Anticipation hotting up for Sound Energy's next well result from Morocco
March 13, 2017
Oil companies analyst Malcom Graham Wood says it is an exciting time for Sound Energy.
Sound Energy PLC (LON:SOU) should now have got into the target zone for the high impact TE-8 well in Morocco, according to Malcolm Graham Wood, who says it shouldn’t take long to have a ‘sniff around’ to find out whether the gas is present.
On Friday, the company told investors that it was just two meters from the main reservoir in the TAGI formation.
The TE-8 well is around 12 kilometers from the last successful hole and is what’s called a step out well because it will test the lateral extent of gas that has been discovered in the TAGI reservoir.
Assuming gas is encountered in the main well bore, a further 30-day side-track will be drilled to prove a potentially deeper gas contact 900 meters to the north-west.
Oil companies analyst Malcom Graham Wood says it is an exciting time for Sound Energy.
“If my experience is anything to go by, they should have entered the reservoir at the weekend – unless something went wrong – and it won’t take long to sniff around and see if you’ve still got the gas and then, of course, you’ve got to start doing the tests and pressures, and everything else.
“It is a pretty crucial time. We’re in exciting territory.
“Some people would say the [present] value of the stock needs to have TE-8 come in, which is probably fair [assessment], but, there’s no reason why it shouldn’t.”
Whatever the result of the latest Morocco well, the company is following up with another high impact well – with the Badile exploration hole near Milan, where drilling began in early March and is due to take around 100 days.
Impressed with Badile exploration site in Italy
MGW today spoke to Proactive Investors’ Stock-tube after he returned impressed from a recent trip to the Badile site.
“It's probably one of the best sites I've ever seen," he told Proactive's Andrew Scott.
"It's an absolutely crucial well this - a big gas and, hopefully, condensate discovery," he explained.
The analyst reckons Badile is worth 35-50p per share to Sound, but, he sees an upside case where the well can add more than a £1 per share.
“Potentially it [Badile] could be huge, and, I think that on that basis the next three months will be absolutely crucial.
MGW also notes though that since the acquisition of Tendrara in Morocco, and Sound’s success there, Badile is now not as important as it once was in the group’s portfolio.
He says when he first looked at Sound, about three years ago, Badile was “about the only thing” in the portfolio.
“The management, to give them credit, have done pretty well in the sense that when they realized that everything they had in Italy was taking so long, they moved over to Morocco and found themselves in something that takes three months to get an environmental approval compared to three years.
“Should TE-8 come in, and we are in absolutely crucial territory right now, then of course still the majority of the value of the business will be almost entirely from Morocco and Tendrara.
“But, then, it could switch around. If Tendrara 8 [TE-8] doesn’t come in and Badile does all of a sudden it is more even.
“It is quite possible that you could have two substantial parts of this business, one in Italy and one in Morocco.”
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