worth investor for
up to £1.5 million, available for three months and any amount drawn down attracted interest of 15% per
quarter. The Company made drawdowns amounting to £1.1 million which attracted interest of £133,000. The
principal and interest amounts were repaid in December 2024. The Company also repaid £0.25 million, being
the remaining principal element of the convertible bond, leaving approximately £0.6m of accrued interest
outstanding.
Financing costs during the year were £2.3 million (2023: £1.9 million), primarily due to the amortised costs
of the Company’s Euro denominated loan notes, the US dollar Afriquia loan facility and unwinding of discount
related to convertible bonds, net of interest capitalised to the development and exploration permits of £0.2
million (2023: £0.3 million). The increase in finance costs arose principally due to a further $6.0 million
drawdown from the Afriquia facility.
The Group spent £5.4 million (2023: £2.9 million) on investing activities during 2024 primarily related to the
Group’s Micro-LNG project with the balance relating to expenditure on the Group’s exploration permits in
Morocco and capitalised general and administrative expenses.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 23 of 100
Balance Sheet
As at 31 December 2024, the carrying amount of property, plant and equipment was £10.5 million (2023:
£157.9 million), primarily related to the development and production assets in Morocco with a carried value
of £10.5 million (2023: £157.8 million). The decrease from the previous year is primarily due to the
impairment loss recognition and disposal of SEME.
Intangible assets, with a carrying amount of £14.1 million (2023: £35.0 million), primarily relates to the
Group’s investment in its exploration permits in Morocco. The decrease from previous year is primarily due
to the disposal of SEME.
Non-current prepayments of £1.5 million (2023: £5.1 million) relate to the Group’s Phase 1 mLNG project.
Deferred consideration receivable of £21.0 million relates to the elements of SEME disposal consideration
receivable in the future as described under the income statement section. The carrying amount on the
balance sheet includes the effect of foreign exchange movements.
Other receivables, amounting to £3.2 million (2023: £0.9 million), are primarily related to the amount
receivable for services provided by the Company supporting the joint operations and cash calls paid in
advance of work being undertaken on our Morocco permits and recoverable VAT.
Trade and other payables amounting to £3.7 million (2023: £2.5 million) primarily related to accruals for
advisers’ fees in respect of the SEME disposal, staff costs accrual and accruals for operations in the Group’s
permits in Morocco.
During 2024, the Company issued 117,500,000 ordinary shares following the conversion of £1,175,000 of
accrued interest by convertible bonds holders.
Going Concern
As detailed in note 1 on page 71, the Company’s cash flow forecasts, for the next twelve-month period to
April 2026, 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 regarding the Company’s ability
to continue as a going concern.
Garry Dempster
Chief Financial Officer
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 24 of 100
S172 statement
Directors’ Statement under Section 172 (1) of the Companies Act 2006
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 32.
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 benefit 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 on 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.
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.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 25 of 100
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 is aware
of the updates to the QCA code made in 2023 which will apply to the Company from 1 January 2025. 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. 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 corruption 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.
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.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 26 of 100
Sustainable and Responsible Business
In 2023 we defined the metrics we measure to demonstrate our commitment to the outcome of the ESG
materiality assessment we undertook against the United Nations Sustainable Development Goals.
In 2024 we began to track the metrics we set the previous year.
Environmental
CO2 Emissions
347 m3 of diesel was used within our operations in 2024, which corresponds to 936 tCO2e. Our diesel
consumption was primarily from heavy plant and equipment used in the mLNG facility civil construction /
ground works, dozers, graders, compactors and the well workover operations on TE6 and TE7 completed
by Star Valley 101.
Environmental Impact Assessment Monitoring
Our Tendrara mLNG development project has an Environmental and Social Impact Assessment and PSSE
(Program de Surveillance et de Suivi Environmental) approved by the Moroccan Ministry of Energy Transition
and Sustainable Development. Our environmental consultant in Morocco, Resing, conduct monthly
compliance audits of the approved environmental management plan.
Social
Local Content
Our workforce in Morocco including subcontractors are over 98% Moroccan nationals. We try to use local
labour and supply chains wherever we can.
Stakeholder Engagement
We record the number of stakeholder engagements with the local authorities and representatives in the area
in which are impacted by our operations.
During 2024 we provided running water supply to the local school in Tendrara.
Community Grievances
We received no grievances from the local community in which we operate in 2024. If any grievances were
to occur, we a have a process involving the local authorities to ensure a satisfactory resolution.
Local Community Monitoring
As the area in which we operate is inhabited by semi-nomadic herders we regularly monitor the movements
of the local population to ensure our operations are not having a detrimental effect on the local population.
Governance
Compliance Training and Compliance Risk Assessments
In 2024 we conducted internal training with our staff covering:
Whistle Blowing Policy
Securities Dealing Code
Statement of Ethics
Anti Bribery and Corruption
All our contracts include clauses that require the highest ethical behaviour from our contractors.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 27 of 100
Health, Safety, Security and Environment
2024 Overview
2024 saw a significant increase in operational activity at Tendrara with a 25% increase in working hours.
Italfluid along with their subcontractors Cryospain and Fratelli Met made significant progress on the LNG
storage tank construction completion of the inner stainless-steel tank. TIEC, our civil engineering contractor
completed the 8km site access road to permit the LNG transport tankers to access the site. Star Valley rig
101 recompleted gas wells TE6 and TE7 with corrosion resistant production tubing in preparation of
commissioning and production operations.
Health
Field medical support is assured by the constant presence of a doctor and ambulance working from a fully
equipped emergency medical clinic at Tendrara to cover our remote area operations. Medical fitness for work
certificates are required for all personnel working in Tendrara.
Safety
We closely monitor all the safety aspects of our operations at Tendrara. All subcontractors are required to
have dedicated safety personnel and adhere to site control of work processes.
In October 2024 we unfortunately had a Lost Time Incident occur when a contractor jumped from an
uncertified scaffold causing a fracture to his lower leg. This incident resulted in a Lost Time Frequency Rate
of 4.95 at the end of 2024 (6.45 2023).
Security
One security review visit was conducted in 2024. Frequent liaison with local security authorities in the area
is conducted and we have day and night access control and overwatch of our assets in Tendrara. The
security situation in Morocco remains stable with no threats to Sound Energy assets in country.
HSSE Reporting Data
We gather a range of HSSE data and aim for continuous improvement by setting objectives following our annual
HSSE performance review.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 28 of 100
Total Man-hours 2024 – 201,986 (2023: 155,553)
Sound Energy & Contractors
HSSE Data
1.
Lagging Indicators - Incidents
2024
2023
Fatality
0
0
Lost Time Injury
1
1
Restricted Work Case
0
0
Medical Treatment Case
0
0
First Aid Case
1
2
Property Damage
1
2
Environmental Incident
0
0
Near Miss
3
2
High Potential Incident
3
1
Lost Workdays
1
10
Lagging indicators show similar results to 2023 despite having worked 25% more hours.
2.
Leading indicators
2024
2023
Audits & Inspections
877
284
HSSE Meetings
44
24
Inductions
302
86
Emergency Drills
25
9
Job Safety Analysis
507
540
Toolbox Talks
694
372
SHOC Cards
297
209
Management Tours
3
3
Leading indicators showed a significant improvement in 2024 in comparison to 2023.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 29 of 100
3.
Environmental Data
2024
2023
Diesel Consumed (m3)
347
118
Water Consumed (m3)
13,148
13,740
Total Barrels Spilled
0
0
CO2 Produced (tCO2e)
936
317
No environmental incidents occurred in 2024. The increased levels of consumption are associated with the
increased activity at site.
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 30 of 100
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 Company’s risk appetite as
well as managing both risks and opportunities to and for 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 bi-annual 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 2024.
Removed or Changed:
Facilities Funding and Failure of proposed Eastern Morocco farm-out risks (removed following completion of
sale of Sound Energy Morocco East Limited to Managem SA).
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 31 of 100
Risk
Impact
Control measure
Owner
1 Limited diversification
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
• Profitability and cash flow
• Increased risk profile
• Limited platform for growth
• Reduced appetite for
investment in the Company
• Build strong relationships with
partners, advisors,
governments, local authorities,
local population and other
stakeholders
• Active new business
development programme
• Working with financial advisor
to screen opportunities
Chairman
2 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
• Reservoir distribution and
effectiveness, hydrocarbon
saturation and H2S risk in
respect of Jurassic carbonate
reservoirs in Sidi Moktar
• Comprehensive geophysical
surveying, data analysis, and
modelling integrated with
geological and reservoir
engineering studies to
improve reservoir
understanding throughout the
basin
• Independent resources
certification
Chairman
3 Share price weakness
• Vulnerability to hostile takeover
at materially less than asset
value
• Difficulty raising finance to
support and grow business
• Strengthen investor appetite
and share price through
delivery of business plan,
diversification and growth
Chairman
4 Major HSSE event
• Loss of life or injury to
personnel
• Environmental impact
• Reputational damage
• Exposure to litigation
• Financial and operational
losses
• Highly skilled, competent, and
qualified personnel and
subcontractors. Training
provided as required
• Management and Board
commitment. Experienced
corporate HSSE Manager
• Robust operational HSSE
processes and procedures
• HSSE Committee reviews and
regular HSSE meetings and
engagements
• Insurance cover
Chairman
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Annual Report 2024
Page 32 of 100
Risk
Impact
Control measure
Owner
5 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
• 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
6 Insufficient funds to
operate and sustain the
business
• Capital constraints due to
insufficient funding of work
programme, potential impact to
long-term viability of business
• Insufficient working capital to
sustain the business as a going
concern
• Active engagement with capital
markets and financing streams
to raise capital
• Long-term cash flow
management
• 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
Chairman
7 Capital project cost
inflation
• Delay in implementation of
Phase 1 and Phase 2
developments
• Diminution in value of capital
projects due to cost escalation
and additional project
management
• Monitor and maintain
contractual arrangements
• Apply disciplined cost control
and project management
• Explore contingent funding
options
Chairman
STRATEGIC REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 33 of 100
Annual Report 2024
Risk
Impact
Control measure
Owner
8 Delayed execution
of Phase 1
• LNG SPA exposure due to late
delivery (potential penalties)
• Delayed revenues due to delayed
gas sales
• Regular monthly reporting and
contract management
• Close collaboration with gas
buyer and key suppliers
• Effective project management
in place
COO
9 Failure to satisfy
exploration permit
commitments
• Delay or inability to unlock
exploration and appraisal
potential within Moroccan
portfolio
• Penalties for inability to satisfy
permit commitments
• Active farm-out discussions
ongoing to seek a partner
• Close collaboration with
ONHYM to extend or amend
permit terms
• Effective project management
in place
COO
10 Escalation of
tensions with Algeria
in border area
• Potential for escalation to reduce
investment appetite, delay
projects, harm people
• Actively monitor geopolitical
events
• Emergency evacuation plan in
place and communicated to
key personnel
COO
The Strategic Report was approved by the Board of Directors on 9 April 2025 and signed on its behalf by:
Graham Lyon
Executive Chairman
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 34 of 100
Annual Report 2024
CORPORATE GOVERNANCE
Chairman’s Corporate Governance Statement
Dear shareholders
As Executive Chair of the Company, I am responsible for ensuring that high standards of governance are
upheld. This involves working closely with my fellow Board members to foster a culture of strong corporate
governance throughout the organisation, instilling positive values and behaviours. My role is to lead the
Board and ensure its effectiveness in driving the Company's governance. We have established a robust and
effective corporate governance framework, which is implemented across all levels of the business, from the
Executive team down.
This report, along with the reports from the Audit, HSSE, and Remuneration & Nomination Committees,
reflects our ongoing commitment to upholding high standards of governance.
The Company follows the Quoted Companies Alliance Corporate Governance Code 2018 (the ‘QCA Code’),
which we believe is the most suitable governance framework for a Company with shares listed on the AIM
market of the London Stock Exchange. The QCA Code provides us with the structure needed to maintain an
appropriate level of governance and embed a strong governance culture throughout the organisation,
contributing to the development of a successful and sustainable business for all stakeholders. The Board are
fully aware of the updates made to the QCA Code in 2023 and we have sought to align with its revised
principles, as far as possible, as outlined on page 35.
The success of the business relies on a united Board that works to deliver value to shareholders while
maintaining a strong focus on employee welfare, safety, corporate governance, and environmental
responsibility. We place great importance on our relationship with shareholders and value their engagement.
The Board ensures opportunities for investors to connect with both the Board and Executive Directors,
offering a mix of virtual and in-person meetings. This year, we hosted live Q&A sessions, recorded video
interviews, and organised a face-to-face meeting with shareholders after the AGM, which saw approximately
50 attendees.
We enjoyed meeting with our shareholders and stakeholders in person at our AGM and look forward to
doing this again in 2025.
