Half-year take: Sound Energy edges towards first gas in Morocco and adds hydrogen option
Sound Energy’s half-year update is all about turning plans into cash flow at Tendrara and planting a couple of new flags in Morocco’s energy transition. The company remains a minority partner alongside Operator Mana Energy and ONHYM, but crucially now expects first gas from the micro‑LNG project by year-end 2025. There’s also a new natural hydrogen and helium vehicle, plus a renewable power JV. It’s progress with caveats: financing is tighter, and Phase 2 is moving slower than hoped.
Micro‑LNG Phase 1: contract reshaped, funding lined up, first gas targeted for Q4 2025
The big operational shift is the move from a vendor-financed lease with Italfluid to a traditional EPC contract (Engineering, Procurement and Construction). In simple terms, Sound and partners will now pay for the plant rather than lease it, with the Operator highlighting a reduction in daily operating costs.
To enable that switch, Mana Energy has secured a $25 million local bank facility, with Sound’s share up to $5 million. Access for Sound is “in discussion”, and the facility has conditions precedent. If those are satisfied promptly, it de-risks the EPC conversion and keeps the commissioning timetable intact.
On the ground, TE‑6 and TE‑7 have been converted for long-term production and successfully flowed gas with no water – a good sign. Equipment for the gas gathering system is on site, LNG tank shells are complete, and plant packages are being assembled. Offtake remains in place with Afriquia Gaz, which will lift LNG to Morocco’s industrial market. Nameplate sales gas is 10 mmcf/d from the two wells.
Phase 2 pipeline: FEED update commissioned, debt closure awaits contractor selection
Phase 2 is the larger pipeline-led development supplying state power stations via a 120 km export line. It’s the slower piece this year. The Operator has commissioned an updated FEED (Front-End Engineering and Design) and is running a process to select the EPC contractor. The FEED/EPC selection is the key outstanding condition precedent for closing project debt.
Funding for Sound’s share of Phase 2 is expected to be met from a combination of the Managem SA carry and previously announced Attijariwafa Bank project debt. Final Investment Decision is intended after the FEED update lands later in 2025.
Energy transition moves: HyMaroc and a renewable power JV
Sound has formed HyMaroc Ltd to explore for natural hydrogen and helium in Morocco. It has also signed a binding agreement to create a JV to produce and sell renewable energy via access to the medium-voltage grid. Financial terms and timelines were not disclosed, but the direction of travel is clear – diversify while leveraging in-country relationships.
Exploration: two carried wells lined up, licences in renewal
Exploration licences (Grand Tendrara and Anoual) are in the process of extension and renewal. Under the Managem transaction, Sound is carried for one well on each permit – a useful way to keep exploration alive without stretching the balance sheet.
- Grand Tendrara: SBK‑1 structure – unrisked 140 Bcf Pmean GIIP. SBK‑1 previously flowed 4.41 mmscf/d after acidisation, and Sound believes modern stimulation could unlock commerciality.
- Anoual: M5 prospect – unrisked 943 Bcf Pmean GIIP. Both wells could tie into Phase 2 if successful.
“Carry” means the partner pays Sound’s share of defined costs – in this case up to $3.6 million for SBK‑1 and $2.6 million for M5 – plus Sound has a Phase 2 development carry up to $24.5 million and a $1.5 million payment on Phase 2 first gas.
Financial snapshot: smaller loss, tight cash, material borrowings
There’s a marked improvement in the income statement versus last year’s impairment-heavy period. However, cash is light and the company flags a material uncertainty around going concern pending additional financing.
| Metric | H1 2025 | H1 2024 | FY 2024 |
|---|---|---|---|
| Loss after tax – continuing | £5.526 million | £125.088 million | £126.624 million |
| Cash and short-term deposits | £2.831 million | £0.235 million | £7.895 million |
| Loans and borrowings | £37.647 million | £35.534 million | £37.707 million |
| Net assets | £11.623 million | £19.560 million | £17.017 million |
| Administrative expenses | £1.437 million | £1.398 million | £4.586 million |
| Foreign exchange (loss)/gain | £(3.866) million | £0.155 million | £2.294 million |
| Deferred consideration asset | £20.082 million | not disclosed | £21.045 million |
At 31 August 2025, unaudited cash was approximately £2.1 million. Management is working to access up to $5.0 million of the new facility to fund Sound’s Phase 1 capex and notes other potential funding routes (debt, equity or equity-linked). The board adopted the going concern basis, but explicitly highlighted the need for additional financing as a material uncertainty.
Debt structure and key instruments
- Secured bonds: €25.32 million, maturing 21 December 2027, effective interest about 6.5%.
- Afriquia Gaz loan note: $18.0 million facility, weighted effective interest about 6.2%, principal repayments commence December 2028.
- Convertible bond interest outstanding: £0.6 million (discounted carrying amount £0.355 million across the instrument).
Why this update matters
- Line of sight to first revenue: commissioning of the mLNG plant and successful well tests are the last big operational hurdles. If the $25 million facility is accessed as planned, Phase 1’s EPC route should be fully funded at the consortium level.
- Diversification with carries: the Managem deal gives Sound exposure to two potentially meaningful exploration shots without cash drain, plus a Phase 2 development carry and a $1.5 million milestone on first gas.
- Strategic optionality: HyMaroc and the renewable JV expand the Morocco footprint beyond gas. Financial details are not disclosed, so think of these as options rather than near-term earnings drivers.
- Risk remains funding and timing: cash is tight, and Phase 2 depends on FEED completion, EPC selection and debt close. Facility access terms for Sound’s $5 million share are still being finalised.
Operational colour: what’s already built at Tendrara
There’s tangible progress at site: the LNG storage tank foundation and shells are completed, firefighting systems, fencing and lighting are in, and gas plant packages have arrived via Moroccan ports. Flowlines and wellhead kit have been delivered, and the TE‑6/TE‑7 conversion to corrosion‑resistant tubing is done. Throughout 2025, equipment is being assembled ahead of commissioning in the final quarter.
Governance, team and Morocco partnerships
Zeus was appointed as NOMAD and corporate broker. A new CFO, Andy Matharu, joined full time on 1 September 2025 with a focus on balance sheet restructuring. The company notes the passing of its HSSE Manager, Sean Gallagher, and recognises ongoing support from Moroccan ministries and ONHYM.
What I’ll be watching next
- Confirmation that Sound has accessed its $5 million share of the new facility and any remaining conditions precedent.
- Commissioning milestones at the mLNG plant – especially O&M contract finalisation with Italfluid and first gas in Q4 2025.
- FEED update results for Phase 2 and selection of the pipeline EPC contractor – the gate to debt close and FID.
- Formal approvals for the Grand Tendrara and Anoual licence extensions and drill timing for SBK‑1 and M5 (both funded by Managem).
- Any detail on HyMaroc and the renewable JV economics, permitting and timelines.
Bottom line: constructive momentum, but finance is the swing factor
This reads as a company transitioning from development into early production with credible partners in-country. The EPC switch, bank facility and successful well tests are all positives. The counterweight is the balance sheet – low cash and material borrowings – and the dependence on partner-led processes for Phase 2 financing and execution.
If first gas lands by year-end 2025 as guided, the narrative could shift decisively to cash generation. Until then, this is about hitting commissioning milestones, closing funding, and keeping costs tight. For more detail, see the company’s site at soundenergyplc.com.
