Oil price, Sound, Cairn, Zenith.

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WTI $47.02 -95c, Brent $50.08 -83c, Diff -$3.06 -11c, NG $2.78 +8c

Oil price

Another bad day for oil but in thin trade, the Covid problems still exist but the main problem overnight was down to President Trump not signing off the Covid package Bill. The API stats were a mixed bag but showed a crude inventory build.

Sound Energy

Sound has announced  that Sound Energy Morocco East Limited, the Company’s wholly owned subsidiary, has ‘entered into a letter of exclusivity with Italfluid Geoenergy S.r.l. pursuant to which the parties have agreed to use their reasonable endeavours to negotiate and enter into a binding project contract which will on entry commit Italfluid to design, construct, commission, operate, maintain and let to SEMEL a mLNG Plant which can produce LNG. The mLNG Plant, which will also treat and process raw gas from the Phase 1 Development prior to liquefaction, is a substantial part of the surface facilities required to be built and operated as part of the Phase 1 Development’.

There will now be a period of exclusivity until 31st March 2021 in order to conclude the project contract which means that the mLNG Plant shall be ‘designed, constructed, commissioned, operated and maintained by Italfluid for SEMEL in consideration for the Initial Payments and the Daily Rental Payments’. The initial contract term will be for 5 years.

‘An initial Payment of five million US Dollars (US$5,000,000) due from SEMEL to Italfluid within 30 days of issuance of the notice to proceed with the Phase 1 Development and two million US Dollars (US$2,000,000) due from SEMEL to Italfluid within 30 days of notification from the SEMEL to Italfluid of the successful commissioning (including production build-up) of the mLNG Plant’.

‘During each day of each contract year in which Italfluid has evidenced to the satisfaction of SEMEL, that the mLNG Plant can deliver a guaranteed daily volume, a daily rental payment of thirty-six thousand US Dollars (US$36,000) per day shall be payable to Italfluid from SEMEL’.

Mohammed Seghiri, Sound Energy’s Chief Operating Officer, commented:

“We are very pleased to announce the signature of this Letter of Exclusivity with Italfluid for the proposed provision and leasing of the mLNG Plant. The Company has worked with Italfluid in Morocco in the past and I am pleased to continue developing our partnership with such a technically assured contractor in support of the Phase 1 Development of the TE-5 Horst.

The mLNG Plant is the most complex element and most significant capital requirement of the proposed Phase 1 Development therefore today’s announcement of a proposed leasing structure, which when combined with the financing proposed to be provided by the Gas Offtaker, would secure the balance of funding required by Sound Energy for the Phase 1 Development, is a key milestone for the Company as we move towards FID.”

This is clearly very good news for Sound who had previously announced an HOT with a Moroccan conglomerate as a gas offtaker until 31st December 2020 which can now been extended until 31st March 2021 thus syncing the negotiations. The three elements of offtake, EPC and Finance are now coming together for Sound and de-risking the route to FID.

Cairn Energy

Cairn has announced that the Tribunal has found in its favour and has awarded them damages of $1.2bn plus interest and costs ‘which now become payable’. Clearly excellent news for the company and its shareholders and the shares have risen some 25% this morning.

Zenith Energy

Zenith has been selected as the successful bidder for the award of a new 25-year licence to operate the Tilapia oilfield (“Tilapia II”). As announced to the market on July 20, 2020, the Company had previously submitted a comprehensive commercial and technical offer for the award of Tilapia II.

Andrea Cattaneo, Chief Executive Officer of Zenith, commented:

“Zenith’s selection by the Ministry of Hydrocarbons of the Republic of the Congo as the successful bidder for Tilapia II is an exceptional achievement and is the product, amongst other qualities, of our unwavering commitment and perseverance in pursuing our development strategy.

 The Company is now positioned to benefit from a potentially transformational asset with highly prospective development and exploration potential in a prolific hydrocarbon basin where we shall be able to deploy our drilling equipment to perform operational activities in agreement with our local partners at a time of increasing recovery in oil prices.

 Further, it is a matter of great satisfaction that the Company has been able to resoundingly vindicate its confidence in its ability to achieve its publicly announced objectives in the Republic of the Congo, specifically in relation to Tilapia II.

 The Company can now look forward with well-grounded confidence to the journey ahead in the Republic of the Congo and the possible achievement of other publicly announced objectives, including the potential acquisition of additional oil production assets, as well as obtaining repayment of the approximately US$5.7 million owed to the Company by SNPC.”

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