Graham Lyon
Executive Chairman
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 35 of 100
Annual Report 2024
QCA Code Principles
Introduction
The Board of Directors understands the critical role of effective corporate governance and has adopted the
Quoted Companies Alliance Corporate Governance Code (2018) (the “QCA Code”) as the most appropriate
framework for a company listed on the AIM market of the London Stock Exchange. The Board believes the
QCA Code offers a solid foundation to uphold strong governance practices, fostering a culture that supports
the Company’s long-term success and sustainability for the benefit of all shareholders.
The QCA Code, as updated in 2023, outlines ten principles of corporate governance, which the Company is
required to adhere to and to make certain disclosures both within this report and on its website. This has
been updated to comply, as far as possible, with the 2023 QCA Code. The Company’s website disclosures
can be found under the Aim Rule 26 section of the Company’s website.
These principles are:
QCA
Code
Principle
Number
QCA Code
Principle
Disclosure
One
Establish a
purpose,
strategy and
business
model which
promotes
long-term
value for
shareholders
a) Explain the Company’s purpose, business model and strategy including key challenges in
their execution.
Comment
a) See the Strategic Report on pages 10 to 11 and the Company’s website.
The Company’s purpose is to create Value for Shareholders working with Stakeholders through exploring, developing and
producing energy.
Two
Promote a
corporate
culture that is
based on
ethical values
and
behaviours
a) Describe the desired company culture within the strategic report. How is the desired corporate
culture supportive of the Company’s purpose, strategy, and business model? How is the tone
from the top (board, chief executive, and senior management) supportive of this culture? How
does the board assess and monitor corporate culture and how were any actions which notably
deviated from what is expected addressed?
Comment
a) The directors are committed to delivering shareholder value in an ethical, safe and respectful manner. These values and
behaviours are applied across the Board and the Company as a whole. The Board is mindful of the industry and jurisdictions in
which the business operates in and takes all issues of ethical behaviours seriously. These behaviours are instilled throughout
the organisation. The importance of delivering success in a safe environment is never undermined.
Governance structures and processes that are fit for purpose and support good decision-making by the Board are maintained.
Policies, procedures are in place moreover best practice is supported.
Issues of bribery and corruption are taken seriously, the Company has a zero-tolerance approach to bribery and corruption and
has an anti-bribery and corruption policy in place to protect the Company, its employees and those third parties with which the
business engages with. The policy is provided to staff upon joining the business and training is provided to ensure that all
employees within the business are aware of the importance of preventing bribery and corruption. Each employee is required to
sign an agreement to confirm that they will comply with the policies. Annually staff are provided with refresher courses to ensure
that the issues of bribery and corruption remain at the forefront of people’s minds. There are strong financial controls across the
business to ensure on going monitoring and early detection.
A whistleblowing policy is in place, which enables staff to raise any concerns in confidence. The Senior Independent Director
(‘SID’) has assumed the role of whistleblowing officer.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 36 of 100
Annual Report 2024
Three
Seek to
understand and
meet shareholder
needs and
expectations
a) Describe the shareholder engagement activities, including the topics discussed and
actions taken in response.
b) Provide appropriate quantitative and qualitative reporting of a company’s environmental
and social matters to meet investor needs and expectations.
Comment
a) Copies of our Annual Report, Notice of Annual General Meetings (AGM) and the interim report are available to all
shareholders and can be downloaded from the investors section of our website.
We engage with shareholders through updates to the Market via regulatory news flow (“RNS”) on matters of a material
substance and regulatory nature.
Our AGM is an annual opportunity for shareholders to meet with the Board and the executive team and to receive a full
update on the Company’s business and strategy. All shareholders are provided with an opportunity to ask questions and
raise issues during the formal business or more informally following the meeting. At the AGM, separate resolutions are
proposed on each substantial issue. For each proposed resolution, shareholders are provided with an opportunity to vote in
advance of the AGM by proxy if they are unable to vote in person. Our registrars, MUFG Corporate Markets count the proxy
votes which are properly recorded, and the results of the AGM are announced through an RNS.
The Board is keen to ensure that the voting decisions of shareholders are reviewed and monitored and that approvals sought
at the Company’s AGM are as much as possible within the recommended guidelines of the QCA Code.
The Company, where appropriate, aggregates shareholder queries and answers periodically (whilst maintaining diligence on
MAR restrictions on inside information and within the requirements of the AIM Rules for Companies). The Company
undertakes from time to time, around significant activity announcements, Investor events to engage with all stakeholders via
Question and Answer sessions online and occasionally in person.
Shareholders with queries should email Chairman@soundenergyplc.com or Sound@Flagstaffcomms.com
b) Please see page 26 to page 29 on ESG.
Four
Take into
account wider
stakeholder
interests,
including social
and
environmental
responsibilities,
and their
implications for
long-term
success
a)
Describe the environmental and social issues that the board has identified as being
material to the company with reference to its purpose, strategy, and business model.
b) Set out any relevant associated KPIs that are used for tracking performance on such
matters and, where relevant, key forward-looking targets that have been established.
Comment
a) The Board reviews its carbon footprint and takes steps to mitigate wherever possible. The CO2 content of the natural gas is
expected to be extracted and sold. Social engagement with remote local communities supports the right to operate.
The Board identified a number of environmental and social aspects that the company’s business materially may impact using
the UN Sustainability Goals model. These aspects are monitored and reported upon on a monthly basis and reviewed at
every Board meeting.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 37 of 100
Annual Report 2024
b) b). The Board at year end reviews company performance against a set of Key Performance Indicators (KPIs) to establish, if
any, year-end bonus is to be awarded. The KPIs follow key value creating aspects of the business and include for 2025, role
as non-operator, initiating exploration, balance sheet strengthening, establishing growth opportunities and share price
appreciation.
The Board approves annual Key Performance Indicators for environmental and social aspects. These KPIs form a key
element of overall company performance and are directly linked to staff renumeration.
Five
Embed effective
risk
management,
internal controls
and assurance
activities,
considering both
opportunities and
threats,
throughout the
organisation
a) Describe how the Board has embedded effective risk management, internal controls and
assurance activities in order to execute and deliver strategy. This should include a
description of what the board does to identify, assess and manage risk and how it gets
assurance that the risk management and related control systems in place are effective.
b) Risk and control information should be disclosed as required in the strategic report and
corporate governance statements, including the non-financial reporting narrative.
c) Explain the Company’s governance around climate-related risks and opportunities; the
process for identifying, assessing and managing climate-related risks and how these
processes are integrated into the Company’s overall risk management framework.
d) Explain how the audit committee has monitored and formally considered auditor
independence during the corporate reporting cycle.
Comment
a) The Company’s approach to the management and identification of risk is set out in the Risks section of the Strategic Report
on page 30.
The Company encourages a culture of risk awareness and management at all levels throughout the Company. Systems are
in place to record and recognise potential risk and establish mitigation strategies. Risks are reviewed by the Audit Committee
and by the Board at every Board meeting.
Through the HSSE and Audit Committees and the feedback provided by these committees to the Board via verbal and/or
written reports and accessible minutes, the Board maintains a full and active awareness of operational and financial risks
and the assurances that effective control systems are in place.
The Board reviews and tracks the Risk Register and management of issues at each Board meeting. A review of potential
risks and mitigation is embedded in each formal Board meeting.
b) See Risk section of the Strategic Report on pages 30 to 33.
c) The Company tracks and records its emissions. The Company uses design engineering in project sanction to mitigate, limit
and or recover wherever possible climate-related emissions.
The Company assesses climate related risk and opportunities seeking to reduce risk and take advantage of opportunities.
Please see page 26 of the Strategic Report.
d) The Audit Committee formally assesses the independence of the Company’s auditors on an annual basis.
Six
Establish and
maintain the
board as a well-
functioning,
balanced team
led by the chair
a) Identify each director and describe the relevant experience, skills, and capabilities that
each director has brought to the board’s agenda during the year.
b) Explain how the board contains (or will contain) the necessary mix of experience, skills,
and capabilities – including with reference to diversity characteristics
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 38 of 100
Annual Report 2024
c) Identify those directors who the board considers to be independent; where there are
grounds to question the real, or perceived independence of a director, this must be
explained.
d) Describe the time commitment required from directors (including non-executive
directors as well as part-time executive directors) and any restrictions on both
executives and non-executives with respect to assuming external roles.
e) Include the number of meetings of the board (and any committees) during the year,
together with the attendance record of each director.
f) Where performance-related remuneration for non-executive directors has been
introduced, the company must disclose how it has consulted its shareholders and how
their support was obtained.
Comment
a) Information on each of the directors as of 9 April 2025 is provided on pages 42 to 43. All their details can be found on the
Company’s website.
Although the QCA Code recommends that all directors be presented for re-election annually, the executive directors of the
Company, given its current small size, considers this approach inappropriate at this stage. Frequent re-elections could disrupt
leadership continuity, which is crucial for a small company navigating growth or strategic changes. However, this decision
will remain under review.
b) The Board of directors covers a wide range of experience and skills. The Board has significant international, industrial,
financial, 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 to long-term.
Each of the directors on the Board, Executive and Non-Executive directors (“INEDs”) have considerable experience and all
have demonstrated skills which are complementary, independent and sufficient to cover all of the requirements of the Board.
c) The Board, as of 9 April 2025, comprises of an Executive Chairman and two INED’s (considered independent in terms of
character and judgement). The Company is mindful of diversity although Board appointments are made with the primary aim
of ensuring that the candidate offers the required skills, knowledge and experience.
For full background refer to pages 42 to 43 and the Company’s website.
d) The executive directors are expected to devote substantially the whole of their time to their duties with the Company. NED’s
have a lesser time commitment which is set out in their letter of appointment.
There is no formal policy restricting the directors’ external appointments, save appointments to direct competitors, however
each director discusses with the Chairman any proposed additional appointments prior to being appointed and it is presented
to full Board for approval.
e) See page 45.
f) NEDs are not awarded any performance related pay.
Seven
Maintain
appropriate
governance
structures and
ensure that
individually and
collectively the
directors have
the necessary up
to date
experience, skills
and capabilities
a) Explain how each director keeps their skillset up to date, setting out how the company
provides the necessary resources for updating and developing each director’s
knowledge and skills.
b) Set out any board sub-committees that have been established to facilitate more focussed
discussions and/or oversight of particular subject matters.
c) Where the board or any committee has sought external advice on a significant matter,
this must be described and explained.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 39 of 100
Annual Report 2024
d) Where external advisers to the board or any of its committees have been engaged,
explain their role.
Comment
a) The Board is kept abreast with developments of governance and AIM regulations. The Company Secretary and Company’s
lawyers provide updates on governance issues and the Company’s NOMAD provides regular board AIM Rules refresher
training as well as the initial training as part of a new director’s onboarding.
The directors have access to the Company’s advisers as and when required and are able to obtain advice from other external
bodies when necessary.
b) The Audit Committee assists with the Board’s oversight of the integrity of the financial reporting and the independence and
performance of the Company’s Auditor.
The HSSE Committee is primarily focused on ensuring that the HSSE policies are adopted and applied across the Company.
The meeting is attended by the HSSE Manager, who is accountable to the Committee on HSSE matters across the Company.
The Remuneration and Nominations Committee consider all material elements of remuneration, including the executive
directors’ remuneration and performance. In addition, the Committee meets as and when required to consider matters related
to succession planning and new nominations to the Board.
c) During 2024, the Board have used some external professional advisers in respect of various segments of its business where
it was felt that external advice was required. This has included specific tax advice in support of material subsidiary disposal
and Moroccan tax codes and employment law advice as and when required.
d) The directors have access to the Company’s Nominated Advisor, Company Secretary and lawyers and are able to obtain
advice from other external bodies as and when required.
The management team and directors are in regular dialogue with the Company’s Nominated Adviser. The Nominated
Adviser provides ongoing advice on matters pertaining to the Company’s compliance with the AIM Rules for Companies.
The Company Secretary advises on corporate governance, arranges, attends and minutes all Board and committee
meetings. The Company Secretary works closely with the Executive Chairman/CEO, all Board members, and advisors of the
Company as and when required.
Lawyers are engaged to provide legal advice when required by the management team and by the Board or committees.
Eight
Evaluate board
performance
based on clear
and relevant
objectives,
seeking
continuous
improvement
a) Include a high-level explanation of the board performance effectiveness process.
b) Set out when the last externally facilitated board review took place and when the next one
is planned for. Where an externally facilitated review has not taken place and there are no
plans to have one, this must be explained.
c) Where a Board performance evaluation has taken place in the year, provide a brief
overview of it, how it was conducted and its results and recommendations. Progress
against previous recommendations should also be addressed.
d) Provide an outline description of the succession planning process including any indicative
timelines for expected appointments (to the extent practicable).
Comment
a) The directors studiously consider the effectiveness of the Board, Committees and individual performance. In 2022, the
Company conducted a Board evaluation review whereby the Board undertook an anonymous survey facilitated by AMBA
Company Secretarial Servies Limited (AMBA). The confidential questionnaires covered key areas such as risk management
and internal controls, strategic oversight, Committees of the Board and Board support and administration. It enabled the
directors to consider the functioning of the Board both within the Board room and the relationships of the non-executive and
executive directors. The area of Board composition continues to be monitored. It is planned that an evaluation shall be carried
out every few years to ensure that the Board continues to function as effectively as possible.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 40 of 100
Annual Report 2024
b) As set out above, the Board conducted an external Board evaluation in 2022. Going forward, the Company plan to conduct
a Board evaluation every year either externally or internally in line with the recommendations under the Code.
c) For further information see a) above.
d) The Board as a whole is mindful of the need for succession planning. The Remuneration and Nominations Committee will
continue to meet and monitor the requirement for succession planning.
Nine
Establish a
remuneration
policy which is
supportive of
long-term value
creation and the
Company’s
purpose, strategy
and culture
a) Explain how the remuneration structure and practice supports the delivery and attainment
of the Company’s purpose, business model, strategy and culture.
Comment
a) The Company have a Remuneration Policy in place.
Pay structures for the executive team and senior management team are simple and easy to understand.
The Remuneration Report on pages 50 to 54.
Ten
Communicate
how the
Company is
governed and is
performing by
maintaining a
dialogue with
shareholders and
any other key
stakeholders
a) Within the corporate governance report, reflect on challenges experienced in the year
and signpost to how these were addressed at the board and whether any changes were
made to board structure or process.
b) Include an audit committee report (or equivalent report if such committee is not in
place).
c) Include a remuneration committee report (or equivalent report if such committee is not
in place).
d) If the Company has not published one or more of the disclosures set out under
Principles 1-10, the omitted disclosures must be identified and the reason for their
omission explained.
Comment
a) The Board retains ultimate accountability for governance and is responsible for monitoring the activities of the executive
team. The Chairman has the responsibility for ensuring that the Board discharges its responsibilities. No one individual has
unfettered powers of decision.
The Chairman is responsible for facilitating full and constructive contributions from each member of the Board in
determination of the Group’s strategy and overall commercial objectives.
The Board maintains a healthy dialogue between it and its stakeholders including its shareholders. The Chairman is primarily
responsible for communicating with shareholders. The SID is also available to communicate with shareholders as required.
Copies of the Company’s report and accounts, and all other shareholder communications are maintained on the Company’s
website.
b) See pages 47 to 48.
c) See page 49.
d) The Company has published all of the disclosures set out under Principles 1-10.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 41 of 100
Annual Report 2024
Board Overview
Leadership
The Company remains dedicated to upholding high standards in all aspects of our operations. Our business
and processes are structured around a robust governance framework that aligns with the principles of the
QCA Code and the requirements of the AIM market of the London Stock Exchange. The Board is fully aware
of the updates to the QCA Code made in 2023 and have reported our compliance with the Code within this
report on pages 35 to 40.
The directors develop policies and procedures in accordance with the QCA Code, and these are regularly
monitored to ensure they remain effective and relevant.
While building a strong governance framework, we aim to take a proportionate approach, ensuring that our
processes are not only fit for purpose but also deeply embedded within the culture of our organisation. We
are committed to continuous evolution and improvement as part of our drive to build a successful and
sustainable Company.
Good governance provides the foundation for making the right decisions by the right people at the right time,
ensuring the long-term success of the organisation.
Shareholders and other stakeholders
Board
Set strategy and deliver value to shareholders. Review performance against plan.
Health, Safety, Security and
Environment Committee
The Committee is primarily
focused on ensuring that the
HSSE 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.
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.
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. The Committee is
mindful of the guidance from the
QCA with respect to the function
and duties of the Remuneration
and Nomination Committee within
the business.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 42 of 100
Annual Report 2024
Board of Directors
1. Graham Lyon - Executive Chairman
Appointed to Board
25 February 2020
Background
Graham is an experienced oil and gas energy Executive with 40 years’ experience across technical,
operational, commercial and leadership roles. Graham has chaired or sat on the board of AIM, TSX, ASX
and AQSE growth companies. Graham holds a BSc (Eng) Hons from Imperial College in Petroleum
Engineering.
Current external commitments
Soncer Limited
Soncer Cyp Limited
2. Christian Bukovics - Director (Senior Independent Non-Executive)
Appointed to Board
2 December 2021
Background
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 from the University of Vienna.
Current external commitments
Director – CB Exploration Limited
Director – Irbis Energy Group Limited
3. David Blewden - Director (Independent Non-Executive)
Appointed to Board
1 July 2020
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 43 of 100
Annual Report 2024
Background
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. David holds an MA in Natural
Sciences from the University of Cambridge.
Current external commitments
Director – Philipshill Consulting Limited
Director – Hodgemoor Investments Limited
Director – Corella Holdings Limited
CFO – Sunny Hill Energy Limited
4. Simon Ashby-Rudd - Director (Independent Non-Executive)
Appointed to Board
26 June 2023 and resigned from the Board on 28 June 2024.
5. Mohamed Seghiri - Chief Operating Officer
Appointed to Board
23 January 2020 and resigned from the Board on 21 February 2025.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 44 of 100
Annual Report 2024
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 of 31 December 2024, the Board comprised of the Executive Chair, one Executive Director, one Senior
Independent Non-Executive Director and one Independent Non-Executive Director.
After the resignation of the COO on the 21 February 2025, the current Board still possesses a strong
combination of industry, financial, banking, public markets, and governance expertise. It has the right blend
of experience, skills, personal qualities, and capabilities to execute the Company's strategy and create long-
term value for shareholders. The Company is led by an Executive Chair, who bridges the roles of Chair and
Chief Executive Officer. The Board maintains a balanced mix of Executive and Non-Executive Directors,
with a notable level of independence.
The Executive Chair is tasked with leading both the Board and the Executive team, ensuring the Board fulfils
its responsibilities. The Chair also facilitates full and constructive participation from all Board members in
shaping the Group's strategy and overall commercial goals. In the absence of a CEO, the Executive Chair,
supported by the other Executive team members, leads the business, ensuring that the strategic and
commercial objectives set by the Board are achieved. The Executive Chair is accountable to the Board for
the Company's operational and financial performance.
The Board continues to believe that, given the current phase of the business, the position of Executive Chair
is appropriate. While there is currently no Chief Executive Officer, the Board has two independent Non-
Executive Directors, ensuring a strong voice of independence. This arrangement is under review for 2025.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 45 of 100
Annual Report 2024
Board Composition
Attendance at Meetings:
A schedule of the Board and Board Committee meetings held during the year ended 31 December 2024 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 2024
Board meetings
Name of the Director
Scheduled
Ad hoc1
Audit
Committee
Remuneration
and
Nominations
Committee
HSSE
Total number of meetings held
5
7
2
2
5
Graham Lyon (Executive Chair)
5
7
N/A
1
N/A
Mohammed Seghiri (COO)
5
7
N/A
N/A
5
David Blewden
5
7
2
2
N/A
Christian Bukovics
5
7
1
2
5
*Simon Ashby-Rudd
3
4
1
1
N/A
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.
* Simon Ashby-Rudd resigned during the year
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 46 of 100
Annual Report 2024
Health, Safety, Security & Environment Committee
Committee Members and Participants
During 2024, the HSSE Committee comprised of Christian Bukovics (Chair) and Mohammed Seghiri. David
Blewden joined the Committee in April 2025 following the departure of Mohammed Seghiri. 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 five occasions to discuss matters pertaining to Health,
Safety, Security 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.
2024 Activities
The Sound Energy plc HSSE Committee met on 5 occasions in 2024, January, April, June, September
and November.
Each meeting follows a set agenda where HSSE performance, progress on annual objectives and any
required adjustment to strategy are discussed. Specific issues and challenges are discussed as they
arise, and appropriate responses are recommended.
Key focus was placed upon safe operations and the avoidance of any environmental damage during
civil construction activities. This was done by ensuring full time safety supervision at Tendrara,
encouraging the main contractor’s management to adequately resource the HSSE management of its
operations and monthly evaluation of conformance with our environmental impact assessment. The
activity leading to most accidents in the oil and gas industry, road transport, received continuing
attention.
Continual reviews were completed to ensure safe working measures were implemented both within
the UK and Morocco.
A 2024 HSSE Plan and HSSE KPIs were developed to ensure the tracking of Company goals for 2024
and report back to the Committee.
Continuously monitored the effectiveness of the Company safety programs to ensure they are relevant
to the Company activities and understood by all the Company employees and contractors. Ensured
tracking for the closure of action items raised during HSSE committee meetings
Kept HSSE management system and resources under review
Ensured ongoing transparent reporting with updates to the Board
2025 Looking Forward
In 2025, the focus for non-operated assets will be to support Managem in strengthening their HSSE
capabilities for Oil and Gas Operations. For operated assets, the priority will be ensuring zero harm to
personnel and the environment.
Christian Bukovics
Chairman of the Health, Safety, Security & Environment Committee
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 47 of 100
Annual Report 2024
Audit Committee Report
Committee Members and Participants
During 2024, the Company’s Audit Committee comprised David Blewden (Chair), Simon Ashby-Rudd (until
June 2024) and Christian Bukovics (from June 2024 onwards). 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 two occasions in 2024 regarding financial reporting, audit and risk
management.
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 reviews the
risk management policy, strategic risks and mitigation actions allocated to the Executive team prior to
submission to the Board for approval. Follow-up reviews 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.
2024 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.
Ongoing monitoring of the going concern status of the business.
Ensured that necessary financial controls were in place and had been tested.
2025 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 QCA Code
Financial and Business Reporting
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 71.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 48 of 100
Annual Report 2024
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 pages 30 to 33.
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
Crowe UK LLP has been the Group’s statutory auditor for 16 years, and the Committee are comfortable that
their audit remains independent.
David Blewden
Chairman of the Audit Committee
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 49 of 100
Annual Report 2024
Nominations and Remuneration Committee Report
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 has evolved to ensure that
Directors and Executives are rewarded for achieving strategic targets and creating value for shareholders.
We have created a remuneration framework that is appropriately aligned, both to our business and to the
interests of our shareholders. The Committee ensures that the policy is fit for purpose and transparent.
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 revised the Company’s remuneration policy in 2022 which ensured alignment
of Executives’ rewards for delivery of the success of the business with shareholders. The framework of the
policy incentivises and drives 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 a longer-term incentive plan. The Committee continues to recognise 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. However, no such discretion was exercised
in 2024.
Christian Bukovics
Chairman of the Nominations and Remuneration Committee
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 50 of 100
Annual Report 2024
Directors’ Remuneration Report
Remuneration Policy
Purpose
Operation
Maximum opportunity
Performance measures
Salary
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.
Increases will be made at the
discretion of the Committee,
or for Non-Executive
Directors, the Executive
Directors, considering:
increase in responsibility,
particularly as the
Company grows and
expands
development and
performance in the role
alignment to the
market level
There are performance
measures in place, and the
performance of the individual is
considered when setting and
reviewing salaries annually.
Reflects individual experience,
skills and role.
Provide the basis for
a competitive
remuneration
package.
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.
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.
Benefits
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
sufficient benefit.
None
Bonus Awards
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
An individual Executive
bonus is based on
performance measured
against Group and personal
objectives.
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.
Performance measures are
both quantitative and
qualitative, and both
financial and non-financial.
The payment of bonus
awards is in the form of nil
stock options, which
replaced the restricted stock
unit plan.
Any cash payments made
by the Company are made
at the sole discretion of the
Remuneration Committee.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 51 of 100
Annual Report 2024
Purpose
Operation
Maximum Opportunity
Performance measures
Long-Term Incentive Plan (LTIP)
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
considering 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.
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
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 % Options
Testing Date Vesting
≥ 5.38p
50%
≥10.75p
100%
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.
Benchmarked externally from
time to time as appropriate.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 52 of 100
Annual Report 2024
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 considered 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.
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.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 53 of 100
Annual Report 2024
Summary of Actual Remuneration of Directors
Salary
£’000
Transaction
completion
bonus
£’000
Annual
bonus
£’000
Company
pension
£’000
Benefits
in kind
£’000
Total
2024
£’000
Total
2023
£’000
Executive Chairman
& Executive Director
Graham Lyon
268
268
155
–
–
691
281
Mohammed Seghiri
214
32
124
4
9
383
220
Non-Executive Directors
Marco Fumagali
–
–
–
–
–
–
18
David Blewden
46
–
–
–
–
46
45
Christian Bukovics
46
–
–
–
–
46
45
Simon Ashbury-Rudd (i)
35
–
–
–
–
35
24
Total for all Directors
609
300
279
4
9
1,201
633
(i) Simon Ashbury-Rudd retired during the year. His total salary for the period includes a termination payment of £11,603 in lieu of notice.
LTIP Awards
Date of grant
Exercisable date
Acquisition
price
per share
(pence)
Options held at
1 January 2024
Options held at
31 December
2024(i)
Graham Lyon
03.05.22
03.05.25–03.05.32
2.4
12,218,879
12,218,879
Mohammed Seghiri
03.05.22
03.05.25–03.05.32
2.4
7,331,327
7,331,327
(i) The LTIP Awards include 1,250,000 awards each qualifying under HMRC’s tax advantaged Company Share Option Plan
(CSOP).
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 2024:
No. of shares
Graham Lyon (Chairman)
2,066,962
Mohammed Seghiri (COO)
11,083,316
David Blewden
1,676,471
Christian Bukovics
500,000
Nil cost options
Date of grant
Exercisable date
Nil cost options
held at 1 January
2024
Nil cost options
held at 31
December
2024
Graham Lyon
03.05.22
03.05.22–03.05.27
7,740,943
7,740,943
Mohammed Seghiri
03.05.22
03.05.22–03.05.27
4,308,017
4,308,017
Nil cost options to Executives and staff were granted in settlement of bonus awards.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 54 of 100
Annual Report 2024
Movements in Share Price During the Year
The Company’s share price at the end of the financial year was 1.025 pence and the range of mid-market
prices during the year was between 0.625 pence and 1.25 pence.
Advice Received by the Committee
The Committee has access to advice when it is considered appropriate. The Committee engages a
consultant to review the existing Directors’ remuneration when necessary. In 2024, no amount was paid for
such consultancy for services provided (2023: nil).
This Remuneration Report was approved by a duly authorised Committee of the Board of Directors on 9
April 2025 and signed on its behalf by:
Christian Bukovics
Chairman of the Nominations and Remuneration Committee
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 55 of 100
Annual Report 2024
Directors’ Report
Other Disclosures
Pages 41 to 58 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 in Morocco and the Company is close to achieving first production from
an onshore discovery after a material sell-down of its interests to a local company. A review of the
performance and future development of the Group’s business is contained on pages 2 to 33 and forms part
of this report.
Results and Dividends
The loss for the year after tax was £150.8 million (2023: £7.2 million). The directors do not recommend
payment of a dividend.
Going Concern
As at 31 March 2025, the Group’s cash balance was £3.1 million. The directors have reviewed the
Company’s cash flow forecasts for the next 12-month period to April 2026. The Company’s forecasts and
projections indicate that, to fulfil its other obligations, primarily the Company’s Sidi Moktar permit
commitments, the Company will require additional funding. Following the sale of its subsidiary SEME, the
Company’s share of the financial obligations for a well commitment on each of the retained 27.5% working
interests on the Grand Tendrara (up to $3.6m) and Anoual licences (up to $2.6m), is to be funded by the
acquirer of SEME, as well as up to $24.5m of the pipeline led development of the Tendrara Production
Concession (Concession Phase 2). The Concession Phase 2 partners are progressing towards a final
investment decision and received a conditional offer for partial financing of the Phase 2 development and
continue to work to satisfy the conditions precedents and other elements necessary for the taking of Phase
2 FID.
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 the Sidi Moktar permit, and various debt, equity and equity-linked funding options. The directors,
therefore, 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.
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.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 56 of 100
Annual Report 2024
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 (2023: £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 53.
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
•
Mohammed Seghiri
•
Christian Bukovics
•
Simon Ashby-Rudd (until June 2024)
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 2024 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 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 2024, the Company had 2,080,622,679 ordinary shares in issue as shown in note 19 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 2024 and up to the date of this report.
Oil & Gas Investment Fund SAS of Morocco holds 265,508,651 shares, representing a 12.76% interest.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 57 of 100
Annual Report 2024
Financial Instruments
The information relating to the Group’s financial assets and its financial risk management can be found in
note 21 to the consolidated financial statements.
Subsequent Events
See note on page 98.
Graham Lyon
Executive Chairman
9 April 2025
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 58 of 100
Annual Report 2024
Statement of Directors’ Responsibilities
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.
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
9 April 2025
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 59 of 100
Annual Report 2024
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 2024, which comprise:
•
the Group statement of comprehensive income for the year ended 31 December 2024;
•
the Group and Company balance sheets as at 31 December 2024;
•
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 2024 and of the Group’s loss for the year then ended;
•
the group and company financial statements have been properly prepared in accordance with UK-adopted
international accounting standards;
•
the financial statements have been prepared 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’s cash flow for the next twelve-month period to April
2026, indicate that additional funding will be required to enable the Group 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 and Company’s ability to continue as going concern. Our opinion 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 forecasts and projections.
•
Understanding what forecast expenditure is committed and what could be considered discretionary.
•
Considering the various scenarios presented including the potential downside scenarios and the resultant
impact on available funds.
•
Testing the mathematical accuracy of the forecasts and projections.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 60 of 100
Annual Report 2024
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 £585k (2023: £2.0m) and the overall materiality for the parent company is £575k (2023: £1.9m), based on 1% of
assets.
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 £350k (2023: £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 £17,500 (2023: £40,000). Errors below
that threshold would also be reported to it if, in our opinion as auditor, disclosure was required on qualitative grounds.
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 have performed a remote
audit of the accounting systems operating locally in Morocco in order to perform the required audit work.
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 above,
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.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 61 of 100
Annual Report 2024
Key audit matter
How the scope of our audit addressed the key audit matter
Impairment of exploration and evaluation
assets
The Group’s primary focus is on exploration
activities in Eastern and Southern Morocco.
Exploration expenditure in the current year was
significant and totalled £0.7m. The carrying value
of the exploration and evaluation assets was £14m
at 31 December 2024 (note 11).
Management are required to assess these assets
for impairment under IFRS 6 which requires
significant management judgement. 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.
We reviewed management’s assessment which concluded that
there are no facts or circumstances that indicate the carrying
amount of the assets exceeds the recoverable amount. We
agreed the impairment posted in the year and assessed whether
any further impairment was required.
In considering this assessment we performed the following:
Challenged management’s assessment with respect to the
indicators of impairment as outlined under IFRS 6
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
Obtained evidence of continued legal title
Reviewed current well and licence reserve appraisals
Discussed and critically analysed plans and intentions with
management
Impairment of development and production
assets
The Group has a significant amount of development
and production assets which totalled £10.5m at 31
December 2024 (note 10).
Management are required to assess these assets
for
impairment
which
requires
significant
management judgement. 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.
We reviewed management’s assessment which included their
internal model. This model was based on a fair value less cost to
sell based on the recent transaction. We agreed the impairment
posted in the year and assessed whether any further impairment
was required.
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 and
obtained evidence of these compared to the recent transaction.
Performed shadow calculations, considering a number of
probabilities.
Determined whether the discount rate used was deemed
appropriate .
Reviewed the board minutes, forecast and projections, 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
Classification and presentation of the
discontinued activities in the financial
statements
On 10 December 2024, the group disposed of
Sound Energy Morocco East Limited (SEME). We
considered the risk that the valuation of the
disposal group could be materially misstated and
whether the classification of transactions included
in the disposal group are correctly recognised as
part of the discontinued operations.
We also considered whether the profit and loss on
disposal were materially misstated considering the
deferred and contingent consideration included
within the total disposal proceeds. (Note 27).
We obtained the Share Purchase Agreement (SPA) for the
disposal and performed the following procedures:
Agreed the balances for SEME from its individual trial balance that
have disposed of and tested material balances to supporting
documentation
Agreed the terms of the SPA to the disclosure
Agreed the consideration for the transaction and where received
to bank statements.
Assessed the NPV of the consideration, including the probability
of the deferred consideration being paid and its timing
Agreed the impairment recognised to the assets to their
recoverable amount
Tested the material balances within the disposal group to
supporting documentation
Recalculated the loss on disposal and agreed through to the
accounts.
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 62 of 100
Annual Report 2024
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.
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
CORPORATE GOVERNANCE REPORT FOR THE YEAR ENDED 31 DECEMBER 2024
Sound Energy plc
Page 63 of 100
Annual Report 2024
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 that 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.
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.
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.
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.
Leo Malkin (Senior Statutory Auditor)
for and on behalf of
Crowe U.K. LLP
Statutory Auditor
London
9 April 2025
Sound Energy plc
Page 64 of 100
Annual Report 2024
FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2024
Notes
2024
£’000s
2023
£’000s
Continuing operations
Revenue
–
–
Other income
3
–
4
Impairment on development assets and exploration costs
(122,042)
–
Gross profit
(122,042)
4
Administrative expenses
(4,586)
(2,311)
Group operating (loss) / profit from continuing operations
4
(126,628)
(2,307)
Finance revenue
7
12
25
Foreign exchange gain/(loss)
2,294
(2,719)
Finance expense
26
(2,302)
(1,893)
Loss for the year before taxation
(126,624)
(6,894)
Tax expense
8
–
(1)
Loss for the year after taxation
(126,624)
(6,895)
Discontinued operations
Loss for the period after tax from discontinued operations
27
(24,196)
(265)
Total loss for the year
(150,820)
(7,160)
Other comprehensive income
Items that may subsequently be reclassified to the profit and loss account
Foreign currency translation gain/(loss)
9
(6,555)
Total comprehensive loss for the year
(150,811)
(13,715)
Loss for the year attributable to:
Owners of the Company
(150,811)
(13,715)
Notes
2024
Pence
2023
Pence
Basic and diluted loss per share for the year from continuing and
discontinued operations attributable to the equity shareholders of the
parent
9
(7.48)
(0.38)
Basic and diluted loss per share for the year from continuing
operations attributable to the equity shareholders of the parent
9
(6.28)
(0.37)
FINANCIAL STATEMENTS
Sound Energy plc
Page 65 of 100
Annual Report 2024
CONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2024
Notes
2024
£’000s
2023
£’000s
Non-current assets
Property, plant and equipment
10
10,489
157,927
Intangible assets
11
14,097
35,002
Prepayments
12
1,522
5,092
Deferred consideration
14
21,045
–
47,153
198,021
Current assets
Inventories
69
915
Other receivables
15
3,247
924
Prepayments
25
1,342
Cash and short-term deposits
16
7,895
3,016
11,236
6,197
Total assets
58,389
204,218
Current liabilities
Trade and other payables
17
3,665
2,495
Tax liabilities
8
–
199
Lease liabilities
18
–
121
3,665
2,815
Non-current liabilities
Tax liabilities
8
–
1,410
Loans and borrowings
26
37,707
33,285
37,707
34,695
Total liabilities
41,372
37,510
Net assets
17,017
166,708
Capital and reserves
Share capital and share premium
41,073
39,898
Shares to be issued
374
374
Accumulated (deficit) /surplus
(28,137)
122,443
Warrant reserve
2,071
2,071
Convertible bond reserve
28
28
Foreign currency reserve
1,608
1,894
Total equity
17,017
166,708
The financial statements were approved by the Board and authorised for issue on 9 April 2025 and were signed on
its behalf by:
Graham Lyon - Director
The accounting policies on pages 71 to 77 and notes on pages 71 to 98 form part of these financial statements.
FINANCIAL STATEMENTS
Sound Energy plc
Page 66 of 100
Annual Report 2024
COMPANY BALANCE SHEET AS AT 31 DECEMBER 2024
Notes
2024
£’000s
2023
£’000s
Non-current assets
Property, plant and equipment
3
4
Right of use assets
10
–
101
Software
49
18
Investments in subsidiaries
13
47,518
190,149
47,570
190,272
Current assets
Other receivables
15
1,953
59
Prepayments
25
29
Cash and short-term deposits
16
7,881
233
9,859
321
Total assets
57,429
190,593
Current liabilities
Trade and other payables
17
3,544
421
Leases liabilities
18
–
121
3,544
542
Non-current liabilities
Loans and borrowings
26
37,707
33,285
33,285
33,285
Total liabilities
41,251
33,827
Net assets
16,178
156,766
Capital and reserves
Share capital and share premium
41,073
39,898
Shares to be issued
374
374
Accumulated (deficit) /surplus
(27,368)
114,395
Warrant reserve
2,071
2,071
Convertible bond reserve
28
28
Total equity
16,178
156,766
The Company’s accumulated deficit includes a loss for the year of £142.0 million (2023: profit of £14.0 million).
The financial statements were approved by the Board and authorised for issue on 9 April 2025 and were signed on
its behalf by:
Graham Lyon – Director
FINANCIAL STATEMENTS
Sound Energy plc
Page 67 of 100
Annual Report 2024
GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2024
Group
Notes
Share
capital
£’000s
Share
premium
£’000s
Shares to be
issued
£’000s
Accumulated
Surplus/
(deficit)
£’000s
Warrant
reserve
£’000s
Convertible
Bond
reserve
£’000s
Foreign
currency
reserves
£’000s
Total
equity
£’000s
At 1 January 2024
19,631
20,267
374
122,443
2,071
28
1,894
166,708
Total loss for the year
–
–
–
(150,820)
–
–
–
(150,820)
Other comprehensive
gain
–
–
–
–
–
–
9
9
Total comprehensive
loss
–
–
–
(150,820)
–
–
9
(150,811)
Issue of share capital
on conversion of bond
26
1,175
–
–
(554)
–
–
–
621
Transfer to profit and
loss account on bond
conversion to shares
–
–
–
554
–
–
–
554
Reclassification to profit
and loss account on
disposal of subsidiary
–
–
–
–
–
–
(295)
(295)
Share-based payments
24
–
–
–
240
–
–
–
240
At 31 December 2024
20,806
20,267
374
(28,137)
2,071
28
1,608
17,017
Company
Notes
Share
capital
£’000s
Share
premium
£’000s
Shares to be
issued
£’000s
Accumulated
Surplus/
(deficit)
£’000s
Warrant
reserve
£’000s
Convertible
bond
reserve
£’000s
Total
equity
£’000s
At 1 January 2024
19,631
20,267
374
114,395
2,071
28
156,766
Total loss for the year
–
–
–
(142,003)
–
–
(142,003)
Issue of share capital on
conversion of bond
1,175
–
–
(554)
–
–
621
Transfer to profit and loss account on
bond conversion to shares
–
–
–
554
–
–
554
Share-based payments
24
–
–
–
240
–
–
240
At 31 December 2024
20,806
20,267
374
(27,368)
2,071
28
16,178
Sound Energy plc
Page 68 of 100
Annual Report 2024
FINANCIAL STATEMENTS
GROUP AND COMPANY STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER 2023
GROUP
Notes
Share
capital
£’000s
Share
premium
£’000s
Shares to be
issued
£’000s
Accumulated
surplus
£’000s
Warrant
reserve
£’000s
Convertible
Bond
reserve
£’000s
Foreign
currency
reserves
£’000s
Total
equity
£’000s
At 1 January 2023
18,487
20,134
404
129,004
1,607
–
8,449
178,085
Total loss for the year
–
–
–
(7,160)
–
–
–
(7,160)
Other comprehensive
loss
–
–
–
–
–
–
(6,555)
(6,555)
Total comprehensive
loss
–
–
–
(7,160)
–
–
(6,555)
(13,715)
Issue of share capital
on conversion of bond
26
1,000
46
–
–
–
–
–
1,046
Other share capital
issues
114
87
–
–
–
–
–
201
Transfer to share
capital on issue of
shares
30
–
(30)
–
–
–
–
–
Fair value of warrants
issued during the year
–
–
–
–
464
–
–
464
Equity component of
convertible bond
–
–
–
–
–
562
–
562
Cost of issue allocated
to equity component
–
–
–
–
–
(174)
–
(174)
Transfer to
accumulated surplus
on bond conversion to
shares
–
–
–
360
–
(360)
–
–
Share-based payments
24
–
–
–
239
–
–
–
239
At 31 December 2023
19,631
20,267
374
122,443
2,071
28
1,894
166,708
Company
Notes
Share
capital
£’000s
Share
premium
£’000s
Shares to be
issued
£’000s
Accumulated
surplus
£’000s
Warrant
reserve
£’000s
Convertible
bond
reserve
£’000s
Total
equity
£’000s
At 1 January 2023
18,487
20,134
404
127,793
1,607
–
168,425
Total loss for the year
–
–
–
(13,997)
–
–
(13,997)
Issue of share capital on
conversion of bond
1,000
46
–
–
–
–
1,046
Other issue of share capital
114
87
–
–
–
–
201
Transfer to share capital on issue
of shares
30
–
(30)
–
–
–
–
Fair value of warrants issued
during the year
–
–
–
–
464
–
464
Equity component of convertible
bond
–
–
–
–
–
562
562
Cost of issue allocated to equity
component
–
–
–
–
–
(174)
(174)
Transfer to accumulated surplus
on bond conversion to shares
–
–
–
360
–
(360)
–
Share-based payments
24
–
–
–
239
–
–
239
At 31 December 2023
19,631
20,267
374
114,395
2,071
28
156,766
FINANCIAL STATEMENTS
Sound Energy plc
Page 69 of 100
Annual Report 2024
GROUP STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024
Notes
2024
£’000s
2023
£’000s
Cash flow from operating activities
Cash flow from operations
(2,352)
(1,403)
Interest received
23
42
Tax paid
–
(134)
Net cash flow from operating activities
(2,329)
(1,495)
Cash flow from investing activities
Disposal of subsidiary
27
9,236
–
Capital expenditure
(4,640)
(1,600)
Exploration expenditure
(651)
(660)
Prepayment for Phase 1 the mLNG project
(143)
(820)
Receipt from interest in Badile land
–
134
Net cash flow from investing activities
3,802
(2,946)
Cash flow from financing activities
Net proceeds from borrowings
26
5,822
4,442
Interest payments
26
(1,168)
(441)
Loan repayments
26
(1,350)
–
Lease payments
(124)
(180)
Net cash flow from financing activities
3,180
3,821
Net increase(decrease)/increase in cash and cash equivalents
4,653
(620)
Net foreign exchange difference
226
(225)
Cash and cash equivalents at the beginning of the year
3,016
3,861
Cash and cash equivalents at the end of the year
16
7,895
3,016
Note to Statement of Cash Flows
For the period ended 31 December 2024
2024
£’000s
2023
£’000s
Cash flow from operations reconciliation
Loss before tax for the year from continuing operation
(126,624)
(6,894)
Loss before tax for the period from discontinued operations
(24,196)
(258)
Loss for the year before tax
(150,820)
(7,152)
Finance revenue
(23)
(42)
(Increase)/decrease in drilling inventories
(260)
48
Decrease in receivables and prepayments
803
688
Increase/(decrease) in accruals and short-term payables
1,113
(343)
Impairment on development assets and exploration costs
122,042
–
Loss on disposal of subsidiary
27
23,438
–
Foreign currency translation loss reclassified from other comprehensive
income
295
–
Impairment of interest in Badile land
–
125
Depreciation
128
194
Share-based payments charge and remuneration paid in shares
794
239
Finance expense and exchange adjustments
138
4,840
Cash flow from operations
(2,352)
(1,403)
Non-cash transactions during the period included the issue of 117.5 million ordinary shares, following partial conversion
of accrued interest on the convertible bond. The Group has provided collateral of $nil (2023: $1.75 million) to the
Moroccan Ministry of Petroleum to guarantee the Group’s minimum work programme obligations for the Anoual, and Sidi
Moktar permits. The cash was 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.
FINANCIAL STATEMENTS
Sound Energy plc
Page 70 of 100
Annual Report 2024
COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2024
Notes
2024
£’000s
2023
£’000s
Cash flow from operating activities
Cash flow from operations
(2,535)
(3,253)
Interest received
5
21
Net cash flow from operating activities
(2,530)
(3,232)
Cash flow from investing activities
Proceeds on disposal of subsidiary
27
10,240
–
Receipt from interest in Badile land
–
134
Advances to subsidiaries
(5,107)
(2,418)
Cash received from subsidiaries
2,219
161
Net cash flow from investing activities
7,352
(2,123)
Cash flow from financing activities
Net proceeds from borrowings
5,822
4,442
Interest payments
(1,168)
(441)
Loan repayments
(1,350)
–
Lease payments
(124)
(180)
Net cash flow from financing activities
3,180
3,821
Net increase/(decrease) in cash and cash equivalents
8,002
(1,534)
Net foreign exchange difference
(354)
246
Cash and cash equivalents at the beginning of the year
233
1,521
Cash and cash equivalents at the end of the year
16
7,881
233
Note to Statement of Cash Flows
for the year ended 31 December 2024
2024
2023
£’000s
£’000s
Cash flow from operations reconciliation
Loss for the year before tax
(142,003)
(13,997)
Impairment of interest in Badile land
–
125
Intragroup recharges
(805)
(1,145)
Finance revenue
(5)
(21)
Decrease in receivables and prepayments
18
5
Increase/(decrease) in accruals and short-term payables
3,123
(344)
Depreciation
124
174
Share-based payments charge, and remuneration paid in shares
Increase/(decrease) in impairment and expected credit loss allowance on
intercompany loans and write-offs
794
159,042
239
(421)
Deferred consideration receivable
27
(20,696)
–
Finance expense and exchange adjustments
(2,127)
12,132
Cash flow from operations
(2,535)
(3,253)
Non-cash transactions during the period included the issue of 117.5 million ordinary shares, following partial conversion
of accrued interest on the convertible bond.
FINANCIAL STATEMENTS
Sound Energy plc
Page 71 of 100
Annual Report 2024
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024
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 2024 were authorised for issue by the Board of Directors on 9 April 2025.
Going concern
As at 31 March 2025, the Group’s cash balance was £3.1 million. The directors have reviewed the Company’s cash flow
forecasts for the next 12-month period to April 2026. The Company’s forecasts and projections indicate that, to fulfil its
other obligations, primarily the Company’s SIDI Moktar permit commitments, the Company will require additional
funding. Following the sale of its subsidiary SEME, the Company’s share of the financial obligations for a well
commitment on each of the retained 27.5% working interests on the Grand Tendrara (up to $3.6m) and Anoual licences
(up to $2.6m), is to be funded by the acquirer of SEME, as well as up to $24.5m of the pipeline led development of the
Tendrara Production Concession (Concession Phase 2). The Concession Phase 2 partners are progressing towards
a final investment decision and received a conditional offer for partial financing of the Phase 2 development and
continue to work to satisfy the conditions precedents and other elements necessary for the taking of Phase 2 FID.
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 the Sidi Moktar permit, and various debt, equity
and equity-linked funding options. The directors, therefore, 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.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 72 of 100
Annual Report 2024
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, 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
impairment indicators and whether any of these indicate 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.
In June 2024, the Company signed a binding SPA with Managem for the sale of 55% interest on the Tendrara
Production Concession, 47.5% interest in the Grand Tendrara licence and 47.5% interest in the Anoual licence.
Following the signing of the SPA, the Company undertook an impairment test as at 30 June 2024 and updated it on
completion of the sale in December 2024. 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. If there is no binding sales transactions or observable market
prices, the fair value is estimated using 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
impairment test led to an impairment charge of approximately £122.0m being recognised as at 31 December 2024 for
continuing operations. 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
20).
Fair value of warrants
Significant judgement and estimation is also required in the determination of the fair value of warrants.
Fair value of convertible bonds
The calculation of fair value on convertible bonds requires estimation of the discount rate to use when discounting
outstanding principal and interest amounts at each reporting date. The discount rate is a significant input into the
discounted cashflow model used by the Company to estimate the fair value of the convertible bonds. The key
assumptions used are disclosed under the fair value measurement section of Note 21.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 73 of 100
Annual Report 2024
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.
Intercompany loans
The Company has funded its subsidiaries through non-interest bearing loans payable on demand. Given that the
Company has no intention of calling in the loans in the foreseeable future, the loans are classified as non-current
investments. Other sources of estimate concern IFRS 9 on intercompany loans at parent Company level (note 13).
Impairment on intercompany loan is disclosed on note 13.
(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.
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 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 of recalling 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. Annually, the Company uses available external data on oil and gas industry
default rates, where available, or speculative bond default rates as the basis for determining expected credit loss.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group, to 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.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 74 of 100
Annual Report 2024
(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 applies the successful efforts method of accounting for E&E costs.
Exploration and evaluation assets
Under the successful efforts method of accounting, all permit 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 permit/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.
Development and production assets
Development and production assets are accumulated, generally, on a permit-by-permit 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 permit, except that a number of permit
interests may be grouped as a cash-generating unit where the cash flows of each permit 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 permit
interest, or a group of permits 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 permit interests directly, or the transfer of an
incorporated entity. Accordingly, no goodwill arises, and 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.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 75 of 100
Annual Report 2024
(e) Expenses recognition
Expenses are recognised on an accruals basis unless otherwise stated.
(f) 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.
(g) 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.
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.
(h) 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 permits.
(i) 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. Deferred consideration is measured at fair value. 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, except for the liability component of the convertible
bond which is measured at fair value. 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.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 76 of 100
Annual Report 2024
(j) Share-based payments
The group issues equity-settled share-based payments to certain employees. The fair value of each long term incentive
plan option (“LTIP”) 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. The estimated fair value of the
option is recognised as an expense over the options’ 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.
(k) 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.
(l) 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 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.
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 unwinding of discount 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 £4,000). 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.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 77 of 100
Annual Report 2024
(m) Discontinued operations
A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale,
and:
• Represents a separate major line of business or geographical area of operations
• Is part of a single coordinated plan to dispose of a separate major line of business or geographical
area of operations.
Discontinued operations are excluded from the results of continuing operations and are presented as a single amount
as profit or loss after tax from discontinued operations in the statement of profit or loss. Cash flows from discontinued
operations are included in the consolidated statement of cash flows and are disclosed separately in note 27. The group
includes proceeds from disposal in cash flows from discontinued operations. Additional disclosures are provided in
note 27. All other notes to the financial statements include amounts for continuing operations unless indicated
otherwise.
(n) Deferred consideration
Deferred consideration relates to future funding to be received by the group from the purchaser (the purchaser) of the
Company’s subsidiary disposed of during the year (note 27). The Company’s share of its future expenditure on the
Morocco licences will be funded by the purchaser up to specified amounts detailed in note 27. Deferred consideration
is recognised at fair value.
(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) Standards, interpretations and amendments to published standards
New and amendments to published standards
The Group has not early adopted any standard, interpretation or amendment that has been issued but is not yet effective.
A number of amendments to standards and interpretations have been issued, but they had no material impact on the
measurement, recognition, presentation or disclosure of items in the Group financial statements.
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 2024, 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.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 78 of 100
Annual Report 2024
2 Segment Information (continued)
Segment results for the year ended 31 December 2024:
Corporate
£’000s
Development
and
production
£’000s
Exploration
and
appraisal
£’000s
Total
£’000s
Other income
–
–
–
–
Impairment of development assets and exploration costs
–
(122,042)
–
(122,042)
Administration expenses
(4,586)
–
–
(4,586)
Operating (loss)/profit segment result
(4,586)
(122,042)
–
(126,628)
Interest receivable
12
–
–
12
Finance expense and exchange adjustments
(8)
–
–
(8)
Loss for the year before taxation from continuing
operations
(4,582)
(122,042)
–
(126,624)
The segments assets and liabilities at 31 December 2024 is as follows:
Corporate
£’000s
Development
and
production
£’000s
Exploration
and
appraisal
£’000s
Total
£’000s
Non-current assets
61
28,707
18,385
47,153
Current assets
9,513
1,649
74
11,236
Liabilities attributable to continuing operations
(25,818)
(15,433)
(121)
(41,372)
The geographical split of non-current assets is as follows:
UK
£’000s
Morocco
£’000s
Development and production assets
–
10,485
Fixtures, fittings and office equipment
3
1
Deferred consideration
–
21,045
Software
49
8
Prepayments
–
1,522
Exploration and evaluation assets
–
14,040
Total
52
47,101
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 79 of 100
Annual Report 2024
2 Segment Information (continued)
Segment results for the year ended 31 December 2023 were as follows:
Corporate
£’000s
Development
and
production
£’000s
Exploration
and
appraisal
£’000s
Total
£’000s
Other income
–
–
4
4
Impairment of development assets and exploration costs
–
–
–
–
Administration expenses
(2,311)
–
–
(2,311)
Operating (loss)/profit segment result
(2,311)
–
4
(2,307)
Interest receivable
25
–
–
25
Finance expense and exchange adjustments
(4,612)
–
–
(4,612)
(Loss)/profit for the year before taxation from continuing
operations
(6,898)
–
4
(6,894)
The segments assets and liabilities at 31 December 2023 was as follows:
Corporate
£’000s
Development
and
production
£’000s
Exploration
and
appraisal
£’000s
Total
£’000s
Non-current assets
137
162,908
34,976
198,021
Current assets
1,959
2,897
1,341
6,197
Liabilities
(23,551)
(11,368)
(2,591)
(37,510)
The 2023 geographical split of non-current assets was as follows:
UK
£’000s
Morocco
£’000s
Development and production assets
–
157,816
Fixtures, fittings and office equipment
4
6
Right of use assets
101
–
Software
18
8
Prepayments
–
5,092
Exploration and evaluation assets
–
34,976
Total
123
197,898
3 Other Income
2024
2023
£’000s
£’000s
Research and development expenditure credit
–
4
In prior 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.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 80 of 100
Annual Report 2024
4 Operating (Loss)/Profit
2024
£’000s
2023
£’000s
Operating (loss)/profit is stated after charging:
Depreciation
128
174
Employee costs
2,290
1,050
Impairment of development assets and exploration costs
122,042
–
5 Auditor’s Remuneration
2024
2023
£’000s
£’000s
Fees payable to the Company’s auditor for the audit of the Company’s annual accounts
63
63
Fees payable to the Company’s auditor and its associates for other services:
The audit of the Company’s subsidiaries pursuant to legislation
7
5
Other assurance services
–
–
Tax services
11
13
81
81
6 Employee Costs
2024
2023
£’000s
£’000s
Staff costs, including the Executive Chairman and Executive Directors
Share-based payments
240
239
Wages and salaries
2,372
1,143
Social security costs
146
145
Employee benefits
76
66
Employee costs capitalised to development and intangible assets
(544)
(543)
Total
2,290
1,050
2024
Number
2023
Number
The average monthly number of employees (including the Executive Chairman and
Executive Directors) was:
Technical and operations
5
5
Management and administration
8
8
Total
13
13
A proportion of the Group’s employee costs (£0.5 million (2023: £0.5 million) is capitalised on the cost of development,
exploration and appraisal under the Group’s accounting policy for these assets.
7 Finance Revenue
2024
2023
£’000s
£’000s
Interest on cash at bank and short-term deposits
12
25
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 81 of 100
Annual Report 2024
8
Taxation
(a) Analysis of the tax charge for the year:
2024
2023
£’000s
£’000s
Current tax
UK Corporation Tax
–
–
Adjustment to tax expense in respect of prior years
–
(1)
Tax cases settlement (overseas tax)
–
–
Total current tax (charge)/credit
–
(1)
Deferred tax credit arising in the current year
–
–
Total tax (charge)/credit
–
(1)
(b) Reconciliation of tax charge
2024
2023
£’000s
£’000s
Loss before tax
(126,624)
(6,894)
Tax (charge)/credit charged at UK corporation tax rate of 25% (2023: 23.5%)
31,656
1,620
Tax effect of:
Expenses not deductible for tax purposes
(231)
(78)
Impairment not deductible for tax purposes
(30,511)
–
Tax losses not recognised
(924)
(1,232)
Change in UK tax rate
–
(310)
Differences in overseas tax rates
10
(1)
Total tax (charge)/credit
–
(1)
Deferred tax assets have not been recognised in respect of tax losses available due to the uncertainty of the utilisation
of those assets. Unused tax losses as at 31 December 2024 were estimated to be approximately £6.9 million (2023:
£9.8 million). The decrease in estimated losses arose following disposal of SEME.
The Group had tax cases where Morocco Tax Authority had claimed taxes relating to the Group’s historical permits
transfers and intragroup transactions. In May 2023, the Company entered into a settlement agreement with Morocco
Tax Authority on a phased payment schedule back ended over 6 years.
The table below sets out the current and non-current tax liability and the movement during the year.
2024
£’000s
2023
£’000s
Amounts due within one year
–
199
Amounts due after more than one year
–
1,410
–
1,609
The movement during the year is as below:
As at 1 January
1,609
1,631
Change in/unwinding of discount
(165)
101
Tax payment
–
(126)
Exchange adjustment
(14)
3
Disposal of subsidiary
(1,430)
–
As at 31 December
–
1,609
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 82 of 100
Annual Report 2024
9 (Loss)/Profit 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 and warrants were converted into shares. Basic and diluted profit/(loss)
per share is calculated as follows:
2024
£’000s
2023
£’000s
Loss after tax from continuing operations
(126,624)
(6,895)
Loss after tax from discontinued operations
(24,196)
(265)
Total loss for the year after taxation
(150,820)
(7,160)
2024
Million
2023
Million
Basic weighted average shares in issue
2,017
1,882
Dilutive potential ordinary shares
–
–
Diluted weighted average number of shares
2,017
1,882
2024
Pence
2023
Pence
Basic and diluted loss per share from continuing operations
(6.28)
(0.37)
Basic and diluted loss per share from discontinued operations
(1.20)
(0.01)
Basic and diluted loss per share from continuing and discontinued
operations
(7.48)
(0.38)
Due to loss during the year, the effect of the potential dilutive shares on the earnings per share would have been anti-
dilutive and therefore were not included in the calculation of the dilutive earnings per share.
10 Property, Plant and Equipment
Development
and
production
assets
Fixtures,
fittings and
office
equipment
Right-of-use
assets
2024
£’000s
£’000s
£’000s
£’000s
Cost
At 1 January 2024
157,816
644
331
158,791
Additions
5,258
2
–
5,260
Exchange adjustments
2,023
–
–
2,023
Disposal on expiry of lease
–
–
(331)
(331)
Disposal on sale of subsidiary
(30,191)
(278)
–
(30,469)
At 31 December 2024
134,906
368
–
135,274
Impairment and depreciation
At 1 January 2024
–
634
230
864
Charge for period
129,845
2
101
129,948
Exchange adjustments
2,393
–
–
2,393
Disposal on expiry of lease
–
–
(331)
(331)
Disposal on sale of subsidiary
(7,817)
(272)
–
(8,089)
At 31 December 2024
124,421
364
–
124,785
Net book amount
10,485
4
–
10,489
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 83 of 100
Annual Report 2024
10 Property, Plant and Equipment (continued)
Development
Fixtures,
and
fittings and
production
office
Right-of-use
assets
equipment
assets
2023
£’000s
£’000s
£’000s
£’000s
Cost
At 1 January 2023
163,074
656
331
164,061
Additions
2,737
2
–
2,739
Exchange adjustments
(7,995)
(14)
–
(8,009)
At 31 December 2023
157,816
644
331
158,791
Impairment and depreciation
At 1 January 2023
–
642
57
699
Charge for period
–
4
173
177
Exchange adjustments
–
(12)
–
(12)
At 31 December 2023
–
634
230
864
Net book amount
157,816
10
101
157,927
In June 2024, the Company entered into a binding sale and purchase agreement (SPA) with Managem SA for the
disposal of SEME (note 27). Property, plant and equipment of the disposal group were measured at the lower of
their carrying amount and fair value less costs to sell and as a result, impairment loss was recognised. Similarly, for
continuing operations, the Company estimated the recoverable amount by reference to the fair value of the Tendrara
Production Concession (Concession) attributable to the discontinued operation and recognised an impairment loss.
The transaction with Managem completed in December 2024 (note 27) and an update of the impairment test was
undertaken. In calculating the fair value less cost to sell, the Company included in its valuation the consideration
received and receivable from sale of SEME, which comprised; expenditure incurred on the licence from 1 January
2022 to the date of disposal (back costs), Concession Phase 2 funding of up to $24.5 million, funding for one
exploration well each on the Anoual and Grand Tendrara licences of up to $2.6 million and $3.6 million, respectively
and $1.5 million on achieving first gas on Concession Phase 2. The funding for Concession Phase 2 and the
exploration wells is expected to be received over the period to July 2028 based on the Company’s understanding
of the timing of the operations. The impairment test calculations in prior year were based on a discounted cashflow
model that took account of forecast and projections of various elements including, future gas prices, field production
profile, development expenditure among others. In the current year, the Company has used fair value less cost to
sell as explained above, as the basis for the impairment test since a recent market transaction was considered a
reasonable basis to use. The impairment loss has primarily arisen due the change in the impairment test method
during the period.
The total impairment loss for discontinued operation recognised amounted to approximately £7.8 million and in
respect of the continuing operations, approximately £124.4m (inclusive of exchange rate movements). The
Company used a discount rate of 10.55% at 31 December 2024, a decrease from 11.25% at 31 December 2023
due to changes in financial market conditions and certain corporate parameters during the period. A change in the
discount rate by 1% has a £0.1m impact of the impairment charge for continuing operation and a 10% reduction in
amount receivable for future funding of Concession Phase 2 and the exploration wells would increase the
impairment charge for continuing operations by £0.6 million.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 84 of 100
Annual Report 2024
11 Intangibles
Software
£’000s
Exploration
&
Evaluation
Assets
£’000s
2024
£000s
Cost
At 1 January 2024
382
45,582
45,964
Additions
53
696
749
Exchange adjustments
(1)
335
334
Disposal
(252)
(32,573)
(32,825)
At 31 December 2024
182
14,040
14,222
Impairment and depreciation
At 1 January 2024
356
10,606
10,962
Charge for the year
25
16,501
16,526
Exchange adjustments
(4)
211
207
Disposal
(252)
(27,318)
(27,570)
At 31 December 2024
125
–
125
Net book amount
57
14,040
14,097
Exploration
& Evaluation
Software
Assets
2023
£’000s
£’000s
£’000s
Cost
At 1 January 2023
375
46,594
46,969
Additions
22
729
751
Exchange adjustments
(15)
(1,741)
(1,756)
At 31 December 2023
382
45,582
45,964
Impairment and depreciation
At the start of the year
356
10,606
10,962
Charge for the year
17
–
17
Exchange adjustments
(17)
–
(17)
At 31 December 2023
356
10,606
10,962
Net book amount
26
34,976
35,002
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 2024, the directors have:
• reviewed the time period that the Group has the right to explore the area and noted no instances of expiration, or
permits that are expected to expire in the near future and not be renewed;
• determined that further E&E expenditure is either budgeted or planned for all permits;
• not decided to discontinue exploration activity due to there being a lack of quantifiable mineral resource; and
• not identified any instances where sufficient data exists to indicate that there are permits 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. Included in the charge for the year is
approximately £16.5 million impairment following the measurement of intangible assets at the lower of their carrying
amount and fair value less costs to sell on signing of the SPA with Managem SA (note 27).
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 85 of 100
Annual Report 2024
12 Prepayments
Non-current prepayment of £1.5 million (2023: £5.1 million) relates to activities of the Company’s Phase 1 mLNG
Project in the Concession.
13 Investment in Subsidiaries
2024
2023
Cost of
Cost of
Intercompany
shares in
Intercompany
shares in
loans subsidiaries
Total
loans
subsidiaries
Total
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
Cost
At 1 January
209,415
–
209,415
216,819
–
216,819
Additions
27,034
–
27,034
3,641
–
3,641
Repayment of intercompany
loans
(12,459)
–
(12,459)
(161)
–
(161)
Write-off on disposal of subsidiary
(48,980)
–
(48,980)
–
–
–
Reclassification to other
receivables on disposal of
subsidiary
(1,908)
–
(1,908)
–
–
Exchange adjustment
3,744
–
3,744
(10,884)
–
(10,884)
At 31 December
176,846
–
176,846
209,415
–
209,415
Credit loss allowance and
impairment
At 1 January
19,266
–
19,266
19,687
–
19,687
Decrease in credit loss
(14,359)
–
(14,359)
(421)
–
(421)
Impairment loss during the year
124,421
–
124,421
–
–
–
At 31 December
129,328
–
129,328
19,266
–
19,266
Net book amount at 31 December
47,518
–
47,518
190,149
–
190,149
The subsidiary companies of the Company at 31 December 2024, which are all 100% owned by the Company, are:
Name
Incorporated
Principal activity
Registered addresses
Sound Oil International Limited
British Virgin Isles
Holding Company
PO Box 173, Kingston, Chambers Road,
Tortola, VG 1110, British Virgin Islands
Sound Oil (Asia) Limited
British Virgin Isles
Holding Company
PO Box 173, Kingston, Chambers Road,
Torola, VG 1110, British Virgin Islands
Arran Energy Holdings Limited
British Virgin Isles
Exploration Company
PO Box 662, Road Town, Tortola,
VG 1110, British Virgin Islands
Mitra Energia Citarum Limited*
Mauritius
Exploration Company
Fifth Floor, Ebene, Esplanade,
24 Cybercity, Ebene, Mauritius
Sound Energy New Ventures Limited
UK
Dormant
20 St Dunstan’s Hill, London EC3R 8HL,
UK
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 86 of 100
Annual Report 2024
13 Investment in Subsidiaries (continued)
Name
Incorporated
Principal activity
Registered addresses
Sound Energy Sustainables Limited
UK
Renewable Energy
20 St Dunstan’s Hill, London EC3R 8HL,
UK
Sound Energy Morocco South Limited
UK
Exploration Company
20 St Dunstan’s Hill, London EC3R 8HL,
UK
Sound Energy Meridja Limited
UK
Exploration and
20 St Dunstan’s Hill, London EC3R 8HL,
Development Company
UK
* The investment in Mitra Energia Citarum Limited is held, indirectly, via Sound Oil International 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 of £124.4 million (2023: nil) was recognised for the
investment in subsidiaries following the recognition 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 9.36% (2023: 9.2%), obtained from publicly available data
published by leading credit rating agencies. Following the impairment and write-offs of some intercompany balances on
disposal of a subsidiary, a reduction of credit loss of £14.4 million (2023: £0.4 million) 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 of calling in the loans in the foreseeable future, the loans are classified as non-current
investments.
Composition of the Group
Information about the composition of the Group at the end of the reporting period is as follows:
Principal activity
Place of incorporation
Place of operation
2024
Number
2023
Number
Gas exploration
UK
Morocco
2
3
Holding companies
UK
UK
1
1
Dormant
UK
UK
1
1
Renewable energy
UK
Morocco
1
1
Holding companies
British Virgin Isles
British Virgin Isles
2
2
Gas exploration
British Virgin Isles
Morocco
1
1
Holding companies
Mauritius
Mauritius
1
1
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 87 of 100
Annual Report 2024
14 Deferred consideration
Deferred consideration relates to future funding to be received by the group from the purchaser (the purchaser) of the
Company’s subsidiary disposed of during the year (note 27). The Company’s share of its future expenditure on the
Tendrara Production Concession Phase 2 development (Phase 2 development) will be funded by the purchaser up to
$24.5 million, the purchaser will also fund the drilling of one exploration well on each of the Anoual and Grand Tendrara
licences for up to $2.6 million and $3.6 million, respectively, and pay to the group $1.5 million upon achieving first gas
on the Phase 2 development. The Company has calculated the deferred consideration after taking account of the
expected timing of receipt of the various elements of the deferred consideration based on current estimates of the
timing of the operations and applied a discount rate of 10.55% (note 10).
15 Other receivables
Group
2024
£’000s
2023
£’000s
UK VAT
–
23
Morocco VAT
5
426
Other receivables
401
475
Advances and receivables from former subsidiary
2,841
–
3,247
924
Company
2024
£’000s
2023
£’000s
UK VAT
–
23
Other receivables
45
36
Receivables from former subsidiary
1,908
–
1,953
59
Following the disposal of subsidiary (note 27) approximately £1.9 million relating to services provided by the Company
to the former subsidiary in respect of the joint operations relating to the Morocco licences was reclassified from
intercompany to other receivables as the amount is expected to be received as agreed by the Company and the
purchase of the subsidiary. The Group provides funding, to the operator of the joint operations, for its share of
expenditure in respect of the Morocco licences in advance of the expenditure being incurred. The amount advanced is
reduced by the Group’s share of actual expenditure incurred during the period. The resulting net position at the end of
the year was a receivable of approximately £0.9 million and is included in the line advances and receivables from
former subsidiary.
2024
£’000s
2023
£’000s
At 1 January
–
–
Fair value of consideration receivable
20,696
–
Exchange adjustments
349
–
At 31 December
21,045
–
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 88 of 100
Annual Report 2024
16 Cash and Cash Equivalents
Group
Company
2024
£’000s
2023
£’000s
Cash at bank and in hand
6,141
45
Cash equivalents:
Short-term deposits
1,740
188
Carrying amount 31 December
7,881
233
Being:
In US dollar
6,100
6
In euros
17
13
In sterling
1,764
214
Total
7,881
233
The Group has provided collateral of $nil (2023: $1.75 million (£1.4 million)) to the Morocco Ministry of Petroleum to
guarantee the Group’s minimum work programme obligations. The cash was held in a bank account under the control
of the Company and, as the Group expected the funds to be released as soon as the commitment was fulfilled, on this
basis, the amount was included within cash and cash equivalents.
17 Trade and Other Payables
Group
Company
2024
£’000s
2023
£’000s
Trade payable
46
102
Payroll taxes and social security
108
135
Accruals
3,390
184
3,544
421
2024
£’000s
2023
£’000s
Cash at bank and in hand
6,155
1,453
Cash equivalents:
Short-term deposits
1,740
1,563
Carrying amount 31 December
7,895
3,016
Being:
In US dollar
6,100
2,734
In euros
17
13
In sterling
1,770
243
In Moroccan dirham
8
26
Total
7,895
3,016
2024
£’000s
2023
£’000s
Trade payable
46
716
Payroll taxes and social security
108
145
Accruals
3,511
1,634
3,665
2,495
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 89 of 100
Annual Report 2024
18 Lease Liabilities
2024
£’000s
2023
£’000s
Amounts due within one year
–
121
Amounts due after more than one year
–
–
–
121
The movement during the year is as below:
As at 1 January
121
283
Unwinding of discount
3
18
Payments
(124)
(180)
As at 31 December
–
121
19 Capital and Reserves
Group and Company
2024
Number
of shares
2023
Number
of shares
At 1 January
1,963,122,679
1,848,702,674
Issued during the year for cash
–
–
Non-cash share issue
117,500,000
114,420,005
At 31 December
2,080,622,679
1,963,122,679
The share issues described below were all non-cash transactions.
Share issues
In April 2024, the Company issued 30,000,000 shares following a partial accrued interest conversion amounting to
£300,000 by the holders of the Company’s convertible bonds.
In July 2024, the Company issued 50,000,000 shares following a partial accrued interest conversion amounting to
£500,000 by the holders of the Company’s convertible bonds.
In October 2024, the Company issued 37,500,000 shares following a partial accrued interest conversion amounting
to £375,000 by the holders of the Company’s convertible bonds.
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.
2024
Number
of shares
£’000s
2023
Number
of shares
£’000s
Ordinary shares – 1p
2,080,622,679
20,806
1,963,122,679
19,631
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 90 of 100
Annual Report 2024
20 Related Party Disclosures
Key management
As at 31 December 2024, there were two key management personnel other than directors of the Company (2023: 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.
2024
£’000s
2023
£’000s
Salaries and employee benefits
1,982
1,041
Share-based payments
240
239
2,222
1,280
Key management (including Executive Directors) interest in LTIP and nil cost options
LTIP options awards by key management (including Executive Directors), at 31 December 2023, have the following
expiry dates and exercise prices:
Expiry
date
Exercise
price
Pence
2024
Number
2023
Number
2022
2032
2.4p
31,769,085
31,769,075
Nil cost bonus options awards by key management (including Executive Directors) at 31 December 2024 have the
following expiry dates and exercise prices:
Expiry date
2024
Number
2023
Number
2022
2027
12,048,960
12,048,960
21 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, deferred consideration, 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 15 (Other Receivables),
note 16 (Cash and Cash Equivalents), note 17 (Trade and Other Payables) and note 26 (Loans and Borrowings).
The table below sets out the Group’s accounting classification of its financial assets and liabilities.
2024
£’000s
2023
£’000s
Financial assets
Cash and short-term deposits
7,895
3,016
Other receivables
3,247
924
Deferred consideration
21,045
–
32,187
3,940
Financial liabilities
Trade and other payables
3,665
2,495
Loans and borrowings
37,707
33,285
41,372
35,780
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 91 of 100
Annual Report 2024
2024
£’000s
2023
£’000s
Borrowings
(37,707)
(33,285)
Cash and cash equivalents
7,895
3,016
Net debt
(29,812)
(30,269)
Total capital excluding reserves:
Equity share capital
20,806
19,631
Equity share premium
20,267
20,267
Shareholders’ equity
17,017
166,708
21 Financial Instruments Risk Management (continued)
Fair value measurements
The Company classifies the fair value of the financial instruments according to the following hierarchy, based on the
number 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 convertible bond amount of £0.3 million at year end was measured at fair value and falls to Level 2 above. A
discounted cashflow method was used using a discount rate of 17.7% to discount the outstanding interest of £0.6 million
over the outstanding term of the bonds. The discount rate is made up of the coupon interest plus a premium of
approximately 2.7%, determined by reference to default spread of the region in which the Company operates.
The deferred consideration amount of £21.0 million at year end was measured at fair value and falls to level 2 above.
The amount receivable are known and the timing of receipts can be reasonably estimated as described on note 14. A
discounted cashflow method was used using a discount rate of 10.55% (note 10) over the expected timing of receipts
of the deferred consideration.
Risks
The main risks arising from the Group’s financial instruments are interest rate risk and foreign currency risk (note 22).
The Board of Directors reviews and agrees with 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 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. 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. The Group monitors capital on a short and medium-term view.
The table below illustrates the Group’s capital structure.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 92 of 100
Annual Report 2024
22 Foreign Currency and Other Risks
Foreign currency risk arises from the Group’s financial instruments (note 21). As a result of most 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, 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.
2024
2023
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
5%
510
(6,409)
461
(7,065)
Increase in EUR/GBP exchange rate
5%
1,097
–
1,098
–
Increase in MAD/GBP exchange rate
5%
(1)
–
(25)
–
Decrease in USD/GBP exchange rate
(5%)
(510)
6,409
(461)
7,065
Decrease in EUR/GBP exchange rate
(5%)
(1,097)
–
(1,098)
–
Decrease in MAD/GBP exchange rate
(5%)
1
–
25
–
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 26.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 93 of 100
Annual Report 2024
23 Financial Instruments Cash and short-term deposits
Cash and short-term deposits
Sterling
1,745
–
25
1,770
1.58
Euro
–
–
17
17
–
US dollar
–
–
6,100
6,100
–
Moroccan dirham
–
–
8
8
–
1,745
–
6,150
7,895
2023
Sterling
218
–
25
243
1.3
Euro
–
–
13
13
–
US dollar
1,374
–
1,360
2,734
0.5
Moroccan dirham
–
–
26
26
–
1,592
–
1,424
3,016
Euro cash balances have been converted at the exchange rate of €1.2068: £1.00 (2023: €1.1532: £1.00). Moroccan
dirham cash balances have been converted at the exchange rate of MAD12.682: £1.00 (2023: MAD12.589: £1.00). US
dollar cash balances have been converted at the exchange rate of US$1.2536: £1.00 (2023: US$1.2731: £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.
24 Share-Based Payments
Group and Company
2024
2023
£’000s
£’000s
Expense arising from equity settled LTIP
240
239
240
239
LTIP Awards
The Company has a 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.
Floating
rate
£’000s
Fixed
rate
£’000s
Interest-
free
£’000s
Total
£’000s
Weighted
average rate
%
2024
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 94 of 100
Annual Report 2024
24 Share-Based Payments (continued)
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 historical volatility is indicative of future trends, which may not necessarily be the
actual outcome.
No LTIP awards were granted during 2024 or 2023. The remaining contractual life of the LTIP awards outstanding at
31 December 2024 is 7.3 years. If all the 31,769,085 LTIP awards were exercisable immediately, new ordinary shares
equal to approximately 1.5% (2023: 1.6%) of the shares currently in issue, would be created.
Nil cost options
The Company has outstanding nil-cost options that were granted to employees in previous years in settlement of bonus
awards. The nil-cost options vested immediately and expire 5 years from the grant date.
Number
Number
2024
2023
Nil cost options outstanding at the start of the year
Granted during the year
Exercised during the year
13,796,793
–
–
16,812,583
–
(3,015,790)
Expired during the year
–
–
Nil cost options outstanding at the end of the year
13,796,793
13,796,793
The weighted average share price at the date of vesting of the RSU awards was n/a (2022: 2.5 pence).
Warrants
As at 31 December 2024, the Company had the following outstanding warrants to subscribe to the Company’s ordinary
shares.
2024
Exercise
price
Pence
Expiry date
Number at
1 January
Granted
/(exercised)
Expired
Number at
31 December
2023 Warrants
2.25
13 June 2026
40,476,190
–
–
40,476,190
2022 Warrants
2.75
13 June 2025
7,056,875
–
–
7,056,875
2021 Warrants
2.75 21 December 2027
99,999,936
–
–
99,999,936
147,533,001
–
–
147,533,001
2023
Exercise
price
Pence
Expiry date
Number at
1 January
Granted
/(exercised)
Expired
Number at
31 December
2023 Warrants
2.25
13 June 2026
–
40,476,190
–
40,476,190
2022 Warrants
2.75
13 June 2025
7,056,875
–
–
7,056,875
2021 Warrants
2.75 21 December 2027
99,999,936
–
–
99,999,936
107,056,811
40,476,190
–
147,533,001
25 Commitment and Guarantees
At 31 December 2024, the Group’s capital expenditure commitment on its permits was, approximately, £2.4 million, for
the development, exploration and appraisal activities in the Group’s permits in Morocco. The Group had placed $0.6
million collateral to guarantee to the Moroccan Oil Ministry for the minimum work commitments on its permits. In
addition, the Company has granted a parent Company guarantee totalling, approximately, £0.6 million for the work
commitments.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 95 of 100
Annual Report 2024
26 Loans and Borrowings
Group and Company
Secured
Bonds
£’000s
Loan note-
Afriquia
£’000s
Convertible
Bonds
£’000s
Short-
term
loan
£’000s
2024
Total
£’000s
Current liabilities
At 1 January
–
–
–
–
–
Gross amount of loan drawn down
–
–
–
1,100
1,100
Accrued interest
–
–
–
133
133
Principal loan and interest repayment
–
–
–
(1,233)
(1,233)
At 31 December
–
–
–
–
–
Non-current liabilities
At 1 January
21,980
10,276
1,029
–
33,285
Gross amount of loan drawdown during the year
–
4,722
–
–
4,722
Amortised finance charges
1,422
816
–
–
2,238
Unwinding of discount
–
–
166
–
166
Interest payments
(430)
(605)
–
–
(1,035)
Debt conversion to equity
–
–
(621)
–
(621)
Principal loan repayment
–
–
(250)
–
(250)
Exchange adjustments
(1,022)
224
–
–
(798)
At 31 December
21,950
15,433
324
–
37,707
Secured
Bonds
£’000s
Loan note-
Afriquia
£’000s
Convertible
Bonds
£’000s
2023
Total
£’000s
Current liabilities
At 1 January
1,121
–
–
1,121
Reclassification to non-current liability
(1,121)
–
–
(1,121)
At 31 December
–
–
–
–
Non-current liabilities
At 1 January
20,855
8,213
–
29,068
Gross amount of loan drawdown during the year
–
2,017
2,500
4,517
Amortised finance charges
890
532
–
1,422
Unwinding of discount
–
–
137
137
Interest payments
(441)
–
–
(441)
Gross equity component at date of issue
–
–
(562)
(562)
Debt conversion to equity
–
–
(1,046)
(1,046)
Exchange adjustments
(445)
(486)
–
(931)
Reclassification from current liabilities
1,121
–
–
1,121
At 31 December
21,980
10,276
1,029
33,285
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 96 of 100
Annual Report 2024
26 Loans and Borrowings (continued)
The Company has €25.32 million secured bonds (the “Secured Bonds”). The Secured Bonds mature on 21 December
2027. The Secured Bonds bear 2% cash interest paid per annum until maturity and a 3% interest per annum to be paid
at 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 6.5%.
The Company has a $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 was deferred and capitalised
semi-annually, until the second anniversary of the issue of Notice to Proceed. Repayment of interest that is not deferred
commenced in Q2 2024. The principal and deferred interest will be repayable annually in equal instalments
commencing December 2028. The Loan is secured on the issued share capital of Sound Energy Meridja Limited. The
weighted effective interest on the drawdowns made is approximately 6.2%.
In June 2023, the Company issued £2.5 million convertible bonds (the ‘‘Bonds’’) from a senior unsecured convertible
bond facility of up to £4.0 million. The £2.5 million Bonds have a fixed conversion price of 2.25 pence per ordinary
share. The term of the Bonds is 5 years from drawdown date, with interest of 15% per annum payable bi-annually in
cash or capitalised to the principal, at the Company's election. The Company issued 33,333,333 warrants to subscribe
for new ordinary shares in the Company at an exercise price of 2.25 pence per ordinary share with a term of 3 years.
During the year, the Company issued 117.5 million new shares following the conversion of £1,175,000 of accrued
interest on the Bonds, leaving £0.6 million accrued interest outstanding. The fair value of the debt converted to equity
was £0.6 million which when compared to the par value of the shares issued of £1.2 million, resulted in a difference of
£0.6 million that was first recorded in equity and subsequently transferred to the profit and loss account. The Company
repaid £250,000, being the principal amount that was outstanding. The carrying amount of the Bonds is stated at fair
value and is measured using the discounted cashflow method. A discount rate of 17.7% was used to discount the
outstanding capitalised interest over the outstanding term of the Bonds.
In Q3 2024, the Company entered into a short-term bridge loan with a high-net-worth investor for up to £1.5 million,
available for three months and any amount drawn down attracted interest of 15% per quarter. The Company made
downs amounting to £1.1 million which attracted interest of £133,000. The principal and interest amounts were repaid
in December 2024.
Reconciliation of liabilities arising from financing activities
Non-cash changes
1 January
2024
Cash
flows
Finance
charges
Exchange
adjustments
Convertible
Bonds non-
cash
movements
31
December
2024
2024
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
Long-term borrowings
33,285
3,304
2,537
(798)
(621)
37,707
Leases
121
(124)
3
–
–
–
Total liabilities from financing
activities
33,406
3,180
2,540
(798)
(621)
37,707
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 97 of 100
Annual Report 2024
26 Loans and Borrowings (continued)
Non-cash changes
1 January
2023
Cash
flows
Finance
charges
Exchange
adjustments
Convertible
Bonds non-
cash
movements
31
December
2023
2023
£’000s
£’000s
£’000s
£’000s
£’000s
£’000s
Long-term borrowings
30,189
4,001
1,559
(931)
(1,533)
33,285
Leases
283
(180)
18
–
–
121
Total liabilities from financing
activities
30,472
3,821
1,577
(931)
(1,533)
33,406
Reconciliation of finance expense
2024
2023
£’000s
£’000s
Amortised finance charges
2,371
1,422
Unwinding of discount
169
256
Bond issue costs expensed
–
601
Less capitalised interest
(238)
(285)
Total finance expense for the year
2,302
1,994
27 Discontinued operations
On 14 June 2024, the Company announced that it had entered into a binding sale and purchase agreement with
Managem SA for the disposal of SEME that owns:
•
55% interest in the Tendrara Production Concession, including the liability for payments arising from the
Schlumberger net profit interest (NPI) agreement (pursuant to the acquisition of Schlumberger Silk Route Services
Limited in 2021);
•
47.5% interest in the Grand Tendrara licence; and
•
47.5% interest in the Anoual licence.
The consideration included:
•
Back costs (expenditure on licences) from 1 January 2022 to completion date, net of working capital and other
adjustments, $13.1 million;
•
Tendrara Production Concession Phase 2 carry of up to $24.5 million;
•
Anoual licence carry on one well, $2.6 million;
•
Grand Tendrara licence carry on one well, $3.6 million;
•
On achieving Phase 2 first gas, $1.5 million.
The transaction was completed in December 2024 and the Company received $13.1 million cash with the other
elements of the consideration remaining as deferred consideration.
The results of the discontinued operations are presented below.
FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2024 (Continued)
Sound Energy plc
Page 98 of 100
Annual Report 2024
27 Discontinued operations (continued)
Represents the results for the period to divestment date on 10 December 2024.
The net cash flows of the discontinued operations were as follows:
The calculation of loss on disposal of subsidiary is shown below:
28 Post Balance Sheet Events
In February 2025, the Company announced the resignation of its Chief Operating Officer as a director of the Company
who left full-time employment of the Group in March 2025.
In March 2025, the Company announced the mLNG project main contractor, Italfluid, and the operator of the Tendrara
Production Concession had agreed to amend their contractual arrangement by terminating the vendor financed lease
agreement entered into in 2020 and entering into an engineering, procurement and Construction (EPC) contract. .
2024*
£’000s
2023
£’000s
Other income
–
38
Impairment of tangible and intangible assets
–
–
Gross loss
–
38
Administrative expenses
(563)
(85)
Operating loss from discontinued operations
(563)
(47)
Finance revenue
11
17
Foreign exchange loss
(76)
(127)
Finance costs recovery/(expense)
165
(101)
Foreign currency translation loss reclassified from
other comprehensive income
(295)
–
Loss on disposal of subsidiary
(23,438)
–
Loss for the period before taxation from
discontinued operations
(24,196)
(258)
Tax expense
–
(7)
Loss for the period after taxation from
discontinued operations
(24,196)
(265)
2024
£’000s
2023
£’000
Net cash flow from operating activities
(816)
189
Net cash flow from investing activities
9,236
–
Net cash flow from financing activities
–
–
Net cash inflow/(outflow)
8,420
189
2024
£’000s
2023
£’000s
Consideration
Cash consideration received on completion
10,240
–
Fair value of deferred consideration
20,696
–
Total consideration on disposal
30,936
–
Carrying amount of net assets disposed
(28,807)
–
Impairment and other expenses on disposal
(25,567)
–
Loss on disposal of subsidiary
(23,438)
–
Sound Energy plc
Page 99 of 100
Annual Report 2024
OTHER INFORMATION
LIST OF PERMITS AND INTERESTS
Permit
Status
Name
Type
WI
(%)
Area (km2)
Operator
Grand Tendrara Permit
Grand Tendrara
Exploration
27.5
14,411
Sound Energy Morocco East1
Tendrara
Permit
Tendrara
Concession
20.0
133.5
Sound Energy Morocco East1
Anoual
Permit
Anoual
Exploration
27.5
8,873
Sound Energy Morocco East1
Sidi Moktar
Permit
Sidi Moktar
Exploration
75.0
4,712
Sound Energy Morocco South
1 Sound Energy Morocco East Limited is a wholly owned subsidiary of Managem SA following completion of the transaction of the disposal by the
Sound Energy Plc of the entire issued share capital of Sound Energy Morocco East Limited to Managem SA on 10 December 2024. On 30
January 2025 Sound Energy Morocco East Limited changed name to Mana Energy Limited.
Annual Report 2024
Sound Energy plc
Page 100 of 100
OTHER INFORMATION
SHAREHOLDER INFORMATION
Dealing Information
Stock code: SOU.LN
Financial Calendar
Meetings
Annual General Meeting – June 2025
Announcements
2025 Interim results – September
2025
2025 Preliminary results – March
2026
Addresses
Registered Office
Sound Energy plc
20 St Dunstan’s Hill
London
EC3R 8HL
Business Address
Sound Energy plc
20 St Dunstan’s Hill
London
EC3R 8HL
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
Nominated Advisor and Stockbroker
Zeus Capital Limited
125 Old Broad St
London
EC2N 1AR
Registrars
MUFG Corporate
Markets (UK) Limited
10th Floor
Central Square
29 Wellington Street
Leeds
LS1 4DL